D.G.khan Cement Company Limited 2011-12 Annual Report

D.G.Khan Cement Company Limited ANNUAL REPORT 2012 D.G. Khan Cement Company Limited MUHAMMAD ALI JINNAH “My message to you all is of hope, courage and confidence. Let us mobilize all our resources in a systematic and organized way and tackle the grave issues that confront us with grim determination and discipline worthy of a great nation. (Eidul-Azha Message to the Nation October 24, 1947) ♦ QUAID-E-AZAM ♦ ANNUAL REPORT 2012 D.G. Khan Cement Company Limited (LATE) MR. ZAKA UD DIN DIRECTOR HE SHALL ALWAYS REMAIN IN OUR DEEPEST MEMORY FOR HIS DEDICATION, SINCERITY, HUMILITY AND INTEGRITY. ANNUAL REPORT 2012 D. Khan Cement Company Limited 2012 HIGHLIGHTS Improving efficiency in a difficult environment Extensive cost-cutting measures and good levels of business in the emerging markets Operating margins exceed the previous year's figures Solid demand for building materials in the emerging markets Reduction in finance cost through better cash flow planning Carbon credits under Kyoto Protocol of United Nation Cost pressure from energy and raw materials weighed on results Increase in net income and higher operating profits More investment in process optimization and alternate energy sources ANNUAL REPORT 2012 .G. D. Khan Cement Company Limited Mission Statement To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team. ANNUAL REPORT 2012 . so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.G. Vision Statement To transform the Company into a modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. ....................13 Pattern of Shareholding ..........................3 Directors’ Report to the Shareholders..............................................................................................................130 ANNUAL REPORT 2012 .........................24 Financial Statements......................................76 Consolidated Financial Statements.................................14 Statement of Compliance with the Code of Corporate Governance ............................................................................................12 Operating and Financial Data ................................................................... Khan Cement Company Limited CONTENTS Corporate profile ...............................................................................................77 Form of Proxy ...................................................................................D........................................................................................G...........25 Directors’ Report on the Consolidated Financial Statements ............................................................................7 Statement of Value Addition ..................................75 Auditors’ Report to the Members on the Consolidated Financial Statements .....21 Review Report to the Members on Statement of Compliance with the Code of Corporate Governance .........2 Notice of Annual General Meeting..............................................................................................................23 Auditors’ Report to the Members....... Farid Noor Ali Fazal Ms. Shahid Hamid. Deutsche Bank AG Dubai Islamic Bank Faysal Bank Limited HSBC Bank Middle East Limited Habib Bank Limited Limited Habib Metropolitan Bank MCB Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited Samba Bank Limited Standard Chartered Bank (Pakistan) Limited Silk Bank Limited The Bank of Punjab United Bank Limited Chairperson Chief Executive Chief Financial Officer Member/Chairman Member Member Member Member/Chairman Member Audit Committee Human Resource & Remuneration Committee Company Secretary Bankers External Auditors Cost Auditors Legal Advisors Registered Office A. Inayat Ullah Niazi Ms. Chartered Accountants Avais Hyder Liaquat Nauman. Ferguson & Co.M. Bar-at-Law Nishat House.F. Nabiha Shahnawaz Cheema Mian Raza Mansha Mr. Nabiha Shahnawaz Cheema Mr.dgcement. Khofli Sattai. Tehsil Kallar Kahar. Arif Bashir Mr. Naz Mansha Mian Raza Mansha Mr. Khalid Qadeer Qureshi Dr. Nabiha Shahnawaz Cheema Mr. Khalid Mahmood Chohan Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Islami Pakistan Limited Barclays Bank Plc Citibank N.com web site: www. Chakwal-Pakistan Phone: 92-543-650215-8 Fax: 92-543-650231 Factory 02 ANNUAL REPORT 2012 .com 2. Dera Ghazi Khan-Pakistan Phone: 92-641-460025-7 Fax: 92-641-462392 Email: dgsite@dgcement. 12.G. Lahore-Pakistan Phone: 92-42-36367812-20 UAN: 111 11 33 33 Fax: 92-42-36367414 Email: info@dgcement. Lawrence Road. Choa Saidan Shah Road. Chartered Accountants Mr. Khalid Qadeer Qureshi Mr. Khan Cement Company Limited CORPORATE PROFILE Board of Directors Mrs.D. 53-A. Farid Noor Ali Fazal Mr. Distt.A.com 1. Distt. Khalid Qadeer Qureshi Ms. K. Khairpur. on 16-10-2012 at Registered Office. Rs. To appoint statutory Auditors for the year ending June 30. Khan Cement Company Limited ("the Company") will be held on October 24. Khan Cement Company Limited NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that Annual General Meeting of the Shareholders of D. 53-A. To receive and adopt the Audited Unconsolidated Financial Information and Consolidated Financial Information of the Company for the year ended June 30. 1.D. 2012 (Wednesday) at 11:00 A.e.m. Physical transfers / CDS Transactions IDs received in order up to 1:00 p. Nishat House. Members who have not yet submitted photocopies of their CNIC to the Company are requested to send the same at the earliest to mention the same on dividend warrants to be issued. 1. Re. In case of corporate entity. at Nishat House. will be considered in time for entitlement of 15% Final Cash Dividend and attending of meeting. 3.50 (Rupee One and Paisas Fifty Only) Per Ordinary Share] as recommended by the Board of Directors 3. Lahore. Proxies of the Members through CDC shall be accompanied with attested copies of their CNIC. Lawrence Road. 2012 together with the Directors' and Auditors' reports thereon. 2013 and fix their remuneration. if any. 2. Lahore to transact the following ordinary business: 1. By order of the Board LAHORE SEPTEMBER 10. Lawrence Road. Account Number and Participant Account Number to produce at the time of attending the meeting. To approve Final Cash Dividend @ 15% [i. G. 2.M. Shareholders are requested to immediately notify the change in address. the Board's Resolution/power of attorney with specimen signature shall be furnished along with proxy form to the Company. The shareholder through CDC are requested to bring original CNIC. A member eligible to attend and vote at this meeting may appoint another member his / her proxy to attend and vote instead of him/her.50 (Rupee One and Paisas Fifty Only) Per Ordinary Share] and attending of Annual General Meeting. BOOK CLOSURE NOTICE:The Share Transfer Books of Ordinary Shares of the Company will remain closed from 17-10-2012 to 24-10-2012 (both days inclusive) for entitlement of 15% Final Cash Dividend [i. 4.G. Proxies in order to be effective must reach the Company's Registered office not less than 48 hours before the time for holding the meeting.e. 2012 ( KHALID MAHMOOD CHOHAN ) COMPANY SECRETARY NOTES: 1. 53-A. ANNUAL REPORT 2012 03 . to put before the Shareholders of the Company for their approval in the forthcoming Annual General Meeting to be held on October 24. 2012 has recommended the following Special Resolution under Section 208 of the Companies Ordinance.D. an associated company”. ALSO RESOLVED THAT. “subsequent to the above said equity investment. FURTHER RESOLVED THAT. pass the following Special Resolution with or without modification(s). “the above said resolution shall be valid for 3 years and the Chief Executive Officer and/or Company Secretary of the Company be and are hereby singly empowered and authorized to undertake the decision of said investment of shares as and when deemed appropriate and necessary in the best interest of the Company and its shareholders and to execute any and all documents and agreements as required in this respect”. Khan Cement Company Limited (“the Company”) in their meeting held on October 02. Khan Cement Company Limited ADDENDUM TO THE NOTICE OF ANNUAL GENERAL MEETING The Board of Directors of D. FURTHER RESOLVED THAT. if thought fit. “pursuant to the requirements of Section 208 of the Companies Ordinance. D. Khan Cement Company Limited (“the Company”) be and is hereby authorized to invest up to Rs.G. G. “a certified true copy of these resolutions duly signed by the Chief Executive Officer or any of the Director or the Company Secretary be issued to whom it may concern and shall remain enforced until notice in writing to the contrary duly signed by the Chief Executive Officer or any of the Directors or Company Secretary”. SPECIAL BUSINESS:To consider and. 1984. G. RESOLVED THAT. a part or all of equity investments made by the Company from time to time as and when deemed appropriate and necessary in the best interest of the Company”. Chief Executive Officer and/or Company Secretary of the Company be and are hereby authorized singly to dispose off through any mode. 500 Million (Rupees Five Hundred Million Only) by way of long term Equity Investment in the shares of Nishat Dairy (Private) Limited. 2012. 1984. 2012 ( KHALID MAHMOOD CHOHAN ) COMPANY SECRETARY 04 ANNUAL REPORT 2012 . By order of the Board Lahore October 02. This statement sets out the material facts pertaining to the special business to be transacted at the forthcoming Annual General Meeting of the Company to be held on October 24. 250 million.700 million as and when required.800 Holstein Friesian heifers (1. purchase contracts for these have already been made with reputable growers. Information required under Clause (a) of sub-regulation (1) of Regulation 3 of Companies (Investment in Associated Companies or Associated Undertakings) Regulations. Off Kot Sarwar Interchange.300 joined and 500 un-joined) from Australia in Phase I. Nishat Dairy (Private) Limited was incorporated on 28 October 2011 as a private limited company with an authorized share capital of Rs.500 milking animals and in the second phase additional investment shall be made for incremental 1. District Hafizabad to establish the dairy farm.200 heifers (all joined) will be bought in Phase II to reach the farm capacity of 2. The company will import 1. The authorized share capital has subsequently been enhanced to Rs.G.No. Additional 1.52% of the final paid up share capital. 1984. i ii Requirement Name of associated company Criteria of associated relationship Purpose Benefits Information Nishat Dairy (Private) Limited Common directorship To participate in the growing Dairy Sector of the Country through equity investment. The company has undertaken the project to establish a dairy farm with the capacity of 2500 milking animals.500 milking cows. 10/. alfalfa hay and rhode grass) will be outsourced.000 milking animals to reach the housing capacity of 2. Khan Cement Company Limited through dividend income from investment in associated company. Shareholding percentage: NIL No. Period of investment iii iv Maximum amount of investment Maximum price/share Strategic Investment – long term Rs. 1. of shares: 50 Million . The project will be completed in two phases.D. In the first phase. v vi Maximum number of shares to be acquired Shareholding before investment Shareholding after investment 50 million shares No. ANNUAL REPORT 2012 05 .500 milking animals. 2012 Ref. of shares: NIL. To earn return on equity of D. Nishat Dairy (Private) Limited is being set up with the principal object of carrying out dairy business in Pakistan.per share since the project is a green field project and the price is less than the fair value determined by independent firm of Chartered Accountants. Cattle feed (corn. Moza Khatrani. Shareholding percentage: 18. The company has purchased 147 acres land at Sukheki Road. the company will set up the dairy farm for 1.500 million which will be further enhanced to Rs 2. 500 million (Rupees Five Hundred Million Only) The price to be paid for the equity investment will be Rs. The directors have carried out their due diligence for the proposed investment and the duly signed recommendation of due diligence report shall be available for inspection of members in the general meeting along with audited accounts of the associated company. 2012. G. The company will sell raw milk to the companies operating in dairy products manufacturing industry. At 2500 milking cows it will be the largest dairy farm in the country. Khan Cement Company Limited STATEMENT UNDER SECTION 160(1)(b) OF THE COMPANIES ORDINANCE. Starting date of work Completion of work Commercial operations date Expected time by which the project shall start paying return on investment 06 ANNUAL REPORT 2012 Rs. (Copy of fair valuation report issued by Tabussum Saleem & Co. 30 June 2012 is company's first year of operations. 9.23 6. Off Kot Sarwar Interchange. Khan Cement Company Limited. The directors of the associated company are interested in the investing company to the extent of their shareholding as under:Name Mian Raza Mansha Mian Umer Mansha Mian Hassan Mansha xv xvi Any other important detail Description of the project None 2500 milking cows dairy farm at Sukheki Road.98% with 4% terminal growth rate. Mian Raza Mansha currently holds 33. Not applicable..86 /share as at June 30.31 Surplus funds of the Company. 2012 March 30. G.14 May 09. 28. 2012). Khan Cement Company Limited Ref. The brothers of Mian Raza Mansha. District Hafizabad. is available at Registered Office of the Company and can be inspected in working hours upto October 23. No Agreements. The Company was incorporated on 28 October 2011.33% shares in Nishat Dairy (Private) Limited.G. 2012. Chartered Accountants. Loss per share for the year 2011-12 is Rs. Moza Khatrani. vii viii Requirement Requirement in case of investment in listed associated company Fair market value of shares Information Not Applicable as Nishat Dairy (Private) Limited is an unlisted. 2013 April 01.55 per share based on discounted cash flows using “Free Cash Flow” to the Company at discount rate of 16. % of Shareholding 2. 0. ix x xi xii xiii xiv Break-up value of shares Earnings per share for the last three years Sources of fund from which shares will be acquired Requirements if shares are intended to be acquired using borrowed funds Salient features of agreement(s) entered into with the associated company Direct/Indirect interest of directors in the associated company One director of D.D. private limited company The fair value of the share determined in terms of Regulation 6(1) is Rs.33% shares each in Nishat Dairy (Private) Limited. 2013 Financial year 2014-15 .90 6.No. Mian Umer Mansha and Mian Hassan Mansha also holds 33. as world economy is stabilizing and construction There is a significant growth in local sales dispatches which remained at 8. Due to prospective increase in cement demand Asian cement industry is investing heavily in Indonesia. India. Europe is also in a vicious cycle of high debt and low growth. Cement Industry Global Cement Industry Globally cement industry grow dynamically with most of the actions taking place in emerging economies. Thailand. Increased competition from the Middle East has badly affected the country's export market. Inflationary pressures were immense in the country. Trade and not trade related exposure to various geographical areas have innumerable mark on our country. Afghanistan. Though. this phase is momentary and long-term projections indicate healthy demand growth. Despite the ongoing financial crisis the global economy is facing. Sri Lanka.G. However negative growth trend continue in export dispatched which remained at negative 9. from natural disasters. infrastructure and human settlements. Pakistan's overall manufacturing sector operated below production capacity.D. in Sindh and adjoining areas of northern Balochistan caused severe damage to crops. from Middle East unrest to USA economic weakening. but at a decelerated pace. Despite minor growth in Construction sector (6. the world is now witnessing a new series of alarming situations.2% in 2012. Iraq and African continent countries are among the major importer of Pakistan cement. Energy is considered to be the lifeline of economic development. Changing global scenarios are impacting our domestic environment as well. demand is growing.84 % as compared to negative growth of 6. the need for housing and continued government investments in infrastructure development by emerging economies is offsetting downturn in mature markets.4%). diminishing supply of natural gas and increase in prices of fuel were also major contributor towards the low GDP growth during the year. Laos and Cambodia Domestic Cement Industry The problems that beset Pakistan's cement industry last year seem to be continuing in 2012. Severe shortfall in Power generation. However. to violence in South Asia. Pakistan's cement industry's rated capacity is 44 million tones per annum and industry's average operations during FY12 was about 73% as compared to 74% last year.47% last year ANNUAL REPORT 2012 07 .64% last year. Overall impact of this natural disaster is estimated around PKR 324 billion There was a decrease in Foreign Direct investments by 68% due to political instability.12% as compared negative 11. activities are also picking up across global markets into the next decade. Out of the 73% utilization 74% was sold in domestic market while 26% was exported. Moreover poor Law and order situation in Karachi and Balochistan also shackled the confidence of investors. The situation further deteriorated by heavy rainfall in August 2011.7% from originally planned 4. Myanmar. at present. Khan Cement Company Limited DIRECTORS’ REPORT 2012 Business Outlook After 2007 & 2008 financial melt down. Our revised GDP growth remained at 3. 202.733 98.969 (211.835) 1. adjustment in respect whereof was claimed by the Company in returns of total income for tax years 2009 to 2011 against dividend income derived during such years.118 2011 Year ended 30 June 18.949. thus resulting into recognition of related deferred tax asset.840 4. Here are the annual performance highlights for FY12: Financial Performance (Rupees in Thousands) 2012 Year ended 30 June Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Impairment on investments Profit from operations Finance cost Profit before taxation Taxation Profit after taxation 22.945 2.004. repayment of long term loans. the likelihood of appellate authorities endorsing Company's claim of adjustment is not strong given to certain recent judgments.229) 4. owner's Capital and liabilities.755 (267.146) 601.599) (37.765. adjustment of dividend income against unabsorbed tax depreciation has not been accounted for.443.108.956 (Metric Tons) 2011 Year ended 30 June 3.773.G.304. 1.231) 170.134.853 (15.670. Liabilities attributed to financial institutions are 27% of total Capital and Liabilities while other liabilities are 8% Increase in sales is attributed to better prices in local and international market and devaluation of Pak Rupee against US Dollar.192 (430. As specified in the following graph.059 million received during the year from investment.198 (14.130 (118.38.723.964) 1. Increase in other operating expenses is attributed to increase in company's provision of Worker Profit Participation due to increased profitability and exchange losses incurred on imports and revaluation of foreign currency loan due to Devaluation of Rupee against Dollar during the year.052.836) 2.680. availability of reduced spreads and efficient utilization of export refinance scheme.521 2. A deferred tax asset of Rs 848.506. Since. There is an increase in Cost of sales which is mainly constituted of fuel and energy cost 61%.338 (2.860.635 Reduction in finance cost is attributed to less utilization of finance lines due to better cash flow planning.948 4.466 55.176.458 5. Other operating income is mainly attributed to Dividend income of Rs. Capital Assets represent more than 53% of the total assets while liquid assets are 36%.253.404 4.470.D.384. 08 ANNUAL REPORT 2012 .738.187.018. Local sales constituted 69% of the total sales while export sales remained at 31%.901) (500.795 1. therefore.250 (1.705) (2.7 million has been recognized in respect of unabsorbed tax depreciation. During FY12 year the Company performed unprecedented and reported a post tax profit of PKR 4.362) (2.784) 4. Khan Cement Company Limited COMPANY'S PERFORMANCE 2012 Production and Sales Statistics 2012 Year ended 30 June Clinker Production Cement Production Clinker Sale Cement Sales ( Local) Cement Sales (Export) Cement Sales Total 3.165.108 million and Earnings Per Share of 9.652 4.577.961 The company maintained a balance proportion of Asset. Following is the composition of Cost in comparison of sales.534 1.936 5.422 4.192.098) 7.079. suppliers and all those who are associated with us in our activities. We also ensure that our products are shipped in a safe manner complying with safety standards and legal requirements. conserve all kinds of resources and adhere to all legal regulations. electronic communication and network infrastructure. Health and Environmental protection. However to some extent the risk is mitigated by export volume. accidents or injuries to employees and visitors. use of municipal and agricultural waste to generate heat is also an effort to reduce impact of fossil fuel on Ozone Layer. Although decrease in SBP interest rate will reduce finance cost. Liquidity and other risks have also been discussed at length in notes to the accounts. The Company takes care and applies appropriate procedures to design /manufacture cement products so as to ensure that no harmful substances are present in its products. Khan Cement Company Limited The Company has a policy of continuous investment in latest and upgraded manufacturing Technology and equipment which is evident from our year wise capitalization. The company's practice is an evidence of commitment to its employees. Information system security and disaster recovery management are given primary importance to safeguard company's information system. Plant and Equipment (cost in millions) company is continuously working on exploration and availability of cheap alternate fuels to reduce dependence on imported coal and furnace oil The company uses imported coal to meet its energy requirement and due to continuous investment in imported plant and machinery.016 MW from waste heat recovery. remove or control the risk of fire. suppliers. which includes management of ERP (Oracle EBS).357 MW of electricity from its own sources including 64. the company also uses export refinance scheme to benefit from reduced spread. customers and communities in which we operate.5 Billion to national exchequer during FY12 in terms of various taxes and levies. During the year the company generated 305. Credit. New avenue of development are continuously evaluated for process optimization and ensuring its effectiveness at the same time. Property. state-of-art technology helps to achieve business goals and objectives. Sensitive Factors Cement Industry is energy intensive and shortfall in supply of electricity and Sui gas and continuous increase in electricity prices results in decline in profits for the stake holders. The company also uses foreign exchange derivatives to mitigate the risk of foreign exchange losses. Contribution to National Exchequer Your Company contributed more than PKR 4. The movements in KIBOR and LIBOR both have substantial impact over shareholder's profitability. 09 The Company's balance sheet represents its strength and your Company's management's controls. The Company also contributed its due share in earning foreign exchange of more than US Dollar 79 Million for the country. The Company has substantial long and short term loans including foreign currency loan. The ANNUAL REPORT 2012 . We are committed to actively managing health and safety risks associated with our business and are actively working towards improving our procedures to reduce. Business Intelligence (BI). Your Company encourages awareness in these areas amongst our employees. hence sharing the burden of national grid.G. Corporate Social Responsibility Corporate social responsibility (CSR) is about business giving back to society. customers. Moreover. the company is exposed to risk of foreign exchange losses due to devaluation in Pak Rupee against other currencies. Cash flow Management The company has an effective cash flow Management in place to project inflow and outflow of cash and develop strategies to meet working capital requirements through cash inflows and short term borrowings Information Systems Information Technology and Communication system of the company support to achieve its management and operation excellence. Continuous improvement in business processes and IT infrastructure with changing technologies and business dynamics is ensured. Our goal is to minimize all adverse environmental and health impacts arising out of our operations. Maintenance of health and safety standards at our plants and offices is our top priority.D. The Company is committed to achieve excellence in Safety. The company's compliance with Kyoto Protocol of United Nations Framework Convention and award of Carbon credit is an evidence of company's commitment to cleaner and healthier environment. Chartered Accountants retire and offer themselves for reappointment. Appropriation The board. Ferguson & Co. Khan Cement Company Limited The company is replacing imported coal with alternate fuels thus saving foreign exchange for the country required for balance of payment Realizing the importance of education. relevant for the year ended 30 June 2012 ANNUAL REPORT 2012 . 47 Billion were allocated to WAPDA for various hydel projects and water schemes. F.250 per ton) and decrease in Custom duty on the import of scrap of rubber/ shredded tyres to be used as substitute material and expected decrease in Imported coal prices. State of the art Waste Heat Recovery Plant at our DG Khan site is successfully running. However the advantage is going to be nullified by increase in electricity cost due to Fuel Price Adjustment (FPA) and increase in Sui gas cess from Rs. your company is working on various environment friendly and energy efficient projects. The company is expecting to generate 8.. are subject to rigorous testing to ensure that each bag of cement is of the highest quality. processing of materials and the finished product. Auditors The present auditors.5 per share for the year. monitoring and continuous enhancement of quality control systems using latest methods of analyses. The company's marketing activities are also directed towards exploration of new export market in African continent counties.D. Alternate Fuels projects are now running successfully and showing favourable results. continuity of energy crises.18 million during the year thus making it accessible to rural community. the company is operating two schools in DG khan bearing cost of more than Rs. Lahore and Islamabad Stock Exchanges in their Listing Regulations. This plant uses the heat of cement plant and generates electricity there-from without using any fossil fuel. Decreasing trend of SBP discount rate will have certain positive implications on company's profitability.000 carbon credits which are yet to be certified. while erection and installation of plant and machinery is under process. sports and flood relief activities being carried out in our country.. Moreover Government permission to export cement to India through land routes will also result in increase in company exports. Company is also investing in state of the art packing plant for its DGK site with automatic cement packing and truck loading equipment. Alternate fuels include: • • • Industrial waste Agricultural waste Municipal waste. During the year company also donated reasonable amount toward the rehabilitation of disabled persons. Installation of Waste Heat Recovery Plant at Khairpur plant is under way. Compliance with Code of Corporate Governance The requirements of the Code of Corporate Governance set out by Karachi.6 MW from this project and this project is expected to be operational in December 2012.G. The industry also foresees increase in demand and sustainability in prices from expected recovery of economy in post election2013 scenario. All stages of the production process right from the selection of raw materials. Future Prospects Cement industry was expecting to benefit this year from pronouncement announced in federal Budget 2012-13 relating to decrease in Federal Excise Duty(FED)(Rs. These projects aim at replacing imported coal with indigenous alternate fuels. Chartered Accountants as auditors for the ensuing year as suggested by the Audit Committee subject to approval of the members in the forthcoming Annual General Meeting. keeping in view the profitability decided to recommend dividend @ Re. During the year the company obtained more than 13. The frequency of sampling and testing along with control parameters is also well defined. This project is in compliance of the Kyoto Protocol of United Nations Framework Convention on Climate Change and is aimed at reducing the greenhouse gases. For this sake. implementation. Ferguson & Co. However. The Board has recommended the appointment of M/s A. Base work is complete. the company is also seeking opportunity from revival activities 10 in Iraq and Libya. The quality check parameters during each level of the process are monitored and controlled by the latest version of technology & equipments connected on-line with Central Control Room through PLC system. 13 to Rs 50 per MMBTU. Etc. Quality Management Quality is assured through systematic and effective adoption. The industry is also expecting increase in sales volume due to government allocation of Rs. 873 Billion toward Public Sector Development Projects (PSDP) out of which Rs. Company Projects The management of the company has committed towards cleaner environment and energy efficiency. 100 per ton against expected Rs. M/s A. 1. F. FATA displaced person. expected increase in fuel prices and increase in Inflation rate may reduce the benefit derived from decrease in government duties and expected decrease in coal prices. Pattern of Shareholding A statement of pattern of shareholding of certain class of shareholders as at 30 June 2012. Company Secretary. The Audit Committee has its terms of reference which were determined by the Board of Directors in accordance with the guidelines provided by the Listing Regulations. • The key operating and financial data for the last six years is annexed.281 million) ANNUAL REPORT 2012 11 . six Meetings of the Audit Committee were held. the results of its operations. Khan Cement Company Limited have been adopted by the company and have been fully complied with. is included in the annexed shareholders' information. • Value of investments of Provident Fund based on its audited financial statements is Rs 579. • Appropriate accounting policies have been consistently applied in the preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. • Any departure from the application of IFRS has been adequately disclosed in”Notes to the Accounts” of financial statements. which now comprises of two Non-Executive Directors (including its Chairman) and one Executive Director. 2012 • There has been no material departure from the Best Practices of Corporate Governance. • There are no doubts upon the company's ability to continue as a going concern. Mian Raza Mansha Chief Executive Officer Lahore: 10 September. Chief Financial Officer. Corporate and Financial Reporting Frame work The financial statements together with the notes thereon have been drawn up by the management of the company in conformity with the Company Ordinance.G. their spouses or minor children did not carry out any trade in the shares of the company during the year. Company's Staff and Customers We wish to record our appreciation of continued commitment of our employees and patronage of our customers. six Board meetings were held and the number of meetings attended by each Director is given in the annexed table. 1984 and applicable International Financial Reporting Standards (IFRS).494 million (2011: Rs 448. • Proper books of account have been maintained by the company. Chief Executive.D. These Statements present fairly the company's state of affairs. The Directors. as detailed in the Listing Regulations. A Statement to this effect is annexed to the Report. During the year. whose disclosure is required under the reporting frameworks. Audit Committee An Audit Committee of the Board has been in existence since the enforcement of the Code of Corporate Governance. cash flow and changes in equity. • The system of internal control is sound in design and has been effectively implemented and monitored and is being continuously reviewed by the internal auditors. Meeting of Board of Directors During the year under consideration. 810.996 2.522 1.547 19% 4% 100% 1.187.Profit for the year Other operating costs .Ordinary share holders Reinvested in business .592.962 56% 4% 4.443.784 1.599.Other income 20.680 1.369 1.680 8% 5.273 28.106.012.404.282 1.576 1.936 28.580.Banks .610 96% 23.Exports Income from other sources .078.Services .232 4.088 7.229 16.534 95% 1.228 21% 1.D.177.430.196 5% 100% Revenue Distributed Suppliers: .196 7% 4% 100% 12 ANNUAL REPORT 2012 .473.466.164 4.960 5.528 15.699 9.118 1.312 % 2011 (Rupees in thousand) % 27.Other levies and duties Providers of Capital: .057.121.499 985.Local sales .580.833 6.Raw and packing materials .702 1.350 155.599 53% 4% 13.986.316 8.409 170.051.058. 2012 2012 (Rupees in thousand) Revenue Generated Revenues: .258.052.670.155.540 1.458 24.621.G.601.757 1.Net (55.379.Stores spares .513.662 24.Depreciation .907 14% 430.805.574. Khan Cement Company Limited STATEMENT OF VALUE ADDITION FOR THE YEAR ENDED JUNE 30.877.Investment income .047.559 1.701 951.Indirect taxes .Fuels and energy Employees Government: .707 129.486.898 2.155.887 2.146.592.670.Direct taxes .652) 4.108.051.546 4% 100% 1.784 6% 2. 417.43 37.765.581 12.591 12.214 50.142.38 9.948 4.331 8.43 18.101 71.078 661.404 4.519.89 (0. 