DYNEA PAKISTAN LIMITED 30, 2006.pdf · The retiring auditors M/s Ford Rhodes Sidat Hyder & Company, Chartered Accountants, being eligible, offer themselves for re-appointment for

DYNEA PAKISTAN LIMITED

COMPANY INFORMATION

Board of Directors :

Mr. Per Haga Chairman Mr. Syed Ali Vice Chairman Mr. Alireza M. Alladin Chief Executive Officer Mr. Rafiq M. Habib Mr. Chew Teck Liong Mr. Donald John Jenkin Mr. Farooq Hassan

Chief Operating Officer : Mr. Muhammad Hanif Ajari

Chief Financial Officer & Company Secretary : Mr. Muhammad Bashir Khan

Audit Committee :

Mr. Syed Ali Chairman Mr. Donald John Jenkin Member Mr. Farooq Hassan Member

Bankers :

M/s. Habib Bank AG Zurich M/s. Habib Bank Limited M/s. Metropolitan Bank Limited M/s. NIB Bank Limited M/s. National Bank of Pakistan M/s. United Bank Limited M/s. Union Bank Limited

Auditors :

M/s. Ford Rhodes Sidat Hyder & Company Chartered Accountants

Legal Advisors :

M/s. Sayeed & Sayeed Advocates & Legal Consultants M/s. Shahid Anwar Bajwa & Company M/s. S.M. Law Associates

Share Registrar :

Noble Computer Services (Pvt) Limited, 2nd Floor, Sohni Center, BS 5 & 6, Main Karimabad, Block-4, F.B. Area, Karachi-75950, Pakistan.

Registered Office :

1st Floor, Siddiqsons Tower, 3-Jinnah Co-operative Housing Society, Block 7/8, Sharea Faisal, Karachi-75350.

Factories :

1) A-101, 102, 103, 134, 135 & 136, Lasbella Industrial Estate Development Authority, Hub Chowki, Distt. Lasbella, Baluchistan.

2) 34-A, R-3, Industrial Estate, Gadoon Amazai, District Swabi, N.W.F.P.

DIRECTORS’ REPORT

The Directors of your company are pleased to welcome you to the twenty fourth Annual General Meeting of your Company and place before you the Annual Report with the Audited Financial Statements of the Company for the year ended June 30, 2006.

By the grace of Almighty Allah during the year 2005-06, Dynea Pakistan Limited posted excellent results. For the first time, Sales Revenue of the Company surpassed Rs. One billion and the Net Profit also improved significantly.

The summarized results are as under:

2006 2005 Rs. ‘000 Rs. ‘000

Profit before taxation 60,195 9,356 Provision for Taxation 23,671 (8,246)

Profit /(loss) after Taxation 36,524 1,110 Un-appropriated profit brought forward 61,080

59,970

Un - appropriated Profit carried forward 97,604 61,080

Resin Division

During the year under review, sales of resin division amounted to Rs. 482.72 million as compared to previous year’s sales of 365.34 million showing an improvement of 32%. Gross Profit of the division also improved significantly which in turn contributed to healthy bottom line.

Aminoplast Divisions Total sales of aminoplast divisions during the year under review amounted to Rs. 631.36 million as against Rs. 609.13 million achieved during the previous year.

For the last many years moulding operations of the company were under pressure due to the dumping of Chinese moulding compound at much cheaper rates and unethical practices (under invoicing) followed by importers. The National Tariff Commission (NTC) being supreme authority to deal with such matters was approached with a request to take appropriate steps to safeguard indigenous industry. The NTC after detailed investigation agreed with our point of view and finally imposed antidumping duty ranging from 4.34% to 11.58% on various Chinese exporters. It is, however very disappointing to report that the antidumping being very low has no impact on imports from China and influx of cheaper material from China coupled with under invoicing continued unabated during the year. Relevant Custom Authorities were also approached with concrete evidence of under invoicing but so far no positive step has been taken by the Government of Pakistan to curb such illegal practices.

Despite all these adverse factors, the company was able to achieve better results mainly because of efficient plant runs and judicious procurement of raw materials.

Future Outlook

Both resin and moulding sectors are showing strong growth and production and consumption of these materials is expected to increase in future. The moulding operations will remain under pressure until judicious antidumping duty is imposed on Chinese material and appropriate steps are taken by the Government to curb under invoicing. The management of the company is however, vigilant of the prevailing situation and all necessary steps will be taken to safeguard interests of all stakeholders.

Corporate Governance

The Directors of your Company confirm compliance with the Corporate and Financial Reporting Frame work of the Securities and Exchange Commission of Pakistan’s code of Corporate Governance for the following:

a) The financial statements prepared by the management of the Company present fairly the Company’s state of affairs, the result of its operations, cash flow and changes in equity.

b) Proper books of account of the Company have been maintained.

c) Appropriate accounting policies have been consistently applied in preparation of the financial statements and the accounting estimates are based on reasonable and prudent judgment.

d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of the financial statement and any departure there from has been adequately disclosed.

e) The system of internal control is sound in design and has been effectively implemented and monitored.

f) There are no significant doubts upon the Company ability to continue as a going concern unless the final decision come against us for the Vend Fee and Permit fee case mentioned earlier.

g) There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations.

h) Information about taxes and levies is given in the notes to the accounts.

i) Value of investment in the Company’s provident fund scheme based of audited accounts for the year ended June 30, 2006 stands at Rs. 57.77 million.

j) There has been no trading in the shares of the Company by the Directors, CEO and CFO, Company Secretary, their spouses or their minor children during the year ended June 30, 2006.

k) Statements regarding the following are annexed:

1. Key financial data for the last six years. 2. Pattern of Shareholding.

l) During the year under review, four meetings of the Board of Directors were attended as under:

Directors Attended

Mr. Per Haga (Nominee - Dynea OY Finland) 4 (all by alternate director) Mr. Syed Ali 4 Mr. Rafiq Habib 3 Mr. Alireza M. Alladin 4 Mr. Chew Teck Liong (Nominee OY Finland) 4 (all by alternate director) Donald John Jenkin (Nominee - OY Finland) 3 (One by alternate Directors) Mr. Farooq Hasan (Nominee - N.I.T) 4

m) The Directors, CEO, COO, CFO and Company Secretary and their spouses and minor children did not carry out any transaction in the shares of the Company during the year.

Dividend

The Board of Directors is pleased to propose a dividend of Rs. 0.75 per share (15%)

Earning per share

Earning per share after taxation is Rs. 1.94 (2005 : Rs. 0.06)

Vend Fee and Permit Fee

As regards Vend and Permit Fee case, Sinh High Court has already pronounced a very strong and favorable decision. The learned Supreme Court has also heard our case and the judgment has been reserved.

Appointment of Auditors

The retiring auditors M/s Ford Rhodes Sidat Hyder & Company, Chartered Accountants, being eligible, offer themselves for re-appointment for the ensuing year. They have been given satisfactory rating under the Quality Control Review Programme of the Institute of Chartered Accountant of Pakistan.

Employees relations

The relations between the Management and workers continued cordial throughout the year. The Directors would also like to express their appreciation to the efforts and hard work put in by the management, staff members and workers of the company.

