Final 1st Qtr, 08 - Ittehad Chemicals Quarter Report... · 2012. 2. 14. · DIRECTORS’ REPORT ITTEHAD CHEMICALS LIMITED Quarterly Report September 30, 2008 3 On behalf of the Board

Quarterly ReportSeptember 30, 2008

CONTENTS

Quarterly Condensed Interim Financial Statements

for the period ended September 30, 2008(Un-Audited)

Corporate Information

Directors’ Report

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

ITTEHAD CHEMICALS LIMITED Quarterly Report September 30, 2008

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CORPORATE INFORMATION

Mr. Muhammad Siddique Khatri Mr. Abdul Ghafoor KhatriMr. Abdul Sattar Khatri Mr. Mansoor Ahmed KhatriMs. Farhana Abdul Sattar Mr. Fawad YousufMs. Noor-ul-Huda

Mr. Mansoor Ahmed KhatriMr. Abdul Sattar KhatriMr. Abdul Ghafoor Khatri

Mr. Javed Iqbal

Mr. Waheed Ashraf

39-Empress Road, P.O. Box 1414, Lahore-54000.Tel : 042- 6306586 - 88Fax : 042- 6365697www.ittehadchemicals.comE-mail: [email protected]

G.T. Road, Kala Shah Kaku, District Sheikhupura.Ph : 042-7950222 - 5Fax : 042-7950206

M/s. Corplink (Pvt.) LimitedCorporate and Financial ConsultantsWings Arcade, 1-K Commercial, Model Town, Lahore.Ph: 042-5839182Fax: 042-5869037

Askari Bank LimitedHabib Metropolitan Bank LimitedMCB Bank LimitedSaudi Pak Industrial & Agricultural Investment Co. (Pvt.) LimitedPak Libya Holding Co. (Pvt.) LimitedPak Kawait Investment Co. (Pvt.) LimitedThe Bank of PunjabAllied Bank LimitedFaysal Bank LimitedUnited Bank LimitedKASB Bank LimitedMy Bank LimitedStandard Chartered Bank LimitedCiti Bank

M/s.BDO Ebrahim & Co., Chartered Accountants,nd2 Floor, Block-C, Lakson Square Building No.1, Sarwar

Shaheed Road, Karachi.Ph: 021-5683189-5683498 Fax: 021-5684239

M/s. Tahir Ali Tayebi & Co.310, Marine Point, Schon Circle,Block 9, Clifton, Karachi.Ph : 021-537 04 58 Fax : 021-537 04 59

BOARD OF DIRECTORS

AUDIT COMMITTEE

CHIEF FINANCIAL OFFICER

COMPANY SECRETARY

REGISTERED OFFICE/HEAD OFFICE

PLANT

SHARE REGISTRARS

BANKERS TO THE COMPANY

AUDITORS

LEGAL ADVISORS

Chairman & Chief ExecutiveDirectorDirectorDirectorDirectorDirectorDirector

ChairmanMemberMember


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DIRECTORS’ REPORT


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On behalf of the Board of Directors of Ittehad Chemicals Limited, I am pleased to present the un-audited financial statements of the Company for the first quarter ended September 30, 2008. Net Sales for the period have shown a sturdy growth of 31.2% and stood at Rs. 858.69 million as compared to Rs. 654.43 million for the corresponding quarter last year. Cost of sales for the quarter under review has increased by 29% from the corresponding period of last year due to increase in fuel & power rates and sky rocketing inflation. Gross profit for the period is Rs. 201.87 million as against Rs. 146.49 million in the preceding period of last year. During the quarter under review the pre-tax profit stood at Rs. 81.56 million as compared to Rs. 35.62 million of the last years’ first quarter. Your company has shown a positive growth in profit after tax which came to Rs. 52.38 million compared to Rs. 20.84 million for the corresponding quarter last year. As a consequence the Earning per share for the quarter is Rs. 1.45 as compared to Rs. 0.58 for the corresponding quarter of last year. The Country’s overall economy reflects a lack luster performance during the quarter under review. At present inflationary pressure, energy crisis, liquidity crunch, high interest rates, Pak rupee devaluation and unbearable increase in power tariffs in September 2008 have increased challenges to the industry, so there is need for prompt and effective remedial action from the Government to curb macroeconomic imbalances in the economy. The Government also needs to be supportive of the manufacturing sector and it is vital to ensure consistency and transparency in economic policies. Despite of all above challenges and anticipated gas stoppage in winter, our focus will be to remain profitable in the existing lines of business with the ultimate objective of long term growth. We will persist in making efforts to sustain our success through maintaining our quality standards, sales volume and profit margins. The Board of Directors acknowledges and deeply appreciates the contributions made by the Company’s staff, valued customers and other stakeholders in the achievement of the Company’s goals.