59 : 1 45 : 55 15.117.834.375 24.720.70 0.205.230) 6.65 : 1 19 : 81 32.565 49.622.45 : 1 25 : 75 23.949.379 4.022 525.023.390.118 170.985 1.Tons) Clinker Cement Cement sales: Local Export Clinker Sale: Local Export OPERATING RESULTS (Rupees in thousand) Net sales Gross profit Pre-tax profit/ (Loss) After tax profit/ (Loss) FINANCIAL POSITION Current assets Current liablilities Property.705.108.953 3.767 4.004.60 0.115 1.217.915.687.783 153.054.198 4.377 11.306 25.000 2011 2010 2009 2008 2007 (%) (%) (Rs.287.877.860. Plant & Equipment Total assets Long term liabilites Shareholder's equity RATIOS Current ratio Debt to equity ratio Gross profit to sales Net profit to sales Break up value per Share Earnings per share: Basic Diluted 1.27 43.834 177.703.101 3.6 : 1 44 : 56 31.632 18.39 (0.655.946.945 3.755 4.21) (0.403 776.793 42.275.730 358.202 2.917 33.064 4.685 30.471 1.908.551 51.572.481 95.764 4. Khan Cement Company Limited OPERATING AND FINANCIAL DATA 2012 PRODUCTION & SALES (M.91 39.189 25.D.090.348.831.840 98.229 22.21) 2.62 1.283 16.923.918.17 9.930) (53.528.956 2.977.90 44.224 20.) ANNUAL REPORT 2012 13 .996 1.894 51.018.202.685.961 16.419.70 0.428 2.882.296 3.75 0.63 1.611.635 2.63 1.227.209 2.853 18.031.273 (250.930.466 601.806.209 12.684.534 1.325.875 72.934 8.198 7.943 25.954 7.192 4.458 4.) (Rs.92 41.165.445.471 3.799 24.492 13.733 4.49 2.041 4.229 5.384.723.233.422 5.625 2.360 5.052.538.718 22.591 15.969 4.19 : 1 28 : 72 16.854.786.253.442 19.274.502.103.577.71 17.080.220 13.) (Rs.900 233.440.861 805.45 1.185 22.43) 41.908.773.744.477 2.97 1.60 6.992.G.43 6.046.433.214.959 30.554 32.041 3.257 19.038.307.738.84 : 1 27: 73 31.043 5.192.28 0.304.38 1.45 0.949 2.345.795 1.506.674 26.354 18.65 25.302 47.829 2.679.176.593 4.962 4.521 4. OF SHAREHOLDERS 1460 2095 1519 2301 567 180 109 79 57 25 35 21 46 11 14 7 9 15 6 4 6 4 25 7 4 1 4 4 5 6 3 2 6 2 4 4 2 4 2 3 3 1 14 3 3 1 2 1 FROM 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 105001 110001 115001 120001 125001 130001 135001 140001 145001 150001 155001 160001 165001 170001 175001 180001 185001 190001 195001 200001 205001 210001 220001 230001 SHARE HOLDING (NO. OF SHARES) TO TOTAL SHARES HELD 67582 690363 1305499 6030031 4415951 2348775 1997819 1865798 1606654 813738 1341419 905890 2285344 577911 828000 445465 612259 1115644 466158 334400 533091 375763 2494139 723880 435120 113401 478000 500000 644367 800816 417175 287283 897800 305698 632284 653900 335203 693480 360000 553310 567250 191000 2792761 607167 623178 210830 447284 231708 Continued 14 ANNUAL REPORT 2012 100 Shares 500 Shares 1000 Shares 5000 Shares 10000 Shares 15000 Shares 20000 Shares 25000 Shares 30000 Shares 35000 Shares 40000 Shares 45000 Shares 50000 Shares 55000 Shares 60000 Shares 65000 Shares 70000 Shares 75000 Shares 80000 Shares 85000 Shares 90000 Shares 95000 Shares 100000 Shares 105000 Shares 110000 Shares 115000 Shares 120000 Shares 125000 Shares 130000 Shares 135000 Shares 140000 Shares 145000 Shares 150000 Shares 155000 Shares 160000 Shares 165000 Shares 170000 Shares 175000 Shares 180000 Shares 185000 Shares 190000 Shares 195000 Shares 200000 Shares 205000 Shares 210000 Shares 215000 Shares 225000 Shares 235000 Shares .G.D. Khan Cement Company Limited PATTERN OF SHARE HOLDING AS AT JUNE 30. 2012 (ORDINARY SHARES) NO. Khan Cement Company Limited PATTERN OF SHARE HOLDING AS AT JUNE 30.G. OF SHARES) TO TOTAL SHARES HELD 240000 496240 518704 265000 275000 280000 281588 586536 891599 605029 309500 330000 337501 697880 354800 360000 365000 389000 1596000 402897 412476 846350 427200 437690 887422 450000 459750 945055 483469 989290 500000 501331 516500 578871 591889 624000 630000 633000 646076 1993708 668700 700000 700310 725760 735046 758300 798276 802080 850320 Continued ANNUAL REPORT 2012 15 240000 Shares 250000 Shares 260000 Shares 265000 Shares 275000 Shares 280000 Shares 285000 Shares 295000 Shares 300000 Shares 305000 Shares 310000 Shares 330000 Shares 340000 Shares 350000 Shares 355000 Shares 360000 Shares 365000 Shares 390000 Shares 400000 Shares 405000 Shares 415000 Shares 425000 Shares 430000 Shares 440000 Shares 445000 Shares 450000 Shares 460000 Shares 475000 Shares 485000 Shares 495000 Shares 500000 Shares 505000 Shares 520000 Shares 580000 Shares 595000 Shares 625000 Shares 630000 Shares 635000 Shares 650000 Shares 665000 Shares 670000 Shares 700000 Shares 705000 Shares 730000 Shares 740000 Shares 760000 Shares 800000 Shares 805000 Shares 855000 Shares . OF SHAREHOLDERS 1 2 2 1 1 1 1 2 3 2 1 1 1 2 1 1 1 1 4 1 1 2 1 1 2 1 1 2 1 2 1 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 1 1 FROM 235001 245001 255001 260001 270001 275001 280001 290001 295001 300001 305001 325001 335001 345001 350001 355001 360001 385001 395001 400001 410001 420001 425001 435001 440001 445001 455001 470001 480001 490001 495001 500001 515001 575001 590001 620001 625001 630001 645001 660001 665001 695001 700001 725001 735001 755001 795001 800001 850001 SHARE HOLDING (NO.D. 2012 (ORDINARY SHARES) NO. Khan Cement Company Limited NO.G. OF SHARES) TOTAL SHARES HELD 924409 981849 2000000 1025000 1053232 1066800 1070357 1100000 1168100 1185500 2400000 1209600 1215708 1300000 1305030 1331973 1349046 1407944 1500000 1548485 1591305 1657100 1703000 1757607 1820800 1924079 1948800 1956760 2246400 2331000 2652677 2707990 5997393 3221572 3745800 3810000 3866411 4237000 4431222 4635974 4688478 4909249 5069117 5221528 5493799 6006253 6394821 6558181 8060906 Continued FROM 920001 980001 995001 1020001 1050001 1065001 1070001 1095001 1165001 1185001 1195001 1205001 1215001 1295001 1305001 1330001 1345001 1405001 1495001 1545001 1590001 1655001 1700001 1755001 1820001 1920001 1945001 1955001 2245001 2330001 2650001 2705001 2995001 3220001 3745001 3805001 3865001 4235001 4430001 4635001 4685001 4905001 5065001 5220001 5490001 6005001 6390001 6555001 8060001 TO 925000 Shares 985000 Shares 1000000 Shares 1025000 Shares 1055000 Shares 1070000 Shares 1075000 Shares 1100000 Shares 1170000 Shares 1190000 Shares 1200000 Shares 1210000 Shares 1220000 Shares 1300000 Shares 1310000 Shares 1335000 Shares 1350000 Shares 1410000 Shares 1500000 Shares 1550000 Shares 1595000 Shares 1660000 Shares 1705000 Shares 1760000 Shares 1825000 Shares 1925000 Shares 1950000 Shares 1960000 Shares 2250000 Shares 2335000 Shares 2655000 Shares 2710000 Shares 3000000 Shares 3225000 Shares 3750000 Shares 3810000 Shares 3870000 Shares 4240000 Shares 4435000 Shares 4640000 Shares 4690000 Shares 4910000 Shares 5070000 Shares 5225000 Shares 5495000 Shares 6010000 Shares 6395000 Shares 6560000 Shares 8065000 Shares 16 ANNUAL REPORT 2012 .D. OF SHAREHOLDERS 1 1 2 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 SHARE HOLDING (NO. 5. Foreign 9.695 137. 7. 3.574.858 50.71 SHARE HOLDING (NO.982. 135. Chief Executive Officer. 4.61 31.62 0. Others Joint Stock Companies Investment Companies Pension Funds.290.G.708.708.066. and their spouse and minor children Associated Companies.29 35.797.D. 2. 6. Khan Cement Company Limited NO.75 7.176.239 3. OF SHAREHOLDERS 1 1 1 1 1 1 1 1 8811 CATEGORIES OF SHAREHOLDERS AS ON JUNE 30.72 1.145 6.723 30. OF SHARES) TOTAL SHARES HELD 8710532 11149920 11197000 15729997 17844422 21289060 22929033 114645168 438119118 FROM 8710001 11145001 11195001 15725001 17840001 21285001 22925001 114645001 TO 8715000 Shares 11150000 Shares 11200000 Shares 15730000 Shares 17845000 Shares 21290000 Shares 22930000 Shares 114650000 Shares TOTAL ANNUAL REPORT 2012 17 .40 18.574 156.559. Local b.201 1.64 11.860 42.591 138.684 1.41 0.033 40. 2012 SHARES HELD 1. Directors. NIT and ICP Banks Development Financial Institutions Non Banking Financial Institutions. undertakings and related parties.312 PERCENTAGE 4.98 9.538. Insurance Companies Modarabas and Mutual Funds Shareholders holding 10% General Public : a.50 9. 8.681. Provident Funds etc.27 31.859. G.D.TRUSTEE MEEZAN ISLAMIC FUND CDC .02 0.TRUSTEE UNIT TRUST OF PAKISTAN CDC .393 412.300 396.TRUSTEE LAKSON EQUITY FUND CDC .409 4.04 0.TRUSTEE ASKARI EQUITY FUND CDC .800 113.62 0.431.500 295.070.STOCK FUND CDC . 2012 No.000.841 42.TRUSTEE FIRST DAWOOD MUTUAL FUND CDC .000.TRUSTEE PAKISTAN STOCK MARKET FUND CDC .TRUSTEE NAFA STOCK FUND CDC .500 191.EQUITY SUB FUND CDC .TRUSTEE ASKARI ASSET ALLOCATION FUND CDC .500 400.23 0.TRUSTEE UNITED COMPOSITE ISLAMIC FUND CDC . FUND CDC .178 162.305 98.000 1.23 0.476 474.168.TRUSTEE APF-EQUITY SUB FUND CDC .ASSET FUND CDC .401 3.01 0.TRUSTEE HBL MULTI .000.TRUSTEE APIF .TRUSTEE FIRST HABIB STOCK FUND CDC .09 0. Khan Cement Company Limited Information Under Clause ( j ) of sub-regulation (XVI) of Regulation 35 of chapter (XI) of Listing Regulations of the Karachi Stock Exchange Limited As at June 30.532 6.514 45. Associated Companies.000 231.02 0.01 0.06 0.799 2.04 0.000 135.897 196.000 349.TRUSTEE KSE MEEZAN INDEX FUND CDC .09 0.TRUSTEE UNITED STOCK ADVANTAGE FUND CDC-TRUSTEE HBL ISLAMIC STOCK FUND CDC-TRUSTEE MEEZAN CAPITAL PROTECTED FUND CDC-TRUSTEE NAFA ASSET ALLOCATION FUND CDC-TRUSTEE NAFA SAVINGS PLUS FUND 18 % 31.21 1.574.708 74.04 1.760 1.09 0.030 42.000 1.01 0. undertakings and related parties Nishat Mills Limited Adamje Insurance Company Limited II.02 0.25 0.TRUSTEE ABL STOCK FUND CDC . Mutual Funds: ASIAN STOCK FUND LIMITED CDC .01 0.TRUSTEE HBL PF EQUITY SUB FUND CDC .000 207.304 1. of Shares I.000 1.02 0.04 0.TRUSTEE PICIC INVESTMENT FUND CDC .07 0.000 3.40 0.TRUSTEE PAK STRATEGIC ALLOC.TRUSTEE PICIC STOCK FUND CDC .TRUSTEE JS LARGE CAP .27 1.3 0.32 0.537 1.493.944 2. FUND CDC .25 0.222 402.03 0.800 1.TRUSTEE NIT-EQUITY MARKET OPPORTUNITY FUND CDC .TRUSTEE NAFA ISLAMIC MULTI ASSET FUND CDC .000 725.953 280.710.17 0.000 94.TRUSTEE AKD AGGRESSIVE INCOME FUND CDC .01 0.TRUSTEE ALFALAH GHP ISLAMIC FUND CDC .201 1.01 0.757.TRUSTEE MEEZAN BALANCED FUND CDC .TRUSTEE ALFALAH GHP ALPHA FUND CDC .TRUSTEE PICIC GROWTH FUND CDC .01 0.TRUSTEE MCB DYNAMIC STOCK FUND CDC .607 102.TRUSTEE HBL .68 0.TRUSTEE ALFALAH GHP VALUE FUND CDC .TRUSTEE ATLAS ISLAMIC STOCK FUND CDC .02 0.36 0.997.11 0.08 0.24 137.357 ANNUAL REPORT 2012 .05 0.250 5.TRUSTEE AL MEEZAN MUTUAL FUND CDC .05 0.000 187.TRUSTEE MEEZAN TAHAFFUZ PENSION FUND CDC .TRUSTEE ATLAS STOCK MARKET FUND CDC .591.04 0.TRUSTEE NAFA MULTI ASSET FUND CDC .100.374 25.000 100.09 0.000 1.TRUSTEE JS ISLAMIC PENSION SAVINGS FUND CDC .100 8.99 0 0.000 924.707.TRUSTEE AKD INDEX TRACKER FUND CDC .000 47.4 0.305.TRUSTEE HBL IPF EQUITY SUB FUND CDC .990 155.03 0 0.TRUSTEE JS PENSION SAVINGS FUND CDC .68 0.000 50.TRUSTEE JS ISLAMIC FUND CDC .407. 000 16.01 0. Insurance Companies.891. There is no trading in the shares of the Company. Company Secretary their spouses and minor children and Other Employees of the Company for whom the Borad of Directors have set the threshold during the period July 1. ANNUAL REPORT 2012 19 .201 6.75 VII.200 2.U.000 105.34 Nil 35.90 0.05 0.40 156. Niazi Ms. PRUDENTIAL STOCKS FUND LTD (03360) SAFEWAY MUTUAL FUND LIMITED TRUSTEE PAK QATAR FAMILY TAKAFUL LTD BALANCED FUND TRUSTEE PAK QATAR FAMILY TAKAFUL LTD AGGRESSIVE FUND III. of Shares CDC-TRUSTEE PAKISTAN PREMIER FUND FIRST CAPITAL MUTUAL FUND LIMITED GOLDEN ARROW SELECTED STOCKS FUND LTD JS VALUE FUND LIMITED MC FSL .295.14 0.01 0.59 0. Information Under Clause (1) of sub-regulation (XVI) of Regulation 35 of chapter (XI) of Listing Regulations of the Karachi Stock Exchange Limited for the financial year ended June 30.01 0.03 2.186 % 0.239 7.TRUSTEE JS KSE-30 INDEX FUND MC FSL-TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND MCBFSL .820 5.574.02 0.16 0 0.03 0.00 1. Shareholders holding Five percent or more voting interest in the Listed Company Mian Umer Mansha Mian Hassan Mansha Nishat Mills Limited 27.551 3. carried out by its Directors.14 31.000 40. 2011 to June 30.066. 2012.000 700. Chief Operating Officer. Head of Internal Audit. Khalid Qadeer Qureshi Mr.879. I. Nabiha Shahnawaz Cheema Mrs. 2012.000 646.02 0 0 0.169 160.03 0.917 137.221. V.02 1.144 50.000 413 64.71 0.538. Directors and their spouse(s) and minor children: Mrs. Chief Executive Officer. Modaraba and Pension Funds: Investment Companies Insurance Companies Financial Institutions Modaraba Companies Mutual Funds Pension Funds/Providend Funds Etc.000 100.797.02 0.500 2.TRUSTEE ABL AMC CAPITAL PROTECT FUND MCBFSL .684 Director/Chairperson Director/CEO Director Director Director/CFO Director Spouse of CEO 113.TRUSTEE NAMCO BALANCED FUND MCBFSL .076 200.G.313 26. Executives: Public Sector Companies and Corporations: Joint Stock Companies Banks.00 0.696.D.312 90.800 3.TRUSTEE NAMCO BALANCED FUND MCBFSL .775 2.000 630.858 42.769.15 0. VI.098 12.00 0.00 0. Chief Financial Officer.04 0. Non-banking Finance Companies.000 100.62 133.572 120.64 9. Farid Noor Ali Fazal Mr.176.723 0.TRUSTEE PAK OMAN ISLAMIC ASSET FUND MCBFSL-TRUSTEE UIRSF-EQUITY SUB FUND MCBFSL-TRUSTEE URSF-EQUITY SUB FUND PAK ASIAN FUND LIMITED PRUDENTIAL STOCK FUND LTD.098 0. Development Finance Institutions.000 99.498 48.290.880 720 1.TRUSTEE PAK OMAN ADVANTAGE ASSET FUND MCBFSL .41 1.000 76. Khan Cement Company Limited No.02 0.02 11. Naz Mansha Mian Raza Mansha Mr.74 0.23 6. Ammil Raza Mansha IV. Takaful. D. Arif Bashir Mr. Farid Noor Ali Fazal **Dr.G. Zaka Ud Din passed away on October 14. attendance position was as under:Sr. Farid Noor Ali Fazal Ms. Naz Mansha Mian Raza Mansha *Mr. Name of Director No. Six Board of Directors Meetings were held. Khan Cement Company Limited ATTENDANCE OF DIRECTORS IN BOARD MEETINGS DURING THE YEAR JULY 01. Nabiha Shahnawaz Cheema (Member/Chairman) (Member) (Member) 6 6 5 20 ANNUAL REPORT 2012 . Zaka Ud Din on October 22. 2. U. 2012 During the year under review. of meetings attended 1. 2011 TO JUNE 30. No. Arif Bashir appointed in place of Mr. Khalid Qadeer Qureshi Mr. No. 3. Zaka Ud Din Mr. 2011. Khalid Qadeer Qureshi Mr. Six Audit Committee Meetings were held. of meetings attended 1. Niazi Ms. **Dr. Name of Director No. after a short illness. attendance position was as under:Sr. I. 2 3 4 5 6 7 8 Mrs. 2011 TO JUNE 30. Nabiha Shahnawaz Cheema * Mr. 2011. 2 5 2 5 5 3 6 4 ATTENDANCE OF MEMBERS IN AUDIT COMMITTEE MEETINGS DURING THE YEAR JULY 01. Mr. 2012 During the year under review. D.G. Khan Cement Company Limited STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE (CCG) (See clause (xI) Name of company D.G. Khan Cement Company Limited Year ending June 30, 2012 This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No.35 of listing regulations of Karachi Stock Exchange Ltd, Lahore Stock Exchange Ltd and Islamabad Stock Exchange Ltd for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The company has applied the principles contained in the CCG in the following manner: 1. The company encourages representation of independent non-executive directors and directors representing minority interests on its board of directors. At present the board includes: Category Independent Directors Executive Directors Names Nil Mian Raza Mansha Mr. Farid Noor Ali Fazal Dr. Arif Bashir Mr. I.U. Niazi Mrs. Naz Mansha Mr. Khalid Qadeer Qureshi Ms. Nabiha Shahnawaz Cheema Non Executive Directors The requirement of Executive Directors and Independent Director in composition of Board under CCG will be met at the time of next election of directors. 2. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this company (excluding the listed subsidiaries of listed holding companies where applicable). 3. All the resident directors of the company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. A casual vacancy occurred in the Board on October 14, 2011 due to sad demise of Mr. Zaka Ud Din and the same was filled up by the Board of directors on October 22, 2011. 5. The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures. 6. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executive and nonexecutive directors, have been taken by the board/shareholders. 8. The meetings of the board were presided over by the Chairperson and, in his absence, by a director elected by the board for this purpose and the board met at least once in every quarter. Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. All the directors on the Board are fully conversant with their duties and responsibilities as directors of corporate bodies. The directors were apprised of their duties and responsibilities through orientation courses ANNUAL REPORT 2012 21 D.G. Khan Cement Company Limited Three ( 3 ) Directors of the Company are exempt from directors training programme due to 14 years of education and 15 years of experience on the board of a listed company. 10. No new appointment of CFO, Company Secretary and Head of Internal Audit has been approved by the board. The remuneration of CFO, Head of Internal Audit and Company Secretary was revised during the year after due approval of the Board. 11. The directors' report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed. 12. The financial statements of the company were duly endorsed by CEO and CFO before approval of the board. 13. The directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding. 14. The company has complied with all the corporate and financial reporting requirements of the CCG. 15. The board has formed an Audit Committee. It comprises 3 members, of whom 2 are non-executive directors and the Chairman of the committee is not an independent director and will be changed after next election of directors. 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the company and as required by the CCG. The terms of reference of the committee have been formed and advised to the committee for compliance. 17. The board has formed an HR and Remuneration Committee. It comprises 3 members, of whom 2 are non-executive directors and the chairman of the committee is a Non Executive director. 18. The board has set up an effective internal audit function who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the company and they are involved in the internal audit function on full time basis. 19. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP , that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP . 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The 'closed period', prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of company's securities, was determined and intimated to directors, employees and stock exchange(s). 22. Material/price sensitive information has been disseminated among all market participants at once through stock exchange(s). 23. We confirm that all other material principles enshrined in the CCG have been complied. LAHORE SEPTEMBER 10, 2012 22 MIAN RAZA MANSHA CHIEF EXECUTIVE NIC Number : 35202-2539500-5 ANNUAL REPORT 2012 D.G. Khan Cement Company Limited REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of D.G. Khan Cement Company Limited ('the Company') to comply with the Listing Regulation No. 35 of the Karachi Stock Exchange, where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement on internal controls covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. Regulation 35 (x) of the Listing Regulations requires the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not. Based on our review nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, 2012. A. F. Ferguson & Co. Chartered Accountants Lahore, Name of engagement partner: Muhammad Masood ANNUAL REPORT 2012 23 We believe that our audit provides a reasonable basis for our opinion and. An audit also includes assessing the accounting policies and significant estimates made by management. and iii) the business conducted. Chartered Accountants. on a test basis. we report that: a) b) in our opinion.2. to the best of our knowledge and belief. 2011 expressed an unqualified opinion thereon. the balance sheet. Ferguson & Co. Khan Cement Company Limited as at June 30. after due verification. investments made and the expenditure incurred during the year were in accordance with the objects of the company. whose report dated September 7. and are in agreement with the books of account and are further in accordance with accounting policies consistently applied except for the changes resulted on initial application of standards. It is the responsibility of the company’s management to establish and maintain a system of internal control. 1984.G. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. ii) the expenditure incurred during the year was for the purpose of the company’s business. amendments or interpretations to existing standards. as well as. Our responsibility is to express an opinion on these statements based on our audit. were necessary for the purposes of our audit.G. Khan Cement Company Limited AUDITORS' REPORT TO THE MEMBERS We have audited the annexed balance sheet of D. in our opinion: i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance. and in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance. evaluating the overall presentation of the above said statements. proper books of account have been kept by the company as required by the Companies Ordinance. 1980 (XVIII of 1980). M/s KPMG Taseer Hadi & Company. profit and loss account. total comprehensive income. d) The financial statements of the Company for the year ended June 30. 2012 and the related profit and loss account. and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance. evidence supporting the amounts and disclosures in the above said statements. Name of engagement partner: Muhammad Masood 24 ANNUAL REPORT 2012 . as stated in note 2. 2012 and of the profit. An audit includes examining. statement of changes in equity and cash flow statement together with the notes forming part thereof. 1984. c) in our opinion and to the best of our information and according to the explanations given to us. statement of changes in equity and cash flow statement together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan. 2011 were audited by another firm of accountants. changes in equity and its cash flows for the year then ended. give the information required by the Companies Ordinance. 1984. for the year then ended and we state that we have obtained all the information and explanations which. Chartered Accountants Lahore. 1984.D.1 to the annexed financial statements with which we concur. and. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at June 30. F. A. statement of comprehensive income. statement of comprehensive income. 467 2.226 284.957.893 139.000 (2011: 950.666.562.G.165.355 185.880.375 4.930.711 30.674.566 35.612 4.000.579 70.000 (2011: 50.000 10.623 CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowing-secured Current portion of non-current liabilities Provision for taxation 11 12 13 14 2.119.205.000) ordinary shares of Rs 10 each .561 35.381 878.090 11.381.D.000) preference shares of Rs 10 each Issued.283 2012 2011 ----(Rupees in thousand)---- 50.886 6.707.381.217.511 8.069 6.687.950. 49.000.118) ordinary shares of Rs 10 each Reserves Accumulated profit 9.000.001.50.198 The annexed notes 1 to 43 form an integral part of these financial statements.090 12.894 162.685.000 5 6 4.119.986.798.500.632 NON-CURRENT LIABILITIES Long term finances Long term deposits Retirement and other benefits Deferred taxation 7 8 9 10 4.116 1.000 4.943 CONTINGENCIES AND COMMITMENTS 15 1.191 23. subscribed and paid up capital 438.829 32.691.733.000 10.548.571 9.000.629.118 (2011: 438.000.229 Chief Executive ANNUAL REPORT 2012 25 .191 24.000 500.108.083 68.000.982 2. Khan Cement Company Limited BALANCE SHEET Note EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital .213 1.500.931 6.703.000 500. 137. prepayments and other receivables Cash and bank balances 20 21 22 23 24 25 4.262 954.416 133.378. spares and loose tools Stock-in-trade Trade debts Investments Advances.008 428.645 317.864.685.126. 2012 Note ASSETS NON-CURRENT ASSETS Property.808 4.543.244.198 49.219 31.440.185.726 73.385 5.209 50.136.342 32.985.821 25. advances and deposits 16 17 18 19 27.970 11.476. plant and equipment Intangible assets Investments Long term loans.126. Khan Cement Company Limited AS AT JUNE 30.349 1.441 18.051 1.229 Director 26 ANNUAL REPORT 2012 .945 120.325.D.034 862.821 18.G.259.703.377 3.300 12.564 197.020 2012 2011 ----(Rupees in thousand)----- CURRENT ASSETS Stores.141 459. deposits. 130 (118.599) (37.853 (15.052.338 (2.964) 1.670.577. Khan Cement Company Limited PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30.936 5.384.506.192 (430.229) 4.108.443.38 0.466 55.231) 170.098) 7.755 (267.969 (211.146) 601.901) (500.705) (2.45 The annexed notes 1 to 43 form an integral part of these financial statements.949.G. Chief Executive ANNUAL REPORT 2012 27 Director .118 18.362) (2.basic and diluted 34 9.680.187.835) 1.250 (1. 2012 Note Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Impairment on investments Profit from operations Finance cost Profit before taxation Taxation Profit after taxation 33 32 28 29 30 31 26 27 2012 2011 ----(Rupees in thousand)---22.202.198 (14.079.192.836) 2.470.784) 4.961 Earnings per share .D.723.134.652 4. D.667 4.118 170.G.961 The annexed notes 1 to 43 form an integral part of these financial statements.706 2. Khan Cement Company Limited STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30.769) 2.394.349 2.542 (118.Change in fair value .Impairment loss through profit and loss account Other comprehensive (loss) /income for the year Total comprehensive income for the year (1. 2012 2012 2011 -----(Rupees in thousand)---Profit after taxation Other comprehensive income Available for sale financial assets .394.108.237.185.066.713.836) 2. Chief Executive 28 Director ANNUAL REPORT 2012 .769) (1. net Interest received Dividend received Net cash used in investing activities (2.398 1.354 (615.204. advances and deposits .189.494.058. Khan Cement Company Limited CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30.300 12.305.245) 370.460.355 Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 36 2.592) (19.120) (10.net Net cash generated from operating activities 35 6.161) (6.064 (2.011.906.751.826.026) 860.832) (1.494.702) (2.314 2012 2011 -----(Rupees in thousand)---- Cash flows from investing activities Fixed capital expenditure Proceeds from sale of property.162.354.135 (8.667) 1.634 2.000 (2.672. Chief Executive ANNUAL REPORT 2012 29 Director .D.146 951.980) Cash flows from financing activities Proceeds from issuance of share capital Proceeds from long term finances Repayment of long term finances Dividend paid Net cash (used in) / generated from financing activities 1.161) The annexed notes 1 to 43 form an integral part of these financial statements.693 42.G.787 (1.205) (335.042) (1) 1.538) 4. plant and equipment Long term loans.106.451) 30.439 23.596.708) (20.049) (225.877 52.850.793) (312.132.113.382 (2.735 1.850) (8. 2012 Note Cash flows from operating activities Cash generated from operations Finance cost paid Retirement and other benefits paid Taxes paid Long term deposits .707 (1.612) 39.792.689 (9. Khan Cement Company Limited STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30.283 4.220 730.394.460.066.750 26.961 170.191 - (1.108.706 353.827 707. 2012 4.066.510 5.827 4.071.Other comprehensive loss for the year Balance as on June 30.191 4.D.G.961 2.650.510 5. Chief Executive 30 Director ANNUAL REPORT 2012 .580.510 5.519.381.908.986.965 12.993 3.163 13.706 2.163 14.711 30.175 353.112 The annexed notes 1 to 43 form an integral part of these financial statements.066.961 170.557.881 878.118 .Profit for the year .198 - - - - 1.974.(1.394.706 2.Right issue Total comprehensive income for the year .769) 4.827 170.930.Other comprehensive income for the year 3.826.118 4.108.381.667 Balance as on June 30. 2010 Transactions with owners .632 4.071.198 730.396 - - 2.Profit for the year .217.829 32. 2011 Total comprehensive income for the year .769) 353.237.071.557. 2012 Capital reserve Share capital Share premium Fair value reserve ( Ru p e e s Capital redemption reserve fund i n Revenue reserve General reserve Accumulated profit Total t h o u s a n d ) Balance as on June 30. G. particularly those involving securitization of financial assets. Wherever the requirements of the Companies Ordinance. The amendments will promote transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position.IFRS 7.1 Standards. 2011). provisions of and directives issued under the Companies Ordinance. amendments or an interpretation to existing standards The following amendments to existing standards have been published that are applicable to the Company's financial statements covering annual periods. The Company has determined that there is no significant transfer of financial assets that requires disclosure under the guidance above. The application of the amendment will not affect the results or net assets of the Company as it is only concerned with presentation and disclosures. . beginning on or after the following dates: 2. clarifies that an entity will present an analysis of other comprehensive income for each component of equity. 1984 or the requirements of the said directives prevail. 1984 or directives issued by Securities and Exchange Commission of Pakistan differ with the requirements of IFRS or IFAS. The new disclosure requirements apply to transferred financial assets. 2011).IAS 24 (revised) (effective July 01.2 . It supersedes IAS 24. ‘Financial Instruments’. emphasises the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments. amendments to published standards and interpretations that are effective in the current year and are relevant to the Company. ANNUAL REPORT 2012 31 2. . issued in 2003. Khan Cement Company Limited ("the Company") is a public limited Company incorporated in Pakistan and is listed on Karachi. An entity transfers a financial asset when it transfers the contractual rights to receive cash flows of the asset to another party. ‘Related party disclosures’. The registered office of the Company is situated at 53-A Lawrence Road. . ‘Related party disclosures’. It is not expected to have any material impact on the Company's financial statements. either in the statement of changes in equity or in the notes to the financial statements. Initial application of standards. New and amended standards. 1984. issued in November 2009. These amendments are a part of the IASBs comprehensive review of off balance sheet activities. 2011).D. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance. 2 Basis of preparation 2. Ordinary Portland and Sulphate Resistant Cement. 1984. It is principally engaged in production and sale of Clinker. Lahore.2. issued in October 8. the requirements of the Companies Ordinance. 2012 1 Legal status and nature of business D. Lahore and Islamabad Stock Exchanges. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities.1 These financial statements have been prepared in accordance with the requirements of the Companies Ordinance. 2011: .IAS 1 (amendments) (effective January 01. 1984 (the Ordinance) and the approved accounting standards as applicable in Pakistan. 'Disclosures on transfers of financial assets' (Amendment) (effective July 01.G.IFRS 7 (Amendments). Khan Cement Company Limited NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30. 2010. and interpretations mandatory for the first time for the financial year beginning July 01. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). If the fair value of the equity instruments issued cannot be reliably measured. ‘Financial Instruments’. The application of this interpretation is not expected to have any material impact on the Company's financial statements. the standard retains most of the IAS 39 requirements.IFRIC 19. 32 ANNUAL REPORT 2012 . Khan Cement Company Limited . . measurement and derecognition of financial assets and financial liabilities. the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The main change is that. The application of this amendment is not expected to have any material impact on the Company's financial statements. Provided certain conditions are met. with bifurcation of embedded derivatives. The Company shall apply these amendments for the financial reporting period commencing on July 01. which should be applied retrospectively to the earliest comparative period presented. entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions.e. The amendment corrects an unintended consequence of IFRIC 14. and the amendment corrects this. and the company does not have any such liabilities.2. This change will mainly affect financial institutions. minimum funding requirements and their interaction’.‘Prepayments of a minimum funding requirement’ (amendments to IFRIC 14). as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. 2011. issued on December 19. 2013 but is available for early adoption. addresses the classification. For liabilities. ‘IAS 19 – The limit on a defined benefit asset. This was not intended when IFRIC 14 was issued. All equity instruments are measured at fair value. The new disclosure requirements apply to offsetting of financial assets and financial liabilities. The amendment clarifies that the right of set-off must be available at present i. and the Company has not early adopted them: . Without the amendment. This is the first part of a new standard on classification and measurement of financial assets and financial liabilities that will replace IAS 39. the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement.D. ‘Extinguishing financial liabilities with equity instruments’. .G. these issues had to be accounted for as derivative liabilities. There will be no impact on the company’s accounting for financial liabilities. such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. This amendment reflects the requirements to enhance current offsetting disclosures. unless this creates an accounting mismatch. in cases where the fair value option is taken for financial liabilities. It requires a gain or loss to be recognised in profit or loss. These include amortised-cost accounting for most financial liabilities. The new disclosure is intended to facilitate comparison between those entities that prepare IFRS financial statements and those that prepare US GAAP financial statements. 2013 and does not expect to have any material impact on its financial statements. it is not contingent on a future event and must be legally enforceable for all counterparties. The application of this amendment is not expected to have any material impact on the Company's financial statements.2 Standards. ‘Disclosures on offsetting financial assets and financial liabilities' (Amendment). 2012 or later periods.IFRS 9. Previously. The following amendments and interpretations to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after July 01. IFRS 9 has two measurement categories: amortised cost and fair value.IFRS 7.