Acknowledgement

The Directors wish to acknowledge the support and cooperation received from the financial institutions, customers and others institutions associated with the company.

On behalf of the Board of Directors

Alireza M. Alladin Karachi: September 09, 2006 Chief Executive Officer

1


BALANCE SHEET AS AT JUNE 30, 2006

2 0 0 6

2 0 0 5

Note Rupees

Rupees

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

3 171,034,016

174,914,145

Long-term loans and advances

4 160,985

1,297,548

Long-term deposits

5 2,213,182

2,278,681

Deferred tax asset

14 -

2,980,065

173,408,183

181,470,439

CURRENT ASSETS

Stores and spares

6 9,184,399

12,351,360

Stock-in-trade

7 147,567,864

137,064,573

Trade debtors

8 229,640,571

163,777,243

Loans, advances, deposits, prepayments and other receivables

9

19,683,288

17,527,972

Taxation – net

10 3,952,789

13,375,181

Cash and bank balances

11 8,932,116

11,934,379

418,961,027

356,030,708

TOTAL ASSETS

592,369,210

537,501,147

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorised capital

40,000,000 (2005: 40,000,000) ordinary

shares of Rs.5/- each

200,000,000

200,000,000

Issued, subscribed and paid-up capital

12 94,362,065

94,362,065

Reserves

198,605,044

162,080,818

292,967,109

256,442,883

NON-CURRENT LIABILITIES

Liabilities against assets subject to finance lease

13 1,893,538

- Deferred tax liability

14 15,118,000

- Deferred liability

15 -

3,247,864

17,011,538

3,247,864

CURRENT LIABILITIES

Trade and other payables

16 75,751,429

102,523,349

Accrued mark-up

3,197,292

2,913,611

Short-term borrowings

17 197,845,250

161,093,321

Current maturity of liabilities against assets subject to finance lease

13

449,855

- Current portion of redeemable capital

-

10,714,281

Sales tax payable

5,146,737

565,838

282,390,563

277,810,400

CONTINGENCIES AND COMMITMENTS

18 -

-

TOTAL EQUITY AND LIABILITIES

592,369,210

537,501,147

28,083,679

7,633,843 The annexed notes from 1 to 39 form an integral part of these financial statements.

Alireza M. Alladin Chief Executive Officer

Farooq Hassan Director

2


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2006

2 0 0 6

2 0 0 5

Note Rupees

Rupees

Turnover – net

19 1,114,079,977

974,478,446

Cost of Sales

20 (933,183,132)

(865,023,340)

Gross Profit

180,896,845

109,455,106

Distribution cost

21 (66,398,550)

(51,884,055)

Administrative expenses

22 (29,823,956)

(32,067,562)

(96,222,506)

(83,951,617)

Other operating income

23 1,262,215

3,682,512

Operating Profit

85,936,554

29,186,001

Finance costs

24 (18,429,195)

(11,591,054)

Other charges

25 (7,312,142)

(8,238,761)

(25,741,337)

(19,829,815)

Profit before taxation

60,195,217

9,356,186

Taxation

26 (23,670,991)

(8,245,671)

Profit after taxation

36,524,226

1,110,515

Basic and diluted earnings per share

27 1.94

0.06

The annexed notes from 1 to 39 form an integral part of these financial statements.

Alireza M. Alladin Chief Executive

Officer


3

DYNEA PAKISTAN LIMITED CASH FLOW STATEMENT

FOR THE YEAR ENDED JUNE 30, 2006

2 0 0 6

2 0 0 5

Note Rupees

Rupees

CASH FLOWS FROM OPERATING ACTIVITIES

60,195,217

9,356,186

Profit before taxation

Adjustments for :

Depreciation

17,255,604

17,793,168

Provision for doubtful debts

5,000,000

19,725,101

Provision for gratuity

2,301,142

1,689,193

Finance costs

18,429,195

11,591,054

Gain on disposal of fixed assets

3,497,472

3,967,890

46,483,413

54,766,406

Operating profit before working capital changes

106,678,630

64,122,592

Decrease/(increase) in stores and spares

3,166,961

(1,150,430)

Increased stock-in-trade

(10,503,291)

(17,178,968)

Increase in trade debtors

(70,863,328)

(27,910,802)

(Increase)/decrease in loans, advances, deposits, prepayments and other receivables

(2,155,316)

3,835,043

(80,354,974)

(42,405,157)

(Decrease)/increase in trade and others payable

(26,771,920)

8,867,567

Increase/(decrease) short term finances (FCIF/Rupee TR)

142,182,643

(101,996,456)

Increase/(decrease) in sales tax payable

4,580,899

(1,454,750)

119,991,622

(94,583,639)

Cash generated from / (used in) operations

146,315,278

(72,866,204)

Finance costs paid

(18,145,514)

(9,831,827)

Income tax refund

9,920,255

8,234,484

Income tax paid

(6,070,788)

(4,618,506)

Gratuity paid

(5,549,006)

(8,449,708)

Long-term loans and deposits

1,202,062

2,900,659

Net cash generated from / (used in) operating activities

127,672,287

(84,631,102)

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure

(16,909,874)

(15,665,933)

Proceeds from sale of fixed assets

2,942,927

1,291,955

Net cash used in investing activities

(13,966,947)

(14,373,978)

CASH FLOWS FROM FINANCING ACTIVITIES

Redeemable capital

(10,714,281)

(14,285,716)

Lease rentals paid

(562,608)

- Net cash used in financing activities

(11,276,889)

(14,285,716)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 102,428,451

(113,290,796)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR (118,194,136)

(4,903,340)

CASH AND CASH EQUIVALENTS AT THE END OF YEAR (15,765,685)

(118,194,136)

CASH AND CASH EQUIVALENTS COMPRISE:


11 8,932,116

11,934,379

Running finances under mark-up arrangements

17 (24,697,801)

(130,128,515)

(15,765,685)

(118,194,136)


Alireza M. Alladin Chief Executive Officer


4


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2006

Reserves

Issued,

subscribed

and paid-up

General

Unappropriated

Total

Total

capital

reserve

profit

Reserves

-----------------------------------------Rupees------------------------------------------

Balance as at June 30, 2004

94,362,065

101,000,000

59,970,303

160,970,303

255,332,368

Profit for the year

-

-

1,110,515

1,110,515

1,110,515


94,362,065

101,000,000

61,080,818

162,080,818

256,442,883

Profit for the year

-

-

36,524,226

36,524,226

36,524,226


94,362,065

101,000,000

97,605,044

198,605,044

292,967,109



Officer


5


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006

1. THE COMPANY AND ITS OPERATIONS

Dynea Pakistan Limited (the company) was incorporated in Pakistan on June 20, 1982 and is listed on the Karachi and Lahore stock exchanges in Pakistan. It is engaged in the manufacture and sale of urea/melamine, formaldehyde and aminoplast compound. The registered office of the company is situated at 1st Floor, Siddiqsons Tower, 3-Jinnah Co-operative Housing Society, Block-7/8, Sharea Faisal, Karachi, Pakistan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1

Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 (the Ordinance). Approved accounting standards comprise of such International Accounting Standards (IASs) notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Ordinance or the requirements of the said directives take precedence.