On behalf of the Board

Place: Lahore Muhammad Siddique Khatri Date: October 28, 2008 Chief Executive

CONDENSED INTERIM BALANCE SHEETas at September 30, 2008

September 30, June 30,2008 2008

Unaudited AuditedNote

ASSETSNON CURRENT ASSETS

Property, plant and equipmentOperating fixed assets 6 2,288,646 2,316,478 Capital work in progress 7 116,328 104,377

2,404,974 2,420,855 Intangible assets 3,728 4,141 Investment properties 70,950 70,950 Long term investments 87,846 65,107 Long term deposits 11,475 11,475

2,578,973 2,572,528 CURRENT ASSETS

Stores, spares and loose tools 359,143 315,257 Stock in trade 179,519 144,335 Trade debts 484,570 297,437

Loans and advances 44,722 34,984 Trade deposits and short term prepayments 62,141 22,790 Other receivables 725 836 Tax refunds due from the Government 439 439 Taxation- net 68,092 61,446

Cash and bank balances 53,985 40,859 1,253,336 918,383

TOTAL ASSETS 3,832,309 3,490,911

EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES

Issued, subscribed and paid up capital 8.2 360,000 360,000 Reserves 467,768 415,650

827,768 775,650

SURPLUS ON REVALUATION OF FIXED ASSETS 643,372 643,372

NON CURRENT LIABILITIESLong term financing 9 34,375 50,000 Long term diminishing musharaka 10 666,667 750,000 Long term murabaha 11 311,111 350,000 Liabilities against assets subject to finance lease 12 382 491

Deferred liabilities 323,847 294,525 1,336,382 1,445,016

CURRENT LIABILITIESTrade and other payables 374,805 221,291 Markup accrued 33,772 60,191

Short term borrowings 443,554 294,969 Current portion of long term liabilities 172,656 50,422

1,024,787 626,873 CONTINGENCIES AND COMMITMENTS 13 - -

(Rupees in thousand)


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CONDENSED INTERIM PROFIT AND LOSS ACCOUNTfor the period ended September 30, 2008 (Un-Audited)

September 30, September 30,

2008 2007

Note

Sales - net 858,691 654,427

Cost of sales 14 (656,821) (507,938)

Gross profit 201,870 146,489

Selling and distribution expenses (38,049) (36,554)

General and administrative expenses (23,770) (16,234)

Other operating expenses (6,132) (1,925)

Other operating income 2,799 3,357

Operating profit 136,718 95,133

Financial charges (55,156) (59,512)

Profit before taxation 81,562 35,621

Taxation (29,183) (14,778)

Profit after taxation 52,379 20,843

Earnings per share - basic and

16 1.45 0.58

The annexed notes form an integral part of these financial statements.

CHIEF EXECUTIVE DIRECTOR

Quarter ended



Appropriations have been reflected in the statement of changes in equity.

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CONDENSED INTERIM CASH FLOW STATEMENTfor the period ended September 30, 2008 (Un-Audited)

September 30, September 30,2008 2007

CASH FLOW FROM OPERATING ACTIVITIESProfit before tax 81,562 35,621 Adjustments for items not involving movement of funds:

Depreciation 42,645 44,829

Amortization of intangible assets 414 150 Provision for gratuity 491 162 Amortization of deferred cost - 213

Gain on sale of fixed assets (49) - Financial charges 55,156 59,512

180,219 140,487 (Increase) / decrease in current assets

Stores, spares and loose tools (43,886) (11,274) Stock in trade (35,184) (32,018) Trade debts (187,133) (36,805)

Loan and advances (9,738) (18,898) Trade deposits and short term prepayments (39,351) (6,384) Other receivables 111 40

(315,181) (105,339)

Increase in current liabilitiesTrade and other payables 153,514 62,013

Cash generated from operations 18,552 97,161 Taxes paid (6,775) (6,689)

Dividend paid - (54,000) Gratuity paid (223) -

Net cash inflow from operating activities 11,554 36,472

CASH FLOW FROM INVESTING ACTIVITIESAdditions to operating fixed assets (14,919) (5,209) Additions to intangible assets - (100)

Additions to capital work in progress (11,951) (18,283) Proceeds from sale of operating fixed assets 155 - Long term Investments (23,000) -