‘Classification of rights issues’ (amendment to IAS 32). ‘Financial Instruments: Recognition and measurement’. which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. issued in October 2009. The standard is not applicable until January 01. . 2. 2012 and does not expect to have any material impact on its financial statements. 'Consolidated Financial Statements’. The areas involving a higher degree of judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows: i) ii) iii) iv) Provision for taxation . This standard includes the disclosure requirements for all forms of interests in other entities. applicable from January 01.note 33 Retirement and other benefits . 'Joint Arrangements'. 2013 and does not expect to have any material impact on its financial statements. 2012.G. The Company shall apply this standard from July 01.IAS 1 . .IFRS 12 . applicable from January 01. 3.‘Financial statement presentation’ (Amendment). The Company shall apply this standard from January 01. . The amendment does not address which items are presented in OCI.note 4. 2013 and does not expect to have any material impact on its financial statements. is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form.‘Disclosures of interests in other entities’. 3. 2013. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets. 2013. including joint arrangements. which are largely aligned between IFRSs and US GAAP . 2013. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.note 4. This is applicable on accounting periods beginning on or after January 01. Khan Cement Company Limited .2 The Company's significant accounting policies are stated in note 4. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates. 2013. special purpose vehicles and other off balance sheet vehicles. associates. Judgments and estimates are continually evaluated and are based on historical experience. This is applicable on accounting periods beginning on or after July 01. The Company shall apply this standard from January 01.note 15 ANNUAL REPORT 2012 33 . There are two types of joint arrangement: joint operations and joint ventures. judgment and estimation involved in their application and their impact on these financial statements.‘Fair value measurement’. revenue and expenses. The following is intended to provide an understanding of the policies the management considers critical because of the complexity. This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The main change resulting from this amendment is a requirement for entities to group items presented in Other Comprehensive Income (OCI) on the basis of whether they are potentially recycled to profit or loss (reclassification adjustments). builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. 2013 and does not expect to have any material impact on its financial statements.1 These financial statements have been prepared under the historical cost convention except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value. including expectations of future events that are believed to be reasonable under the circumstances. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. .IFRS 13 . . do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP . subjective or complex judgments or estimates. Proportional consolidation of joint ventures is no longer allowed. Basis of measurement 3. The Company shall apply this standard from July 01. 2013 and does not expect to have any material impact on its financial statements.5 Provisions and contingencies .IFRS 11. The Company shall apply this amendment from July 01.D. Not all of these significant policies require the management to make difficult.IFRS 10.3 & 9 Residual values and useful lives of depreciable assets . liabilities. The requirements. This is applicable on accounting periods beginning on or after January 01. where considered necessary. Khan Cement Company Limited 4. in which case it is recognised in equity.G. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences.D. 4. 4. rebates and exemptions. these are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss over the period of the borrowings on an effective interest rate basis. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Significant accounting policies The significant accounting policies adopted in the preparation of these financial statements are set out below. based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.3 Retirement and other benefits The main features of the schemes operated by the Company for its employees are as follows: Defined benefit plans The Company operates an approved funded defined benefit gratuity plan for all employees having a service period of more than five years for management staff and one year for workers. Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realised or the liability is settled. The amount recognised in balance sheet represents the present value of the defined benefit obligation as on June 30. The dividend on these preference shares are recognised in the profit and loss account as finance cost. Finance costs are accounted for on an accrual basis. The charge for current tax also includes adjustments. Income tax is recognised in profit and loss account except to the extent that it relates to items recognised directly in equity. These policies have been consistently applied to all the years presented. Preference shares. The most recent valuation was carried out as at June 30. Provisions are made in the financial statements to cover obligations on the basis of actuarial valuations carried out annually. which are mandatorily redeemable on a specific date at the option of the Company.1 Borrowings Interest bearing borrowings are recognised initially at fair value less attributable transaction cost. Subsequent to initial recognition. to provision for tax made in previous years arising from assessments framed during the year for such years. 2012 as adjusted for unrecognised actuarial gains and losses. Defined contribution plan The Company operates a recognised provident fund for all its regular employees. unless otherwise stated. Equal monthly contributions are made to the fund both by the Company and the employees at the rate of 10% of the basic salary for officers and 34 ANNUAL REPORT 2012 . except in the case of items charged or credited to equity in which case it is included in the statement of changes in equity. unused tax losses and tax credits can be utilised. are classified as liabilities.2 Taxation Income tax expense comprises current and deferred tax. Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the Company obligations and the fair value of plan assets are amortised over the expected average working lives of the participating employees. 4. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to profit for the year if enacted after taking into account tax credits. Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. Deferred tax is charged or credited to the profit and loss account. if any. 2012 using the "Projected Unit Credit Method". 4. Cost in relation to certain property. unutilised leaves may be accumulated without any limit. 4. In case of workers. plant and equipment is charged from the month in which an asset is acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off. subject to the approval of the Company's management. All other repair and maintenance costs are charged to profit and loss account during the period in which they are incurred. as appropriate. assets are written down to their recoverable amounts and the resulting impairment loss is recognised in profit and loss account. Where an impairment loss is recognised. the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. plant and equipment Property. the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life.5 Property. Under the service rules. plant and equipment signifies historical cost. Obligation for contributions to defined contribution plan is recognised as an expense in the profit and loss account as and when incurred. except for plant and machinery which is being depreciated using the straight line method. Depreciation on additions to property. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset. residual values and the useful lives of the assets are reviewed at least at each financial year end and adjusted if impact on depreciation is significant. plant and equipment. only when it is probable that future economic benefits associated with the item shall flow to the Company and the cost of the item can be measured reliably. 2012 using the "Projected Unit Credit Method". Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services. gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 4. when the employees render service that increase their entitlement to future compensated absences.4 Trade and other payables Financial liabilities are initially recognised at fair value plus directly attributable cost. except freehold land. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to profit and loss account. Unutilised leaves can be used at any time by all employees.D. Where carrying amounts exceed the respective recoverable amount. Unutilised leaves can be accumulated upto 90 days in case of officers. Khan Cement Company Limited 10% of basic salary plus cost of living allowance for workers.G. and subsequently at amortised cost using effective interest rate method. Accumulating compensated absences The Company provides for accumulating compensated absences. Depreciation methods. if any. Freehold land is stated at cost less any identified impairment loss. Any balance in excess of 90 days can be encashed upto 17 days a year only. however accumulated leave balance above 50 days is encashable upon demand of the worker.19. Actuarial gains and losses are charged to the profit and loss account immediately in the period when these occur. are stated at cost less accumulated depreciation and any identified impairment loss. ANNUAL REPORT 2012 35 . The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. plant and equipment may be impaired. so as to write off the historical cost of such asset over its estimated useful life at annual rates mentioned in note 16 after taking into account their residual values. Any further unutilised leaves lapse. The most recent valuation was carried out as at June 30. If such indication exists.5 days leave per month. Depreciation on all property. The Company assesses at each balance sheet date whether there is any indication that property.16 and borrowing costs as referred to in note 4. employees are entitled to 2. The amount recognised in the balance sheet represents the present value of the defined benefit obligations. plant and equipment is charged to the profit and loss account on the reducing balance method. 8 Leases Finance leases Leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. 4. Where carrying amounts exceed the respective recoverable amount.D. Cost also includes applicable borrowing costs.G. Depreciation methods. plant and equipment during the construction and installation. Transfers are made to relevant property.6 Capital work-in-progress Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment loss and represents expenditure incurred on property. are included in liabilities against assets subject to finance lease. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Intangible assets are amortised using the straight line method over a period of five years. If such an indication exists. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off. if any. are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Depreciation of leased assets is charged to the profit and loss account. The interest element of the rental is charged to income over the lease term. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. Payments made under operating leases (net of any incentives received from the lessor) are 36 ANNUAL REPORT 2012 . Khan Cement Company Limited The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. plant and equipment category as and when assets are available for use. finance leases are capitalised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets. The Company assesses at each balance sheet date whether there is any indication that intangible assets may be impaired. Contingent lease payments. net of finance costs. The liabilities are classified as current and non-current depending upon the timing of the payment. At inception. Assets acquired under a finance lease are depreciated over the estimated useful life of the assets on reducing balance method except plant and machinery which is depreciated on straight line method. 4. Where an impairment loss is recognised. 4. Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or capitalised while no amortisation is charged for the month in which the asset is disposed off. The related rental obligations. if any. assets are written down to their recoverable amounts and the resulting impairment loss is recognised in profit and loss account. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. residual values and the useful lives of the assets are reviewed at least at each financial yearend and adjusted if impact of depreciation is significant. the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. the amortisation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. less accumulated depreciation and impairment loss.7 Intangible assets Expenditure incurred to acquire Oracle enterprise resource planning (ERP) system has been capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. Available for sale investments are recognised initially at fair value plus any directly attributable transaction costs. if any. Unquoted investments. where active market does not exist. the carrying amount of the investment is adjusted to the extent of impairment loss. After initial recognition. All purchases and sales of investments are recognised on the trade date which is the date that the Company commits to purchase or sell the investment. 4. the respective surplus or deficit is transferred to profit and loss. Available for sale Investments which are intended to be held for an indefinite period of time but may be sold in response to the need for liquidity are classified as available for sale. Khan Cement Company Limited charged to profit on a straight-line basis over the lease term. in the consolidated financial statements. Impairment losses recognised in the profit and loss account on equity instruments are not reversed through the profit and loss account. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. these investments are remeasured at fair value. Investments in associated undertakings. the Company reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. are carried at cost as it is not possible to apply any other valuation methodology. Unrealised gains and losses arising from the changes in the fair value are included in fair value reserves in the period in which they arise. If any such indication exists. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. at subsequent reporting dates. Impairment losses are recognised as an expense. the Company reviews the carrying amount of the investment and its recoverability to determine whether there is an indication that such investment has suffered an impairment loss. ANNUAL REPORT 2012 37 .G. The Company is required to issue consolidated financial statements along with its separate financial statements. are included in current assets. Impairment losses are recognised as expense in the profit and loss account. At each reporting date. with any resulting gains and losses being taken directly to equity until the investment is disposed off or impaired. in accordance with the requirements of IAS 27 'Consolidated and Separate Financial Statements'. are being accounted for using the equity method. 4. Investments in equity instruments of associated company Investments in associates where the Company has significant influence are measured at cost in the Company's separate financial statements. If any such indication exists. these are stated at fair values unless fair values can not be measured reliably.D. while items considered obsolete are carried at nil value.9 Investments Investments in equity instruments of subsidiary company Investment in subsidiary company is measured at cost as per the requirements of IAS-27 "Consolidated and Separate Financial Statements". Fair value of quoted investments is their bid price on Karachi Stock Exchange at the balance sheet date. unless fair value cannot be reliably measured. Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital. At the time of disposal. all other investments are classified as non-current. At each balance sheet date. the recoverable amount is estimated in order to determine the extent of the impairment loss. However.10 Stores and spares Usable stores and spares are valued principally at moving average cost. Khan Cement Company Limited 4. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument. labour and appropriate manufacturing overheads. demand deposits. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in statement of other comprehensive income.16 Derivative financial instruments These are initially recorded at fair value on the date on which a derivative contract is entered into and subsequently measured at fair value. 4. 4. Cost of work in process and finished goods comprises cost of direct materials. as the case may be. In the balance sheet. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. except for those in transit. work in process and finished goods are valued principally at the lower of moving average cost and net realisable value.D. both at hedge inception and on an ongoing basis.G. All financial assets and liabilities are initially measured at cost.15 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item. other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings.12 Financial instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and derecognised when the Company loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. Stock of packing material is valued principally at moving average cost. For the purpose of cash flow statement. amortised cost or cost. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make a sale. 4. Bad debts are written off when identified. 38 ANNUAL REPORT 2012 . and if so. cash and cash equivalents comprise cash in hand. as well as its risk management objective and strategy for undertaking various hedge transactions.13 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognised amount and the Company intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. which is the fair value of the consideration given and received respectively. The Company documents at the inception of the transaction the relationship between the hedging instruments and hedged items. Derivatives are carried as asset when the fair value is positive and liability when the fair value is negative. The Company also documents its assessment. of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items.14 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. These financial assets and liabilities are subsequently measured at fair value. cancelled or expired.11 Stock-in-trade Stock of raw materials. The Company designates certain derivatives as cash flow hedges. the nature of the item being hedged. 4. short term borrowings are included in current liabilities. 4. However. plant and equipment acquired out of the proceeds of such borrowings. Non-monetary assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at exchange rates prevailing at the date when fair values are determined. The financial statements are presented in Pak Rupees. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue. which is the Company’s functional and presentation currency. Dividend income on equity investments is recognised as income when the right of receipt is established.G. net of discounts and sales tax. Any gains or losses arising from change in fair value derivatives that do not qualify for hedge accounting are taken directly to profit and loss account. interest and other charges are charged to profit and loss account. However. and the associated cost incurred.21 Dividend Dividend distribution to the Company's shareholders is recognised as a liability in the period in which the dividends are approved.18 Provisions Provisions are recognised when the Company has a legal or constructive obligation as a result of past events 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 amount can be made. 4. interest and other charges on borrowings are capitalised up to the date of commissioning of the related property. when the forecast hedged transaction results in the recognition of a nonfinancial asset or a liability.D. ANNUAL REPORT 2012 39 . can be measured reliably.20 Revenue recognition Revenue represents the fair value of the consideration received or receivable for goods sold. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return.e. 4. provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 4.19 Borrowing costs Mark up. or to be incurred. Khan Cement Company Limited Amounts accumulated in equity are recognised in profit and loss account in the periods when the hedged item shall effect profit or loss. 4. All other mark up. Figures are rounded to the nearest thousand. 4. Exchange gains and losses are included in income. the gain and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Transactions in foreign currencies are translated into rupees at exchange rates prevailing at the date of transaction. Revenue from sale of goods is recognised when the significant risk and rewards of ownership of the goods are transferred to the buyer i. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into rupees at exchange rates prevailing at the date of transaction.17 Foreign currency transactions and translation All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date. on the dispatch of goods to the customers. 071.381. 2012 2011 -----(Rupees in thousand)---6.000 74.957.071.029 20.827 23.Fair value reserve At the beginning of the year Fair value (loss) / gain during the year At the end of the year . Khan Cement Company Limited 5 Issued.163 14. an associated concern as at June 30.607.407.Share premium At the beginning of the year Additions during the year At the end of the year .191 137.note 6.944) ordinary shares are held by Adamjee Insurance Company Limited.201 (2011: 137.119.201) ordinary shares of the Company are held by Nishat Mills Limited.574.112 353.769) 13.562.706 14. subscribed and paid up capital 2012 2011 ----(Number of shares)---343.580.071 4.118 Ordinary shares of Rs.965 730.944 (2011: 1.note 6.163 4.118 343.827 5.120 200.881 353.000 746. Reserves Movement in and composition of reserves is as follows: Capital .510 19.120 200.974.1 4.2 . 10 each issued for consideration other than cash Ordinary shares of Rs.407. 2012.607. 1.198 4.881 (1.D.G.10 each fully paid in cash Ordinary shares of Rs.381 40 ANNUAL REPORT 2012 .000 746.827 5.175 2.574.908.3 .510 18.066.381. 2012. In addition.435.071. 10 each issued as fully paid bonus shares 2012 2011 ----(Rupees in thousand)---3.089 438.071.512.512.General reserve At the beginning of the year Transferred (to) / from profit and loss account At the end of the year .827 24.885.557. a related party as at June 30.554 5.000 74.826.490.000.612 3.163 12.089 438.Capital redemption reserve fund Revenue .785 5.974.119.029 20.191 3.394.435.557.071 4.000.557.note 6. 9 this represents the unrealised gain on remeasurement of investments at fair value and is not available for distribution. Khan Cement Company Limited 6.579 ANNUAL REPORT 2012 41 .Long-term loans .Loan under Musharika arrangement . the Company was required to maintain a redemption fund with respect to preference shares. to ensure timely payments.D.7.083 6.880. 2007.768 4.2 .3 This reserve can be utilised by the Company only for the purposes specified in section 83(2) of the Companies Ordinance.601 701.127 1. The Company had created a redemption fund and appropriated Rs 7.067. 2012 2011 -----(Rupees in thousand)---7.994.785.G. The Capital redemption reserve fund represents fund created for redemption of preference shares and in accordance with the terms of issue of preference shares.note 7.548 4.2 6.500 6.4 million each month from the profit and loss account in order to ensure that fund balance at redemption date was equal to the principal amount of the preference shares.secured .851 Less : Current portion shown under current liabilities .2 6.629.1 .875.627 807. This amount shall be transferred to profit and loss account on realisation.1 .note 14 2. The preference shares have been redeemed during the year ended June 30. As referred to in note 4.note 7.secured . 1984.250 6.1 6.7.084.156. Long term finances These are composed of: . 3% Quarterly Foreign Currency 12 European Investment Bank US$ 8.25% Quarterly 3 National Bank of Pakistan - 100.063% 2 equal semi-annual installments ending in March 2013 9 equal semi-annual installments starting in May 2013 and ending in May 2017 14 step-up quarterly installments.851 6.000 Semi-annual 5 Bank Alfalah 230.D.067.1% Quarterly 10 Askari Bank Limited 431.65% subject to cap of 18% *** Base rate + 1.000 *** Base rate + 1.secured Lender 2012 2011 (Rupees in thousand) 90.785.000 750.000 * Base rate + 0.000 800.000 *** Base rate + 0.686 1.818 *** Base rate + 1.909 Rate of Mark-up per annum *** Base rate + 1.0% Quarterly 7 Allied Bank Limited 675.1 Loan 1 Long term loans .787 6.976.393.545 345.65% Semi-annual 14 Musharika Arrangement Meezan Bank ** Base rate + 1.1% Number of installments Outstanding The loan has been fully repaid during the year The loan has been fully repaid during the year The loan has been fully repaid during the year The loan has been fully repaid during the year 4 equal semi-annual installments ending in March 2014 14 step-up quarterly installment ending in November 2015 16 step-up quarterly installments ending in June 2016 4 equal quarterly installment ending in May 2013 11 equal quarterly installments ending in February 2015 15 step-up quarterly installments ending in January 2016 8 unequal semi-annual installments starting in November 2013 and ending in May 2015 Mark-up payable Semi-annual Habib Bank Limited 2 Habib Bank Limited - 100.000 500.000 *** Base rate + 1.193 million) 13 Eco Trade and Development Bank US$ 20.500 ** Base rate + 1.000 *** Base rate + 1. ending in December 2015 Quarterly 1.85% Quarterly 9 Bank of Punjab 183.333 250.0% Quarterly 8 Standard Chartered Bank 500.000 950.000 ** Base rate + 1.084.500 **** Base rate + 1.627 807.985 million (2011 : Nil) 762.601 701.250 6.127 * ** Base rate: Average ask rate of one-month Karachi Inter Bank Offer Rate (”KIBOR”) to be rest for each mark-up period Base rate: Average ask rate of three-month Karachi Inter Bank Offer Rate (”KIBOR”) to be reset for each mark-up period *** Base rate: Average ask rate of six-month Karachi Inter Bank Offer Rate (”KIBOR”) reset for each mark-up period **** Base rate: Average ask rate of three-month and six-month London Inter Bank Offer Rate (”LIBOR”) reset for each mark-up period 42 ANNUAL REPORT 2012 .0% Quarterly 6 Allied Bank Limited 825.1% Semi-annual 4 United Bank Limited - 300. Khan Cement Company Limited 7.G.400 **** Base rate + 0.3% Quarterly 11 Faysal Bank Limited 500.0% Quarterly 6.096 million (2011 : US$ 16.875.250 487.000 ** Base rate + 1. Loan 6 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1. ANNUAL REPORT 2012 43 . Loan 7 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1. Loan 2 The loan was secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 4.D.G. Loan 14 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1.340 million. Loan 8 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1. Khan Cement Company Limited 7.000.333 million.133 million. Loan 9 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 500 million.2 Security Loan 1 The loan was secured by registered first pari passu charge over all present and future fixed assets of the Company. Loan 12 The loan is secured by first pari passu charge over all present and future movable fixed assets of the Company amounting to US$ 8.980. Loan 11 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 667 Million. amounting to Rs 1.349. Loan 13 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to US$ 27.991 million. Loan 5 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 845 million. Loan 4 The loan was secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1. Loan 3 The loan was secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 1.469. Loan 10 The loan is secured by first pari passu charge over all present and future fixed assets of the Company amounting to Rs 667 million.734 million.334 million.340 million.334 million. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---8.935 394 4 3.416) 119.893 These represent interest free security deposits from stockists and suppliers and are repayable on cancellation / withdrawal of the dealership or on cessation of business with the Company respectively.252 37.G.641 70.701) 10.note 9.935 21.678 30. 2012 2011 ----(Rupees in thousand)---9.727 (3.673 51.673 60. Retirement benefits Staff Gratuity Leave Encashment 9.1 Staff gratuity The amounts recognised in the balance sheet are as follows: Present value of defined benefit obligation Fair value of plan assets Unrecognised actuarial losses Liability as at June 30 9.2 119.3 Movement in fair value of plan assets Fair value of plan assets as at July 1 Expected return on plan assets Contributions during the year Benefits paid during the year Actuarial gain on plan assets Fair value of plan assets as at June 30 167.673 75.857) 119.409 8.D.528 87.931) 87.528 127.732 (3.873 68.482 33.271 (9.1 .540 139.1.588 185.355 33.264 21. Long term deposits Customers Others 34.476) 25.116 87.783 17.701) 33 82 127.228 (9.1.935 (332) (39.528 65.416 (9.467 (82) (47.2 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid during the year Actuarial loss on present value of defined benefit obligation Present value of defined benefit obligation as at June 30 9.213 44 ANNUAL REPORT 2012 .1.799) 1 332 .1 Change in present value of defined benefit obligation Liability as at July 1 Charge for the year including capitalised during the year Contributions plus benefit payments made directly by the Company during the year Liability as at June 30 9.note 9.784 (3.954 127.732) 87.222 167.467 332 2 9.673 41. 4 Actual return on plan assets Expected return on plan assets Actuarial gain on plan assets 2 33 35 9.931) (10.467 (82) 167.7 Charge for the year (including capitalised during the year) Current service cost Interest cost Expected return on plan assets Actuarial losses charged to profit during the year 82 (39.850 1.5 % 5% 12 2011 14 % 14 % 1% 13 ANNUAL REPORT 2012 45 .766 33.1.1.1.414 33 1 (28) - (39) 9.264 (394) 74.271 2012 9. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---9.603 75.5 Plan assets consist of the following: Cash and other deposits 9.G.1.954) 538 (39.409 8.040 (274) 55.935 (332) 127.296 (47.870 56.385 127.515) (25.931) 21.D.222) 2.784 (4) 538 30.8 Historical information As at June 30 Present value of defined benefit obligation Fair value of plan assets Deficit Experience adjustment arising on plan obligation Experience adjustment arising on plan assets 2011 2010 (Rupees in thousand) 2009 4 1 5 332 (14.1.9 Assumptions used for valuation of the defined benefit scheme for managment and non-managment staff are as under: 2012 Discount rate Expected rate of increase in salary Expected rate of return on plan assets Average expected remaining working life time of employee Per annum Per annum Per annum Number of years 12.5 % 12.122 (1) 33.228 (2) 2.6 Movement in unrecognised actuarial losses Un recognised actuarial losses as at July 1 Actuarial losses arising during the year Actuarial losses charged to profit during the year Un recognised actuarial losses as at June 30 9.121 10.857) 21.262 41.727 2008 167.783 17.1.222 25.954 (46) 8. 587 (10.D.540 74.2.2 Leave encashment Opening balance Expenses recognised Payments made Payable within one year Closing balance 9.739 74.10 The Company expects to pay Rs 49. 2012 2011 ----(Rupees in thousand)---9.259) 8.2.018) 51.319 (10.587 8.319 14.558 4.612 2012 As at June 30 Present value of defined benefit obligation Experience adjustment arising on obligation 2011 2010 (Rupees in thousand) 2009 12.466 2008 43.558 26.764 4.99 million in contributions to defined benefit plan in 2013.764 4.558 .553 31.2 Charge for the year (including capitalised during the year) Current service cost Interest cost Actuarial losses charged to profit during the year 4.note 14 58.010 9.1 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid during the year Actuarial loss on present value of defined benefit obligation 58.789) 14.739 26.3 Assumptions used for valuation of the accumulating compensated absences are as under: 2012 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee Expected with drawal and early retirement rate Per annum Per annum Number of years 12.381 58.789) 74.558 (7.259) 58.062 14.381 (8.351 25.558 49.351 12.381 9.115 587 5.554 7.739 8.466 (10.793) 65.5 % 2011 14 % 14 % 11 13 Based on experience 46 ANNUAL REPORT 2012 .2.115 25.G.554 7. Khan Cement Company Limited 9.1.5 % 12.588 43.612 (10.969 3.115 58.153 42. 00 16.038 4.00 1.00 0. Khan Cement Company Limited Officers 2012 (days) Average number of leaves . 2001. 2001 are recognized to the extent that the realisation of related tax benefits through future taxable profits is probable.764 (36.Utilized per annum .00 1.791.00 1.535.653 (52.25 Workers 2012 (days) 19.559 million) in respect of minimum tax paid and available for carry forward u/s 113 of the Income Tax Ordinance.962.234 214. The Company has not recognised deferred tax assets of Rs 444.Encashed per annum in excess of accrued leave of 30 days 15.00 0.666.1 647.00 1.110 125 104.00 6.00 2.25 2011 (days) 16.00 2011 (days) 18.799 441.767 4.143 1.707.845) 1. Minimum tax paid u/s 113 aggregating to Rs 444.D.870 930 125 108.881 million (2011: 324. 