Standards, interpretation and amendments to published approved accounting standards that are not yet effective

i. IAS 19 Amendments – Employee Benefits

effective from January 1, 2006

ii. IAS 39 Financial Instrument: Recognition and Measurement – Fair Value Option


iii.

IAS 1 Presentation of Financial Statements Capital Disclosures


Adoption of the above amendments may only impact the extent of disclosures presented in the financial statements.

In addition to above, a new series of standards called “International Financial Reporting Standards (IFRSs)” have been introduced and seven IFRSs have been issued by IASB. Out of these following four IFRS have been adopted by Institute of Chartered Accountant of Pakistan (ICAP) however since these have not been adopted by SECP therefore, do not form part of the approved local financial reporting framework:

IFRS-2 (Share based Payments); IFRS-3 (Business Combinations); IFRS-5 (Non-current Assets held for Sale and Discontinued Operations); and IFRS-6 (Exploration for and Evaluation of Mineral Resources).

The Company expects that the adoption of these pronouncements mentioned above will have no significant impact on the Company’s financial statements in the period of initial application.

2.2 Accounting convention

These financial statements have been prepared under the historical cost convention.

6

Dynea Pakistan Limited

2.3 Critical judgements and estimates

The preparation of financial statements in conformity with the above requirements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The

matters involving

a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in respective notes to the financial statements.

2.4 Property, plant and equipment

Owned

These are stated at cost less accumulated depreciation except for freehold land which is stated at cost. Depreciation is charged to income using the reducing balance method, other than freehold land which is determined to have an indefinite life, at the rates specified in note 3 to the financial statements. Depreciation on additions is charged for the full month in which the asset is put to use and on disposals upto the month immediately preceding the deletion. Assets residual values and useful lives are reviewed and adjusted, if appropriate at each balance sheet date.

Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Gains and losses on disposal of fixed assets are taken to profit and loss account currently.

Leased

Assets held under finance leases are capitalized at the lower of present value of the minimum lease payments at the inception of the lease term and the fair value of leased assets. The related obligations under finance lease less finance charges allocated to future periods are shown as liabilities. Finance cost is calculated at the rate implicit in the lease and are charged to profit and loss account. Depreciation is charged to income applying the same basis as for owned assets.

2.5 Impairment of assets

The carrying values of assets

are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amount. Impairment losses are recognized in the profit and loss account.

2.6 Stores and spares

These are valued at the lower of cost and net realizable value (NRV). Cost is determined on weighted average basis. Stores and spares are regularly reviewed by the management and obsolete items if any, are brought down to their NRV. NRV signifies the estimated selling price

the ordinary course of business, less estimated cost of completion and the cost necessary to make the sale.

2.7 Stock-in-trade

These are stated at the lower of net realizable value and cost determined as follows:

Raw and packing materials - Weighted average cost. Finished goods - Cost of direct materials and labour plus

attributable overheads. Goods in transit and stock in bonded warehouse - Invoice price plus other charges paid

thereon.

Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

7


2.8 Trade debtors

Trade debts originated by the Company are recognized and carried at original invoice amount less provision for impairment which is based on management’s assessment of customers outstanding, and credit worthiness. Bad debts are written off as and when identified.

2.9 Cash and cash equivalents

Cash and bank balances are carried at cost.

For the purpose of cash flow statement, cash and cash equivalents consist of cash and bank balances net off short term running finances utilised under mark-up arrangements maturing within three months from the date of acquisition.

2.10

Staff retirement benefits

Defined contribution plan

The Company operates a recognised provident fund for its permanent employees. Equal monthly contributions are made to the

fund by the Company and the employees in accordance with the rules of the scheme. The Company has no further obligation once the contributions have been paid. The contributions made by the Company are recognised as employee benefit expense when they are due.

2.11

Compensated absences

The Company accounts for these benefits in the accounting period in which the absences are earned.

2.12

Trade and other payables

Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company.

2.13

Dividend and appropriation to reserve

Dividend and appropriation to the reserves are recognized in the period in which these are approved.

2.14

Revenue recognition

Sales are recorded when goods are dispatched to customers. Storage and rental charges are recognized on an accrual basis. Profit on bank deposits is recognized on an accrual basis on a time proportion basis.

2.15

Foreign currency transactions

Transactions in foreign currencies are translated into rupees at the rates of

exchange prevailing on the date of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into rupees at the rates of exchange prevailing at the balance sheet date.

Exchange differences are taken to the profit and loss account.

8


2.16

Operating leases

Lease payments under operating leases are recognized as an expense in the profit and loss account on a straight line basis over the respective lease term.

2.17

Borrowing costs

Borrowing cost is recognized as expense, in the period in which it is incurred.

2.18

Taxation

2.18.1

Current

Provision for taxation is based on taxable income at the current rate of tax after taking into account applicable tax credits, rebates and exemptions available, if any, or on one half percent of the turnover whichever is higher.

2.18.2

Deferred

Deferred tax liability is accounted for using the liability method on all taxable temporary differences, while deferred tax assets are recognized

for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, if any, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry forward of unused tax assets and unused tax losses can be utilized.

The

carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

2.19

Financial instruments

All the financial assets and financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights that comprise the financial assets

are realised, expired or surrendered. Financial liabilities are derecognised when they are extinguished -

that is, when the obligation specified in the contract is discharged, cancelled, or expired. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to the profit and loss account currently. All financial assets and liabilities are initially measured at cost, which is

the fair value, amortized cost or cost, as the case may be.

2.20

Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported

in the balance sheet when the Company has a legally enforceable right to set-off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

9


2.21

Transactions with related parties

All transactions with related parties are priced on an arm’s length basis. Prices for these transactions are determined on the basis of admissible valuation method.

2.22

Provisions

Provision is recognised when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made.

2.23

Segment reporting

A segment is a distinguishable component within a Company that is engaged in providing products and under a common control environment (business segment), or in providing products within a particular economic environment (geographical segments), which is subject to risks and returns that are different from those of other segments.