Net cash (used in) investing activities (49,715) (23,592)

CASH FLOW FROM FINANCING ACTIVITIESRepayment of long term financing (15,625) (654,164)

Proceeds from long term diminishing musharaka - 750,000 Proceeds from long term murabaha - 350,000 Repayment of long term murabaha - (311,188) Liabilities against assets subject to finance lease (98) (89)

Financial charges paid (81,575) (62,520) Short term borrowings 148,585 (62,926)

Net cash generated from financing activities 51,287 9,113

Net increase in cash and cash equivalents 13,126 21,993 Cash and cash equivalents at beginning of the period 40,859 29,130 Cash and cash equivalents at end of the period 53,985 51,123




Quarter ended


Net cash flow before working capital changes

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CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITYfor the period ended September 30, 2008 (Un-Audited)

Capital reserve - Fair value reserve

Unappropriated profits

Total

Balance as at July 01, 2007 360,000 1,134 403,343 764,477

Fair value loss - (78) - (78)

Dividend paid - - (54,000) (54,000)

Profit after taxation for the period - - 20,843 20,843

Balance as at September 30, 2007 360,000 1,056 370,186 731,242



Balance as at June 30, 2008 360,000 699 414,951 775,650



Balance as at September 30, 2008 360,000 438 467,330 827,768


( Rupees in thousand )



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NOTES TO THE CONDESNSED INTERIM FINANCIAL STATEMENTSfor the period ended September 30, 2008 (Un-Audited)

1 LEGAL STATUS AND NATURE OF BUSINESS

2 STATEMENT OF COMPLIANCE

3 ACCOUNTING POLICIES

4 TAXATION

These condensed interim financial statements have been presented in Pakistan Rupees, which is the

functional currency of the Company.

Ittehad Chemicals Limited (the Company) was incorporated on September 28, 1991 to takeover the assets

of Ittehad Chemicals and Ittehad Pesticides under a Scheme of Arrangement dated June 18, 1992 as a

result of which the Company became a wholly owned subsidiary of Federal Chemical and Ceramics

Corporation (Private) Limited. The Company was privatized on July 03, 1995 when 90% of the shares

were transferred to the buyer.

The Company was listed on Karachi Stock Exchange on April 14, 2003 when sponsors of the Company

offered 25% of the issued, subscribed and paid up shares of the Company to the general public.

The registered office of the Company is situated at 39, Empress Road, Lahore. The Company is engaged

in business of manufacturing and selling caustic soda and other allied chemicals.

The accounting policies adopted and methods of computation followed in the preparation of these

financial statements are the same as those of the preceding published annual financial statements for the

year ended June 30, 2008.

Income tax expense is recognized based on management's best estimate of the weighted average annual

income tax rate expected for the full financial year.

These financial statements are unaudited and are being submitted to the shareholders as required under

Section 245 of the Companies Ordinance, 1984.

These financial statements have been prepared in accordance with the approved accounting standards as

applicable in Pakistan and the requirements of the Companies Ordinance 1984. Approved accounting

standards comprise of such International Accounting Standards as notified under the provisions

Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984 or

directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements

these standards, the requirement of the Companies Ordinance 1984, or the requirements of the said

directives take precedence.

The disclosures made in these financial statements have however, been limited in accordance with the

requirements of International Accounting Standard 34 "Interim Financial Reporting".


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5 ESTIMATES


(Unaudited) (Audited)Note

6 OPERATING FIXED ASSETS

Opening book value 2,316,478 2,359,749

Additions during the period / year 6.1 14,919 138,911

2,331,397 2,498,660

Disposals during the period / year 6.2 (106) (281)

Depreciation charged during the period / year (42,645) (181,901)

(42,751) (182,182)

Closing book value 2,288,646 2,316,478

6.1 Detail of additions during the period / year are as follows:

Owned assets:

Freehold land - 55,035

Building on freehold land - 11,870

Railway sidings - 3,318

Plant and machinery 11,566 54,012

Other equipments - 2,464

Furniture and fixtures 46 583

Office and other equipments 1,985 6,688

Vehicles 1,322 4,908

14,919 138,878 Assets subject to finance lease

Vehicles - 33

14,919 138,911

6.2 Detail of disposals during the period / year are as follows:

Vehicles 106 281

106 281


The preparation of condensed interim financial statements requires management to make judgments,

estimates and assumptions that affect the application of accounting policies and the reported amounts

assets and liabilities, income and expenses. Actual results may differ from these estimates. The

significant judgments made by management in applying the Company's accounting policies and key

sources of estimation of uncertainty are the same as those that were applied to the financial statements for

the year ended June 30, 2008.