2012 2011 ----(Rupees in thousand)---11 Trade and other payables Trade creditors Infrastructure cess Advances from customers Accrued liabilities Workers' profit participation fund Federal excise duty payable Special excise duty payable Withholding tax payable Retention money payable Unclaimed dividends Advances against sale of scrap Advance against sale of fixed asset Redeemable preference shares (non-voting) .00 6.00 2012 2011 ----(Rupees in thousand)---10 Deferred income tax liabilities The liability for deferred taxation comprises temporary differences relating to: Deferred tax liability Accelerated tax depreciation Deferred tax assets Provision for retirement and other benefits Unabsorbed tax credits 4.069 4.226 .545 2.204 118 1.00 2.681.642 169.990 286.2 204.00 7.Encashed per annum .164 686.423 89.739) (2.870 936 63.464 531.894 ANNUAL REPORT 2012 47 .note 11.unsecured Others .238 125.note 11.363 5.864 13.881 million would not be available for carry forward against future tax liabilities subsequent to years 2013 through 2017.987 5.886 Deferred tax asset on tax losses available for carry forward and those representing minimum tax paid available for carry forward u/s 113 of the Income Tax Ordinance.342 27.Utilized per annum in excess of accrued leave of 30 days .674.G. as sufficient taxable profits would not be available to set these off in the foreseeable future.978 31.678) 1.108.200) (2.851 12. stock in trade.642 31.secured Short term running finances .79%) or part thereof on the balance outstanding.467 84 284.996 million (2011: Rs 1.secured Short term running finances available from various commercial banks under mark up arrangements amount to Rs 8595.secured . investments.133 214.D.960 129.462 36 1.642 213.120 Less: payments made during the year Closing balance 12.681.000 6.secured . Khan Cement Company Limited 11.090 52.899 3. receivables and pledge of 10 million (2011: 10.251 31.498 20.487.511 4.914 3.642 1. The rates of mark up range from 12.24% to 13.931 13.02% to 15.note 13.928 1.996 11. These are secured by first registered charge on all present and future current assets of the Company wherever situated including stores and spares.1 .secured Import finances .2 .288 1.157.053 million) 48 ANNUAL REPORT 2012 1.983 21. 13.691.892 99.1 Short term running finances .498 million).987 154. book debts.secured Preference dividend on redeemable preference shares 62.341 31.note 13.190 246.note 13.Short term borrowings .G.955 84 162.5 million (2011: 10 million) shares of Nishat Mills Limited and Nil (2011: 2.918.133.2 Import finances .205 2.046.3 million) shares of Adamjee Insurance Company Limited.140 8.03% (2011: 12.832 million).3 1. Accrued mark-up Accrued mark-up on: .733. Short term borrowings .982 .163 million (2011: Rs 9.837 million (2011: Rs 4.167.1 Trade creditors include amount due to related parties amounting to Rs 2.467 13. 13.Long term loans .2 Workers' profit participation fund Opening balance Provision for the year Interest for the year 31.75 million) shares of MCB Bank Limited. 2012 2011 ----(Rupees in thousand)---MCB Bank Limited Adamjee Insurance Company Limited Security General Insurance Company Limited Pakistan Aviators & Aviation (Private) Limited Sui Northern Gas Pipelines Limited 58 31 702 2.568 1.secured The Company has obtained import finance facilities aggregating to Rs 6.secured Export refinance . 93 million) and Rs 1.48 million (2011: Rs 14. However. the Company imported plant and machinery relating to expansion unit. while framing the assessments for the assessment years 1984-85 to 1990-91. Khan Cement Company Limited from commercial banks.1 Contingencies . As per the provisions of SRO 484 (I)/92.994. Of the aggregate facility of Rs 9. the Custom Authorities rejected the claim of the Company by arguing that the said machinery was on the list of locally manufactured machinery.1. Collector of Customs and Central Excise. investments and receivables.5% to 11%).5% to 11% per annum (2011: 9. no adjustment has been made in these financial statements for the relief granted by the Appellate Tribunal aggregating Rs 35. stock in trade. Of the facility for guarantees.2 During the period 1994 to 1996.G. against the Company on the grounds that the said machinery was being manufactured locally during the time when it was imported. ANNUAL REPORT 2012 49 . 2012 2011 ----(Rupees in thousand)---14 Current portion of non-current liabilities Long term finances Retirement and other benefits 15 Contingencies and commitments 15. Multan Bench. published by the Federal Board of Revenue. Consequently. for which exemption was claimed under various SROs from the levy of custom duty and other duties including sales tax.3 Export finances .090 million.48 million) is secured by a lien over bank deposits as referred to in note 25. Appeal against the order is still pending with the authorities. there are meritorious grounds that the ultimate decision would be in its favour.1.018 2.66% to 12. Rs 14.112 million) respectively. 1999.D.548 7. the Custom Authorities have filed an appeal with the Supreme Court of Pakistan against the orders of the Lahore High Court. The rates of mark up range from 1.400 million (2011: Rs 8.2 2.566. The aggregate facilities for guarantees are secured by a registered charge on current assets of the Company.165. An appeal against the order was filed with the Lahore High Court.note 9.768 8. has taxed the income of the Company on account of interest on deposits and sale of scrap. which has been decided in favour of the Company. However. etc. These loans are obtained for a period of 180 days and are against pari passu hypothecation charge over current assets of the Company. the Company appealed before the Lahore High Court.156.880 million (2011: Rs 1.566 15. The Honorable court remanded back the case to Customs Authorities to reassess the liability of the company. Pending final outcome of such reference.999 million (2011: Rs 2.26% to 15%). book debts.793 2.2. the amount utilised as at June 30.001. the exemption from the statutory duty would be available only if the said plant and machinery was not manufactured locally. No provision for the outstanding balance of Rs 634. Multan has passed an order dated November 26.note 7 . which carry mark up at 10.1 The Income Tax Officer. 978 (I)/95 and 569 (I)/95. 13.561 1. 15.430 million) for opening letters of credit and Rs 1. 2012 was Rs 1. which allowed the Company to release the machinery on furnishing indemnity bonds with the Custom Authorities. The Appellate Tribunal on appeal filed by the Company issued an order in favour of the Company for the assessment years 1984-85 to 1990-91.secured This represents ERF loans obtained from various commercial banks.237.76% (2011: 2.712.158 million (2011: Rs 1. The aggregate import finances are secured by a registered charge on all present and future current assets of the Company wherever situated including stores and spares.388 million has been made in the financial statements as according to the management of the company. The Income Tax Department filed reference before the Lahore High Court.610 million) for guarantees. the Sindh High Court and the Supreme Court of Pakistan. Although the parties have reached an interim arrangement.164 million. Excise Collection Office.460 million) Director. The vires of the Competition Commission of Pakistan. The amount of refund. The similar notices were also issued to All Pakistan Cement Manufacturers Association (APCMA) and its member cement manufacturers.5 The Company. challenging the levy of fifth version of the law enforcing infrastructure cess. duly appreciating the contentions of the taxpayers.115. Based on the legal opinion. The CCP accordingly passed an order on August 28. vide its order dated August 24. 1944 (1944 Act) has now attained finality after having been adjudicated by the honourable Supreme Court of Pakistan through its judgement dated January 27. was challenged by the taxpayers in appeals before the honourable High Courts of the country which. The Company has issued the following guarantees in favour of: Collector of Customs. custom duty and excise amounting to Rs 30. therefore 50% of the amount of infrastructure cess payable has not been incorporated in these financial statements amounting to Rs.145 million.3 The Competition Commission of Pakistan (the CCP) took suo moto action under Competition Ordinance. Now since the controversy has attained finality up to the highest appellate level. Punjab against installation of cement factory near Khairpur.D. The Lahore High Court. Earlier.4 The matter relating to interpretation of provisions of section 4(2) of the repealed Central Excise Act. being against the spirit of law. 15. The Lahore High Court vide its order dated August 31.1. 2007 is ultra vires of the Constitution. stay orders have been granted by the Courts. 2009 allowed the CCP to issue its final order. 15. 2006 shall be payable by the petitioners. Khan Cement Company Limited 15. A large number of grounds have been raised by these Petitioners and the matter is currently being adjudicated by the Lahore High Court. The departmental view. Mines and Minerals. filed a petition before the Sindh High Court.1. The Company has filed a Writ Petition in the Lahore High Court. The longstanding controversy between the revenue department and the tax payers related primarily to finer interpretation of the provisions of section 4(2) of the 1944 Act wherein the department had a view that excise duty shall be included as a component for determination of the value (retail price) for levying excise duty. through an order of Sindh High Court dated May 31.6 .389 million (2011: Rs 20.90 million (2011: Rs 340. Shale and other cement manufacturers amounting to Rs 3 million (2011: Rs 3 million) 50 ANNUAL REPORT 2012 15. consequent to the order passed by the Supreme Court of Pakistan against the decision of the Sindh High Court in the matter of infrastructure cess. however. 2009 (upholding its previous judgement dated February 15. 2009 restrained the CCP from enforcing its order against the Company for the time being. the Company has initiated the process of claiming refund of excess excise duty paid by it during the periods from 1994 to 1999 which aggregates to Rs 1. 89. the Sindh High Court. Quetta against Limestone. 2009 and imposed a penalty of Rs 933 million on the Company.9 million) Director General. District Chakwal amounting to Rs 3 million (2011: Rs 3 million) Director General.1. Sindh Development and Maintenance against recovery of infrastructure fee amounting to Rs 375. Mines and Minerals. In all these cases. 2007). the management is confident that the Company has a good case and there are reasonable chances of success in the pending Petition in the Supreme Court of Pakistan. 2008 for increase in prices of cement across the country. chances of favourable outcome of the appeal are fair. for release of 50% of the guarantees. the final order from Sindh High Court is still pending.1. 2011.G. in August 2008. According to the legal counsel of the Company. ruled out that only levies computed against consignments made on or after December 28. 2007 have been challenged by a large number of Petitioners and all have been advised by their legal counsels that prima facie the Competition Ordinance. Excise and Sales Tax against levy of Sales Tax. overturned the departmental view and succeeded the appeals. 2007 and issued Show Cause Notice on October 28. shall be incorporated in the books of accounts once it is realised by the Company. 985.1 .5 million (2011: Rs 3 million) Managing Director.36 million) (iv) The amount of future payments under operating leases and the period in which these payments will become due are as follows: 2012 2011 ----(Rupees in thousand)---Not later than one year Later than one year and not later than five years Later than five years 331 1.385 331 1.325 6.639 million) (ii) Letters of credits for capital expenditure Rs 760.2 25.872 million (2011: Rs 873.151 million) The Managing Director.2 The President of the Islamic Republic of Pakistan against the performance of a contract to Frontier Works Organisation amounting to Rs 1.455 million) Professional Tax imposed by Administration Zila Council (The District Coordination Officer. Lahore Waste Management Company (LWMC) against the performance of a contract amounting to Rs 20 million (2011: Rs 10 million) Commitments in respect of: (i) Contracts for capital expenditure Rs 156. Pakistan Railways against the performance of a contract amounting to Rs 1.G.17 million (2011: Rs 113.726 24.G Khan Project amounting to Rs 722.050 million) Bank guarantee in respect of Alternative Energy Development Board (AEDB) of Rs Nil (2011: Rs 2.364.373.826 16 Property.320 ANNUAL REPORT 2012 51 .note 16.05 million (2011: Rs 10.170 7.820 25.993. DG Khan) amounting to Rs 0.611.325 6.D.note 16.192.377 million (2011: Rs 715.127 million (2011: Rs 1.214 1.565 1. plant and equipment Operating assets Capital work in progress .512 27.57 million) (iii) Letter of credit other than capital expenditure Rs 952.185.664 8. Khan Cement Company Limited 15.908 million (2011: Rs 3.852 million) Sui Northern Gas Pipelines Limited against supply of 6 MMCFD and 14 MMCFD Gas for captive and Industrial use for Khairpur Project and for D. 844 75.4.442 (45.635 122.565 .874 26.670 562.300) 119.16. 2010 Depreciation charge/ (deletions) for the year (Rupees in thousand) Accumulated depreciation as at June 30.313.514 879.828 (25.226 81. 2011 Additions/ (Deletions) Cost as at 30 June 2012 Accumulated Depreciation as at July 01.313 2.76 .966 306.349 220.963 26.216 8.576.185 467.304 19.331 103.100 509. 2011 Book value as at June 30.Office building and housing colony Roads Plant and machinery Quarry equipment Furniture.215 261.867 438.497.117 - 509.707 145.392 213.843 (17.938 306.106 52.072 357.056.Factory building .892 63.98 20 10 20 30 10 35.575 36.357 434.178.737 164.499 (26.576 571.966 284.185 467.807 2.908) 27.590 197.326 38.497.410 (16.178.948.459 1.132 (251) 66.33 340.000 410 - 341.349 220.845.450 2.703 321.000 4.056.045 21.208 4.555 (5.408 1.925 792. Khan Cement Company Limited ANNUAL REPORT 2012 Aircraft Power and water supply lines 4.Office building and housing colony Roads Plant and machinery Quarry equipment Furniture.596 107. 2011 Freehold land Leasehold land 10 5 10 4.447.644 (15.383 438.715 975.543 3.000 168.716 36.948.789 546.222 341.265.164) 79.981 111.880 551.542 7.909 35.214 870.538.049 100.847. 2012 Depreciation charge/ (deletions) for the year Accumulated depreciation as at June 30.735 289.680 143.709 148. fixture and office equipment Vehicles D.362.938 191.650.240 194.166 2.76 .170 (10.459 36.740.385 191.450 177.538.891 9.301 38.089 454.737.892.970 206.185 467.947 88.563.214 Buildings on freehold land .302 63.055 1.497 163.139) 10.331 183.328 6.757 10.944 681.542 7.109 26.293.550 2.250 1.674 908.469) 461 96.723 116.445 247.046 35.611.326 24.867 252.229 34.471.201 7.510 1.33 341.222 197.188 (108) 22.384.450 177.966 306.430.266.495) 12.952.4.Factory building .185 463.350 2.215 1.867 38.082 618.114 38.885 764.259 760.302 63.1 2012 Annual rate of depreciation % Cost as at July 01.419 53.421 19.757) 743 31. 2010 Additions/ (Deletions) Cost as at 30 June 2011 Accumulated Depreciation as at July 01.485 8.497.018 (1.590 1.514 33.530 249.039.105 (82) 17. fixture and office equipment Vehicles Aircraft Power and water supply lines 40.993 52 2011 Annual rate of depreciation % Cost as at July 01.98 20 10 20 30 10 1.G.192.633) 37. 2011 Book value as at June 30.650 2.387) 520 28.471.201 4.963 26.444 879.018 19.419 63.383 317.181 28.360 25. 2012 Operating assets (Rupees in thousand) Freehold land Leasehold land 10 5 10 4.086.424 5.100 316.000 7.234 27.867 81.952.114 5.635 122.380) 22.891 2.712 (15.925 792.596 1.410 800.277) 3.045.104 225.892 Buildings on freehold land .271 1.563.334 3.302 55.350 9.903.768 (28. 391 92 607 87 42 237 428 122 315 97 212 193 247 191 200 647 52 136 98 185 200 192 527 16.429.1 Freehold land and building include book values of Rs 12 million (2011: Rs 12 million) and Rs 7.090 427 879 353 555 555 571 398 555 1.447.501 174 318 555 1.495 303 303 258 86 11.690 1.000 368 1.968 12.1.087 526 525 555 686 460 582 1. Muhammad Ali Rizwan Javed Irfan Ahmed Irfan Ahmed Sayed Yasir Hussain Attiq-ur-Rehman Raheem Buksh Nasir Zahoor Rizwan Javed Ahmed Haroon Khan Imran Fatima Nazar Hussain Major Iftikhar Tahir Ali Shah Irfan Ahmed Waseem Riaz Nadeem Gul Khalid Farooq Hashmi Office Equipment Furniture and Fittings 334 334 284 Other assets with book value less than Rs 50.294 174 1.101 million (2011: Rs 7. 16. This property is located in the locality of Defense Housing Authority where the by-laws restrict transfer of title of the residential property in the name of the Company. Khan Cement Company Limited 16.1.712 1.379 15.G.D.752 2.162 -do-do-doAuction 560 12.000 89 26.578 2. plant and equiment Detail of property.430. plant and equipment disposed off during the year is as follows: 2012 Particulars of assets Sold to Cost Accumulated depreciation Book value Sales proceeds (Rupees in thousand) Gain/(Loss) on disposal Mode of Disposal Vehicles Muhammad Sajid Iqbal Ghani Syed Yasir Hussain Hasnat Aziz Bantth Ch.410 16.609 276 393 310 313 317 339 253 772 429 313 362 439 269 382 478 898 376 537 315 360 21 Auction -do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-doAssets written off ANNUAL REPORT 2012 53 .517 760 275 753 560 555 213 343 6.000 397 355 554 767 375 1.903 82 894 87 276 318 662 305 564 256 343 362 324 207 355 870 708 139 655 375 355 21 217 5.1.475 million) respectively which are held in the name of Chief Executive of the Company.3 Disposal of property.414.2 The depreciation charge for the year has been allocated as follows: Total 2012 2011 ----(Rupees in thousand)---- Cost of sales Administrative expenses Selling and distribution expenses -note 27 -note 28 -note 29 1.125 950 512 635 500 560 213 310 10.138 334 334 284 89 30.633 31 31 26 3 15.300 31 31 26 3 19.755 1. 123 74. Rehmat Ali Engr.2 Capital work in progress Civil works Plant and machinery Advances Others Expansion project : .373.105 998 965 939 790 749 571 566 560 560 560 555 483 274 275 272 272 272 59 161 45. Fakhar-ul-Islam Atiq-ur-Rehman Kashif Manzoor Mr.709 52.769 1.do .701 1.do .439 681 680 626 543 443 504 512 690 691 514 281 309 253 341 164 318 265 236 287 335 362 341 404 14 (72) 9.139 719 700 326 320 358 296 268 265 312 263 280 314 138 184 186 179 235 314 175 176 166 166 163 16 107 29.217 1.299 28 23. 54 ANNUAL REPORT 2012 .do .1 206.512 16.003 777 561 623 391 525 350 497 500 550 462 511 528 507 567 30 35 39.820 .993.do - 2012 2011 ----(Rupees in thousand)---16.119 1.do Auction 28.do .081 10 (52) Negotiation .do .776 925.908 741 760 891 876 761 809 730 700 627 527 469 257 428 376 374 381 320 169 99 99 106 106 109 43 54 16.380 90 5.do .380 952 863 801 800 780 955 1. Ahtesham-ul-Haq Security General Insurance (related party) Qadeer Ahmed Pervaiz Akhtar Security General Insurance (related party) Ahmad Subhani Zahid Ali Khan Nabeel Riaz Zeeshan Ali Shah Nisar Ahmed Qureshi Muhammad Nadeem Other assets with book value less than Rs 50.2. Rehmat Ali Kh.490 1.400 1.014 million (2011: Rs Nil).2.do Insurance claim Auction .460 1.951 61.do .do .do .do .note 16.do .do .030 18.206 18.G.1 Included in plant and machinery are borrowing costs of Rs 6.765 31.992 42.549.do Insurance claim Auction .460 1.108 16.do .D.992 33.081 62 23.Others 334.670 Auction .Civil works .943 1. Irfan Khan Atiq-ur-Rehman Mr. Khan Cement Company Limited 2011 Particulars of assets Sold to Cost Accumulated depreciation Book value Sales proceeds (Rupees in thousand) Gain/(Loss) on disposal Mode of Disposal Equipment M/S Nishat Mills Limited (related party) Shahbaz Brothers Vehicles Shahzad Ahmed Nadeem Mahmood Jalal Mirza Umer Zameer Nadeem Ahmed Engr.do .190 115.000 1.do . Umer Zameer Ch.do .196 1. 661.189 2.unquoted Nishat Paper Products Company Limited 23.note 29 12.1.quoted .728.note 18.note 27 .1 Investment in subsidiary company .268.629 203.327.629 203.055.682.259.682. Cost As at July 1 Additions As at June 30 Less: Accumulated amortisation As at July 1 Amortisation for the year As at June 30 92.Quoted Related parties Others Cumulative fair value gain . Investments Investment in subsidiary company .316 1.D.316 4. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---- 17.2 203.864.629 5.note 28 .260 92.260 .1 .916 2.055. Intangible assets This represents Oracle ERP system.189 3.398 (2011: 23.768 2.1 .629 4.452 18.548 45.G.548 45.416 - ANNUAL REPORT 2012 55 .768 18.452 73.787 5.unquoted Available for sale .2.268.note 18.127 4.641 1.728.598 5.note 18.note 18.2.661.945 18.933.787 203.452 18.1 18.629 203.2 1.note 17.398) fully paid ordinary shares of Rs 10 each Equity held: 50% (2011: 50%) 18.2 Available for sale . The amortisation charge for the year has been allocated as follows: Cost of sales Administrative expenses Selling and distribution expenses .808 - 17.629 203.641 1. 607.353 (2011: 2.289.360 million) 282 (253) 29 20 (10) 10 890 (678) 212 24 (6) 18 45.834 125.1 Related Parties Nishat Mills Limited .Rs 0.Rs 1.501) fully paid ordinary shares of Rs 10 each Market value .900 (2010: 4.682.0120 million (2011: Rs 0.286 million (2011: Rs 230.254 76 76 282 (253) 29 20 (10) 10 890 (678) 212 24 (6) 18 45.441.Associated company 17.615) 1.000 (2011: 89.858 (118.391) fully paid ordinary shares of Rs 10 each Market value .Rs 2.999 (2011: 1.254 45.559 125.615) 1.Rs 0.548 Nishat Mills Limited.174 million (2011: Rs 1.007.926.501 (2011: 30.900) fully paid ordinary shares of Rs 10 each Market value .D.155 1.Rs 206.Associated company 30.577.700 (2011: 16.G.548 1.378 million (2011: Rs 0.703) 230.927.559 125.Rs 85. for the purpose of measurement.395 million (2011: Rs 0. however.0636 million (2011: Rs 0.195 million) Adamjee Insurance Company Limited .0283 million) Less: Impairment Loss 1. 1984. MCB Bank Limited and Adamjee Insurance Company Limited are associated undertakings as per the Companies Ordinance.254 45.834 348.703) 230.541.174 (250.174 (250.926.821 million) Oil and Gas Development Company Limited 2.Rs 0.541.999) fully paid preference shares of Rs 10 each Market value .002) fully paid ordinary shares of Rs 10 each Market value .Rs 0.155 million) Less: Impairment Loss 1.000) certificates of Rs 10 each Market value .747 (2011: 13.289.Associated company 3.391 (2011: 3.834 125. these have been classified as available for sale and measured at fair value as the Company does not have significant influence over these companies. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---18.0098 million) Less: Impairment Loss First Capital Mutual Fund 89.679 million (2011: Rs 109.326.747) fully paid ordinary shares of Rs 10 each Market value .577.155 1.018 million) Less: Impairment Loss Nishat (Chunian) Limited 4.858 (118.682.Rs 0.353) fully paid ordinary shares of Rs 10 each Market value . 2012 2011 ----(Rupees in thousand)---18.223 million) Less: Impairment Loss Habib Bank Limited 174 (2011: 159) fully paid ordinary shares of Rs 10 each Market value .104 million (2011: Rs 3.254 76 76 56 ANNUAL REPORT 2012 .2 Others Maple Leaf Cement Factory Limited 13.326.834 348.773 million) Less: Impairment Loss MCB Bank Limited .020 million (2011: Rs 0.190.2.524.2. Rs 0.219 410 118 17 545 162 383 Loan to related party .078 126 1.563 million (2011: Rs 3.Others Less: receivable within one year .021 million) Investments with a face value of Rs 235 million (2011: Rs 230.550 3.712 .029 17.5 million) are pledged as security against bank facilities.807 120.304 (2011: 2.641 18. ANNUAL REPORT 2012 57 .240 1.G.D. 3.1 Executives Opening balance Transfer from others to executives Interest accrued Less: repayment during the year These represent secured loans given to executives and other employees for house building and purchase of motor vehicles and are recoverable in equal monthly installments over a period of 24 to 96 months.considered good Less: receivable within one year Security deposits 19.note 19.028 44.Executives .933 129 1.Others .206 86.383 million (2011: Rs 0.371 2.823 48.933 million) are secured against the employees' respective retirement benefits.819 4.190.528 million). The maximum aggregate amount due from executives at any time during the year was Rs 0.3 27 27 15 15 45.180 million) Kot Addu Power Company Limited 500 (2010: 500) fully paid ordinary shares of Rs 10 each Market value .Executives . Long term loans. advances and deposits Loans to employees .342 383 5 388 129 259 383 3.1 259 3.242 1.366 2.234 17.Rs 0. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---27 27 15 15 45.641 Pakistan Petroleum Limited 958 (2010: 871) fully paid ordinary shares of Rs 10 each Market value . The loans given to executives and other employees carry interest at the rate of 10% per annum (2011: 10% per annum) except for loans given to workers which are interest free.023 million (2010: Rs 0. 2012 2011 ----(Rupees in thousand)---19.considered good .900.277) shares of MCB Bank Limited are blocked in CDC account.note 19.180 million (2011: Rs 0.2 86. The loans of Rs 2.206 68.629 133.562 103. 191 million)] Spares [including in transit Rs 195.126.093 2.587 2.1 21.D.unsecured Nishat Developers Nishat Hospitality (Private) Limited Nishat Dairy (Private) Limited MCB Bank Limited Lalpir Power Limited 194.216 million (2011: Rs 32.G.734 million) given to Sui Northern Gas Pipelines Limited (SNGPL) for the development of infrastructure for the supply of natural gas to the plants at D.786 25.note 23. Mark up is charged at rates ranging from 1.1 11.5% to 2% per annum) respectively and is received annually.1 .737 862. 2017. 20.282.073 7.985 11.013 million (2011: Rs 6.066 10. Khan and Khairpur respectively.778 million (2011: Rs 73.G.quoted Related parties Others Cumulative fair value gain .051 58 478.049 254.2 This represents an unsecured loan of Rs 61.923 111.096 4.262 1. Stock-in-trade Raw materials Packing material [including in transit Rs 0.970 732 4.699 million)] Loose tools 2012 2011 ----(Rupees in thousand)---1.note 22.195 3.235.389.411 million)] Work-in-process Finished goods 177.141 236.Related parties .256 3.974 374 11.25 million and Rs 24.234 832 479. Khan Cement Company Limited 19. 2016 and March 28.considered good Secured Unsecured .703 10.349 ANNUAL REPORT 2012 .300 1.241 169.note 23.271 .50 million and Rs 29.193 million (2011: Rs 214.990 954. Investments Available for sale .5% to 2% per annum (2011: 1.201 322.137.972 10.340 8.1 Related parties .741. Stores and spares include items which may result in fixed capital expenditure but are not distinguishable. The principal amount is receivable in 5 annual installments ending December 31.312 212.Others 22.776 317.647.612 294.551 255.923 23.405 200.034 20.543.646.285 459.283 12. Trade debts .312 22.234 832 479.2 478.053 2.066 11. Stores and spares Stores [including in transit Rs 50.126.645 142. 812 48.379 1.2 .932 17. deposits.835.271 27.655 1.371 17.243 68. opening charges.470 111.715 73. for the purpose of measurement.361 855.quoted MCB Bank Limited .note 24.considered good Current portion of long term receivable from related party Advances .Associated company 66. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---23.Export rebate Other receivables 24. 1984.448 2. prepayments and other receivables Current portion of loans to employees .446 million (2011: Rs 1.329 505.206 4.007 62.206 3.To suppliers Due from related parties Prepayments Mark-up receivable from related party Derivative financial instruments Profit receivable on bank deposits Letters of credit .303 5.234 MCB Bank Limited is an associated undertaking as per the Companies Ordinance. this has been classified as available for sale and measured at fair value as the Company does not have significant influence over this company.967 1.Income tax .672 326.483 thousand (2011: Rs 2.920 1.422 17.Rs 1.476.4 Included in advances to employees are amounts due from executives of Rs 1.831 1.159 (2011: 83.136.396 thousand). Advances.note 24.Sales tax .008 1.135 70.285 2.note 24.1 Related Parties .366 17. however. etc Claims recoverable from government .918.Freight subsidy . deposits.234 478.Excise duty .228 2.234 478.201 51.G.3 .To employees .482 27.quoted Nishat (Chunian) Limited 83.D.915 703.159) fully paid ordinary shares of Rs 10 each Market value .1 1.125 million (2011: Rs 12.234 478.370 41.854 million) 24.considered good . 2012 2011 ----(Rupees in thousand)---23.margins.564 832 832 832 832 .013 12.850 311.2 Others . ANNUAL REPORT 2012 59 .940 (2011: 60.note 24.1 .004.190 23.124 million) 478.402) fully paid ordinary shares of Rs 10 each Market value Rs 11. 2012 2011 ----(Rupees in thousand)---20.2.905 425.801 2.1% to 5% per annum (2011: 0.2 133.341 4.441 77.385.088 7.1 25.019 1.2 Due from related parties .146.454. Sales Local sales Export sales . Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---24.404.044 206. 25. 24.486.488 million).234 428.473.228 14.2 and from Nishat Paper Products Company Limited against advances as referred to in note 24.523 27.258.896.198 26.336 18.480 million) which are under lien to secure bank guarantees referred to in note 13.986.1% to 5% per annum). The Company has filed appeals against the demands at different forums.755 311.999 326.821 The balances in saving accounts bear mark-up which ranges from 0.1 24.2.366 2 120.201 . Sales tax recoverable includes amounts which have been recovered by the sales tax department against miscellaneous demands raised by it.194 274.2.792.184.2 2012 2011 ----(Rupees in thousand)---- .962 (2011: US$ 22.3 24.378 million (2011: Rs 31.853 26.1 This represents amount due from subsidiary company relating to advance for purchase of paper bags carrying interest at average borrowing rate of the Company.4 This represents mark-up receivable from Sui Northern Gas Pipelines Limited against the loan as referred to in note 19.310 197.480 million (2011: Rs 14.note 24.2.461 12 297.G.D.unsecured Nishat Mills Limited Lalpir Power Limited Nishat Paper Products Company Limited 13.678 143 197. Cash and bank balances At banks: Saving accounts Pak Rupee Foreign Currency: US$ 902.1 Export sales include rebate on exports amounting to Rs 38.611 16.1 Less: Sales tax Excise duty and special excise duty Commission to stockists and export agents 2.949. Included in balances at banks on saving accounts are Rs 14.note 26.577.20) Current accounts Cash in hand 25.437.258 85.701 23.759 443 310.534 2.207 3. 60 ANNUAL REPORT 2012 .833 6.758 22.540 277.note 25.1 & 25.199 4. D.G. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---1,877,887 941,316 2,109,987 7,262,703 1,375,329 224,370 57,814 1,429,379 12,916 147,132 13,715 24,672 3,200 5,029 1,984 24,673 19,822 18,379 6,328 25,711 15,582,346 Opening work-in-process Closing work-in-process - note 21 - note 21 169,612 (322,049) (152,437) Cost of goods manufactured Opening stock of finished goods Closing stock of finished goods - note 21 - note 21 15,429,909 294,737 (254,990) 39,747 Less: Own consumption 26,558 15,443,098 27.1 1,805,898 804,957 1,880,289 6,160,054 1,338,239 175,077 54,992 1,414,968 146,625 13,597 25,234 4,212 7,147 1,790 10,744 15,298 13,675 11,566 25,605 13,909,967 537,539 (169,612) 367,927 14,277,894 219,365 (294,737) (75,372) 10,293 14,192,229 27. Cost of sales Raw and packing materials consumed Salaries, wages and other benefits Electricity and gas Furnace oil and coal Stores and spares consumed Repairs and maintenance Insurance Depreciation on property, plant and equipment Amortisation of intangible assets Royalty Excise duty Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Estate development Rent, rates and taxes Freight charges Other expenses - note 27.1 - note 16.1.2 - note 17.1 Salaries, wages and other benefits include Rs 24.626 million (2011: Rs 21.950 million), Rs 30.252 million (2011: Rs 20.382 million) and Rs 19.518 million (2011: Rs 15.907 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. ANNUAL REPORT 2012 61 D.G. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---27.1.1 Salaries, wages and other benefits Salaries, wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 28. Administrative expenses Salaries, wages and other benefits Electricity, gas and water Repairs and maintenance Insurance Depreciation on property, plant and equipment Amortisation of intangible assets Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional services Travelling and conveyance Rent, rates and taxes Entertainment School expenses Fee and subscription Other expenses 15,967 12,628 (1) 1,658 30,252 3,340 5,368 10,810 19,518 14,202 5,825 (2) 357 20,382 7,973 2,865 5,069 15,907 117,184 5,908 5,981 1,809 12,752 5,428 7,998 9,202 8,143 5,293 1,197 1,798 15,083 7,681 5,905 211,362 - note 28.1 - note 16.1.2 - note 17.1 - note 28.2 139,338 5,678 8,507 1,738 15,578 2,768 6,181 8,358 18,532 16,321 6,879 147 2,316 18,888 11,549 4,927 267,705 28.1 Salaries, wages and other benefits include Rs 4.949 million (2011: Rs 4.322 million), Rs 7.365 million (2011: Rs 7.983 million) and Rs 4.763 million (2011: Rs 2.305 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. 2012 2011 ----(Rupees in thousand)---Salaries, wages and other benefits Salaries, wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 3,887 3,074 404 7,365 62 28.1 5,562 2,282 (1) 140 7,983 ANNUAL REPORT 2012 D.G. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---815 1,310 2,638 4,763 28.2 Legal and professional charges Legal and professional charges include the following in respect of auditors' services for: Statutory audit Half yearly review Certification and sundry services Out of pocket expenses 1,155 415 735 2,305 Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 1,500 400 100 75 2,075 1,250 270 50 70 1,640 29. Selling and distribution expenses Salaries, wages and other benefits Electricity, gas and water Repairs and maintenance Insurance Depreciation on property, plant and equipment Amortisation of intangible assets Vehicle running Postage, telephone and telegram Printing and stationery Rent, rates and taxes Legal and professional charges Travelling and conveyance Entertainment Advertisement and sales promotion Freight and handling charges - export Other expenses - note 29.1 74,945 1,209 819 481 2,755 2,768 3,743 2,058 3,393 1,337 695 3,336 838 7,349 2,095,508 1,667 2,202,901 29.1 63,822 1,277 427 336 2,690 3,075 2,117 1,344 1,250 633 2,740 521 3,020 2,386,618 729 2,470,599 - note 16.1.2 - note 17.1 29.1 Salaries, wages and other benefits include Rs 3.004 million (2011: Rs 2.588 million), Rs 3.526 million (2011: Rs 2.312 million) and Rs 2.280 million (2011: Rs 1.411 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. 