3. PROPERTY, PLANT AND EQUIPMENT

COST

DEPRECIATION / AMORTISATION

As at

As at

As at

As at

Written down

July 1,

June 30,

July 1,

Charge

June 30,

value as at

2005

Additions/ transfers

Disposals/ adjustments*

2006

Rate

2005

for the year

Disposals / adjustments*

2006

June 30, 2006

-----------------------------Rupees-------------------------------

%

-----------------------------Rupees-------------------------------

Rupees

Owned

Freehold land

659,961

-

-

659,961

-

-

-

-

-

659,961

Leasehold land

2,564,884

1,600,000

-

4,164,884

99 years

355,324

32,634

-

387,958

3,776,926

Buildings on freehold land

20,307,457

-

-

20,307,457

5

11,862,256

422,260

-

12,284,516

8,022,941

Buildings on leasehold land

41,143,033

-

(2,769,122)*

38,373,911

5

17,762,456

1,086,144

(1,097,621)*

17,750,979

20,622,932

Plant and machinery

291,376,488

11,989,391*

(9,635,468)

293,730,411

10

164,489,415

12,988,471

(4,228,146)*

173,249,740

120,480,671

Electrical installations

16,400,087

-

-

16,400,087

10

10,189,186

621,091

-

10,810,277

5,589,810

Furniture and fixtures

3,297,665

-

(853,475)

2,444,190

20

2,304,794

194,701

(663,617)

1,835,878

608,312

Office equipments

2,560,220

-

(707,871)

1,852,349

20

1,131,424

281,289

(488,846)

923,867

928,482

Computers and accessories

5,246,028

398,480

(3,480,184)

2,164,324

33

4,466,072

319,033

(3,284,427)

1,500,678

663,646

Vehicles

4,357,295

5,342,223

(1,540,354)

8,159,164

20

1,945,103

740,484

(147,580)

2,538,007

5,621,157

Storage tanks**

3,408,344

331,000

(583,309)

3,156,035

10

1,901,287

177,230

(467,927)

1,610,590

1,545,445

Leased assets

Motor vehicles

-

2,906,000

-

2,906,000

20 -

392,267

-

392,267

2,513,733

391,321,462

22,567,094

(19,569,783)

394,318,773

216,407,317

17,255,604

(10,378,164)

223,284,757

171,034,016

2 0 0 5

390,461,166

15,665,933

(14,805,637)

391,321,462

208,159,941

17,793,168

(9,545,792)

216,407,317

174,914,145

**

These includes transfer of raw material / finished goods containers having cost of Rs.2.751 million and written down value of Rs.1.656 million from building on lease hold land to plant and machinery. Had there been no change,

the depreciation expense for the year would have been lower and profit for the year would have been higher by Rs.82,217/-.

** These have been installed at the premises of certain customers and on vehicles of certain transporters and are not under the possession and control of the company. However, the future economic benefits associated with these assets are flowing to the Company.

10


3.1.

The following property, plant and equipment were disposed off during the year:

Written

Gain /

Original Accumulated

Down

Sale

(loss) Mode of

cost

depreciation

Value

proceeds

on sale

disposal

Particulars of buyers

----------------------------------Rupees--------------------------------

Buildings on leasehold land *

17,902

2,742

15,160

-

(15,160)

Negotiation

Mr. Sajjad Khan Lasi, Shershah, Karachi

Plant and machinery

9,286,878

5,277,877

4,009,001

500,000

(3,509,001)

-do-

-do-

Furniture and fixtures

12,950

8,248

4,702

-

(4,702)

-do-

-do-

Office equipment

120,624

85,626

34,998

-

(34,998)

-do-

-do-

Computer accessories

2,857,495

2,736,519

120,976

-

(120,976)

-do-

-do-

Furniture and fixture

840,525

655,369

185,156

-

(185,156)

-do-

Mr. Gul khan, Gadoon Amazai, District Sawabi

Office equipment

587,247

403,220

184,027

50,000

(134,027)

-do-

-do-

Computer accessories

622,689

547,908

74,781

-

(74,781)

-do-

-do-

Extruder machine

348,590

45,148

303,442

650,000

346,558

-do-

Azmat Industries, Gujranwala.

Suzuki Mehran VXR

346,000

57,897

288,103

320,000

31,897

Insurance claim

Habib Insurance Co. Limited – related party

Vehicle - Coure

125,700

-

125,700

141,588

15,888

Company scheme

Mr. Maqbool Jaffer, Employee

Vehicle - Toyota

230,700

-

230,700

259,860

29,160

-do-

Mr. Rashid M. Yousuf, Employee

Vehicle - Coure

131,700

-

131,700

148,348

16,648

-do-

Mr. Tejpar Maheshwari, Employee

Vehicle - Coure

125,700

-

125,700

141,588

15,888

-do-

Mr. Kamil Saeed, Employee

Vehicle - Toyota

190,698

-

190,698

259,860

69,162

-do-

Mr. Rana M. Afzal, Employee

Vehicle - Coure

125,700

-

125,700

141,588

15,888

-do-

Mr. Mohammad Sadiq, Employee

Vehicle - Coure

125,700

-

125,700

141,588

15,888

-do-

Mr. Saeed-uz-Zafar, Employee

Various items having book value less than Rs. 50,000/=

721,765

557,610

164,155

188,507

24,352

-do-

Various parties

16,818,563

10,378,164

6,440,399

2,942,927

(3,497,472)

* These consist of sanitation and other fixtures attached to the buildings on leasehold land.

2 0 0 6

2 0 0 5 Note

Rupees

Rupees 3.2

Depreciation charge for the year has been allocated as follows:

Cost of sales 20 16,267,031

17,000,441

Distribution Cost 21 246,118

35,796

Administrative expenses 22 742,455

756,931

17,255,604

17,793,168

4. LONG-TERM LOANS AND ADVANCES

Unsecured - considered good

Due from executives

4.1 -

385,118

Due from other employees

4.1 530,423

3,087,472

Contractors

4.2 18,728

43,042

549,151

3,515,632

Less: Current portion shown under current assets 9 388,166

2,218,084

160,985

1,297,548

4.1

Loans were granted for purchase of property, motor vehicles and for miscellaneous purposes to the employees of the Company repayable in three years and a mark up @ 8% (2005:8%) is charged on these loans. These include mark-up free loans of Rs. 0.22 million (2005: Rs.0.16

million).

Maximum aggregate amount due from executives at the end of any month during the year was Rs. 0.37 million (2005:Rs. 0.5 million).

11


2 0 0 6

2 0 0 5

Reconciliation of the carrying amount of loans to executives

Opening balance at the beginning of the year 385,118

-

Disbursement -

775,000

Interest charged for the year 5,184

29,939

Repayments (390,302)

(419,821)

-

385,118

4.2

The loans to contractors carry mark-up at the rate of 8 percent (2005: 8 percent) per annum.

2 0 0 6

2 0 0 5 Note

Rupees

Rupees 5. LONG-TERM DEPOSITS

Deposits

- Against bank guarantees 981,583

981,583

- Utility corporations 823,200

870,800

- Lasbela Industrial Estate Development Authority 212,870

212,870

- Others 195,529

213,428

2,213,182

2,278,681

6. STORES AND SPARES

Stores

1,923,690

2,187,133

Spares

7,260,709

10,164,227

9,184,399

12,351,360

7. STOCK-IN-TRADE

Raw material:

In hand 86,415,737

60,462,830

In bonded warehouse 42,516,587

33,566,583

In transit 7,621,667

25,132,592

136,553,991

119,162,005

Packing material 1,084,049

644,477

137,638,040

119,806,482

Finished goods 9,929,824

17,258,091

147,567,864

137,064,573

8. TRADE DEBTORS - unsecured

Considered good 8.1 229,640,571

163,777,243

Considered doubtful

31,375,883

26,375,883

261,016,454

190,153,126

Less: Provision for doubtful debts 8.2 31,375,883

26,375,883

229,640,571

163,777,243

8.1 Includes amount of Rs. 6.43 million (2005: Rs. 9.1 million) due from Thal Limited –

a related party.