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(Unaudited) (Audited)

7 CAPITAL WORK IN PROGRESS


Building 766 766

116,328 104,377

7.1

8 SHARE CAPITAL

8.1 Authorized share capital

50,000,000 (June 30, 2008: 50,000,000)

ordinary shares of Rs. 10/- each 500,000 500,000

25,000,000 (June 30, 2008: 25,000,000)

preference shares of Rs. 10/- each 250,000 250,000

750,000 750,000

8.2 Issued, subscribed and paid up capital

100,000 (June 30, 2008: 100,000) fully paid in cash 1,000 1,000

24,900,000 (June 30, 2008: 24,900,000) issued for

consideration other than cash 249,000 249,000

11,000,000 ( June 30, 2008: 11,000,000 ) fully

paid bonus shares 110,000 110,000

360,000 360,000

9 LONG TERM FINANCING

From banking companies and financial institutions- Secured

Balance as at July 01 100,000 799,253

Obtained during the period / year - -

100,000 799,253

Payments made during the period / year (15,625) (699,253)

84,375 100,000

Current portion shown under current liabilities (50,000) (50,000)

34,375 50,000

An amount of Rs. nil (June 30, 2008: Rs. 24.422 million) has been transferred to operating fixed assets

during the period.



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September 30, June 30,

2008 2008


10 LONG TERM DIMINISHING MUSHARAKA


Balance as at July 01 750,000 -

Obtained during the period / year - 750,000

750,000 750,000

Current portion shown under current liabilities (83,333) -

666,667 750,000

11 LONG TERM MURABAHA

From banking companies - secured



350,000 661,188

Payments made during the period / year - (311,188)

350,000 350,000


311,111 350,000

12 LIABILITIES AGAINST ASSETS

SUBJECT TO FINANCE LEASE

Secured

Balance as at July 01 913 1,286

Payments made during the period / year (98) (373)

815 913

Current portion shown under current liabilities (433) (422)

382 491



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13 CONTINGENCIES AND COMMITMENTS

13.1 Contingent liabilities

a)

b)

c)

13.2 Commitments

Commitments as on September 30, 2008 were as follows:

Demand for Rs. 56.437 million for assessment year 1996-97 with respect to disallowance of expenses

incurred on account of Golden Hand Shake (GHS) and of Voluntary Separation Scheme (VSS) for

reason of non deduction of tax on these payments was set aside by the Honorable Income Tax Appellate

Tribunal (ITAT) with direction to re-compute the tax liability by using the specified methodology. The

Inspecting Additional Commissioner (IAC), vide his order dated December 23, 2003 had restored the

original assessment under section 66-A of the Income Tax Ordinance, 1979 without considering the

directions of ITAT. Management had filed a revised petition before ITAT and Reference Application

before the Learned Lahore High Court. The matter had been remanded back to IAC by ITAT.

The Company is facing claims, launched in the labour courts, pertaining to staff retirement benefits. In

the event of an adverse decision the Company would be required to pay an amount of Rs. 4.680 million

(June 30, 2008: Rs. 4.680 million) against these claims.

Letters of guarantee outstanding as at September 30, 2008 were Rs. 209.056 million (June 30, 2008:

Rs.207.997 million) and corporate guarantee on behalf of Chemi Chloride Industries Limited amounted

to Rs. 118 million (June 30, 2008: Rs. 118 million)

- Against letter of credit outstanding amounting to Rs. 71.651 million (June 30, 2008: Rs. 73.086 million)

- Against purchase of land amounting to Rs. 1.838 million (June 30, 2008: Rs 1.838 million).

In order to avoid further delay in the subject case, management filed an application to the Federal Board

of Revenue (FBR) for appointment of the Alternative Dispute Resolution Committee (ADRC) in October

2007. ADRC had agreed with the Company’s viewpoint and recommended that the tax demand should

not be more than Rs. 5.50 million. FBR had considered the recommendations of ADRC and vide its order

under section 134A dated May 8, 2008 had directed the Commissioner of Income Tax to take necessary

action for implementing the said order. Now CIT office is in the process of allowing the said expenses.