2012 2011 ----(Rupees in thousand)---Salaries, wages and other benefits Salaries, wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 1,861 1,472 193 3,526 63 1,611 662 (1) 40 2,312 ANNUAL REPORT 2012 1.187.263 2.632 50.Related parties .815 7.473 9.D.workers' welfare fund Provisions and unclaimed balances written back Mark-up on loan / advances to related parties Others 31.182 37. None of the directors and their spouses had any interest in any of the donees.642 140 6.955 945.835 30.467 1.074 77.815 .288 1.658 10.067.652 1.468 943.853 943.162 3.914 201 153.434 24 5. Other operating expenses Workers' profit participation fund Donations Exchange loss .1 213.603 53 27.411 Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss Other operating income Income from financial assets Income on bank deposits Interest on loans to employees Gain on derivative financial instruments Dividend income from: .707 1.304 1.539 951. 31.541 1.354 980.048.048.724 859.note 31.601 22.Others .1 3.134.1 31.049 1.632 Income from non-financial assets Rental income Gain on disposal of property.note 30.058. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---390 627 1.000 150 120.670 12.238 8.658 75.700 285. plant and equipment Scrap sales Provision written back .3 759 19.162 27.note 16.320 52.478 64 ANNUAL REPORT 2012 .964 707 254 450 1.1 Dividend income from related parties Nishat Mills Limited MCB Bank Limited Adamjee Insurance Company Limited 99.G.280 30.936 1.847 500.130 1. 817) (55. For purposes of current taxation.090 21.652) 188.05 0.37) Average effective tax rate charged to profit and loss account ANNUAL REPORT 2012 65 2011 % 35.71 36.56 (1.305 188.908 1. Finance costs Interest and mark-up on: .For the year .246 1.57 1. the tax losses available for carry forward as at June 30.Short term borrowings .305 241.18 (9.Prior Deferred 101.G.56 71.465 million (2011: Rs 7. Taxation For the year Current .1 The provision for current taxation represents minimum tax under section 113 of the Income Tax Ordinance.670. 2001 at the rate of 1% (2011: 1%) of turnover from local sales.00 35.079.Not deductible for tax purposes .secured .00 14.37) . 2012 % 33.74 (3.Chargeable to tax at different rates Effect of change in prior years' tax Tax credits and losses in respect of which no deferred tax asset has been recognised Tax effect under presumptive tax regime and others Rounding and others 0. In addition to this.97) 0.231 33.335) (13.242.Long term loans .15) (24.secured .18) 0.191 15.926 430.973 1.835) (41.2 Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate Applicable tax rate Tax effect of amounts that are: .035 1. it includes tax on exports and rental income which is full and final discharge of Company's tax liability in respect of income arising from such source.Workers' profit participation fund Guarantee commission Bank charges 657.020 37.533 2.01 (36.784 778. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---- 32.692 958. 2012 are estimated approximately at Rs 8.500 (115.D.242 36.146 33.976 million).23 20. 368 0.504) 158.691. Earnings per share 34.Depreciation on property.38 170. Cash generated from operations Profit before tax Adjustments for: .2 Earnings per share .Provision for retirement benefits .670) (27.117.468) (951.354) 118.733.467) (6.649.999 (5.836 (52.784 2. Rupees Number Rupees 4.052.basic 34.825 268.361 (525.847 1.Basic Profit for the year Weighted average number of ordinary shares Earnings per share .192 1.000) 67.193 6.079.441 (6.735 (155.010 12.021) 6.162.182 2.466 601.494.305.064 197.961.883 285.119.Finance costs Profit before working capital changes Effect on cash flow due to working capital changes Increase in stores. spares and loose tools (Increase) / decrease in stock-in-trade Decrease / (increase) in trade debts Decrease in advances.293) 174.707) (50.712 18. plant and equipment .Gain on derivative financial instruments .1 Earnings per share . Khan Cement Company Limited 34.342 1. prepayments and other receivables .026) 66 4.Diluted There is no dilution effect on the basic earnings per share as the Company has no such commitments.118 9.410 (9.Amortisation on intangible assets .000 380. deposits.45 2012 2011 ----(Rupees in thousand)---35. plant and equipment .787 36.351) 86.108.447.D.452 (19.161) ANNUAL REPORT 2012 .688 438.Exchange loss .489) 2. Cash and cash equivalents Cash and bank balances Short term borrowings .579) (424.Gain on disposal of property.876 (247.670.Mark-up income .357.982) (8.437.note 25 .Impairment charged on investments .146 2.058.430.228) (92.826.Increase / (decrease) in trade and other payables (594.note 13 428.821 (8.Dividend income .162) (5.secured .914) 56.467) (1.G. 068 1.D.815 ii.218 97.076 10.032 796 50.302 3 18.819 30.882 23.637 3.842 1 Directors 2012 2011 (Rupees in thousand) 20. full time working Directors and Executives of the Company are as follows: Chief Executive 2012 2011 Managerial remuneration Contributions to Provident and Gratuity Fund Housing Utilities Leave passage Medical expenses Others Number of persons 8. Directors and Executives 37.690 1.1. Other related parties All transactions with related parties have been carried out on commercial terms and conditions. 38 Transactions with related parties The related parties comprise subsidiary company.925 4.580 13.757 632.G. Amounts due from and to related parties are shown under receivables and payables.592 22.700 82.461 5. expense charged in respect of staff retirement benefit plans is disclosed in note 9.585 324. to the Chief Executive. directors.539 1. Khan Cement Company Limited 37 Remuneration of Chief Executive. ANNUAL REPORT 2012 67 .432 29.517 3 Executives 2012 2011 169. travelling and utilities.658 1.159 1.426 759 48.550 130 The company also provides the chief executive and some of the directors and executives with Company maintained cars.558 10.187 74.764 43. Subsidiary Company Nature of transaction Purchase of goods Rental income Interest income Sale of goods Sale of equipment Purchase of asset Insurance premium Purchase of services Insurance claims received Mark-up income on balances with related parties Dividend income 996.592 3.096 943.101 1.2 Remuneration to other directors Aggregate amount charged in the financial statements for the year for fee to 5 directors (2011: 5 directors) is Rs Nil (2011: Rs Nil). 37.098 152 147.408 1.782 1. dividend income is disclosed in note 31.048. Other significant transactions with related parties are as follows: 2012 2011 ----(Rupees in thousand)---Relationship with the company i. other related companies.505 34.1 The aggregate amount charged in the financial statements for the year for remuneration.064 818 171 3.494 4.032. The company does not provide any remuneration and benefits to non-executive directors of the company. amounts due from directors and key management personnel are shown under receivables and remuneration of directors and key management personnel is disclosed in note 37.170 61. key management personnel and post employment benefit plans.477 14.526 2.584 272. associated companies.468 2.496 270 529 4.770 693 1.033.621 270 169 5. The Company in the normal course of business carries out transactions with various related parties.986 27.231 49.537 1 7.127 3.044 26.547 12. including certain benefits. mainly as a result of foreign exchange losses / gains on translation of US dollardenominated financial assets and liabilities. primarily with respect to the United States Dollar (USD). The Company's finance department evaluates and hedges financial risks. if the Rupee had weakened / strengthened by 10% against the US dollar with all other variables held constant.325. 2012. cash flow interest rate risk and price risk).632 1. Risk management is carried out by the Company's Board of Directors (the Board).254 million) lower / higher.989 1. the Company’s foreign exchange risk exposure is restricted to bank balances and amounts receivable from / payable to the foreign entities. Financial risk management 40.692 Actual production 2012 2011 68 ANNUAL REPORT 2012 . Khan Cement Company Limited 39 Capacity and production Capacity 2012 2011 Clinker (Metric Tonnes) Unit I Unit II Unit III 40.200. credit risk and liquidity risk. as well as written policies covering specific areas. The company is exposed to currency risk arising from various currency exposures.327 694.D. The Company uses derivative financial instruments to hedge certain risk exposures.981 million (2011: Rs 140.000 2.835 1. The Company’s investments in equity of other entities that are publicly traded are included in all of the following three stock exchanges.000 1. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies.G.200.000 1. and investment of excess liquidity. credit risk. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board. 810.717. Karachi Stock Exchange.680.877 1. use of derivative financial instruments and non-derivative financial instruments.253.010. interest rate risk. post-tax profit for the year would have been Rs 245.000 839. The Company's overall risk management procedures to minimise the potential adverse effects of financial market on the Company's performance are as follows: (a) Market risk (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance.000 810. (ii) Price risk The Company is exposed to equity securities price risk because of investments held by the Company and classified as available for sale. The board provides written principles for overall risk management. Currently. Lahore Stock Exchange and Islamabad Stock Exchange. At June 30. The primary goal of the Company's investment strategy is to maximise investment returns.1 Financial risk factors The Company’s activities expose it to a variety of financial risks: market risk (including currency risk.000 2. fair value interest rate risk.010. such as foreign exchange risk. Various scenarios are simulated taking into consideration refinancing. For banks and financial institutions. including outstanding receivables and committed transactions. The utilisation of credit limits is regularly monitored and major sales to retail customers are settled in cash.874 171. taking into account their financial position. The Company monitors the credit quality of its financial assets with reference to historical performance of such assets and available external credit ratings. Khan Cement Company Limited The table below summarises the impact of increases / decreases of the KSE-100 index on the Company’s posttax profit for the year and on equity. the Company’s income is substantially independent of changes in market interest rates. As at June 30. (b) Credit risk Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.G. The Company analyses its interest rate exposure on a dynamic basis. renewal of existing positions. if interest rates on floating rate borrowings had been 1% higher / lower with all other variables held constant. post-tax profit for the year would have been Rs 108. as well as credit exposures to distributors and wholesale and retail customers. The analysis is based on the assumption that the KSE had increased / decreased by 10% with all other variables held constant and all the Company’s equity instruments moved according to the historical correlation with the index: Impact on post-tax profit 2012 2011 (Rupees in thousand) Karachi Stock Exchange Impact on other components of equity 2012 2011 (Rupees in thousand) 157. (iii) Interest rate risk As the Company has no significant floating interest rate assets. only independently rated parties with a strong credit rating are accepted.821 Post-tax profit for the year would increase / decrease as a result of gains / losses on equity securities classified as at fair value through profit or loss. These borrowings issued at variable rates expose the Company to cash flow interest rate risk. At June 30. derivative financial instruments and deposits with banks and financial institutions. 2012. the Company calculates the impact on profit and loss of a defined interest rate shift. 2012. Other components of equity would increase / decrease as a result of gains / losses on equity securities classified as available for sale.867 million (2011: Rs 147. The carrying values of financial assets exposed to credit risk and which are neither past due nor impaired are as under: ANNUAL REPORT 2012 69 . The management assesses the credit quality of the customers. The Company’s interest rate risk arises from short term and long-term borrowings. Based on these scenarios.596 million) lower / higher. Credit risk of the Company arises from cash and cash equivalents. mainly as a result of higher / lower interest expense on floating rate borrowings. The scenarios are run only for liabilities that represent the major interest-bearing positions.D. past experience and other factors. the Company has no investments classified as fair value through profit or loss. alternative financing and hedging. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. 482 55.220 The ageing analysis of trade receivables is as follows: Up to 90 days 90 to 180 days 181 to 365 days Above 365 days 45.097 6. The provision is written off by the Company when it expects that it cannot recover the balance due.062.G.499 10.413 40 240.972 425.699 392.A.678 952.044 1. Any subsequent repayments in relation to amount written off.219 222.067 960 39.134 222.911 197.883 1.763 51.342 123.079 47.207 77 7 5.783 566 85.678 70 ANNUAL REPORT 2012 .812 197.D.380 59 124.020 32.442 123.207 1.387 14.678 16. are credited directly to profit and loss account. Dubai Islamic Bank (Pakistan) Limited Faysal Bank Limited Habib Bank Limited HSBC Bank Middle East Limited MCB Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited Silk Bank Limited Standard Chartered Bank Pakistan Limited United Bank Limited A1+ A1+ A1+ A1 A1+ A1 A1 A1 AA A1+ P1 A1+ A1+ A1+ A1+ A2 A1+ A1+ AA+ AA AA A AAA+ A+ A A1+ AA A1 AA+ AAAAA AAAAAA AA+ Rating Agency PACRA PACRA PACRA PACRA PACRA S&P S&P PACRA PACRA JCR-VIS Moody's PACRA JCR-VIS JCR-VIS PACRA JCR-VIS PACRA JCR-VIS 2012 2011 (Rupees in thousand) 49 10.597 133. deposits.680 42.021 9.699 96. prepayments and other receivables Balances with banks 120.852 239 425.126 611 111 14.924 376 2. advances and deposits Trade debts Advances.137 160 1. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---Long term loans.157 96 1.597 398.306 The management estimates the recoverability of trade receivables on the basis of financial position and past history of its customers based on the objective evidence that it shall not receive the amount due from the particular customer.505 366 9. The credit quality of Company's bank balances can be assessed with reference to external credit ratings as follows: Rating Short term Long term Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Islami Pakistan Limited Bank of Punjab Barclay's Bank PLC Pakistan Citibank N. 008. the Company's finance department maintains flexibility in funding by maintaining availability under committed credit lines.231 Between 1 and 2 years 1.639 2. (Rupees in thousand) At June 30.774. Management monitors the forecasts of the Company’s cash and cash equivalents (note 36) on the basis of expected cash flow.768 1. the Company's liquidity management policy involves projecting cash flows in each quarter and considering the level of liquid assets necessary to meet its liabilities.165 162.691. The gearing ratio as at June 30.629.258.931 6. This is generally carried out in accordance with practice and limits set by the Company.871. These limits vary by location to take into account the liquidity of the market in which the entity operates. Khan Cement Company Limited (c) Liquidity risk Liquidity risk represents the risk that the Company shall encounter difficulties in meeting obligations associated with financial liabilities.733.982 11. The Company’s strategy. Consistent with others in the industry and the requirements of the lenders.467 15.190 284.356.871. In addition.D.875.858 3 to 5 years 2.639 3 to 5 years 3. was to maintain a gearing ratio of 60% debt and 40% equity. Total debt represent long term and short-term finances obtained by the Company. the Company may adjust the amount of dividends paid to shareholders or issue new shares.156.894.858 3. The table below analyses the Company’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.secured Carrying value 6.940 . In order to maintain or adjust the capital structure.008.548 923. the company monitors the capital structure on the basis of gearing ratio.225 Between 1 and 2 years 2.576. which was unchanged from last year. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions.931 6.994. the availability of funding through an adequate amount of committed credit facilities.467 10.2 Capital risk management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans. Due to the dynamic nature of the Company's businesses. This ratio is calculated as total debt divided by total capital employed.331 Less than 1 year 1.691.851 1. Total capital employed includes equity as shown in the balance sheet plus total debt.511 8. 2012 Long term finances Trade and other payables Accrued finance cost Short term borrowings .414 At June 30. 2011 Long term finances Trade and other payables Accrued finance cost Short term borrowings .272. The amounts disclosed in the table are the contractual undiscounted cash flows as the impact of discounting is not significant.secured Carrying value 6.785.576.982 16.272.127 923. 2011 is as follows: ANNUAL REPORT 2012 71 Less than 1 year 2.940 2.511 8.356.G.190 284. 2012 and June 30.733.810 40. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities.165 162.225 1. 2012. 41.283 45. The financial instruments that are not traded in active market are carried at cost and are tested for impairment according to IAS 39. 1. for the purposes of comparison.567.930.519. Chief Executive 72 Director ANNUAL REPORT 2012 .318 32. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. Date of authorisation for issue These financial statements were authorised for issue on September 10.Property.950 29% 15. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.to trade suppliers" now reclassified under "Due from related parties". now reclassified under Available for Sale . These financial statements do not reflect this dividend payable. The quoted market price used for financial assets held by the Company are the current bid prices.considered good . Events after the balance sheet date The Board of Directors have proposed a final dividend for the ended June 30. Plant and Equipment" as it is considered a better presentation under International Accounting Standard 16 . Further. significant re-arrangements made are as follows: (Rupees in thousand) "Capital work in progress" has been reclassified to "Property.others" Gain on derivative financial instruments previously classified under "Finance cost" now reclassified to "Other operating income" 43. 2012 for approval of the members at the Annual General Meeting to be held on October 24.254 166.3 13.468 The above figures have been re-arranged as the reclassifications made are considered more appropriate for the purposes of presentation.999 30. Khan Cement Company Limited 2012 2011 ----(Rupees in thousand)---Total debt Total equity Total capital employed Gearing ratio 40. 2012 by the Board of Directors of the Company.449. Negative bank balances previously appearing in "Cash and bank balances . Amount classified previously under secured trade debtors.(Others') long-term Investments. 42. previously classified under "Advances .784. Nishat (Chunian) Limited previously classified under Available for sale .current accounts" now reclassified under "Trade and other payables . 2012 of Rs 1. now reclassified as unsecured trade debtors.179 27.620 310.217.820 45.(related parties') long-term Investments. Corresponding figures Corresponding figures have been re-arranged and reclassified. amounting to Rs 657.G. Plant and Equipment.179 million (2011: Rs Nil) at their meeting held on September 10.50 (2011: Rs Nil) per share.373. subsidiary company.109 30. Advance amount relating to Nishat Paper Products Company Limited.392 34% Fair value estimation The carrying value of financial assets and liabilities reflected in the financial statements approximate their fair values.632 46. wherever necessary.D. Khan Cement Company Limited Notes ANNUAL REPORT 2012 73 .G.D. G.D. Khan Cement Company Limited Group Consolidated Financial Statements 74 ANNUAL REPORT 2012 . G. 2012 ANNUAL REPORT 2012 75 . 23. 4. Khan Cement Company Limited Group DIRECTORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS The board of directors of the company is pleased to submit its report along with the consolidated financial statements for the year ended 30 June 2012.962 124 4.395 (1. the company earned a post tax profit Rs.745 (1. but continual increase in fuel prices and persistent energy shortfall will remain the major challenges in 2013.438) 2. Our discussion of the affairs of the holding company has been separately presented.873 407 3.236) 7.846 (16.280 608 3.086 millions. Sales Cost of sales Gross profit Profit from operations Finance cost Profit before taxation Taxation Profit after taxation Despite challenges being offered by the economic conditions.D.190) 682 (485) 197 4. Continued energy crises and poor law and order continued Consolidated Financial Performance (Rupees in million) 2012 Year ended 30 June 2011 Year ended 30 June Change Year on Year to hit our economy in 2012.957 2.086 Staff and Customer 19.889 We wish to record our appreciation of continued commitment of our employees and patronage of our customers For and on behalf of the Board Mian Raza Mansha Chief Executive Officer Lahore: 10 September.783) 3. Although.610 5.871 (2.653 2. Our economic targets remained unachieved and our manufacturing sector operated below full capacity.451 (14.798) 4. there is a hope of changes in business scenario after 2013 general elections. The situation got worse by heavy rainfall in Sindh and Balochistan. D. the Group has changed its accounting policies on initial application of standards. consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof. The consolidated financial statements of the Group for the year ended June 30. Chartered Accountants. Khan Cement Company Limited Group AUDITORS' REPORT TO THE MEMBERS We have audited the annexed consolidated financial statements comprising consolidated balance sheet of D. Our responsibility is to express an opinion on these financial statements based on our audit. Ferguson & Co. Khan Cement Company Limited. Khan Cement Company Limited and its subsidiary company (the Group) as at June 30.G. 2012 and the related consolidated profit and loss account. Nishat Paper Products Company Limited was audited by another firm of auditors. 2011 were audited by another firm of accountants.G. 2012 and the results of their operations for the year then ended. Khan Cement Company Limited (the Holding Company) and its subsidiary company (hereinafter referred to as 'the Group') as at June 30.2.1 annexed to the financial statements. amendments or interpretations to existing standards. Name of engagement partner: Muhammad Masood 76 ANNUAL REPORT 2012 .G. whose report dated September 7. Chartered Accountants Lahore. Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of a accounting records and such other auditing procedures as we considered necessary in the circumstances. 2011 expressed an unqualified opinion thereon. consolidated statement of comprehensive income. Its subsidiary company. These financial statements are the responsibility of the Holding Company's management. As stated in note 2.G. We have also expressed a separate opinion on the financial statements of D. is based solely on the report of such other auditors. whose report has been furnished to us and our opinion in so far as it relates to the amounts included for such company. for the year then ended. A. F. In our opinion the consolidated financial statements present fairly the financial position of D. M/s KPMG Taseer Hadi & Company. 658.893 139.601.355 185.711.231.271.349.019. Khan Cement Company Limited Group CONSOLIDATED BALANCE SHEET Note EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital .801 1.996.090 13.381.265 33.213 1.505.381.730.800 9.118 (2011: 438.051 2.877.000.649.950.983 9.500.750 6.561 35.000 10.000.000 500. Chief Executive ANNUAL REPORT 2012 77 .405 939.916 30.G.083 68.512 341.960.131.000 (2011: 950.685 8 9 10 11 4.362.250.50.193 51.000.036.191 24.000.718 330.119.886 6.000) preference shares of Rs 10 each Issued.000) ordinary shares of Rs 10 each .891 33.000 4.000 500.105.000.191 23.116 1.500. subscribed and paid up capital 438.652 7.579 70.921 2012 2011 ----(Rupees in thousand)---- CONTINGENCIES AND COMMITMENTS 16 The annexed notes 1 to 45 form an integral part of these consolidated financial statements.245.901.000 (2011: 50.D.000 10.000 6 7 4.514 52.571 9.119.000.863 178.636 5.317.348 2.559.090 12.304 4.602.controlling interest NON-CURRENT LIABILITIES Long term finances Long term deposits Retirement and other benefits Deferred taxation CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowing-secured Current portion of non-current liabilities Provision for taxation 12 13 14 15 2.118) ordinary shares of Rs 10 each Reserves Accumulated profit Non .409 30.566 35.686 304. 808 4.316 138.445 27.596.014 650. Khan Cement Company Limited Group AS AT JUNE 30.126.999 5.055. 2012 Note ASSETS NON-CURRENT ASSETS Property.661.801 51.158.288. deposits.954 1.678 239.604.034 462.573 73.283 12.774 52.787 134.G.270.356 3.125 32.685 Director 78 ANNUAL REPORT 2012 .478 19.393 19.367 866.477 1.911 2012 2011 ----(Rupees in thousand)---- CURRENT ASSETS Stores. plant and equipment Intangible assets Investments Long term loans.D. prepayments and other receivables Cash and bank balances 21 22 23 24 25 26 4.748 32.071 1. advances and deposits 17 18 19 20 28.126.947.080. spares and loose tools Stock-in-trade Trade debts Investments Advances.198.513.073.105.597 11.000.784 486.271. 653.341 (16.744.218.085.161 184.975 (11.basic and diluted (2011: Restated) 35 9.D.831 4.859 (484.161 0.836) 2.815) (520.303) 1.096.610.613) 681.927) (2.846.101) 1.controlling interest 34 33 29 30 31 32 27 28 2012 2011 ----(Rupees in thousand)---23.189.622) (50.236.484.017) 7. 2012 Note Sales Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Impairment on investments Profit from operations Finance cost Profit before taxation Taxation Profit after taxation Attributable to: Equity holders of the parent Non .101 197. Khan Cement Company Limited Group CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30.472 (2.078 123.324 (273.085. Chief Executive ANNUAL REPORT 2012 79 Director .797.451.871) 3.088.494 (216.666 (118.753 4.884) (2.425 5.698) 197.782.866) 4.G.48 Earnings per share .949 (1.147.35 The annexed notes 1 to 45 form an integral part of these consolidated financial statements.360 (14.060 13.962.144) 4.871.831 19. 2012 2012 2011 ----(Rupees in thousand)---Profit after taxation Other comprehensive income Available for sale financial assets .766 13.691.206 (11.769) 2.D.706 2.394.185.836) 2.250.394.831 197.101 2.062 2.542 (118.691.867 The annexed notes 1 to 45 form an integral part of these consolidated financial statements.controlling interes 4.066. Khan Cement Company Limited Group CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30.702.769) (1. Chief Executive 80 Director ANNUAL REPORT 2012 .062 2.G.161 (1.085.867 2.263.144) 2.Impairment loss through consolidated profit and loss account Other comprehensive (loss) / income for the year Total comprehensive income for the year Attributable to: Equity holders of the parent Non .263.Change in fair value . 909.080) 41. Khan Cement Company Limited Group CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30.242.net Net cash generated from operating activities Cash flows from investing activities Fixed capital expenditure Proceeds from sale of property.667) 2. plant and equipment Long term loans.058.861.618 (9.122.233.761.025.655) 1.300 (4.850.573) The annexed notes 1 to 45 form an integral part of these consolidated financial statements. advances and deposits .398 1.917 1.955) 1.493) 205.773) (155) (1) 941.096.000 (2.049) (335.122.622) (19.476 3. Chief Executive ANNUAL REPORT 2012 81 Director .390 (1.717 (9.623) 1.674.688) (10.290) (9.024.708 (1.817.808) (2.G.191.355 (655.251 (2.469 694.573) (7.500.460.793) (351.net Interest received Dividend received Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of share capital Proceeds from long term finances Repayment of long term finances Repayment of liabilities against assets subject to finance lease Dividend paid Net cash (used in) / generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 37 36 2012 2011 ----(Rupees in thousand)---- 6.287 951.090 23.382 (2.D.363) (20.205) (397.191) (1.903 (2.245) 408.538) 3.906.693 2. 2012 Note Cash flows from operating activities Cash generated from operations Finance cost paid Retirement and other benefits paid Taxes paid Long term deposits .368. 606.096.265 33.974.096.163 13.112 - .144) - 4.650. 2011 Total comprehensive income for the year .993 730.396 Transactions with owners . Khan Cement Company Limited Group ANNUAL REPORT 2012 Chief Executive Director .975 - 4.381.066.308 26.161 2.460. 2010 3.510 2.460.Right issue Total comprehensive income for the year .867 30.101 13.557.036.706 5.085. 2012 Capital Reserve Revenue Reserve Share Capital R u p e e s i n t h o u s a n d Share Premium Fair Value Reserve General Reserve Capital Redemption Reserve Fund Total equity attributable to shareholders NonAccumulated of parent Controlling Profit company Interest Total Shareholders equity Balance as on June 30. D.706 2.191 4.066.250.658.851 - 184.060 2.Other comprehensive income for the year 4.110.198 730.769) 4. 2012 The annexed notes 1 to 45 form an integral part of these consolidated financial statements.510 5.921 82 Balance as on June 30.396 3.019.394.349.175 353.394.263.512 13.983 Balance as on June 30.934.066.965 12.658 1.CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30.G.4.Profit for the year .557.908.766 939.881 353.975 (1.916 30.580.317.060 184.110.394.110.769) 330.831 (1.163 14.856 26.101 341.851 5.409 197.350 328.826.706 2.Profit / (loss) for the year .Other comprehensive loss for the year (1.191 4.066.851 755.891 33.198 1.706 2.381.769) 353.510 5.060 184.718 (11. D. Ordinary Portland and Sulphate Resistant Cement. provisions of and directives issued under the Companies Ordinance. 1984. Wherever the requirements of the Companies Ordinance. 2010.2. Nishat Paper Products Company Limited is a public limited Company incorporated in Pakistan under the Companies Ordinance. 2004. . emphasizes the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments. issued in October 8. and . The application of the amendment will not affect the results or net assets of the Group as it is only concerned with presentation and disclosures. 1984 or directives issued by Securities and Exchange Commission of Pakistan differ with the requirements of IFRS or IFAS. The new disclosure requirements apply to transferred financial assets. Khan Cement Company Limited (""the Parent Company""). Basis of preparation 2. 1984. Khan Cement Company Limited ("the Company") is a public limited Company incorporated in Pakistan and is listed on Karachi. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance.Nishat Paper Products Company Limited 2. ‘Financial Instruments’. 1984 (the Ordinance) and the approved accounting standards as applicable in Pakistan. amendments to published standards and interpretations that are effective in the current year and are relevant to the Group New and amended standards. 1984 or the requirements of the said directives prevail. the requirements of the Companies Ordinance. The registered office of the Company is situated at 53-A Lawrence Road. % age of holding . Khan Cement Company Limited Group NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30.D. Legal status and nature of business The group comprises of .IFRS 7 (Amendments). Lahore and Islamabad Stock Exchanges. 2012 1. Initial application of standards. G. It is principally engaged in production and sale of Clinker. 2011). G. amendments or an interpretation to existing standards The following amendments to existing standards have been published that are applicable to the Group's consolidated financial statements covering annual periods. beginning on or after the following dates: 2.2 .1 These consolidated financial statements have been prepared in accordance with the requirements of the Companies Ordinance. and interpretations mandatory for the first time for the financial year beginning July 01. The amendments will promote transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position. An entity transfers a financial asset when it transfers the contractual rights to receive cash flows of the asset to another party. It is principally engaged in the manufacturing and sale of paper products and packaging material. 1984 on July 23. particularly ANNUAL REPORT 2012 83 50% 2.1 Standards.G.Nishat Paper Products Company Limited (""the Subsidiary Company"") D. Lahore.IFRS 7. 2011: . 'Disclosures on transfers of financial assets' (Amendment) (effective July 01. These amendments are a part of the IASBs comprehensive review of off balance sheet activities. 2 Standards. 2013 but is available for early adoption. The new disclosure is intended to facilitate comparison between those entities that prepare IFRS financial statements and those that prepare US GAAP financial statements.IAS 1 (amendments) (effective January 01. Khan Cement Company Limited Group those involving securitization of financial assets. This is the first part of a new standard on classification and measurement of financial assets and financial liabilities 84 ANNUAL REPORT 2012 . The standard is not applicable until January 01. which should be applied retrospectively to the earliest comparative period presented. ‘Related party disclosures’. The application of this amendment is not expected to have any material impact on the Group's consolidated financial statements. It supersedes IAS 24. it is not contingent on a future event and must be legally enforceable for all counterparties.IFRIC 19. ‘Financial Instruments’. minimum funding requirements and their interaction’. amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group The following amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after July 01. . measurement and derecognition of financial assets and financial liabilities. The application of this interpretation is not expected to have any material impact on the Group's consolidated financial statements. Provided certain conditions are met. issued in October 2009. . . The new disclosure requirements apply to offsetting of financial assets and financial liabilities.IFRS 9. This amendment reflects the requirements to enhance current offsetting disclosures. The amendment corrects an unintended consequence of IFRIC 14. which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. the equity instruments should be measured to reflect the fair value of the financial liability extinguished. 