12


2 0 0 6

2 0 0 5

Note

Rupees

Rupees

8.2 Reconciliation of provision for impairment of debts.

Opening provision 26,375,883

6,650,782

Charge for the year 5,000,000

20,000,000

Less: Reversal during the year

-

274,899

Balance at the end of the year 31,375,883

26,375,883

9. LOANS, ADVANCES, DEPOSITS, PREPAYMENTS AND

OTHER RECEIVABLES

Loans - considered good

Current portion of long term loans - Employees 369,438

2,175,042

- Contractors 18,728

43,042

4 388,166

2,218,084

Advances - considered good

- Suppliers and contractors

9,245,550

8,780,410

- Employees 2,435,392

1,698,970

11,680,942

10,479,380

Deposits

Margin against Letter of credit 5,333,500

-

Prepayments -

415,593

Other receivables

- Related parties 9.1 -

12,804

- Receivable against storage rentals -

209,178

- Sales tax refundable 1,828,332

2,831,887

- Others 452,348

1,361,046

2,280,680

4,414,915

19,683,288

17,527,972

9.1 Maximum aggregate amount due from associated undertakings, at the end of any month during the year was Rs. 0.013 million (2005: Rs. 0.49 million).

2006

2005 Note

Rupees

Rupees

10. TAXATION – NET

Advance tax 18.3

9,525,714

18,247,573

Provision for taxation (5,572,925)

(4,872,392)

3,952,789

13,375,181

11. CASH AND BANK BALANCES

Cash at banks - current accounts 8,578,879

11,632,086

Cash in hand

353,237

302,293

8,932,116

11,934,379

12. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL

Number of ordinary shares of Rs. 5/- each

2 0 0 6 2 0 0 5

8,316,000

8,316,000

Fully paid in cash 41,580,000

41,580,000

10,556,413

10,556,413

Issued as fully paid bonus shares 52,782,065

52,782,065

18,872,413

18,872,413

94,362,065

94,362,065

The shares held by related parties as at June 30, 2006 were 7,028,319 (2005: 7,028,319) ordinary shares of Rs. 5/- each.

13


13. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Minimum Present

Minimum Present

Lease Value of

Lease Value of

Payments MLP

Payments

MLP

2006

2005

Not later than one year 732,356

449,855

- -

Later than one year but not later than five years 2,328,982

1,893,538

- -

Total minimum lease payments 3,061,338

2,343,393

- -

Less : financial charges allocated to future periods 717,945

-

- -

Present value of minimum lease payments 2,343,393

2,343,393

- -

Less: Current maturity shown under current liabilities 449,855

449,855

- - 1,893,538

1,893,538

- -

This represents finance lease entered into with modaraba for vehicles. The balance of the liability is payable by December 2008 in quarterly installments. The above lease contracts contain a bargain purchase option. Quarterly lease payments include finance charges ranging from KIBOR+2 percent

to KIBOR+2.75 percent per annum (2005: Nil), which is used as a

discounting factor. There are no financial restrictions in the lease agreements.

2006

2005 Note

Rupees

Rupees

14. DEFERRED TAX (LIABILITY)/ASSET

This is comprised of the following:

Deductible temporary differences

- Provision for doubtful debts 10,981,560

9,231,559

- Provision for gratuity -

1,136,752

- Carry forward tax losses (assessed and unassessed)

-

18,994,320

Taxable temporary difference

Difference in tax and accounting bases of tangible fixed assets

(26,099,560)

(26,382,566)

(15,118,000)

2,980,065

15. DEFERRED LIABILITY

Staff gratuity 15.1 & 15.2

-

3,247,864

15.1 Movement in the net liability recognised in the balance sheet is as follows:

Opening balance 3,247,864

10,008,379

Charge for the year 2,301,142

1,689,193

5,549,006

11,697,572

Less: Benefits paid during the year 5,549,006

8,449,708

Closing balance -

3,247,864

15.2 Effective October 01, 2005, the Company converted the unfunded gratuity scheme to recognized

gratuity fund. Subsequently, during the year the Company has decided to withdraw the said benefit for the staff with effect from June 15, 2006.

2 0 0 6

2 0 0 5

Note

Rupees

Rupees 16. TRADE AND OTHER PAYABLES

Trade creditors

5,277,046

9,074,155

Accrued liabilities 46,784,093

53,009,659

Bills payable 12,273,376

29,129,499

Workers’ Welfare Fund

100,238

100,238

Workers’ Profit Participation Fund 16.1

3,168,169

492,427

Provident fund

-

986,227

Income tax deducted at source

22,793

952,739

Unclaimed dividend

673,755

675,586

Vend / permit fee

16.2

7,451,959

8,102,819

75,751,429

102,523,349

14


2 0 0 6

2 0 0 5

Note

Rupees

Rupees

16.1 WORKERS’ PROFIT PARTICIPATION FUND

Balance at the beginning of the year

492,427

-

Interest on fund utilized in company’s business

23,066

-

515,493

-

Allocation for the year

3,168,169

492,427

3,683,662

492,427

Less: Payments during the year

515,493

- Balance at the end of the year

3,168,169

492,427

16.2

This represents amount charged to customers in respect of vend fee and permit fee. Depending on the outcome of the law suit mentioned in note 18.2, the amount would either be paid to the Excise and Taxation Department, Government of Sindh or refunded to the customers. The Company has discontinued this practice of charging the fee from July 2002 in accordance with the industrial norms.

2 0 0 6

2 0 0 5

Note

Rupees

Rupees 17. SHORT TERM BORROWINGS – Secured

Running finance under mark-up arrangements 17.1

24,697,801

130,128,515

Foreign currency import facility (FCIF) 17.2

173,147,449

-

Trust receipts (TR) arrangements -

30,964,806

197,845,250

161,093,321

17.1 Running finance under mark-up arrangements

These facilities have been obtained from banks and are secured by hypothecation of stores and spares, stock-in-trade and trade receivables. The facilities available under mark-up arrangements amount to Rs. 270 million (2005: Rs. 240 million) of which the amount unavailed at the year end was Rs .245.302 million (2005: Rs.109.87 million). The rates of mark-up for short term running finances ranged from 8.51 percent to 11.25 percent (2005: 4.16 percent to 8.99 percent) per annum.

17.2 Foreign currency import facility

The facilities for opening letters of credit and guarantees as at June 30, 2006 amounted to Rs. 315 million (2005: Rs. 210 million) and Rs.15 million (2005: Rs.15 million) respectively, of which the amount remaining unutilized at year end was Rs.141.85 million (2005:

Rs.161.56 million) and Rs. 2.39 million (2005: Rs. 3.39 million) respectively.

The facilities for foreign currency import financing obtained from banks as at June 30, 2006 amounted to Rs. 173.147 million (2005: Nil). Under new financing arrangements with the banks (except with Habib Bank AG. Zurich), FCIF/TR facilities were combined with the facilities available under running finance arrangements. The rates of mark-up for FCIF ranged from 5.149 percent to 6.40 percent per annum.