12



14 COST OF SALES

Raw materials consumed 111,657 81,199

Stores, spares and loose tools

consumed 54,087 40,146

Packing materials consumed 4,524 1,795

Salaries, wages and benefits 34,923 25,844

Fuel and power 444,358 295,019

Repair and maintenance 4,599 4,104

Insurance 2,117 2,204


Vehicle running expenses 2,825 1,737

Postage, printing and stationery 381 442

Other expenses 746 753

701,798 497,395

Opening work-in-process 3,694 3,201

Closing work-in-process (3,694) (3,201)

- -

Cost of goods manufactured 701,798 497,395

Cost of stores traded - 1,372

Opening stock of finished goods 46,537 59,312

Closing stock of finished goods (91,514) (50,141)

(44,977) 9,171

656,821 507,938

15 TRANSACTIONS WITH RELATED PARTIES

Relation with the Company Nature of transaction

Associated company Marketing service charges 8,646 6,594

Subsidiary / Associated companies Sale of goods and services 5,371 4,048

Subsidiary company Rental Income 1,200 2,379

Subsidiary company Loans and advances made 5,634 8,357

Subsidiary company Mark up on loans and advances 401 207


The related parties comprise of group companies, local associated companies, staff retirement funds,

directors and key management personnel. Transactions with related parties and remuneration and benefits

to key management personnel under the term of employment are as follows:

Quarter ended


s

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September 30, September 30,2008 2007(Rupees in thousand)

Quarter ended

41 34

9,084 6,595

Subsidiary company Advance against issue of shares 23,000 -

Staff retirement fund Contribution to staff retirement

benefit plans

Remuneration to directors and

key management personnel

Directors and employees

16

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

- Profit after taxation

(Rupees in thousand) 52,379 20,843

- Weighted average number of

ordinary shares (in thousand) 36,000 36,000

Earnings per share - (Rupees) 1.45 0.58

17 DATE OF AUTHORISATION

18 GENERAL

Amounts have been rounded off to the nearest rupees in thousand unless otherwise stated.

BASIC AND DILUTED EARNING PER SHARE

These financial statements were authorized for issue on October 28, 2008 by the Board of Directors

the Company.



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CONTENTS

Quarterly Condensed Consolidated Interim Financial Statements

for the period ended September 30, 2008

(Un-Audited)

Directors’ Report on Consolidated Accounts

Consolidated Balance Sheet

Consolidated Profit & Loss Account

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

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17

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19

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DIRECTORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS


On behalf of the Board of Directors I am pleased to present the un-audited consolidated financial statements of the Company and its subsidiary, Chemi Chloride Industries Limited (CCIL), for the first quarter ended September 30, 2008. The Directors’ Report on the performance of Ittehad Chemicals Limited (ICL), for the first quarter ended September 30, 2008 has been presented separately. During the period under review CCIL has made net sales of Rs. 6.21 million and earned gross profit of Rs. 1.33 million. The Company posted after tax loss of Rs. 3.94 million due to fixed overheads and high finance cost which could not be recovered on account of low production and under utilization of capacity. The subsidiary company has therefore reported a negative earning per share of Rs. 0.06 for the quarter under review whereas group’s earning per share is Rs. 1.34. The Management expects that the subsidiary company’s (CCIL) results will improve after overcoming the plant’s operational problems by foreign engineers whose arrival is still awaited. CCIL has obtained approval from its shareholders in their Annual General Meeting held on October 14, 2008 for the issuance of fully paid ordinary shares by way of otherwise than rights u/s 86(1) of the Companies Ordinance 1984 to Ittehad Chemicals Limited, the holding Company and now the CCIL is going to file an application to SECP under section 86(1) of the Companies Ordinance 1984 for permission to issue these shares. Place: LahoreDate: October 28, 2008

On behalf of the Board

__________________________ Muhammad Siddique Khatri

Chief Executive Officer

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CONDENSED CONSOLIDATED INTERIM BALANCE SHEETas at September 30, 2008


Unaudited AuditedNote

ASSETS

NON CURRENT ASSETSProperty, plant and equipment

Operating fixed assets 6 2,491,040 2,523,899 Capital work in progress 7 116,328 104,377

2,607,368 2,628,276 Intangible assets 3,728 4,141

Goodwill 6,445 6,445 Investment properties 52,950 52,950

Long term investments 446 707 Long term deposits 12,339 12,339

2,683,276 2,704,858 CURRENT ASSETS

Stores, spares and loose tools 361,333 317,191 Stock in trade 206,075 159,683

Trade debts 484,301 299,766 Loans and advances 40,450 18,125

Trade deposits and short term prepayments 68,010 27,987 Other receivables 41 21

Tax refunds due from the Government 439 439 Taxation- net 69,599 62,897

Cash and bank balances 54,960 42,070 1,285,208 928,179

TOTAL ASSETS 3,968,484 3,633,037

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorized share capital 8.1 750,000 750,000