2013 and does not expect to have any material impact on its consolidated financial statements.‘Prepayments of a minimum funding requirement’ (amendments to IFRIC 14). 2012 or later periods. It is not expected to have any material impact on the Group's consolidated financial statements. 2.e. The Group has determined that there is no significant transfer of financial assets that requires disclosure under the guidance above. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. 2011).2. issued in November 2009. ‘IAS 19 – The limit on a defined benefit asset. such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. addresses the classification. these issues had to be accounted for as derivative liabilities. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). issued in 2003. It requires a gain or loss to be recognised in profit or loss. either in the statement of changes in equity or in the notes to the financial statements. ‘Related party disclosures’. entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions.G. If the fair value of the equity instruments issued cannot be reliably measured. The application of this amendment is not expected to have any material impact on the Group's consolidated financial statements. and the amendment corrects this.‘Classification of rights issues’ (amendment to IAS 32).D. The Group shall apply these amendments for the financial reporting period commencing on July 01. 2011). clarifies that an entity will present an analysis of other comprehensive income for each component of equity. Without the amendment.IAS 24 (revised) (effective July 01. . Previously. issued on December 19. and the Group has not early adopted them: . 2011. . ‘Disclosures on offsetting financial assets and financial liabilities' (Amendment). This was not intended when IFRIC 14 was issued. . The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The amendment clarifies that the right of set-off must be available at present i.IFRS 7. ‘Extinguishing financial liabilities with equity instruments’. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. This change will mainly affect financial institutions. Proportional consolidation of joint ventures is no longer allowed. There are two types of joint arrangement: joint operations and joint ventures. the standard retains most of the IAS 39 requirements. All equity instruments are measured at fair value.G. The requirements. applicable from January 01. . revenue and expenses. unless this creates an accounting mismatch. The Group's significant accounting policies are stated in note 5. The Group shall apply this standard from July 01. 2013. which are largely aligned between IFRSs and US GAAP . 2013. Basis of measurement 3. The Group shall apply this amendment from July 01. including joint arrangements. with bifurcation of embedded derivatives. These include amortised-cost accounting for most financial liabilities. .IFRS 10. 2013 and does not expect to have any material impact on its consolidated financial statements. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets. as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss. . The standard provides additional guidance to assist in the determination of control where this is difficult to assess. subjective or complex judgments or estimates.‘Fair value measurement’. The Group shall apply this standard from January 01. Khan Cement Company Limited Group that will replace IAS 39. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. The main change is that. applicable from January 01. 2013 and does not expect to have any material impact on its consolidated financial statements.IFRS 11. 2013. This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. IFRS 9 has two measurement categories: amortised cost and fair value. There will be no impact on the Group's accounting for financial liabilities.‘Financial statement presentation’ (Amendment). .IAS 1 . 'Consolidated Financial Statements’. This standard includes the disclosure requirements for all forms of interests in other entities. 2012. special purpose vehicles and other off balance sheet vehicles. in cases where the fair value option is taken for financial liabilities. 2012 and does not expect to have any material impact on its consolidated financial statements.‘Disclosures of interests in other entities’. is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. and the Group does not have any such liabilities. 2013 and does not expect to have any material impact on its consolidated financial statements. ‘Financial Instruments: Recognition and measurement’. liabilities.IFRS 12 . The main change resulting from this amendment is a requirement for entities to group items presented in Other Comprehensive Income (OCI) on the basis of whether they are potentially recycled to profit or loss (reclassification adjustments). do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP . For liabilities. The amendment does not address which items are presented in OCI. This is applicable on accounting periods beginning on or after July 01.D.IFRS 13 . This is applicable on accounting periods beginning on or after January 01. 2013 and does not expect to have any material impact on its consolidated financial statements. The following is intended to provide 85 3.2 ANNUAL REPORT 2012 . . 2013. the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement. The Group shall apply this standard from January 01. associates. builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the Parent Company.1 These consolidated financial statements have been prepared under the historical cost convention except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value. This is applicable on accounting periods beginning on or after January 01. 'Joint Arrangements'. 3. The Group shall apply this standard from July 01. Not all of these significant policies require the management to make difficult. 1 Principles of consolidation Subsidiary The consolidated financial statements include the financial statements of D. the above mentioned prior period error has been corrected retrospectively in the current year by restating the EPS of the earliest period presented i. 86 ANNUAL REPORT 2012 . judgment and estimation involved in their application and their impact on these consolidated financial statements. Non-controlling interests are that part of the net reserves of the operation and of net assets of the subsidiary attributable to interests which are not owned by the Group. the Group calculated the EPS on the basis of weighted average number of shares of both the Parent Company and the Subsidiary Company instead of the weighted average number of shares of the Parent Company. Finance costs are accounted for on an accrual basis. Non-controlling interest is presented as a separate line item in the consolidated financial statements.05 per share. G.D. These policies have been consistently applied to all the years presented.note 5. year ended June 30.note 34 Retirement and other benefits . 2011. The areas involving a higher degree of judgments or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are as follows: i) ii) iii) iv) 4. Accordingly. 5. Material intra-group balances and transactions have been eliminated. The restatement has resulted in an increase in EPS of the prior period by Re 0. The financial statements of the subsidiary are included in the consolidated financial statements from the date control commences until the date control ceases.note 5. The assets and liabilities of the subsidiary company have been consolidated on a line by line basis and carrying value of investments held by the Parent Company is eliminated against the subsidiary shareholders' equity in the consolidated financial statements. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates. Khan Cement Company Limited Group an understanding of the policies the management considers critical because of the complexity. This miscalculation constitutes a ‘prior period error’ as defined in IAS 8 “Accounting Policies. Significant accounting policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below.e. are classified as liabilities. beneficially owns or holds more than 50% of voting securities or otherwise has power to elect and appoint more then 50% of its Directors. 5.4 & 10 Residual values and useful lives of depreciable assets . including expectations of future events that are believed to be reasonable under the circumstances. 2011. Khan Cement Company Limited and its subsidiary Nishat Paper Products Company Limited with 50% holding (2011: 50%) ("the Group Companies") Subsidiary is that enterprise in which Parent Company directly or indirectly controls. Preference shares.2 Borrowings Interest bearing borrowings are recognised initially at fair value less attributable transaction cost.note 16 Prior period error During the previous year ended June 30. these are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated profit and loss over the period of the borrowings on an effective interest rate basis.G. Judgments and estimates are continually evaluated and are based on historical experience. Subsequent to initial recognition. which are mandatorily redeemable on a specific date at the option of the Group. Changes in Accounting Estimates and Errors”. The dividend on these preference shares is recognised in the consolidated profit and loss account as finance cost. unless otherwise stated.6 Provisions and contingencies . 5. Provision for taxation . The amount recognised in the consolidated balance sheet represents the present value of the defined benefit obligation as on June 30. The charge for current tax also includes adjustments. in which case it is recognised in equity. based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the consolidated profit and loss account. The most recent valuation was carried out as at June 30. Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the Parent Company obligations and the fair value of plan assets are amortised over the expected average working lives of the participating employees. Any balance ANNUAL REPORT 2012 87 . Accumulating compensated absences The Parent Company provides for accumulating compensated absences. unused tax losses and tax credits can be utilised. Obligation for contributions to defined contribution plan is recognised as an expense in the consolidated profit and loss account as and when incurred. Equal monthly contributions are made to the fund both by the Parent Company and the employees at the rate of 10% of the basic salary for officers and 10% of basic salary plus cost of living allowance for workers.5 days leave per month. Defined contribution plan The Parent Company operates a recognised provident fund for all its regular employees. Khan Cement Company Limited Defined benefit plans The Parent Company operates an approved funded defined benefit gratuity plan for all employees having a service period of more than five years for management staff and one year for workers. Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. when the employees render service that increase their entitlement to future compensated absences.G. Unutilised leaves can be accumulated upto 90 days in case of officers. employees are entitled to 2. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of the taxable profit. except in the case of items charged or credited to equity in which case it is included in the consolidated statement of changes in equity. if any.4 Retirement and other benefits The main features of the schemes operated by the Group for its employees are as follows: D. Income tax is recognised in consolidated profit and loss account except to the extent that it relates to items recognised directly in equity. to provision for tax made in previous years arising from assessments framed during the year for such years. 5.3 Taxation Income tax expense comprises current and deferred tax. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences. Provisions are made in the consolidated financial statements to cover obligations on the basis of actuarial valuations carried out annually. Khan Cement Company Limited Group 5. rebates and exemptions. 2012 using the "Projected Unit Credit Method". The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to profit for the year if enacted after taking into account tax credits. G.D. where considered necessary. 2012 as adjusted for unrecognised actuarial gains and losses. Under the service rules. Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realised or the liability is settled. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. 5. however accumulated leave balance above 50 days is encashable upon demand of the worker. plant and equipment is charged to the consolidated profit and loss account on the reducing balance method. are stated at cost less accumulated depreciation and any identified impairment loss.G. 2012 using the "Projected Unit Credit Method". In case of workers. the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. All other repair and maintenance costs are charged to consolidated profit and loss account during the period in which they are incurred. The amount recognised in the consolidated balance sheet represents the present value of the defined benefit obligations. if any. gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 5.D.5 Trade and other payables Financial liabilities are initially recognised at fair value plus directly attributable cost. Where an impairment loss is recognised. plant and equipment Property. except freehold land. the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. The Group assesses at each balance sheet date whether there is any indication that property. Where carrying amounts exceed the respective recoverable amount. subject to the approval of the Parent Company's management. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset. Cost in relation to certain property. plant and equipment is charged from the month in which an asset is acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. except for plant and machinery which is being depreciated using the straight line method. 5. assets are written down to their recoverable amounts and the resulting impairment loss is recognised in the consolidated profit and loss account. Depreciation on additions to property. The most recent valuation was carried out as at June 30. plant and equipment signifies historical cost. Depreciation methods. plant and equipment. Unutilised leaves can be used at any time by all employees. Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services. residual values and the useful lives of the assets are reviewed at least at each financial year end and adjusted if impact on depreciation is significant.20. as appropriate. so as to write off the historical cost of such asset over its estimated useful life at annual rates mentioned in note 17 after taking into account their residual values. Any further unutilised leaves lapse.6 Property. only when it is probable that future economic benefits associated with the item shall flow to the Group and the cost of the item can be measured reliably. unutilised leaves may be accumulated without any limit. Khan Cement Company Limited Group in excess of 90 days can be encashed upto 17 days a year only. Freehold land is stated at cost less any identified impairment loss. Actuarial gains and losses are charged to the consolidated profit and loss account immediately in the period when these occur. and subsequently at amortised cost using effective interest rate method.17 and borrowing costs as referred to in note 5. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to consolidated profit and loss account. plant and equipment may be impaired. Depreciation on all property. 88 ANNUAL REPORT 2012 . If such indication exists. 5. if any.8 Intangible assets Expenditure incurred by the Parent Company to acquire Oracle enterprise resource planning (ERP) system has been capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. are included in liabilities against assets subject to finance lease.7 Capital work-in-progress Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment loss and represents expenditure incurred on property. Where carrying amounts exceed the respective recoverable amount. Khan Cement Company Limited Group 5. are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. ANNUAL REPORT 2012 89 . less accumulated depreciation and impairment loss. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Depreciation of leased assets is charged to the consolidated profit and loss account. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off. plant and equipment during the construction and installation. If such an indication exists. Transfers are made to relevant property. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit on a straight-line basis over the lease term. Where an impairment loss is recognised. residual values and the useful lives of the assets are reviewed at least at each financial year-end and adjusted if impact of depreciation is significant. the amortisation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. if any. net of finance costs. assets are written down to their recoverable amounts and the resulting impairment loss is recognised in the consolidated profit and loss account. the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Depreciation methods. The interest element of the rental is charged to income over the lease term. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. plant and equipment category as and when assets are available for use. The related rental obligations. Intangible assets are amortised using the straight line method over a period of five years. The liabilities are classified as current and non-current depending upon the timing of the payment. finance leases are capitalised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets. Contingent lease payments. Cost also includes applicable borrowing costs. The Parent Company assesses at each balance sheet date whether there is any indication that intangible assets may be impaired.G.D. Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or capitalised while no amortisation is charged for the month in which the asset is disposed off.9 Leases Finance leases Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Assets acquired under a finance lease are depreciated over the estimated useful life of the assets on reducing balance method except plant and machinery which is depreciated on straight line method at the rates mentioned in note 17. 5. At inception. Unrealised gains and losses arising from the changes in the fair value are included in fair value reserves in the period in which they arise. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. these are stated at fair values unless fair values cannot be measured reliably. the Group does not recognise further losses. After initial recognition. At each reporting date. all other investments are classified as non-current. the respective surplus or deficit is transferred to consolidated profit and loss account. are included in current assets.10 Investments Investments in equity instruments of associated company Associates are all entities over which the Group has significant influence but not control.D. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Impairment losses recognised in the consolidated profit and loss account on equity instruments are not reversed through the consolidated profit and loss account. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Fair value of quoted investments is their bid price on Karachi Stock Exchange at the balance sheet date. and its share of post-acquisition movements in reserves is recognised in reserves. Khan Cement Company Limited Group 5. the recoverable amount is estimated in order to determine the extent of the impairment loss. unless fair value cannot be reliably measured. these investments are remeasured at fair value. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The investments for which a quoted market price is not available. Available for sale Investments which are intended to be held for an indefinite period of time but may be sold in response to the need for liquidity are classified as available for sale. these investments are remeasured at fair value (quoted market price). unless fair value cannot be reliably measured. All purchases and sales of investments are recognised on the trade date which is the date that the Group commits to purchase or sell the investment. The Group's share of its associates' post acquisition profits or losses is recognised in the consolidated profit and loss account. The Group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. All purchases and sales of investments are recognised on the trade date which is the date that the Group commits to purchase or sell the investment. Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital.G. if any. where active market does not exist. 90 ANNUAL REPORT 2012 . the Group reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. Realised and unrealised gains and losses arising from changes in fair value are included in net profit or loss for the period in which they arise. including any other unsecured receivables. At each balance sheet date. Available for sale investments are recognised initially at fair value plus any directly attributable transaction costs. are carried at cost as it is not possible to apply any other valuation methodology. Impairment losses are recognised as expense in the consolidated profit and loss account. are measured at cost as it is not possible to apply any other valuation methodology. unless it has incurred obligations or made payments on behalf of the associate. They are initially measured at cost and at subsequent reporting dates. When the Group's share of losses in an associate equals or exceeds its interest in the associate. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. If any such indication exists. Unquoted investments. At the time of disposal. Investments at fair value through profit or loss Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as at fair value through consolidated profit or loss account and are included in current assets. with any resulting gains and losses being taken directly to equity until the investment is disposed off or impaired. G. ANNUAL REPORT 2012 91 . short term borrowings are included in current liabilities. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument. Khan Cement Company Limited Group 5.12 Stock-in-trade Stock of raw materials. Cost of work in process and finished goods comprises cost of direct materials. as the case may be. In the consolidated balance sheet.D. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make a sale. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item. 5. work in process and finished goods are valued principally at the lower of moving average cost and net realisable value. The Group designates certain derivatives as cash flow hedges. as well as its risk management objective and strategy for undertaking various hedge transactions.13 Financial instruments Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument and derecognised when the Group loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged. cancelled or expired. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. Stock of packing material is valued principally at moving average cost.15 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. except for those in transit. These financial assets and liabilities are subsequently measured at fair value. amortised cost or cost. cash and cash equivalents comprise cash in hand. Bad debts are written off when identified. 5. labour and appropriate manufacturing overheads.11 Stores and spares Usable stores and spares are valued principally at moving average cost. 5.17 Derivative financial instruments These are initially recorded at fair value on the date on which a derivative contract is entered into and subsequently measured at fair value. demand deposits.14 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the Group financial statements only when there is a legally enforceable right to set off the recognised amount and the Group intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. 5.16 Cash and cash equivalents Cash and cash equivalents are carried in the consolidated balance sheet at cost. All financial assets and liabilities are initially measured at cost. which is the fair value of the consideration given and received respectively. 5. the nature of the item being hedged. while items considered obsolete are carried at nil value. other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings. and if so. 5. The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items. For the purpose of consolidated cash flow statement. Revenue from sale of goods is recognised when the significant risk and rewards of ownership of the goods are transferred to the buyer i. can be measured reliably. Amounts accumulated in equity are recognised in the consolidated profit and loss account in the periods when the hedged item shall effect profit or loss. Derivatives are carried as asset when the fair value is positive and liabilities when the fair value is negative. However. 5. 92 ANNUAL REPORT 2012 .19 Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of past events 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 amount can be made. the gain and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. on the dispatch of goods to the customers. and the associated cost incurred. All other mark up. The consolidated financial statements are presented in Pak Rupees.21 Revenue recognition Revenue represents the fair value of the consideration received or receivable for goods sold. interest and other charges are charged to the consolidated profit and loss account. of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated profit and loss account.18 Foreign currency transactions and translation All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date.e. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. interest and other charges on borrowings are capitalised up to the date of commissioning of the related property. net of discounts and sales tax. Dividend income on equity investments is recognised as income when the right of receipt is established. 5. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in consolidated statement of comprehensive income. which is the Group's functional and presentation currency. Transactions in foreign currencies are translated into rupees at exchange rates prevailing at the date of transaction. both at hedge inception and on an ongoing basis. Khan Cement Company Limited Group The Group also documents its assessment. plant and equipment acquired out of the proceeds of such borrowings. 5. Figures are rounded to the nearest thousand. when the forecast hedged transaction results in the recognition of a non-financial asset or a liability. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue.20 Borrowing costs Mark up.D. Any gains or losses arising from change in fair value derivatives that do not qualify for hedge accounting are taken directly to the consolidated profit and loss account. However. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into rupees at exchange rates prevailing at the date of transaction. provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 5.G. Non-monetary assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at exchange rates prevailing at the date when fair values are determined. Exchange gains and losses are included in income. or to be incurred. 6 Issued.G. Prices for transactions with related parties are determined using admissible valuation methods.512.944 (2011: 1.118 343. 5.10 each issued for consideration other than cash Ordinary shares of Rs.000 74. 10 each fully paid in cash Ordinary shares of Rs.000 746.201) ordinary shares of the Parent Company are held by Nishat Mills Limited.381.407. who is responsible for allocating resources and assessing performance of the operating segments. subject to approval of the Board of Directors.201 (2011: 137.435. has been identified as the Group executive committee. 2012. ANNUAL REPORT 2012 93 .191 3.071 4. except in extremely rare circumstances where.119.607.512.407.607.23 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. subscribed and paid up capital 2012 2011 (Number of shares) 343. it is in the interest of the Group to do so. The chief operating decision-maker. 10 each issued as fully paid bonus shares 2012 2011 ----(Rupees in thousand)---- 3. a related party as at June 30.029 20.118 Ordinary shares of Rs. an associated concern as at June 30. In addition.120 200.000.24 Related party transactions The Group enters into transactions with related parties on an arm's length basis.089 438.000 74.22 Dividend Dividend distribution to the shareholders is recognised as a liability in the period in which the dividends are approved.944) ordinary shares are held by Adamjee Insurance Company Limited.000.D. 1.120 200.381.089 438.574. 2012.119.029 20.574.071 4. Khan Cement Company Limited Group 5.000 746. 5.191 137.435. Loan under Musharika arrangement .965 730.1 . Long term finances These are composed of: .184.note 7.163 4.580.768 4.note 8.1 7.198 4.4 million each month from the consolidated profit and loss account in order to ensure that fund balance at redemption date was equal to the principal amount of the preference shares. This amount shall be transferred to consolidated profit and loss account on realisation. The preference shares have been redeemed during the year ended June 30. to ensure timely payments.394.636 3.601.110.785 5.8. 2012 2011 ----(Rupees in thousand)---- 7.250 6.8. 1984.579 94 ANNUAL REPORT 2012 .851 23.627 807.D.3 8.note 7.note 7. As referred to in note 5.548 4.083 6.510 19.996.Share premium At the beginning of the year Additions during the year At the end of the year .908.974.163 12.405 . The Capital redemption reserve fund represents fund created for redemption of preference shares and in accordance with the terms of issue of preference shares.557.769) 13. 2007.General reserve At the beginning of the year Transferred (to) / from consolidated profit and loss account At the end of the year .960.706 14. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---7 Reserves Movement in and composition of reserves is as follows: Capital .851 5.649.2 . the Group was required to maintain a redemption fund with respect to preference shares.10 this represents the unrealised gain on remeasurement of investments at fair value and is not available for distribution.110.851 2.066.085.Fair value reserve At the beginning of the year Fair value (loss) / gain during the year At the end of the year .secured .175 2.110.2 .851 5. The Group had created a redemption fund and appropriated Rs 7.601 701.110.note 15 6.112 353.490.G.124.2 This reserve can be utilised by the Group only for the purposes specified in section 83(2) of the Companies Ordinance.127 2.851 24.163 14.236.Capital redemption reserve fund Revenue .881 (1.510 18.885.note 8.277.881 353.974.1 4.557.secured Less : Current portion shown under current liabilities .Long-term loans .1 .885.826.554 5.2 .500 7.557.3 7. 787 - **** Base rate + 1.65% subject to cap of 18% *** Base rate + 1.3% Quarterly 11 Faysal Bank 500.250 6.063% Quarterly 1.0% 14 step-up quarterly installments.25% *** Base rate + 0.333 250.secured Loan 1 2 3 4 5 Lender Habib Bank Limited Habib Bank Limited National Bank of Pakistan United Bank Limited Bank Alfalah 2012 2011 (Rupees in thousand) 230.3% Quarterly 12 Habib Bank Limited 13 Habib Bank Limited 60.G.000 *** Base rate +1.400 **** Base rate + 0.65% Semi-annual 6.65% Quarterly Foreign Currency 15 European Investment Bank US$ 8.1% *** Base rate + 1.909 100.1% Quarterly 10 Askari Bank 431. ending in December 2015 Quarterly 6.000 60.000 300.000 50.250 487.627 807.277.193 million) 16 Eco Trade and Development Bank US$ 20.000 100. ending in March 2014 14 step-up quarterly installments ending in November 2015 16 step-up quarterly installments ending in June 2016 4 equal quarterly installments ending in May 2013 11 equal quarterly installments ending in February 2015 15 step-up quarterly installments ending in January 2016 8 unequal semi annual installments starting in November 2013 and ending in May 2015 This loan has been fully repaid during the year 3 equal semi-annual installments ending in June 2013 4 equal semi-annual installments ending in January 2014 2 equal semi-annual installments ending in March 2013 9 equal semi-annual installments starting in May 2013 and ending in May 2017 Mark-up payable Semi-annual Quarterly Semi-annual Semi-annual Quarterly 6 Allied Bank Limited 825.D.000 800.851 7.085.000 *** Base rate +1.818 Rate of mark-up per annum *** Base rate + 1.000 *** Base rate + 1.1% *** Base rate + 1.000 ** Base rate + 1.885.500 ** Base rate + 1.545 90.000 *** Base rate + 1.000 345.000 950.184.65% Quarterly Quarterly 14 Habib Bank Limited 40.0% Quarterly 7 Allied Bank Limited 675.0% Number of installments outstanding The loan has been fully repaid during the year The loan has been fully repaid during the year The loan has been fully repaid during the year The loan has been fully repaid during the year 4 equal semi-annual installments.686 1.0% Quarterly 8 Standard Chartered Bank 500.85% Quarterly 9 Bank of Punjab 183.127 * Base rate: Average ask rate of one-month Karachi Inter Bank Offer Rate ("KIBOR") to be reset for each mark-up period ** Base rate: Average ask rate of three-month Karachi Inter Bank Offer Rate ("KIBOR") to be reset for each mark-up period *** Base rate: Average ask rate of six-month Karachi Inter Bank Offer Rate ("KIBOR") reset for each mark-up period **** Base rate: Average ask rate of three-month and six-month London Inter Bank Offer Rate ("LIBOR") reset for each mark-up period ANNUAL REPORT 2012 95 .000 500. Khan Cement Company Limited Group 8.096 million (2011: US$ 16.976.000 100.500 ** Base rate + 1.601 17 Musharika Arrangement Meezan Bank 701.000 750.1 Long term loans .393.15% *** Base rate + 1.985 million (2011: Nil) 762.000 * Base rate + 0.000 ** Base rate + 1. Loan 3 The loan was secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1. Loan 13 The loan is secured by first exclusive charge over all fixed assets of the Subsidiary Company amounting to Rs 960 million. Loan 5 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 845 million. Loan 6 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1. Loan 17 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1.340 million.469. Loan 12 The loan was secured by first exclusive charge on fixed assets of the Subsidiary Company amounting to Rs 629 million.334 million. Loan 4 The loan was secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1.133 million. Khan Cement Company Limited Group 8. Loan 10 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 667 million. Loan 2 The loan was secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 4. Loan 14 The loan is secured by first exclusive charge over all fixed assets of the Subsidiary Company amounting to Rs 960 million. 