18. CONTINGENCIES AND COMMITMENTS

Contingencies

18.1 Bank guarantees amounting to Rs. 13.59 million (2005: Rs. 12.59 million) have been issued to the Collector of Customs against import of machinery and to Excise & Taxation Department

against liability on account of vend and permit fee and infrastructure cess.

15


18.2 The Excise and Taxation Department, Government of Sindh imposed vend and permit fee on methanol, a major raw material used by the company in the production of formaldehyde. The Company filed a petition against the imposition of these levies in the Honourable High Court of Sindh in August 1996. In June 2001, the Honourable High Court of Sindh decided the case in the favour of the Company. However, the Excise and Taxation department filed an appeal in the Honourable Supreme Court of Pakistan against the above judgement. The Honourable Supreme Court of Pakistan suspended the decision of the Honourable High Court of Sindh and reverted the case back to the Honourable High Court of Sindh for fresh hearing. After a number of hearings, finally the Honourable Bench of Sindh High Court kept the judgment order reserved in November 2002. In March 2003, the division bench announced the judgment order and termed the impugned declaration and the notification to that effect as unlawful and set aside the impugned demands of the vend and permit fee on methanol.

The Company was served a notice from the Advocate on record, Honourable Supreme Court of Pakistan that the Advocate General Sindh, High Court has filed a petition for Leave to Appeal in the Honourable Supreme Court of Pakistan, that has been accepted and a stay has been granted to them with the remarks that the matter would be decided in near future and till then the status quo would be maintained and the matter will be heard afresh.

Total liability against vend and permit fee, as on June 30, 2006 works out at Rs. 621 million (2005: Rs. 568 million). Since the Company is confident to get a favourable decision from the Supreme Court, therefore no provision of the potential liability has been made

in these financial statements. Furthermore, management

is making necessary efforts to resolve this matter and is confident that the Company will be able to continue as a going concern.

18.3

The Company is in litigation with the Income Tax Department, Peshawar (Department) against levy of

minimum tax under section 80D of the repealed Income Tax Ordinance, 1979 on its former, subsidiary company, M/s Visionite (Private)

Limited. The subsidiary company was setup on June 7, 1993 and was exempt from income tax for a period of ten years under the repealed Income Tax Ordinance, 1979. While no tax was charged on profits of the subsidiary company during tax holiday period, minimum tax at the rate one half percent of turnover was recovered arbitrarily by the department for the assessment years 1994-95 to 2002-03. Out of total nine years of dispute, decision on eight appeals had been decided by Income Tax Appellate Tribunal, Peshawar in Company's favour while one (assessment year 2000-2001) being decided unfavourably by the Commissioner of Income Tax (Appeals)

was challenged and appealed with the learned Income Tax Appellate Tribunal, Peshawar. Decision of the learned Appellate Tribunal on that appeal is expected shortly. Department has also filed a reference in the High Court against the judgement of

Income Tax Appellate Tribunal on eight appeals.

As the Income Tax Appellate Tribunal, Peshawar has already decided favourably on all appeals filed against levy of minimum tax under section 80D of the repealed Income Tax Ordinance, 1979, so a favourable decision is also expected for the year 2000-01. Since the Company is confident to win all the appeals, therefore no provisions against income tax liability has been made in these financial statements. After favourable decision of learned Income Tax Appellate Tribunal, Peshawar, tax amounting to Rs. 8.4 million is levied under section 80D for the subject years has already been refunded by the Income Tax Department. However, tax amounting to Rs. 0.48 million levied under section 80D for the year 2000-01 has yet to be refunded after favourable decision of the Income Tax Appellate Tribunal, Peshawar, therefore, this amount has been shown as advance tax in these financial statements.

18.4

The Company during the year 2001 filed a writ petition in the High Court of Sindh against levy of Professional Tax by the Excise and Taxation Department. Since the Company is confident to win the case, therefore liability amounting to Rs. 0.5 million pertaining to the years 2001-06 has not been provided in these financial statements.

Commitments

18.5 Commitments under letters of credit as at the year end amounted to Rs. 86.179 million (2005: Rs. 48.44 million).

16


2 0 0 6

2 0 0 5

Rupees

Rupees

18.6 Commitments for rentals under operating lease agreements

in respect of vehicles and leased factory are as follows:

Within one year

384,156

1,083,511

After one year but not more than five years

84,470

593,306

468,626

1,676,817

19. TURNOVER – net

Special

Resin

Aminoplast

aminoplast

division

Division

division

2 0 0 6

2 0 0 5

--------------------------------------- Rupees------------------------------------------

Sales

559,666,506

550,046,338

195,495,676

1,305,208,520

1,133,446,898

Less: Sales tax

72,949,659

69,931,986

24,904,429

167,786,074

146,275,909

Sales return

427,562

13,905,723

4,557,466

18,890,751

11,022,249

Rebate and discounts

3,573,510

348,190

530,018

4,451,718

1,670,294

76,950,731

84,185,899

29,991,913

191,128,543

158,968,452

482,715,775

465,860,439

165,503,763

1,114,079,977

974,478,446

Special

Resin

Aminoplast

aminoplast

division

division

division

2 0 0 6

2 0 0 5

--------------------------------------- Rupees------------------------------------------ 20. COST OF SALES

Opening stock - raw and

packing materials

13,262,466

47,844,841

-

61,107,307

52,021,113

Purchases

479,896,197

284,238,949

-

764,135,146

679,191,293

Inter division transfers-in

542,171

173,139,757

111,396,775

285,078,703

287,555,892

493,700,834

505,223,547

111,396,775

1,110,321,156

1,018,768,298

Closing stock - raw and

packing materials

(20,407,746)

(67,092,040)

-

(87,499,786)

(61,107,307)

Inter division transfers-out

(21,753,844)

(111,938,946)

-

(133,692,790)

(123,808,368)

Raw and packing material consumed

451,539,244

326,192,561

111,396,775

889,128,580

833,852,623

Manufacturing expenses:

Indirect material consumed

2,385,144

674,460

480,431

3,540,035

3,110,659

Stores, and spares consumed

5,953,551

2,907,491

3,320,878

12,181,920

6,397,268

Fuel and power

15,060,593

24,992,964

9,123,128

49,176,685

50,246,988

Gas charges

16,394

7,178

9,225

32,797

175,909

Salaries, wages and

other benefits - note 20.1

33,208,769

31,430,728

18,583,758

83,223,255

79,182,281

Rent, rates and taxes

109,630

152,570

63,060

325,260

248,714

Insurance

1,624,134

1,709,654

416,111

3,749,899

3,205,586

Repairs and maintenance

709,269

5,456,706

488,622

6,654,597

4,756,442

Vehicles running and maintenance

859,426

1,048,110

474,504

2,382,040

2,402,375

Lease rent

9,377

4,028

5,350

18,755

1,770,580

Vehicles lease rentals

346,624

285,506

190,422

822,552

1,461,681

Postage, telephone and telex

133,456

282,064

78,454

493,974

540,014

Storage and handling charges

4,089,872

-

-

4,089,872

3,811,287

Travelling and conveyance

397,919

483,804

199,853

1,081,576

4,820,864

Printing and stationery

124,393

154,533

67,274

346,200

384,744

Depreciation - note 3.2

11,076,444

4,613,654

576,933

16,267,031

17,000,441

Consultancy

198,000

84,194

111,606

393,800

Others

1,618,847

1,426,697

286,406

3,331,950

2,123,098

77,921,842

75,714,341

34,476,015

188,112,198

181,638,931

529,461,086

401,906,902

145,872,790

1,077,240,778

1,051,491,554

Inter division transfers of stock

(151,385,913)