Issued, subscribed and paid up capital 8.2 360,000 360,000 Reserves 427,113 379,123

787,113 739,123

Advance against future issue of shares 1,811 1,811

Minority interest 3,315 3,124

792,239 744,058

SURPLUS ON REVALUATION OF FIXED ASSETS 643,372 643,372

NON CURRENT LIABILITIESLong term financing 9 154,770 173,117

Long term diminishing musharaka 10 666,667 750,000 Long term murabaha 11 311,111 350,000

Liabilities against assets subject to finance lease 12 382 491 Deferred liabilities 323,847 294,525

1,456,777 1,568,133 CURRENT LIABILITIES

Trade and other payables 391,190 237,717 Markup accrued 37,272 63,663

Short term borrowings 443,554 294,969 Current portion of long term liabilities 204,080 81,125

1,076,096 677,474 CONTINGENCIES AND COMMITMENTS 13 - - TOTAL EQUITY AND LIABILITIES 3,968,484 3,633,037



17


Appropriations have been reflected in the statement of changes in equity.

CONDENSED CONSOLIDATED INTERIM PROFIT AND LOSS ACCOUNTfor the period ended September 30, 2008 (Un-Audited)

September 30, September 30,

2008 2007

Note

Sales - net 861,182 654,427

Cost of sales 14 (656,486) (507,938)

Gross profit 204,696 146,489

Selling and distribution expenses (39,168) (36,554)

General and administrative expenses (24,017) (16,234)

Other operating expenses (6,629) (1,925)

Other operating income 729 3,357

Operating profit 135,611 95,133

Financial charges (57,912) (59,512)

Profit before taxation 77,699 35,621

Taxation (29,257) (14,778)

Profit after taxation 48,442 20,843

Minority interest - share of profit (191) -

Profit attributable to equity holders of parent 48,251 20,843

Earnings per share - basic and diluted (Rupees) 16 1.34 0.58

Quarter ended



18

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTfor the period ended September 30, 2008 (Un-Audited)


CASH FLOW FROM OPERATING ACTIVITIESProfit before tax 77,699 35,621

Adjustments for items not involving movement of funds:Depreciation 47,672 44,829

Amortization of intangible assets 414 150

Provision for gratuity 491 162

Amortization of deferred cost - 213

Gain on sale of fixed assets (49) -

Loss on foreign exchange 478 -

Financial charges 57,912 59,512

184,617 140,487

(Increase) / decrease in current assetsStores, spares and loose tools (44,142) (11,274)

Stock in trade (46,392) (32,018)

Trade debts (184,535) (36,805)

Loan and advances (22,325) (18,898)

Trade deposits and short term prepayments (40,023) (6,384)

Other receivables (20) 40

(340,011) (105,339)

Increase in current liabilitiesTrade and other payables 152,994 62,013

Cash generated from operations 174 97,161

Taxes paid (6,905) (6,689)

Dividend paid - (54,000)

Gratuity paid (223) -

Net cash inflow / (outflow) from operating activities (6,954) 36,472

CASH FLOW FROM INVESTING ACTIVITIESAdditions to operating fixed assets (14,919) (5,209)

Additions to intangible assets - (100)

Additions to capital work in progress (11,951) (18,283)

Proceeds from sale of operating fixed assets 155 -

Net cash (used in) investing activities (26,715) (23,592)

CASH FLOW FROM FINANCING ACTIVITIES

Repayment of long term financing (17,625) (654,164)

Proceeds from long term diminishing musharaka - 750,000

Proceeds from long term murabaha - 350,000

Repayment of long term murabaha - (311,188)

Liabilities against assets subject to finance lease (98) (89)

Financial charges paid (84,303) (62,520)

Short term borrowings 148,585 (62,926)

Net cash generated from financing activities 46,559 9,113

Net increase in cash and cash equivalents 12,890 21,993

Cash and cash equivalents at beginning of the period 42,070 29,130

Cash and cash equivalents at end of the period 54,960 51,123



Quarter ended


Net cash flow before working capital changes

19

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITYfor the period ended September 30, 2008 (Un-Audited)

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20

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTSfor the period ended September 30, 2008 (Un-Audited)

1 LEGAL STATUS AND NATURE OF BUSINESS

2 STATEMENT OF COMPLIANCE

3 ACCOUNTING POLICIES

4 TAXATION

These condensed consolidated interim financial statements have been presented in Pakistan Rupees, whichis the functional currency of the Company.