96 ANNUAL REPORT 2012 . Loan 7 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1. Loan 8 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 1.D.349.G.333 million. Loan 16 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to US$ 27.2Security Loan 1 The loan was secured by registered first pari passu charge over all present and future fixed assets of the Parent Company. Loan 9 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 500 million.980.340 million.734 million.334 million. Loan 15 The loan is secured by first pari passu charge over all present and future movable fixed assets of the Parent Company amounting to US$ 8.991 million. amounting to Rs 1.000. Loan 11 The loan is secured by first pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs 667 Million. 1.note 10.1 Change in present value of defined benefit obligation Liability as at July 1 Charge for the year including capitalised during the year Contributions plus benefit payments made directly by the Parent Company during the year Liability as at June 30 10.540 139.264 21.784 (3.1 Staff gratuity The amounts recognised in the consolidated balance sheet are as follows: Present value of defined benefit obligation Fair value of plan assets Unrecognised actuarial losses Liability as at June 30 10.409 8.note 10.931) 87.783 17.935 21.857) 119.528 65.213 167.252 37.935 (332) (39.673 41. 2012 2011 ----(Rupees in thousand)---Retirement benefits Staff Gratuity Leave Encashment 10.673 51.673 87.641 70.467 75.116 87. These represent interest free security deposits from stockists and suppliers and are repayable on cancellation / withdrawal of the dealership or on cessation of business with the Group respectively.893 10.1 .528 127.935 394 4 3.2 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid during the year Actuarial loss on present value of defined benefit obligation Present value of defined benefit obligation as at June 30 10.1.673 127.416 (9.1.701) 33 82 97 .799) 1 332 ANNUAL REPORT 2012 .222 167.416) 119.476) 25.228 (9.G.D.873 68.467 (82) (47.2 119.678 30.727 (3.732) 87.732 (3.3 Movement in fair value of plan assets Fair value of plan assets as at July 1 Expected return on plan assets Contributions during the year Benefits paid during the year Actuarial gain on plan assets Fair value of plan assets as at June 30 332 2 9.482 33.701) 10. Long term deposits Customers Others 34.355 33.588 185.528 60.954 127. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---9.271 (9. 1.228 (2) 2.5% 5% 12 14% 14% 1% 13 10.870 (46) (28) 56.783 17.296 (47.954) 538 (39.222 33 127.931) (10.385 10.5% 12.766 8.515) (25.4 Actual return on plan assets Expected return on plan assets Actuarial gain on plan assets 10.850 33.935 (332) 127.222) 2.1.G.262 41. 98 ANNUAL REPORT 2012 .784 (4) 538 30.727 2008 (39.D.7 Charge for the year (including capitalised during the year) Current service cost Interest cost Expected return on plan assets Actuarial losses charged to profit during the year 2012 10.040 (274) 55.10 The Parent Company expects to pay Rs 49.954 1 75.99 million in contributions to defined benefit plan in 2013.122 (1) 33.603 25.414 (39) 21.1.467 (82) 167.409 8.1.8 Historical Information As at June 30 Present value of defined benefit obligation Fair value of plan assets Deficit Experience adjustment arising on plan obligation Experience adjustment on plan assets 167.6 Movement in unrecognised actuarial losses Un recognised actuarial losses as at July 1 Actuarial losses arising during the year Actuarial losses charged to profit during the year Un recognised actuarial losses as at June 30 10.1.1.857) (14.1.271 2011 2010 (Rupees in thousand) 2009 21. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---10.9 Assumptions used for valuation of the defined benefit scheme for management and non-management staff are as under: 2012 2011 Discount rate Expected rate of increase in salary Expected rate of return on plan assets Average expected remaining working life time of employee Per annum Per annum Per annum Number of years 12.931) 82 332 2 33 35 4 1 5 10.121 1.5 Plan assets consist of the following: Cash and other deposits 10.264 (394) 74. 793) 65.558 8.587 (10.554 7.588 43.115 49.969 31.2.D.115 25.1 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid during the year Actuarial loss on present value of defined benefit obligation 58.558 .466 2008 43.612 (10.540 10.587 8.558 (7.789) 74.G.381 14.764 4.2 Charge for the year (including capitalised during the year) Current service cost Interest cost Actuarial losses charged to profit during the year 4.558 26.739 26.5% 11 Based on Experiance 2011 14% 14% 13 ANNUAL REPORT 2012 99 .010 2011 2010 (Rupees in thousand) 2009 12.062 3.5% 12.2 Leave encashment Opening balance Expenses recognised Payments made 58.466 (10.115 58.739 58.018) 51.319 (10.259) 8.764 4.381 Payable within one year Closing balance 10.351 12.153 587 42.381 10. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---10.553 5.2.319 14.789) 14.558 4.3 Assumptions used for valuation of the accumulating compensated absences are as under: 2012 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee Expected with drawal and early retirement rate Per annum Per annum Number of years 12.351 25.554 7.note 15 (8.259) 58.612 2012 As at June 30 Present value of defined benefit obligation Experience adjustment arising on obligation 74.739 74.2. 100 2.799 443.1 682.110 125 104.602.200) (2.990 1.981.note 12.413 5.453 5.00 1.500 1.342 27.unsecured Others .262 2.204 118 51.863 100 .870 936 63.844.00 6.00 2.686 ANNUAL REPORT 2012 .00 1.670 119.00 2.387 531.730.3 279.note 12.061 4.00 1.722 169.790 4.25 16.019) 1.Utilized per annum .Utilized per annum in excess of accrued leave of 30 days .292 227.870 930 125 109.576) 1.00 2012 2011 ----(Rupees in thousand)---11 Deferred incom tax laibilities The liability for deferred taxation comprises temporary differences relating to: Deferred tax liability Accelerated tax depreciation Deferred tax assets Provision for retirement and other benefits Unabsorbed tax credits 4.00 7.799 686.00 1. Minimum tax paid u/s 113 aggregating to Rs 493.2 .877.851 12. 2001.25 Workers 2012 2011 (days) (days) 19.662 (36.00 16.00 18.739) (3.00 0.886 12. The Group has not recognised deferred tax assets of Rs 493.750 4. 2012 2011 ----(Rupees in thousand)---Trade and other payables Trade creditors Infrastructure cess Advances from customers Due to related parties Accrued liabilities Workers' profit participation fund Workers welfare fund Sales tax payable Federal excise duty payable Special excise duty payable Custom duty payable Withholding tax payable Retention money payable Unclaimed dividends Advances against sale of scrap Advance against sale of fixed asset Redeemable preference shares (non-voting) .189.541 57. 2001 are recognised to the extent that the realisation of related tax benefits through future taxable profits is probable.508 (52.778 288.00 0.776 1.Encashed per annum in excess of accrued leave of 30 days 15.00 6.G.Encashed per annum .850 million (2011: 356.748.note 12. as sufficient taxable profits would not be available to set these off in the foreseeable future.D. Deferred tax asset on tax losses available for carry forward and those representing minimum tax paid available for carry forward u/s 113 of the Income Tax Ordinance. Khan Cement Company Limited Group Officers 2012 2011 (days) (days) Average number of leaves .850 million would not be available for carry forward against future tax liabilities subsequent to years 2013 through 2017.074 million) in respect of minimum tax paid and available for carry forward u/s 113 of the Income Tax Ordinance.231.864 18.446 146.095 15.330 45. has held the amendments introduced to the Workers Welfare Fund Ordinance.note 12. 2011.931 3.595 23.870 33.800 ANNUAL REPORT 2012 101 .498 million).D.1 2.996 1. through such order.462 36 1.498 12.3.836 2. since the Subsidiary Company does not have any taxable profits for the said years.205 2.095 5. Accrued mark-up Accrued mark-up on: .903 141.3.996 million (2011: Rs 1.288 2.836 2.095 Less: payments made during the year Less: reversals during the year .secured .095 45.Short term borrowings .292 112. 2008 as ultra vires the constitution and. 2012 2011 ----(Rupees in thousand)---13.262 58 31 702 2. the Subsidiary Company has reversed the provision made for WWF in respect of above mentioned years.413 30. 2012 2011 ----(Rupees in thousand)---MCB Bank Limited Adamjee Insurance Company Limited Security General Insurance Company Limited Pakistan Aviators & Aviation (Private) Limited Sui Northern Gas Pipelines Limited 12.095 3.652 162.320 260.276 84 178. 1971 through Finance Act.813 84 304.155 1.G.secured Preference dividend on redeemable preference shares 66.457 227.3 Workers' welfare fund Opening balance Provision for the year 2.Long term loans .090 68.262 213.1 The Subsidiary Company has written back the provisions created on account of Workers' Welfare Fund relating to years 2010 and 2011 based on the judgment issued by the honorable Lahore High Court through order dated August 19. Khan Cement Company Limited Group 12.333 45.350 37.1 Trade creditors include amount due to related parties amounting to Rs 2. The Honorable court.095 2.2 Workers' profit participation fund Opening balance Provision for the year Interest for the year Less: payments made during the year Closing balance 12. 2006 and Finance Act. The rates of mark up range from 1.secured Murabaha finance 14. 2012 2011 ----(Rupees in thousand)---15. book debts.230. 13.182. investments and receivables.489 1. investments.617. The aggregate facilities for guarantees are secured by a registered charge on current assets of the Group. 14.000 7. the amount utilised as at June 30.030 million) for opening letters of credit and Rs 1. stock in trade.410.131.79% (2011: 12. 14. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---. Of the facility for guarantees.158 million (2011: Rs 1.secured This represents ERF loans obtained from various commercial banks.2.40% to 15. The rates of mark up range from 12.680 million) is secured by a lien over bank deposits as referred to in note 26.1 .note 10.880 million (2011: Rs 1.75 million) shares of MCB Bank Limited.2 Import finances .559.516.400 million (2011: Rs 9.340 million (2011: Rs 2. Of the aggregate facility of Rs 10. These loans are obtained for a period of 180 days and are against pari passu hypothecation charge over current assets of the Group. stock in trade.secured Import finances .4 Murabaha .124.1 .051 14.note 14.140 57. Current portion of non-current liabilities Long term finances Retirement and other benefits 15.903 million) from commercial banks. 102 ANNUAL REPORT 2012 .secured The murabaha finance facility of Rs Nil (2011: Rs 57.20% per annum).500 9.67 million) on all present and future current assets of the Group.1 Short term running finances . These are secured by first registered charge on all present and future current assets of the Group wherever situated including stores and spares.245.018 2.195.795.5% to 11%).D.348 4. receivables and pledge of 10 million (2011: 10.3 Export finances .3 .4 2.G. The murabaha finance facility is secured by first pari-passu hypothecation charge with 25% margin amounting to Nil (2011: 76.5% to 11% per annum (2011: 9.20% per annum (2011: 14. The aggregate import finances are secured by a registered charge on all present and future current assets of the Group wherever situated including stores and spares.14% to 15.768 8.note 14.580 million (2011: Rs 53.793 2. which carry mark up at 10.29%).24% to 15.5 million (2011: 10 million) shares of Nishat Mills Limited and Nil (2011: 2.635. Rs 36.1 .5 million) carries mark-up range from 13.26% to 17.112 million) respectively.236.66% to 16. book debts.note 14.362.55% (2011: 2.201 3.597.990 million) and Rs 1.56 Current portion of long term liabilities include overdue installments of principal aggregating to Rs 20 million (2011: Rs 70 million).837 million (2011: Rs 4.210 1.secured Short term running finances available from various commercial banks under mark up arrangements amount to Rs 9.secured Export refinance .2 2.487.3 million) shares of Adamjee Insurance Company Limited. Short term borrowings . 2012 was Rs 1.02% to 15.859 3.918.561 2. 14.note 14.610 million) for guarantees.163 million (2011: Rs 10.secured Short term running finances .secured The Group has obtained import finance facilities aggregating to Rs 7.note 8 & 15.2 .548 7.282 million).66%) or part thereof on the balance outstanding. 2007). However. 2007 have been challenged by a large number of Petitioners and all have been advised by their legal counsels that prima facie the Competition Ordinance. The similar notices were also issued to All Pakistan Cement Manufacturers Association (APCMA) and its member cement manufacturers. 978 (I)/95 and 569 (I)/95. the Custom Authorities have filed an appeal with the Supreme Court of Pakistan against the orders of the Lahore High Court. The Lahore High Court.388 million has been made in the consolidated financial statements as according to the management of the Parent Company. 2008 for increase in prices of cement across the country. which has been decided in favour of the Parent Company.1. Consequently. 2007 and issued Show Cause Notice on October 28. Based on the legal opinion. the Parent Company appealed before the Lahore High Court. Collector of Customs and Central Excise.4 The matter relating to interpretation of provisions of section 4(2) of the repealed Central Excise Act. the management is confident that the Parent Company has a good case and there are reasonable chances of success in the pending Petition in the Supreme Court of Pakistan.1 The Income Tax Officer. no adjustment has been made in these financial statements for the relief granted by the Appellate Tribunal aggregating Rs 35. the exemption from the statutory duty would be available only if the said plant and machinery was not manufactured locally. 2009 (upholding its previous judgement dated February 15. 16. vide its order dated August 24. 16. stay orders have been granted by the Courts.G. the Custom Authorities rejected the claim of the Company by arguing that the said machinery was on the list of locally manufactured machinery.090 million. the Sindh High Court and the Supreme Court of Pakistan. 1944 (1944 Act) has now attained finality after having been adjudicated by the honourable Supreme Court of Pakistan through its judgement dated January 27. The longstanding controversy between the revenue department and the tax payers related primarily to finer interpretation of the provisions of section 4(2) of the 1944 Act wherein the department had a view that excise duty shall be included as a component for determination of the value (retail price) for levying excise duty. The Parent Company has filed a Writ Petition in the Lahore High Court. As per the provisions of SRO 484 (I)/92.D. However.2 During the period 1994 to 1996. Pending final outcome of such reference. 2009 allowed the CCP to issue its final order. has taxed the income of the Parent Company on account of interest on deposits and sale of scrap etc. Appeal against the order is still pending with the authorities. 16. while framing the assessments for the assessment years 1984-85 to 1990-91. The Lahore High Court vide its order dated August 31. A large number of grounds have been raised by these Petitioners and the matter is currently being adjudicated by the Lahore High Court.1 Contingencies 16. The Honorable court remanded back the case to Customs Authorities to reassess the liability of the Parent Company. 2009 restrained the CCP from enforcing its order against the Parent Company for the time being. The Appellate Tribunal on appeal filed by the Parent Company issued an order in favour of the Parent Company for the assessment years 1984-85 to 1990-91. Multan has passed an order dated November 26. The Income Tax Department filed reference before the Lahore High Court. the Parent Company imported plant and machinery relating to expansion unit. there are meritorious grounds that the ultimate decision would be in its favour.1. for which exemption was claimed under various SROs from the levy of custom duty and other duties including sales tax.1. which allowed the Parent Company to release the machinery on furnishing indemnity bonds with the Custom Authorities. 2007 is ultra vires of the Constitution. was challenged by the taxpayers in appeals before the honourable High Courts of the ANNUAL REPORT 2012 103 . against the Parent Company on the grounds that the said machinery was being manufactured locally during the time when it was imported. Multan Bench. The departmental view.3 The Competition Commission of Pakistan (the CCP) took suo moto action under Competition Ordinance. No provision for the outstanding balance of Rs 634. being against the spirit of law. 1999. Khan Cement Company Limited Group 16.1. 2009 and imposed a penalty of Rs 933 million on the Parent Company. published by the Federal Board of Revenue. The vires of the Competition Commission of Pakistan. Contingencies and commitments 16. In all these cases. An appeal against the order was filed with the Lahore High Court. The CCP accordingly passed an order on August 28. The amount of refund. 89.Managing Director. through an order of Sindh High Court dated May 31. for release of 50% of the guarantees. Khan Cement Company Limited Group country which. District Chakwal amounting to Rs 3 million (2011: Rs 3 million) .9 million) . Excise Collection Office. Mines and Minerals.151 million) .050 million) . consequent to the order passed by the Supreme Court of Pakistan against the decision of the Sindh High Court in the matter of infrastructure cess. DG Khan) amounting to Rs 0.D. 2011. Earlier.5 The Parent Company.90 million (2011: Rs 340. Lahore Waste Management Company (LWMC) against the performance of a contract amounting to Rs 20 million (2011: Rs 10 million) 104 ANNUAL REPORT 2012 .6 The Group has issued the following guarantees in favour of: .Collector of Customs.455 million) . Punjab against installation of cement factory near Khairpur. Pakistan Railways against the performance of a contract amounting to Rs 1. ruled out that only levies computed against consignments made on or after December 28.460 million) . however.115. According to the legal counsel of the Parent Company.389 million (2011: Rs 20.Bank guarantee in respect of Alternative Energy Development Board (AEDB) of Rs Nil (2011: Rs 2.Sui Northern Gas Pipelines Limited against supply of 6 MMCFD and 14 MMCFD Gas for captive and Industrial use for Khairpur Project and for D.1.Director General.908 million (2011: Rs 3. challenging the levy of fifth version of the law enforcing infrastructure cess. the Group has initiated the process of claiming refund of excess excise duty paid by it during the periods from 1994 to 1999 which aggregates to Rs 1. Sindh Development and Maintenance against recovery of infrastructure fee amounting to Rs 375. Quetta against Limestone.05 million (2011: Rs 10. the Sindh High Court.164 million. Now since the controversy has attained finality up to the highest appellate level. Excise and Sales Tax against levy of Sales Tax. 2006 shall be payable by the petitioners. chances of favourable outcome of the appeal are fair.1. Shale and other cement manufacturers amounting to Rs 3 million (2011: Rs 3 million) .Professional Tax imposed by Administration Zila Council (The District Coordination Officer.Director.The President of the Islamic Republic of Pakistan against the performance of a contract to Frontier Works Organisation amounting to Rs 1.145 million.Director General. the final order from Sindh High Court is still pending. shall be incorporated in the books of accounts once it is realised by the Group. therefore 50% of the amount of infrastructure cess payable has not been incorporated in these consolidated financial statements amounting to Rs. 16. custom duty and excise amounting to Rs 30.G Khan Project amounting to Rs 722. 16.G. duly appreciating the contentions of the taxpayers. Although the parties have reached an interim arrangement. filed a petition before the Sindh High Court. in August 2008.The Managing Director. overturned the departmental view and succeeded the appeals. Mines and Minerals.852 million) .377 million (2011: Rs 715.5 million (2011: Rs 3 million) . 035.420 million) (iv) The amount of future payments under operating leases and the period in which these payments will become due are as follows: 2012 2011 ----(Rupees in thousand)---Not later than one year Later than one year and not later than five years Later than five years 331 1.664 8.170 7.3 26.373.179 1.364.2 .1 .G.2 Commitments in respect of: (i) Contracts for capital expenditure Rs 156.573 25.233.325 6.076.827 177.note 17.826 331 1.820 27.325 6.073. plant and equipment Operating assets Capital work in progress Assets subject to finance lease .996.note 17.700 1.57 million) (iii) Letter of credit other than capital expenditure Rs 1.488 million (2011: Nil) 2012 2011 ----(Rupees in thousand)---Not later than one year Later than one year and not later than five years Later than five years 33.999 - ANNUAL REPORT 2012 105 .note 17.213 million (2011: Rs 1. Khan Cement Company Limited Group 16.873 28.488 17.D.17 million (2011: Rs 113.639 million) (ii) Letters of credits for capital expenditure Rs 760. Property.707.127 million (2011: Rs 1.080.661 211.320 (v) Commitments for ijarah rentals for ijarah financing from Standard Chartered Modaraba of Subsidiary Company Rs 211. 387) 36.000 7.269. 2012 Accumulated Depreciation as at July 01. 2012 Cost as at July 01.33 63.642 22.100 9.538.662 1.806 1.045 449. Khan Cement Company Limited Group Power and water supply lines ANNUAL REPORT 2012 .746 21.710 314.271 556.076.239.157 319.185 38.331 792.424 801.195.433 249.477 30 10 36.550 480.350 2.223 38.392 106 10 312.106 1.180 (243.4.561) 40.072 879.340.244 215.876 (15.98 Quarry equipment 20 1.215 268.836 1.000 63.467 7.675 3.194) 255.949 28.168 5.892 552.606 (108) 82.709 Aircraft - 36.419 - - 509.231.675 26.17.Factory building .302 168.196 (38.103 20 200.536 Furniture.439) 96. fixture and office equipment 126.550. 2011 Additions/ (Deletions) Transfer in/(out) Cost as at June 30. 2011 Annual rate of depreciation % Freehold land 3.832 52.435 (1.487.145 229.966 - 975.122.419 53.918 937.046.547.366 (216.399 (53.705.970 212.635 28.680 562.325 2.Office building and housing colony 10 5 10 27.762 38.371 520 29.548 12.266 326.220 107.840 364.832 (25.469) 461 2.112.196 5.131 165.450 82.859 Vehicles - 90.700 D.411 220.497.934) - 148.117 - 509.437.185 481. 2012 Book value as at June 30.931 20.560 8.1 Operating assets 2012 (Rupees in thousand) Depreciation charge/ (deletions) for the year Transfer in/(out) Accumulated Depreciation as at June 30.902.628.307.164) 80.G.491 195.494.987 8.450 - 341.792 Roads Plant and machinery 4.76 .723 2.229 34.550 Leasehold land Buildings on freehold land .742 1. 406) 1.049 111.444.949 195.131 4.494.918 879.581 (5.220 167.944 453 453 681.020 25.101 million (2011: Rs 7.G.729 1.302 55.179 20 30 10 Leasehold land Buildings on freehold land .606 (82) 17.779 1.930 9. This property is located in the locality of Defense Housing Authority where the by-laws restrict transfer of title of the residential property in the name of the Parent Company.583 151. fixture and office equipment 107 Vehicles Aircraft Power and water supply lines 17.153.843 (18.1 Freehold land and building include book values of Rs 12 million (2011: Rs 12 million) and Rs 7.755 1.125 200.902.710 220.487.662 6.966 290.744 D.000 63.447 572.122.500 (251) 312.812 2.344) 455. 2010 Additions/ (Deletions) Transfer in/(out) Cost as at June 30.108.795.832 107.635 126.089 449.707.474.284 38.458.477 75.380) 27.371 63.157 1.550 38.775) 1. 2010 Annual rate of depreciation % Freehold land 3. 2011 Accumulated Depreciation as at July 01.300)445.475 million) respectively which are held in the name of Chief Executive of the Company.note 30 1.000 5.250 2.229 7.922 765.735 298.539 (16.468.981 5.877 36.2011 (Rupees in thousand) Depreciation charge/ (deletions) for the year Transfer in/(out) Book value as at June 30.716 13.539 17.991 20.285 27.726 2.966 760.331 186.639 35.222 1.962) 743 32.474.812 1.987 194.885 480.738 26.832 15.130.350 - 340.497.2 The depreciation charge for the year has been allocated as follows: Cost of sales Administrative expenses Selling and Distribution expenses .340.094 2.231. 2011 Accumulated Depreciation as at June 30.Office building and housing colony Roads Plant and machinery 4.707 149.835 1.086 117.450 182.note 28 .98 Quarry equipment Furniture.182.637 901.984 326.185 66. Khan Cement Company Limited Group ANNUAL REPORT 2012 20 10 618.211 5.642 36.304 19.1.note 29 .723 22.650 3.125 3.185 476.512 (10.762 36.742 11.Factory building .399 1.195.909 (47.100 7.067.746 82.302 - - - - 341.4. 2011 Cost as at July 01.938 792.892 410 - 341.497.263 (28.176 100.1.038 253.736.33 10 5 10 27.331 119. Total 2012 2011 ----(Rupees in thousand)---.76 . 087 526 525 555 686 460 582 1.294 174 1.517 760 275 753 560 555 213 334 334 284 343 6.3 Disposal of property.609 276 393 310 313 317 339 253 772 429 313 362 439 269 382 478 898 376 537 315 360 21 31 31 26 Auction -do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-do-doAssets written off -do-do-do- Plant and machinery Standard Chartered Modaraba Other assets with book value less than Rs 50.000 368 1. Muhammad Ali Rizwan Javed Irfan Ahmed Irfan Ahmed Sayed Yasir Hussain Attiq-ur-Rehman Raheem Buksh Nasir Zahoor Rizwan Javed Ahmed Haroon Khan Imran Fatima Nazar Hussain Major Iftikhar Tahir Ali Shah Irfan Ahmed Waseem Riaz Nadeem Gul Khalid Farooq Hashmi Office Equipment Furniture and Fittings 560 12.1.040 Sale and leaseback Auction 108 ANNUAL REPORT 2012 .561 89 243.090 427 879 353 555 555 571 398 555 1. Khan Cement Company Limited Group 17.194 38.300 (3. plant and equipment disposed off during the year is as follows: 2012 Particulars of assets Sold to Cost Accumulated depreciation Book value Sales proceeds (Rupees in thousand) Gain/(Loss) on disposal Mode of Disposal Vehicles Muhammad Sajid Iqbal Ghani Syed Yasir Hussain Hasnat Aziz Bantth Ch.122 86 189.391 92 607 87 42 237 428 122 315 97 212 193 247 191 200 647 52 136 98 185 200 192 303 303 258 527 16.000 216.903 82 894 87 276 318 662 305 564 256 343 362 324 207 355 870 708 139 655 375 355 21 31 31 26 217 5.439 3 53. plant and equipment Detail of property.000 89 205.122) 3 16.125 950 512 635 500 560 213 334 334 284 310 10.000 397 355 554 767 375 1.D.260 175.G.934 178.501 174 318 555 1. 2 Capital work in progress 2012 2011 ----(Rupees in thousand)---Civil works Plant and machinery Advances Others Expansion project : . Khan Cement Company Limited Group 2011 Particulars of assets Sold to Cost Accumulated depreciation Book value Sales proceeds Gain/(Loss) on disposal Mode of Disposal Equipment M/S Nishat Mills Limited (related party) Shahbaz Brothers Vehicles Shahzad Ahmed Nadeem Mahmood Jalal Mirza Umer Zameer Nadeem Ahmed Engr.851 1.do .do .190 115.do .081 10 (52) Negotiation .003 777 561 623 391 525 350 497 500 550 462 511 528 507 567 30 866 785 35 41.D.549.do - 17.do .do .943 1.776 925.063 1.299 28 23.105 998 965 939 790 749 571 566 560 560 560 555 483 274 275 272 272 272 59 826 672 161 47.373.343 719 700 326 320 358 296 268 265 312 263 280 314 138 184 186 179 235 314 175 176 166 166 163 16 672 622 107 31.820 ANNUAL REPORT 2012 .709 52.406 741 760 891 876 761 809 730 700 627 527 469 257 428 376 374 381 320 169 99 99 106 106 109 43 154 50 54 16.do .note 17.196 1.do Insurance claim Auction .1 337.701 1.do .do Auction 28. Ahtesham-ul-Haq Security General Insurance (related party) Qadeer Ahmed Pervaiz Akhtar Security General Insurance (related party) Ahmad Subhani Zahid Ali Khan Nabeel Riaz Zeeshan Ali Shah Nisar Ahmed Qureshi Muhammad Nadeem Umer Zaheer Naveed Rathore Other assets with book value less than Rs 50.992 42.081 62 23.090 681 680 626 543 443 504 512 690 691 514 281 309 253 341 164 318 265 236 287 335 362 341 404 14 194 163 (72) 10.Others .do .do .do Insurance claim Auction .do . Rehmat Ali Engr.996.460 1.do .217 1.108 16.000 1.206 18.do . Rehmat Ali Kh.380 90 5.030 18.460 1.765 31.951 61.380 952 863 801 800 780 955 1.400 1.do .873 109 206.2. Umer Zameer Ch.do . Fakhar-ul-Islam Atiq-ur-Rehman Kashif Manzoor Mr.do . Irfan Khan Atiq-ur-Rehman Mr.027 Auction .do .do .do .992 33.123 74.Civil works .G.119 1. quoted Related parties Others Cumulative fair value gain .1 The depreciation charge for the year has been allocated as follows: Cost of sales 18.452 73.260 92.316 110 1.3 Assets subject to finance lease This represents vehicles: Annual depreciation rate Cost As at July 1 Additions (Disposals) Transfer in / (Transfer out) As at June 30 Less: Accumulated depreciation As at July 1 Depreciation for the year Transfer in / (Transfer out) As at June 30 .Available for sale .note 30 12. The amortisation charge for the year has been allocated as follows: Cost of sales Administrative expenses Selling and distribution expenses 19.note 17.3.808 - 18.1 Included in plant and machinery are borrowing costs of Rs 6. 2012 2011 ----(Rupees in thousand)---17.661.768 18.note 19.452 18.189 2.055.641 1.682.G.125 (1.3.note 19.note 18.2 ANNUAL REPORT 2012 .598 5.189 3.127 4. Investments .548 45.014 million (2011: Rs Nil).787 .125) 449 4 (453) - 92.768 2.D.note 28 4 20% 1.933.682. Intangible assets This represents Oracle ERP system.1.260 . Cost As at July 1 Additions As at June 30 Less: Accumulated amortisation As at July 1 Amortisation for the year As at June 30 .note 28 .548 45.728.728. Khan Cement Company Limited Group 17.1 .1 17.452 1.1 18.641 1.2.note 29 .916 2.327. 155 1.391) fully paid ordinary shares of Rs 10 each Market value .G. however.577.155 million) Less: Impairment Loss 1.834 348. MCB Bank Limited and Adamjee Insurance Company Limited are associated undertakings as per the Companies Ordinance.174 million (2011: Rs 1.Rs 0.773 million) Less: Impairment Loss MCB Bank Limited .700 (2011: 16.289.286 million (2011: Rs 230.858 (118.155 1.559 125. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---19.174 (250.Associated company 17.441.391 (2011: 3.0120 million (2011: Rs 0.D. 1984.541.834 125.174 (250.0283 million) Less: Impairment Loss 1.703) 230.Associated company 30.682.326.0098 million) Less: Impairment Loss First Capital Mutual Fund 89.999 (2011: 1.548 19.190.2 Nishat Mills Limited.577.834 125.326.000 (2011: 89.682.703) 230.615) 1.501 (2011: 30.Rs 0.395 million (2011: Rs 0.524.195 million) Adamjee Insurance Company Limited .615) 1.747) fully paid ordinary shares of Rs 10 each Market value . for the purpose of measurement.007.Rs 0.002) fully paid ordinary shares of Rs 10 each Market value .000) certificates of Rs 10 each Market value .999) fully paid preference shares of Rs 10 each Market value .Rs 206.607.1 Related parties Nishat Mills Limited .834 125.541. 2012 2011 ----(Rupees in thousand)---Others Maple Leaf Cement Factory Limited 13. these have been classified as available for sale and measured at fair value as the Parent Company does not have significant influence over these companies.548 348.858 (118.559 1.927.104 million (2011: Rs 3.289.Associated company 3.501) fully paid ordinary shares of Rs 10 each Market value .223 million) Less: Impairment Loss 282 (253) 29 20 (10) 10 282 (253) 29 20 (10) 10 890 (678) 212 890 (678) 212 ANNUAL REPORT 2012 111 .747 (2011: 13.Rs 2.0636 million (2011: Rs 0.Rs 1. Rs 0. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---Habib Bank Limited 174 (2011: 159) fully paid ordinary shares of Rs 10 each Market value .254 45.641 19.641 15 15 45. 2012 2011 ----(Rupees in thousand)---- 20.550 3.254 45.213 138.360 million) Pakistan Petroleum Limited 958 (2011: 871) fully paid ordinary shares of Rs 10 each Market value . advances and deposits Loans to employees .078 126 1.Executives .353) fully paid ordinary shares of Rs 10 each Market value .933 129 1.366 2.Executives .535 134.378 million (2011: Rs 0.242 1.206 86.254 45.371 2.240 1.020 million (2011: Rs 0.note 20.748 383 3.Rs 0.926.712 .277) shares of MCB Bank Limited are blocked in CDC account.028 45.1 259 3.G.180 million (2011: Rs 0.304 (2011: 2.021 million) 24 (6) 18 24 (6) 18 45.2 86.note 20.considered good Less: receivable within one year Security deposits 112 ANNUAL REPORT 2012 .D.562 103.029 17.Rs 85.926.679 million (2011: Rs 109.Rs 0.900.Rs 0.900) fully paid ordinary shares of Rs 10 each Market value .823 67.180 million) Kot Addu Power Company Limited 500 (2011: 500) fully paid ordinary shares of Rs 10 each Market value .023 million (2011: Rs 0.125 Loan to related party .considered good . 3.353 (2011: 2.900 (2011: 4.819 4.234 17.3 Investments with a face value of Rs 235 million (2011: Rs 230.206 68.821 million) Oil and Gas Development Company Limited 2.Others Less: receivable within one year .5 million) are pledged as security against bank facilities.018 million) Less: Impairment Loss Nishat (Chunian) Limited 4.254 76 76 76 76 27 27 27 27 15 15 45. Long term loans.Others .190. 450 4.013 million (2011: Rs 6.5% to 2% per annum (2011: 1.082 255.383 million (2011: Rs 0.750 million)] Packing material [including in transit Rs 0.563 million (2011: Rs 3.236.2 This represents an unsecured loan of Rs 61.596. Mark up is charged at rates ranging from 1. Stock-in-trade Raw materials [including in transit Rs 82.1 1. The principal amount is receivable in 5 annual installments ending December 31.528 million).513.734 million) given to Sui Northern Gas Pipelines Limited (SNGPL) for the development of infrastructure for the supply of natural gas to the plants at D. Khan and Khairpur respectively.5% to 2% per annum) respectively and is received annually.030 198.612 288.393. 