-

-

(151,385,913)

(163,747,524)

Cost of goods manufactured

378,075,173

401,906,902

145,872,790

925,854,865

851,744,030

Cost of finished goods :

Opening stock

8,332,063

4,328,543

4,597,485

17,258,091

30,537,401

Closing stock

(3,614,343)

(3,196,743)

(3,118,738)

(9,929,824)

(17,258,091)

4,717,720

1,131,800

1,478,747

7,328,267

13,279,310

382,792,893

403,038,702

147,351,537

933,183,132

865,023,340

17


20.1 Salaries, wages and other benefits

Salaries, wages and other benefits include Rs. 4.938 million (2005: Rs. 3.887 million) in respect of staff retirement benefits.

20.2 Inter-segment pricing

Transfers between business segments are recorded at cost which includes direct material, direct labour and applicable overheads.

2 0 0 6 2 0 0 5

Note

Rupees Rupees

21. DISTRIBUTION COST

Salaries and other benefits 21.1 8,949,204

8,340,007

Cartage and freight 47,590,155

19,414,759

Rent, rates and taxes 380,640

355,000

Insurance 292,019

341,850

Repairs and maintenance 44,863

707,234

Vehicles running and maintenance 873,371

660,906

Vehicles lease rentals 136,383

441,150

Postage, telephone and telex 497,489

668,006

Travelling and conveyance 1,714,116

359,657

Printing and stationery 34,970

22,953

Electricity

62,765

107,881

Depreciation

3.2 246,118

35,796

Sales promotion 471,837

229,950

Entertainment 3,670

16,839

Subscription

7,459

- Provision for impairment of debts 5,000,000

19,725,101

Others 93,491

456,966

66,398,550

51,884,055

21.1 Salaries and other benefits

Salaries and other benefits include Rs. 0.332 million (2005: Rs. 0.59 million) in respect of staff retirement benefits.

2 0 0 6 2 0 0 5

Note

Rupees Rupees

22. ADMINISTRATIVE EXPENSES

Salaries and other benefits

22.1 16,295,691

19,075,298

Directors’ fee

8,000

8,000

Rent, rates and taxes

1,115,680

1,012,097

Insurance

379,582

219,108

Repairs and maintenance

1,217,530

1,335,064

Vehicles running and maintenance

789,695

1,047,802

Vehicle lease rentals

-

404,664

Postage, telephone and telex

645,037

744,864

Travelling and conveyance

1,503,496

1,306,342

Printing and stationery

362,482

661,468

Electricity and gas

716,512

707,795

Depreciation

3.2 742,455

756,931

Legal and professional charges

3,274,614

1,990,856

Advertisement and publicity

152,331

196,439

Charity and donations

22.2

877,633

260,000

Annual listing fee

88,750

106,249

Computer service charges

696,596

908,539

Auditors’ remuneration

22.3

510,505

468,535

Entertainment

-

8,850

Subscription

91,136

74,799

ISO certification fees

153,985

146,129

Others

202,246

627,733

29,823,956

32,067,562

18


22.1 Salaries and other benefits include Rs. 0.551 million (2005: Rs. 0.904

million) in respect of

staff retirement benefits.

22.2 Charity and donations

Donations do not include any donee in whom any director of the Company or his / her spouse has any interest except an amount of Rs. 0.06 million (2005: Rs. 0.06 million) paid to Muhammad Ali Habib Welfare Trust, Karachi, of

which Mr. Rafiq M. Habib, Director of the

Company is a trustee.

2 0 0 6 2 0 0 5

Rupees Rupees

22.3 Auditors' remuneration

Audit fee

210,000

175,000

Taxation services

-

86,780

Certification and other services

217,000

141,700

Out of pocket expenses

83,505

65,055

510,505

468,535

23. OTHER OPERATING INCOME

Storage and rental income

-

823,529

Mark-up on loans to employees and contractors 132,327

559,170

Profit on bank deposits

3,426

6,882

Insurance claim received

200,000

1,787,904

Scrap sales

-

270,020

Rebate on imports

920,513

- Others

5,949

235,007

1,262,215

3,682,512

24. FINANCE COSTS

Mark-up on - redeemable capital 503,652

1,327,715

- short term/running finances 16,946,558

9,100,252

17,450,210

10,427,967

Markup on finance lease 164,370

- Interest on workers' profit participation fund 23,066

- Bank guarantees commission 122,941

471,948

Bank charges 668,608

691,139

18,429,195

11,591,054

25. OTHER CHARGES

Workers' profit participation fund 3,168,169

492,427

Loss on disposal of property, plant and equipment 3,497,472

3,967,890

Exchange loss 646,501

3,778,444

7,312,142

8,238,761

26. TAXATION

Current 5,570,400

4,872,392

Prior 2,525

(6,045,154)

Deferred 18,098,066

9,418,433

23,670,991

8,245,671

26.1 The provision for income tax is based on section 113 of the Income Tax Ordinance, 2001 which specifies minimum tax charge at the rate of one half percent of the Company’s turnover. Tax expense reconciliation is not presented as income for the current and prior year is subject to minimum tax on turnover.

19


2 0 0 6 2 0 0 5

Rupees Rupees

27. BASIC AND DILUTED EARNINGS PER SHARE

There is no dilutive effect on the basic earnings per share which is based on :

Profit after taxation

36,524,226

1,110,515

Weighted average number of ordinary shares

18,872,413

18,872,413

Earnings per share

1.94

0.06

28. REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTOR AND EXECUTIVES

2006

2005 Chief

Chief

Executive

Director

Executives

Total

Executive

Director Executives

Total ---------------------------Rupees----------------------------

------------------------------Rupees-------------------------------

Managerial remuneration 1,073,771

-

3,151,976

4,225,747

1,073,771

-

3,151,976

4,225,747

Retirement and other benefits

445,294

-

2,073,323

2,518,617

445,294

-

2,073,323

2,518,617

House rent 118,738

-

1,012,968

1,131,706

118,738

-

1,012,968

1,131,706

1,637,803

-

6,238,267

7,876,070

1,637,803

6,238,267

7,876,070

Number of persons 1

-

4

5

1

-

4

5

28.1

In addition, the Chief Executive Officer, director and certain executives are provided with free use of company maintained cars.

28.2

Fee paid to non-executive directors was Rs. 8,000 (2005: Rs.10,000).