Ittehad Chemicals Limited (the Company) was incorporated on September 28, 1991 to takeover the assets

of Ittehad Chemicals and Ittehad Pesticides under a Scheme of Arrangement dated June 18, 1992 as a

result of which the Company became a wholly owned subsidiary of Federal Chemical and Ceramics

Corporation (Private) Limited. The Company was privatized on July 03, 1995 when 90% of the shares

were transferred to the buyer.

The Company was listed on Karachi Stock Exchange on April 14, 2003 when sponsors of the Company

offered 25% of the issued, subscribed and paid up shares of the Company to the general public.

The registered office of the Company is situated at 39, Empress Road, Lahore. The Company is engaged

in business of manufacturing and selling caustic soda and other allied chemicals.

The accounting policies adopted and methods of computation followed in the preparation these

financial statements are the same as those of the preceding published annual financial statements the

group for the year ended June 30, 2008.

Income tax expense is recognized based on management's best estimate of the weighted average annual

income tax rate expected for the full financial year.

These condensed consolidated interim financial statements are unaudited and are being submitted to theshareholders as required under Section 245 of the Companies Ordinance, 1984.

These financial statements have been prepared in accordance with the approved accounting standards as

applicable in Pakistan and the requirements of the Companies Ordinance 1984. Approved accounting

standards comprise of such International Accounting Standards as notified under the provisions

Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984 or

directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements

these standards, the requirement of the Companies Ordinance 1984, or the requirements of the said

directives take precedence.

The disclosures made in these financial statements have, however, been limited in accordance with the

requirements of International Accounting Standard 34 "Interim Financial Reporting".

These condensed consolidated interim financial statements include financial statements of IttehadChemicals Limited (Holding company) and Chemi Chloride Industries Limited (Subsidiary company), inwhich holding company has 93.33% shareholding.

of

of


21


5 ESTIMATES


(Unaudited) (Audited)Note

6 OPERATING FIXED ASSETS

Opening book value 2,523,899 2,359,749

Additions / acquired during the period /year 6.1 14,919 356,925

2,538,818 2,716,674

Disposals during the period / year 6.2 (106) (281)

Depreciation charged during the period / year (47,672) (192,494)

(47,778) (192,775)

Closing book value 2,491,040 2,523,899

6.1 Detail of additions / acquisitions during the period / year

Owned assets:

Freehold land - 73,035

Building on freehold land - 33,052

Railway sidings - 3,318


Other equipments - 3,988

Furniture and fixtures 46 619

Office and other equipments 1,985 6,932

Vehicles 1,322 5,840

14,919 356,892 Assets subject to finance lease

Vehicles - 33

14,919 356,925

6.2 Detail of disposals during the period / year are as follows:

Vehicles 106 281

106 281


The preparation of condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgments made by management in applying the Company's accounting policies and key sources of estimation of uncertainty are the same as those that were applied to the consolidated financial statements for the year ended June 30, 2008.

are as follows:


22




7 CAPITAL WORK IN PROGRESS


Building 766 766

116,328 104,377

7.1

8 SHARE CAPITAL

8.1 Authorized share capital

50,000,000 (June 30, 2008: 50,000,000)

ordinary shares of Rs. 10/- each 500,000 500,000

25,000,000 (June 30, 2008: 25,000,000)

preference shares of Rs. 10/- each 250,000 250,000

750,000 750,000

8.2 Issued, subscribed and paid up capital

100,000 (June 30, 2008: 100,000) fully paid in cash 1,000 1,000

24,900,000 (June 30, 2008: 24,900,000) issued for

consideration other than cash 249,000 249,000

11,000,000 ( June 30, 2008: 11,000,000 ) fully

paid bonus shares 110,000 110,000

360,000 360,000

9 LONG TERM FINANCING



Acquired during the period / year -

953,073

Payments made during the period / year (17,625) (699,253)

253,820

Current portion shown under current liabilities (81,425) (80,703)

154,770

An amount of Rs. nil (June 30, 2008: Rs. 24.422 million) has been transferred to operating fixed assets

during the period.