2012 2011 ----(Rupees in thousand)---21.327 3. The maximum aggregate amount due from executives at any time during the year was Rs 0.599 million)] Loose tools 21.619 1.25 million and Rs 24.D.049 300.22 million (2011: Rs 204.954 Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.216 million (2011: Rs 32.784 800. Stores and spares Stores [including in transit Rs 50.342.G.411 million)] Work-in-process Finished goods 776.016 7.604. 2017.191 million)] Spares [including in transit Rs 195. The loans of Rs 2.50 million and Rs 29. The loans given to executives and other employees carry interest at the rate of 10% per annum (2011: 10% per annum) except for loans given to workers which are interest free.1 Executives Opening balance Transfer from others to executives Interest accrued Less: repayment during the year 383 5 388 129 259 410 118 17 545 162 383 These represent secured loans given to executives and other employees for house building and purchase of motor vehicles and are recoverable in equal monthly installments over a period of 24 to 96 months.086 322.893 2. 20.014 ANNUAL REPORT 2012 113 .734 25.313 million (2011: Rs 218.198.G. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---20.241 169.079 1.477 1.798. 2012 2011 ----(Rupees in thousand)---- 22.011 2. 2016 and March 28.778 million (2011: Rs 73.933 million) are secured against the employees' respective retirement benefits. Trade debts .234 478.1 Related Parties .124 million) .G. this has been classified as available for sale and measured at fair value as the Parent Company does not have significant influence over this Company.923 1.1 Related parties .051 20 11.256 3.Rs 1.quoted Related parties Others Cumulative fair value gain At fair value through profit and loss 24.Others 23.312 362.647.126.972 10.Related parties .835.125 million (2011: Rs 12.unsecured Nishat Developers Nishat Hospitality (Private) Limited Nishat Dairy (Private) Limited MCB Bank Limited Lalpir Power Limited 24.note 24.159 (2011: 83.898 .234 832 479.126.597 427.923 111.283 478.1 11.quoted MCB Bank Limited .312 212.066 10.234 MCB Bank Limited is an associated undertaking as per the Companies Ordinance. 2012 2011 ----(Rupees in thousand)---24.2 478.Rs 0.quoted Nishat (Chunian) Limited 83.018 million) 114 832 832 832 832 20 20 18 18 ANNUAL REPORT 2012 .587 2.646.126. for the purpose of measurement.367 732 4.note 23.Associated company 66.234 478.974 374 11.note 24.considered good Secured Unsecured .446 million (2011: Rs 1.854 million) 24.1 .D. 1984. Investments Available for sale .066 11.340 8.686 10.071 478.020 million (2011: Rs 0.402) fully paid ordinary shares of Rs 10 each Market value Rs 11.note 24.234 478.776 486.126.283 12.285 650.940 (2011: 60. however. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---23.3 At fair value through profit and loss Habib Bank Limited 174 (2011: 159) fully paid ordinary shares of Rs 10 each Market value .234 832 479.159) fully paid ordinary shares of Rs 10 each Market value .985 11.2 Others .349 18 12.918.3 . 3 3.422 17.234 462.considered good Current portion of long term receivable from related party Advances . The Group has filed appeals against the demands at different forums.759 443 15.044 217.considered good .361 986. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---25.202 25.473 14.366 17.160. deposits.396 thousand). 2012 2011 ----(Rupees in thousand)---- 26.050 13.note 26.G.note 25.3 25. Cash and bank balances At banks: Saving accounts Pak Rupee Foreign Currency: US$ 902.478 ANNUAL REPORT 2012 115 .160 17.159 3.678 .note 25.206 4.593 15.4 Included in advances to employees are amounts due from executives of Rs 1.329 593.2 156.Freight subsidy .882 866.370 41.2.1 .1 1.303 5.483 thousand (2011: Rs 2.461 12 13.note 25.Sales tax . prepayments and other receivables Current portion of loans to employees .034 3.806 17.206 . Sales tax recoverable includes amounts which have been recovered by the sales tax department against miscellaneous demands raised by it.note 25.871 75.Income tax .857 459. etc Claims recoverable from government .834 23.unsecured Nishat Mills Limited Lalpir Power Limited 13.202 147 836 1.962 (2011: US$ 22. opening charges.Export rebate Other receivables 25.404 2 121.20) Current accounts Cash in hand .347 13.1 & 26.243 68.474 2. 2012 2011 ----(Rupees in thousand)---Due from related parties .258 85.4 This represents mark-up receivable from Sui Northern Gas Pipelines Limited against the loan as referred to in note 20.285 2.929 239.To suppliers Due from related parties Prepayments Mark-up receivable from related party Derivative financial instruments Profit receivable on bank deposits Letters of credit .915 791.Excise duty .2 .393 117.831 1.2 25.284 1.042 111.D.288.335 143 239.959 702 1.271 27. deposits.To employees . Advances.179 71.020 3.759 28.margins.467 87. 498 249.936 2.458.1 .694 4.822 18.229 1.146.049) (152.222 5.171.538 2.236.281.197 23.846.228 7.566 2.539 (169.488 million).612 (322.656 7.3.708 1.437) 16.D.715 25.540) 26.note 22 116 ANNUAL REPORT 2012 .1 26.262.1 .623 176.270 15.132 13.084 24.015 7.935.340 5.339) 10.122.571 537.619) (12.445 962.716 225.771 3.540 277.612) 367. 2.199 4.058.916 147.079 (300.210.346.293 14.478.924 12.680 million) which are under lien to secure bank guarantees referred to in note 14.4% per annum (2011: 0.1% to 10.900 14.593 25.612.023.G.275.385.597 26.079) (38.378 million (2011: Rs 31.495 1.523 28.1 21. wages and other benefits Electricity and gas Furnace oil and coal Stores and spares consumed Repairs and maintenance Insurance Depreciation on property.037 2.289 6.note 22 .4% per annum).573.1.785 1. Included in balances at banks on saving accounts are Rs 36.Ijara financing Amortisation of intangible assets Royalty Excise duty Vehicle running Postage.509.451.102 16. Khan Cement Company Limited Group 26.072 63. plant and equipment Depreciation on assets subject to finance lease Lease rentals .486.598.684 19. 2012 2011 ----(Rupees in thousand)---.130 60.360 27.576 19.017 2.740 (288. rates and taxes Freight charges Other expenses Opening work-in-process Closing work-in-process Cost of goods manufactured Opening stock of finished goods Closing stock of finished goods Less: Own consumption .846.915 11.444.716 4 146.2 .558 16.note 17.1% to 10.468. Export sales include rebate on exports amounting to Rs 38.748 11.458 1.115 288.338 1.500 26.797.note 18.2 The balances in saving accounts bear mark-up which ranges from 0.866 Cost of sales Raw and packing materials consumed Salaries.1 28.427.570 2.832 15.388.2. telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Estate development Rent.580 million (2011: Rs 53.927 14.235 6.note 22 .341 18.552 169.701 24.note 22 .note 28.298 14. Sales Local sales Export sales Less: Sales tax Excise duty and special excise duty Commission to stockists and export agents 27.298.666 274.257 1.391 6.note 27.note 17.094 824.625 13.1 .880. 908 5.368 10. telephone and telegram Printing and stationery Legal and professional services Travelling and conveyance Rent.note 29.927 15.393 18.983 million) and Rs 4. gas and water Repairs and maintenance Insurance Depreciation on property.252 million (2011: Rs 20.825 (2) 357 20.note 29.678 8.274 8.note 18.869 13. Rs 30. Khan Cement Company Limited Group 28.382 7. 2012 2011 ----(Rupees in thousand)---28.967 12.908 216.792 15.004 273.225 5.1.340 5.013 million (2011: Rs 4.094 5.365 million (2011: Rs 7.735 459 1.1 . rates and taxes Entertainment School expenses Fee and subscription Advances written off Other expenses .637 5.D. provision for gratuity and staff compensated absences.042 9.518 million (2011: Rs 15.252 3.143 7.1.865 5.203 million (2011: Rs 22. provision for gratuity and staff compensated absences.628 (1) 1.866 224 2.2 .483 million). in respect of provident fund contribution by the Group. Rs 7.373 18.note 17.907 .083 7.1 Salaries.382 million) and Rs 19.1 143.555 17.810 19. wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 29. wages and other benefits include Rs 5.228 9.549 5.658 30.069 15.888 11.202 5.1 120.305 million) respectively. plant and equipment Amortisation of intangible assets Vehicle running Postage.377 million).1 Salaries.518 14.884 29.G.763 million (2011: Rs 2.681 782 5. Administrative expenses Salaries.839 15.995 1.907 million) respectively. wages and other benefits Electricity.518 1. wages and other benefits include Rs 25.768 6.047 5. wages and other benefits Salaries.442 8. in respect of provident fund contribution by the Group.812 2. ANNUAL REPORT 2012 117 .973 2.2 Salaries. wages and other benefits Salaries.768 3.763 29.887 3.Subsidiary Company (2011: Parent Company) Half yearly review Certification and sundry services Out of pocket expenses 30. Statutory audit .296 2.349 2.562 2.354 852 7.500 400 100 75 400 25 2.153 1.393 1. rates and taxes Legal and professional charges Travelling and conveyance Entertainment Advertisement and sales promotion Freight and handling charges Other expenses .D.796 529 3.824 2.note 17.218. telephone and telegram Printing and stationery Rent.134 2. Statutory audit .074 404 7.346 1.2 .305 . wages and other benefits Electricity.337 695 3.729 3.075 400 25 1. Selling and distribution expenses Salaries. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---29.391 2.431 1.1.1 Salaries.225 1.250 270 50 70 2.247 2.484. Ferguson & Co.F.397.095 3.065 5.693 880 2.note 30.282 (1) 140 7.250 633 3.310 2.638 4.209 819 1.1 75. gas and water Repairs and maintenance Insurance Depreciation on property. plant and equipment Amortisation of intangible assets Vehicle running Postage.155 415 735 2. wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 3.1.277 427 1.G.983 1.Parent Company (2011: Subsidiary Company) Half yearly review Certification and sundry services Out of pocket expenses KPMG Taseer Hadi & Co.1 118 ANNUAL REPORT 2012 .755 2.815 64.2 Legal and professional charges Legal and professional charges include the following in respect of auditors' services for: A.056 2.109.365 815 1.note 18.622 1.494 2. 933 677 10.Related parties .303 1.050 1.027 13.312 million) and Rs 2.526 million (2011: Rs 2.053 4 53 27.794 1.D.1 None of the directors and their spouses had any interest in any of the donees. in respect of provident fund contribution by the Group.1 Salaries.472 193 3.155 140 2.430 2 24 5.095 10.071.355 983.611 662 (1) 40 2. plant and equipment Scrap sales Provisions and unclaimed balances written back Mark-up on loan / advances to related parties Others .147.280 1.526 390 627 1.1 31.861 1.1. Other operating expenses Workers' profit participation fund Donations Workers' welfare fund Exchange loss .101 37.note 31.Others Income from non-financial assets Rental income Gain on disposal of property.3 ANNUAL REPORT 2012 119 . provision for gratuity and staff compensated absences.467 1. wages and other benefits include the following in respect of retirement benefits: Gratuity Current service cost Interest cost for the year Expected return on plan assets Actuarial loss Leave Encashment Current service cost Interest cost for the year Expected return on plan assets Actuarial loss 31. Other operating income Income from financial assets Income on bank deposits Fair value gain on investment Interest on loans to employees Gain on derivative financial instruments Dividend income from: .507 2.666 .540 951.096 200 104. wages and other benefits Salaries.288 1.1 213.226 78.783 149 75.411 million) respectively.280 million (2011: Rs 1.468 943.040 29.263 2.138 28.058.1.note 17.815 7.610 million).411 30.733 1. Khan Cement Company Limited Group Salaries.113 520. 2012 2011 ----(Rupees in thousand)---30.700 305. Rs 3.G.030 million (2011: Rs 2.312 707 254 450 1.425 5.1 7.708 1.631 16. 32.913 50.684 1.048.note 32. wages and other benefits include Rs 3.658 10.088. Workers' profit participation fund Guarantee commission Bank charges 34.853 943.D.090 21.698 34.954 (114.314.Finance lease .1 Provision for taxation The provision for current taxation represents minimum tax under section 113 of the Income Tax Ordinance.00 35.08 Average effective tax rate charged to consolidated profit and loss account (3.00 Tax effect of amounts that are: . 2012 2011 % % Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate Applicable tax rate 35.658 75.048.08 120 ANNUAL REPORT 2012 99.G. the tax losses available for carry forward as at June 30.242 37. 34.554 1.927 484.19 12. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---32.41 Tax credits and losses in respect of which no deferred tax asset has been recognised 1.815 675.49 (38. Taxation Current .3 .For the year .Long term loans .70 Tax effect under presumptive tax regime and others (4.383 (128.238 8.55 .111.189.39 1.Not deductible for tax purposes 0.321 15.724 859.753) 205.136) (123.12) 36.06) 0.955 945.782.571) 4.281 2.93 Rounding and others -1.12) 71.secured . In addition to this.771 278. 2001 at the rate of 1% (2011: 1%) of turnover from local sales.1 Dividend income from related parties Nishat Mills Limited MCB Bank Limited Adamjee Insurance Company Limited 33.secured .20 20.020 38.Prior Deferred .Chargeable to tax at different rates (9.051.352 1.For the year 34. 2012 are estimated approximately at Rs 9.783 million).541 1.939 1. Finance costs Interest and mark-up on: .239 2.871 815.508. it includes tax on exports and rental income which is full and final discharge of the Group's tax liability in respect of income arising from such source.444 2 1.212 million (2011: Rs 8.71) 0.2 For purposes of current taxation.769 2 205.162 3.Short term borrowings .613 118.35) Effect of change in prior years' tax (24. 523) (83.189.note 26 .859 1.000 380.122. Cash generated from operations Profit before tax Adjustments for: .545) 123.864) 188.859.(Increase) / decrease in advances.Diluted There is no dilution effect on the basic earnings per share as the Group has no such commitments.2 Earnings per share .474.118 9.G.Fair value gain on revaluation of investment .Basic Profit for the year .355) 118.883 305.119. spares and loose tools .348) (7. Cash and cash equivalents Cash and bank balances Short term borrowings . deposits.317 (516.437.096) (4) 56.Depreciation on assets subject to finance lease .708) (1.756) 3.Amortisation on intangible assets .783) (2) 67.579.027) (27.Decrease / (increase) in trade debts .Mark-up income .406) 6.024.(Increase) / decrease in stock-in-trade .040) (5.051) (9.467) (1.251 2012 2011 Restated 184.D.Dividend income .35 37.148 (555.000 438.487.note 14 462.975.113 1.Finance costs Profit before working capital changes Effect on cash flow due to working capital changes .539 4 (10.385 (350.573) ANNUAL REPORT 2012 121 .399 18.Gain on derivative financial instruments .955) 239.362.Exchange loss .452 (16.478 (9.559.1 Earnings per share .060.Increase in trade and other payables 3.Impairment charged on investments . plant and equipment .096.191.Increase in stores.390 681.096.468) (951.Provision for retirement benefits .718 (593.48 Rupees Number Rupees 4.366 (41.193 10.573 47. 2012 2011 ----(Rupees in thousand)---36.871 2.secured .058.613 2.Gain on disposal of property.attributable to equity holders of the Parent Company Weighted average number of ordinary shares Earnings per share .815 (187.393 (7.770) 180.916) 55. Earnings per share 35. plant and equipment .368 0.078 1. Khan Cement Company Limited Group 35.836 (2.962.782.Depreciation on property.913 2.basic 35. prepayments and other receivables . 003 154 149. key management personnel and post employment benefit plans.147 22.096 943.882 23.496 270 529 4.925 4. Transactions with related parties The related parties comprise associated companies.847 327.477 14. including certain benefits.1 The aggregate amount charged in the consolidated financial statements for the year for remuneration.033. full time working Directors and Executives of the Group are as follows: Chief Executive Directors Executives 2012 2011 2012 2011 2012 2011 (Rupees in thousand) Managerial remuneration Contributions to Provident and Gratuity Fund Housing Utilities Leave passage Medical expenses Others Number of persons 8.867 26. amounts due from directors and key management personnel are shown under receivables and remuneration of directors and key management personnel is disclosed in note 38.461 5.815 All transactions with related parties have been carried out on commercial terms and conditions. other related companies.764 43.048.D.593 30.558 10.231 49.539 3 19.G.417 1.547 12.700 94.2 Remuneration to other directors Aggregate amount charged in the consolidated financial statements for the year for fee to 5 directors (2011: 5 directors) is Rs Nil (2011: Rs Nil).782 1. Other significant transactions with related parties are as follows: 2012 2011 ----(Rupees in thousand)---Relationship with the Group i.505 34. Related parties Nature of transaction Sale of goods Sale of equipment Purchase of asset Insurance premium Purchase of services Insurance claims received Mark-up income on balances with related parties Dividend income 97. 38.537 1 7. Directors and Executives 38.1.757 632. travelling and utilities. Khan Cement Company Limited Group 38.621 270 169 5.400 13.869 3.101 1.776 10.494 4. The Group does not provide any remuneration and benefits to non-executive directors of the Group. directors.539 1. 122 ANNUAL REPORT 2012 . expense charged in respect of staff retirement benefit plans is disclosed in note 10.637 3.187 74.408 1.770 693 2.811 275. The Group in the normal course of business carries out transactions with various related parties.170 62. 39.368 3.468 2.032 132 The Group also provides the chief executive and some of the directors and executives with Group maintained cars.842 1 20. Remuneration of Chief Executive.398 818 171 3.526 2.810 3 170.658 30.154 28. Amounts due from and to related parties are shown under receivables and payables. dividend income is disclosed in note 32.475 1.690 1. to the Chief Executive. D.G. Khan Cement Company Limited Group Capacity 2012 2011 40. Capacity and production Clinker (Metric Tonnes) Unit I Unit II Unit III Cement bags (number of bags) 41. Financial risk management 41.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by the Group's Board of Directors (the Board). The Group's finance department evaluates and hedges financial risks. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Group's overall risk management procedures to minimise the potential adverse effects of financial market on the Group's performance are as follows: (a) Market risk (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies. The Group is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD) and Euro. Currently, the Group’s foreign exchange risk exposure is restricted to bank balances and amounts receivable from / payable to the foreign entities. At June 30, 2012, if the Rupee had weakened / strengthened by 10% against the US dollar with all other variables held constant, post-tax profit for the year would have been Rs 255.797 million (2011: Rs 161.156 million) lower / higher, mainly as a result of foreign exchange losses / gains on translation of US dollar-denominated financial assets and liabilities. At June 30, 2012, if the Rupee had weakened / strengthened by 10% against the Euro with all other variables held constant, post-tax profit for the year would have been Rs 0.075 million (2011: Rs 19.633 million) lower / higher, mainly as a result of foreign exchange losses / gains on translation of Euro-denominated financial assets and liabilities. (ii) Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified as available for sale and fair value through profit or loss. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board. The primary goal of the Group's investment strategy is to maximise investment returns. 810,000 1,200,000 2,010,000 120,000,000 810,000 1,200,000 2,010,000 120,000,000 839,989 1,253,632 1,680,327 87,476,085 694,835 1,325,877 1,717,692 92,090,336 Actual production 2012 2011 ANNUAL REPORT 2012 123 D.G. Khan Cement Company Limited Group The Group’s investments in equity of other entities that are publicly traded are included in all of the following three stock exchanges, Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. The table below summarises the impact of increases / decreases of the KSE-100 index on the Group’s post-tax profit for the year and on equity. The analysis is based on the assumption that the KSE had increased / decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation with the index: Impact on post-tax profit 2012 Karachi Stock Exchange Impact on other components of equity 2011 2012 2011 (Rupees in thousand) 157,874 171,821 Post-tax profit for the year would increase / decrease as a result of gains / losses on equity securities classified as at fair value through profit or loss, this impact is considered to be immaterial. Other components of equity would increase / decrease as a result of gains / losses on equity securities classified as available for sale. (iii) Interest rate risk As the Group has no significant floating interest rate assets, the Group’s income is substantially independent of changes in market interest rates. The Group's interest rate risk arises from short term and long-term borrowings. These borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on consolidated profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. At June 30, 2012, if interest rates on floating rate borrowings had been 1% higher / lower with all other variables held constant, post-tax profit for the year would have been Rs 117.216 million (2011: Rs 154.758 million) lower / higher, mainly as a result of higher / lower interest expense on floating rate borrowings. (b) Credit risk Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation. Credit risk of the Group arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to distributors and wholesale and retail customers, including outstanding receivables and committed transactions. The management assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored and major sales to retail customers are settled in cash. For banks and financial institutions, only independently rated parties with a strong credit rating are accepted. The Group monitors the credit quality of its financial assets with reference to historical performance of such assets and available external credit ratings. The carrying values of financial assets exposed to credit risk and which are neither past due nor impaired are as under: 124 ANNUAL REPORT 2012 D.G. Khan Cement Company Limited Group 2012 2011 ----(Rupees in thousand)---Long term loans, advances and deposits Trade debts Advances, deposits, prepayments and other receivables Balances with banks 138,748 123,699 47,317 459,159 768,923 The ageing analysis of trade receivables is as follows: Up to 90 days 90 to 180 days 181 to 365 days Above 365 days 45,678 16,097 6,482 55,442 123,699 96,020 32,680 42,763 51,134 222,597 34,125 222,597 40,286 239,335 636,343 The management estimates the recoverability of trade receivables on the basis of financial position and past history of its customers based on the objective evidence that it shall not receive the amount due from the particular customer. The provision is written off by the Group when it expects that it cannot recover the balance due. Any subsequent repayments in relation to amount written off, are credited directly to consolidated profit and loss account. The credit quality of Group's bank balances can be assessed with reference to external credit ratings as follows: The credit quality of Company's bank balances can be assessed with reference to external credit ratings as follows: Short term Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Islami Pakistan Limited Bank of Punjab Barclay's Bank PLC Pakistan Citibank N.A. Dubai Islamic Bank (Pakistan) Limited Faysal Bank Limited Habib Bank Limited HSBC Bank Middle East Limited MCB Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited Silk Bank Limited Standard Chartered Bank Pakistan Limited United Bank Limited A1+ A1+ A1+ A1 A1+ A1 A1 A1 AA A1+ P1 A1+ A1+ A1+ A1+ A2 A1+ A1+ Rating Long term AA+ AA AA A AAA+ A+ A A1+ AA A1 AA+ AAAAA AAAAAA AA+ Rating Agency PACRA PACRA PACRA PACRA PACRA S&P S&P PACRA PACRA JCR-VIS Moody's PACRA JCR-VIS JCR-VIS PACRA JCR-VIS PACRA JCR-VIS (Rupees in thousand) 2012 2011 32,942 85,044 1,499 10,022 9,157 96 1,079 47,499 40 251,788 160 1,442 14,924 376 2,852 239 459,159 ANNUAL REPORT 2012 125 49 39,818 77 358 5,883 1,067 960 39,457 59 125,508 611 704 14,505 366 2 9,911 239,335 699. 2012 Long term finances Trade and other payables Accrued finance cost Short term borrowings . 2011 Long term finances Trade and other payables Accrued finance cost Short term borrowings . This ratio is calculated as total debt divided by total capital employed.851 1.2 Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.051 12.800 9.272.348 16. In order to maintain or adjust the capital structure.051 17.secured Carrying value 6.236. Khan Cement Company Limited Group (c) Liquidity risk Liquidity risk represents the risk that the Group shall encounter difficulties in meeting obligations associated with financial liabilities.085.639 3 to 5 years 3. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities.940 3. Due to the dynamic nature of the Group's businesses.134 178.639 2.049 Between 1 and 2 years 1.081. These limits vary by location to take into account the liquidity of the market in which the entity operates.322.548 1. Consistent with others in the industry and the requirements of the lenders. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions. The amounts disclosed in the table are the contractual undiscounted cash flows as the impact of discounting is not significant.272.768 1.D.126. the Group monitors the capital structure on the basis of gearing ratio.376.902 Less than 1 year 1.134 178.126. In addition.858 3.650 304.362.secured Carrying value 7.650 304.225 1.628 41.G.985 At June 30.225 Between 1 and 2 years 2.127 1.362. Total debt represent long term and short-term finances obtained by the Group.652 7.800 9.699.081.008. the Group's finance department maintains flexibility in funding by maintaining availability under committed credit lines.348 11.559. the Group may adjust the amount of dividends paid to shareholders or issue new shares. monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans. Total capital employed includes 126 ANNUAL REPORT 2012 Less than 1 year 2.788.008.885.652 7.559.940 .994. the Group's liquidity management policy involves projecting cash flows in each quarter and considering the level of liquid assets necessary to meet its liabilities. The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. (Rupees in thousand) At June 30. This is generally carried out in accordance with practice and limits set by the Group. Management monitors the forecasts of the Group’s cash and cash equivalents (note 37) on the basis of expected cash flows.878.376.673. the availability of funding through an adequate amount of committed credit facilities.858 3 to 5 years 3. Segment results.447. is based on the Group's management reporting structure. was to maintain a gearing ratio of 60% debt and 40% equity. Operating Segments Segment information is presented in respect of the Group's business. Allocation of the individual organisational entities to the operating segments was exclusively based on economic criteria. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one year. identified as the 'Chief Operating Decision Maker' as defined by IFRS 8.764. built on the different products and services within the Group. Khan Cement Company Limited Group equity as shown in the consolidated balance sheet plus total debt. The gearing ratio as at June 30. assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. All Group financial data are assigned to the operating segments. The quoted market price used for financial assets held by the Group are the current bid prices. which was unchanged from last year.019.917 30% 16.690 35% The identification of operating segments was based on the internal organisational and reporting structure. business segment. 42. This information is prepared under the IFRSs applicable to the consolidated financial statements. 1984. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. 2011 is as follows: 2012 2011 ----(Rupees in thousand)---Total debt Total equity Total capital employed Gearing ratio 41.445.718 47. ANNUAL REPORT 2012 127 . ordinary portland and sulphate resistant cements Manufacture and supply of paper products and packing material 14. irrespective of the participation structure under Companies Ordinance.464.199 33. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.178 30. The financial instruments that are not traded in active market are carried at cost and are tested for impairment according to IAS 39.317.1 Segment analysis and reconciliation The information by operating segment is based on internal reporting to the Group executive committee. The primary format. The Group’s strategy.G. 2012 and June 30. The Group's operations comprise of the following main business segment types: Type of segments Cement Paper Nature of business Production and sale of clinker. 42.3 Fair value estimation The carrying value of financial assets and liabilities reflected in the consolidated financial statements approximate their fair values.D.512 46. 164 1.755 (2.745.341 7.147.466.042) (9.551 (27.349.080) (1.946 896. significant re-arrangements made are as follows: 128 ANNUAL REPORT 2012 .632 17.612 34.441) 1.989 (402.851 1.079.net 2011 2012 Rupees in thousands 874. wherever necessary.088. 2012 by the Board of Directors of the Parent Company. 2012 for approval of the members at the Annual General Meeting to be held on October 24.853 7.925) (118.384.983 18.537) 23.231) 170.145) (52.488 848.971.085.755.283 19.853 22.257) 2011 2012 Total 2011 22.217.924 1.924) (848.936 (1.50 (2011: Rs Nil) per share.476 (2.818 19.992) 6. These financial statements do not reflect this dividend payable. 44.108.012. amounting to Rs 657.468) 73.543 4. Date of authorisation for issue These consolidated financial statements were authorised for issue on September 10.753 4.674.494 (2.613) (484.852) (118.949.634 (2.980) (4.836) 1.879) (4.961 30.782.784) 55.761.509 (871.161 30.800) 1.227 416.672. Further.610.162 871.101 (45.469.505.612.011.652 4.832) (615.570) 68.G.935) (51.666 (2.467) 48.D.017) (54.355 (848.638) (10.658.566 18.2 Geographical segments All segments of the Group are managed on nation-wide basis and operate manufacturing facilities and sales offices in Pakistan only.362 1.External customers .187.836) 1. 43.883) (1.324 (3.065) 101.314 (1.412 79.225) 371.191) (655.506.871 (25.214) 11.485.098) 67.587 (179.134.846.360 4.474.577. 2012.480 - 48.612) (223. Corresponding figures Corresponding figures have been re-arranged and reclassified.360 19.745.425 (1.118 32.451) 370.403.472 - 3.930.861.520 (35.152 (166.969 (2.430.938 47.588 1.670.596.058 10.146) (430.130 (2. Events after the balance sheet date The Board of Directors have proposed a final dividend for the ended June 30.075 1. for the purposes of comparison.050 (342.097 1.026) (3.097) (22.097) (871.500. Khan Cement Company Limited Group Cement 2012 Revenue from .075 10.610) (1.754.698) 197.410 29.846.493) 408.451.903 (1.764 Segment gross profit Segment expenses Impairment on investments Other income Financial charges Taxation Profit after taxation Segment net assets Segment liabilities Depreciation and amortisation Net cash generated from operating activities Capital expenditure Net cash used in investing activities 1.451.341 23.751.921 20.831 33.198 4.259 290.179 million (2011: Rs Nil) at their meeting held on September 10.655) 42.550 (22.616) 55.719. 45.653.189.924) 23.027) 25.698 (16.483 22.Inter group 2011 2012 paper Elimination .577.198 18. 2012 of Rs 1.949.751.871) 123. now reclassified as unsecured trade debtors.254 166.(related parties') long-term Investments.373. now reclassified under Available for Sale . Negative bank balances previously appearing in "Cash and bank balances .635 The above figures have been re-arranged as the reclassifications made are considered more appropriate for the purposes of presentation.164 30.620 30.others" Gain on derivative financial instruments previously classified under "Finance cost" now reclassified to "Other operating income" Amount previously classified under "Accrued Liabilities".(Others') long-term Investments. Khan Cement Company Limited Group (Rupees in thousand) "Capital work in progress" has been reclassified to "Property. now reclassified as a separate line item "Infrastructure Cess" in "Trade and other payables" Amount previously classified under "Others". Chief Executive Director ANNUAL REPORT 2012 129 .G.current accounts" now reclassified under "Trade and other payables .179 27. Amount classified previously under secured trade debtors. now reclassified as a separate line item "Infrastructure Cess" in "Trade and other payables" 1. Plant and Equipment" as it is considered a better presentation under International Accounting Standard 16 .D. Plant and Equipment.820 45.468 89. Nishat (Chunian) Limited previously classified under Available for sale .Property. ___________________as my/our proxy to vote for me / us and on my / our behalf at the Annual General Meeting of the Company to be held on 24th October 2012 at 11:00 a. 53-A. G . at Registered Office. Sub A/C No. Khan Cement Company Limited Group PROXY FORM Folio No. Lahore and at any adjournment thereof. I/We of b e i n g a m e m b e r o f D . No. Sub Account Number and Participant I. Proxies of the members through CDC shall be accompanied with attested copies of thier NIC. Nishat House.D. The shareholders through CDC are requested to bring their original NIC./CDC A/C Sub A/C No.m.D. must be received at the Company’s Registered Office not less than forty eight hours before the time for holding the meeting and must be stamped. A/C.D. signed and witnessed. vide Registered Folio No. As witness my/our hand this_______________day of _______________2012 Witness Signature Name Dated Place CNIC Note: Proxies . Lawrence Road. 130 ANNUAL REPORT 2012 Signature on Five Rupees Revenue Stamp . to produce at the time of attending the meeting. in order to be effective. CDC Participant’s Name Shares Held CDC Participant I. No.G. K H A N C E M E N T C O M PA N Y L I M I T E D h e r e b y a p p o i n t (NAME) of or falling him/her (NAME) of who is also a member of the Company.