29. SEGMENT INFORMATION

2 0 0 6

2 0 0 5

Special

Special

Resin

Aminoplast aminoplast

Resin

Aminoplast

aminoplast

division

division

division

Total

division

division

division

Total

-----------------------------Rupees------------------------------

-------------------------------Rupees--------------------------------

29.1

Business segments

Segment assets 365,336,808

153,040,852

29,348,291

547,725,951

321,874,476

126,403,003

27,478,482

475,755,961

Unallocated assets

44,643,259

61,745,186

Total assets

592,369,210

537,501,147

Segment liabilities -

12,273,376

-

12,273,376

41,317,169

31,975,148

764,133

74,056,450

Unallocated liabilities

287,128,725

207,001,814

Total liabilities

299,402,101

281,058,264

Capital expenditure 13,690,525

6,125,350

-

19,815,875

13,536,273

2,129,660

-

15,665,933

Depreciation

12,031,608

4,647,063

576,933

17,255,604

12,318,824

4,831,410

642,934

17,793,168

Non-cash expenses other

than depreciation 6,145,635

499,415

656,092

7,301,142

21,148,916

211,639

328,638

21,689,193

20


30. TRANSACTIONS WITH RELATED PARTIES

Related parties of the Company comprise companies with common directorship, retirement funds, directors and key management personnel. Detail of transactions with associated companies during the year, other than those which have been disclosed elsewhere in these financial statements, are as follows:

2 0 0 6 2 0 0 5

Rupees Rupees

Sales

69,242,063

67,140,517

Purchases 500,325

4,136,796

Insurance premium 5,609,257

4,401,074

Insurance claim received 1,320,000

1,787,904

Contribution to the provident fund 3,519,229

3,657,863

There are no transactions with key management personnel other than under terms of employment.

The related party status of outstanding receivable/payable as at June 30, 2006 are disclosed in the respective notes to the financial statements.

Transactions with associated undertakings and related parties are made under normal commercial terms and conditions.

31. LIQUIDITY RISK

Liquidity risk is the risk that the company will be unable to meet its funding requirements. To guard against the risk, the company has diversified funding sources

and assets are managed with liquidity in mind. The maturity profile is monitored to ensure that adequate liquidity is maintained.

32. YIELD / MARK-UP RATE RISK

Yield/mark-up rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market yield/mark-up rates. Sensitivity to yield/mark-up rate risk arises from mismatches of financial assets and liabilities that mature or reprice in a given period. The company manages these mismatches through risk management strategies where significant changes in gap position can be adjusted. The company is exposed to yield/mark-up rate risk in respect of the following:

21


2 0 0 6

Exposed to yield / mark-up rate

risk

Not

exposed

Maturity

Maturity

to yield /

upto one

after one

mark-up

rate

Total

Year

year

Sub-total

risk

Financial assets

-----------------------------------Rupees--------------------------------


549,151

388,166

160,985

549,151

-

Long-term deposits

981,583

-

-

-

981,583

Trade debtors

229,640,571

-

-

-

229,640,571

Loans, advances, deposits, Prepayments and other receivables

452,348

-

-

-

452,348


8,932,116

-

-

-

8,932,116

240,555,769

388,166

160,985

549,151

240,006,618

Financial liabilities

Short term borrowings

197,845,250

197,845,250

-

197,845,250

-

Liabilities against assets subject to finance lease

2,343,393

449,855

1,893,538

2,343,393

- Trade and other payables

75,712,561

-

-

-

75,712,561

275,901,204

198,295,105

1,893,538

200,188,643

75,712,561

2 0 0 5

Exposed to yield / mark-up rate risk

Not exposed

Maturity

Maturity

to yield /

Upto one

after one

mark-up rate

Total

Year

year

Sub-total

Risk Financial assets

-----------------------------------Rupees--------------------------------


3,515,632

2,133,885

1,219,280

3,353,165

162,467

Long-term deposits

981,583

-

-

-

981,583

Trade debtors

163,777,243

-

-

-

163,777,243

Loans, advances, deposits, Prepayments and other receivables

1,583,028

-

-

-

1,583,028


11,934,379

-

-

-

11,934,379

181,791,865

2,133,885

1,219,280

3,353,165

178,438,700

Financial liabilities

Redeemable capital

10,714,281

10,714,281

-

10,714,281

- Short term borrowings

161,093,321

161,093,321

-

161,093,321

- Trade and other liabilities

101,570,610

-

-

-

101,570,610

273,378,212

171,807,602

-

171,807,602

101,570,610

The effective mark-up / profit rates have been disclosed in the respective notes to the financial statements.

33. CREDIT RISK AND CONCENTRATION OF CREDIT RISK

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly

affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the company's performance to developments affecting a particular industry.

The Company’s exposure to credit risk is indicated by the carrying amount of its trade debtors. The company controls credit risk by monitoring the amount of credit extended, limiting transactions with specific customers and continually assessing the credit worthiness of the customers.

22


2006

2005

Amount

Percent

Amount

Percent

(Rupees)

(Rupees)

Trade debtors

Wood working industry

175,971,365

77%

111,405,672

68%

Plastic industry

53,669,206

23%

52,371,571

32%

229,640,571

100%

163,777,243

100%

34. PROPOSED DIVIDEND

The Board of Directors at the meeting held on September 09, 2006

have proposed for the year ended June 30, 2006 cash dividend of Re. 0.75 per share (2005: nil), amounting to Rs. 14.154 million subject to approval of members at the annual general meeting to be held on October 18, 2006.

35. FOREIGN EXCHANGE RISK MANAGEMENT

Foreign currency risk is the risk that the value of a financial asset or a liability will fluctuate due to a change in foreign exchange rates. It arises mainly where receivables and payables exist due to transactions with foreign undertakings. Financial liabilities include Rs. 173.15 million (2005: Rs. Nil) which are subject to currency risk exposure and off-balance sheet risk consists of commitments under letters of credit as disclosed in note 18.5.The Company does not have any formal foreign currency risk management policy.

36. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, differences may arise between the carrying values and the fair value estimates.

Underlying the definition of fair value is the presumption that the Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.

The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.

37. CAPACITY AND PRODUCTION

Rated

Actual

Rated

Actual

capacity

production

capacity

production

2 0 0 6

2 0 0 6

2 0 0 5

2 0 0 5

Note

-----------------------------M. Tons----------------------------

RESIN DIVISION

Urea/Melamine formaldehyde

34,000

34,341

34,000

29,101

Formaldehyde

39,000

31,543

39,000

29,359

37.1

73,000

65,884

73,000

58,460

========

=========

=========

==========

AMINOPLAST DIVISION

Aminoplast compound

8,000

8,878

8,000

9,927

Special aminoplast compound

2,000

3,241

2,000

3,345

10,000

12,119

10,000

13,272

========

=========

=========

==========

37.1

The reason for shortfall in actual production is due to low demand.

23


38. DATE OF AUTHORISATION FOR ISSUE

These financial statements were authorised for issue on September 09, 2006

by the Board of

Directors of the company.

39. GENERAL

Figures have been rounded off to the nearest rupee.


Officer


Documents

DYNEA PAKISTAN LIMITED 30, 2006.pdf · The retiring auditors M/s Ford Rhodes Sidat Hyder & Company, Chartered Accountants, being eligible, offer themselves for re-appointment for