253,820

236,195

153,820

173,117


23


September 30, June 30,

2008 2008


10 LONG TERM DIMINISHING MUSHARAKA


Balance as at July 01 750,000 -


750,000 750,000


666,667 750,000

11 LONG TERM MURABAHA

From banking companies - secured



350,000 661,188

Payments made during the period / year - (311,188)

350,000 350,000


311,111 350,000

12 LIABILITIES AGAINST ASSETS

SUBJECT TO FINANCE LEASE

Secured

Balance as at July 01 913 1,286

Payments made during the period / year (98) (373)

815 913

Current portion shown under current liabilities (433) (422)

382 491



24


13 CONTINGENCIES AND COMMITMENTS

13.1 Contingent liabilities

a)

b)

c)

13.2 Commitments

Commitments as on September 30, 2008 were as follows:

Demand for Rs. 56.437 million for assessment year 1996-97 with respect to disallowance of expenses

incurred on account of Golden Hand Shake (GHS) and of Voluntary Separation Scheme (VSS) for

reason of non deduction of tax on these payments was set aside by the Honorable Income Tax Appellate

Tribunal (ITAT) with direction to re-compute the tax liability by using the specified methodology. The

Inspecting Additional Commissioner (IAC), vide his order dated December 23, 2003 had restored the

original assessment under section 66-A of the Income Tax Ordinance, 1979 without considering the

directions of ITAT. Management had filed a revised petition before ITAT and Reference Application

before the Learned Lahore High Court. The matter had been remanded back to IAC by ITAT.

The Company is facing claims, launched in the labour courts, pertaining to staff retirement benefits. In

the event of an adverse decision the Company would be required to pay an amount of Rs. 4.680 million

(June 30, 2008: Rs. 4.680 million) against these claims.

Letters of guarantee outstanding as at September 30, 2008 were Rs. 209.056 million (June 30, 2008:

Rs.207.997 million) .

- Against letter of credit outstanding amounting to Rs. 71.651 million (June 30, 2008: Rs. 73.086 million)

- Against purchase of land amounting to Rs. 1.838 million (June 30, 2008: Rs 1.838 million).

In order to avoid further delay in the subject case, management filed an application to the Federal Board

of Revenue (FBR) for appointment of the Alternative Dispute Resolution Committee (ADRC) in October

2007. ADRC had agreed with the Company’s viewpoint and recommended that the tax demand should

not be more than Rs. 5.50 million. FBR had considered the recommendations of ADRC and vide its order

under section 134A dated May 8, 2008 had directed the Commissioner of Income Tax to take necessary

action for implementing the said order. Now CIT office is in the process of allowing the said expenses.


25



14 COST OF SALES

Raw materials consumed 111,139 81,199

Stores, spares and loose tools

consumed 55,487 40,146

Packing materials consumed 4,532 1,795

Salaries, wages and benefits 36,706 25,844

Fuel and power 446,195 295,019

Repair and maintenance 4,688 4,104

Insurance 2,246 2,204


Vehicle running expenses 2,825 1,737

Postage, printing and stationery 381 442

Other expenses 746 753

711,499

497,395

Opening work-in-process 3,694 3,201

Closing work-in-process (3,694) (3,201)

- -

Cost of goods manufactured 497,395

Cost of stores traded - 1,372

Opening stock of finished goods 48,756 59,312

Closing stock of finished goods (103,769) (50,141)

(55,013) 9,171

656,486 507,938

15 TRANSACTIONS WITH RELATED PARTIES

Relation with the Company Nature of transaction

Associated company Marketing service charges 8,646 6,594

Sale of goods 169 4,048

Rental Income 2,379

Loans and advances made 8,357

Mark up on loans and advances 207


The related parties comprise of group companies, local associated companies, staff retirement funds,

directors and key management personnel. Transactions with related parties and remuneration and benefits

to key management personnel under the term of employment are as follows:

Quarter ended

-

-

-

Associated company

Associated company

Associated company

711,499


s

26

Associated company


September 30, September 30,2008 2007(Rupees in thousand)

Quarter ended

41 34

9,534 6,595

Staff retirement fund Contribution to staff retirement

benefit plans

Remuneration to directors and

key management personnel

Directors and employees

16

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

- Profit after taxation

(Rupees in thousand) 48,251 20,843

- Weighted average number of

ordinary shares (in thousand) 36,000 36,000

Earnings per share - (Rupees) 1.34 0.58

17 DATE OF AUTHORIZATION

18 GENERAL

Amounts have been rounded off to the nearest rupees in thousand unless otherwise stated.

BASIC AND DILUTED EARNING PER SHARE

These financial statements were authorized for issue on October 28, 2008 by the Board of Directors

the Company.



27

Final 1st Qtr, 08 - Ittehad Chemicals Quarter Report... · 2012. 2. 14. · DIRECTORS’ REPORT ITTEHAD CHEMICALS LIMITED Quarterly Report September 30, 2008 3 On behalf of the Board

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