FSA_59 ICL_2009

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8/7/2019 FSA_59 ICL_2009


CONTENTS

Corporate Information

Vision & Mission Statement

Notice of Annual General Meeting

Directors' Report

Operating & Financial Highlights

Statement of Value Added

Statement of Ethics and Business Practices

Statement of Compliance with theCode of Corporate Governance

Review Report to the Members on Statement of Compliance

with Best Practices of Code of Corporate GovernanceFinancial Statements

Consolidated Financial Statements

Pattern of Shareholding

Form of Proxy

2

3

4

5

9

10

11

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Our Vision

To be sustainable and growth oriented Company who plays acompetitive role in industry and adds value to economy throughexcellence in technological advancement and quality products

Our Mission

The mission of Ittehad is to be

A Company built on sound financial footings and achievesexcellent operating results through superior efficiency and cost

control

A Company that consistently benefits its stakeholders throughenhanced profitability

A Company that achieves a high level of customer care service byproviding quality products and positive feedback

A Company that provides excellent working environment to itsemployees that assists in enhancing their strengths and abilities,create a culture that fosters motivation and promotes individual

growth and care

A Company that contributes towards a good corporate citizenship

and sets highest standards in serving the society

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

ToGovernment

Depreciationand Retained

Profits

To Lenders To Employees To Shareholders

45%

20%16%

15%

4%

STATEMENT OF VALUE ADDED

2009 2008

WEALTH GENERATED

Total revenue net of discount and allowances 4,197 3,157 Bought-in-material and services 2,722 2,040

1,475 1,117

WEALTH DISTRIBUTED

To EmployeesSalaries benefits and other cost 223 165

To GovernmentIncome tax, sales tax and special excise duty 663 491

To Providers of CapitalDividend to shareholders 54 54 Mark up / interest expenses on borrowed funds 240 213

Retained for Reinvestment and GrowthDepreciation and retained profits 296 194

1,475 1,117

(Rs. in million)

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Provide

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BDO Ebrahim & Co.

Chartered Accountants2nd Floor, Block-C, Lakson Square Building No. 1,Sarwar Shaheed Road, Karachi-74200, Pakistan.Telephone: 5683030, 5683189, 5683498, 5683703Telefax : 5684239Email : [email protected] : http://www.bdoebrahim.com

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AUDITORS' REPORT TO THE MEMBERS We have audited the annexed balance sheet of ITTEHAD CHEMICALS LIMITED as at June 30, 2009 and the

related profit and loss account, cash flow statement and statement of changes in equity together with the notesforming part thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company’s management to establish and maintain a system of internal control, andprepare and present the above said statements in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free

of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the above said statements. An audit also includes assessing the accounting policies and significantestimates made by management, as well as, evaluating the overall presentation of above said statements. We believethat our audit provides a reasonable basis for our opinion and, after due verification, we report that:

a) in our opinion, proper books of accounts have been kept by the Company as required by the Companies

Ordinance, 1984; b) 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, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the year was for the purpose of the Company's business; and

iii) the business conducted, investments made and the expenditure incurred during the year were in

accordance with the objects of the Company; c) in our opinion and to the best of our information and according to the explanations given to us, the balance

sheet, profit and loss account, cash flow statement and statement of changes in equity together with thenotes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give

the information required by the Companies Ordinance, 1984, in the manner so required and respectivelygive a true and fair view of the state of the Company's affairs as at June 30, 2009 and of the profit, its cashflows and changes in equity for the year then ended; and

d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was

deducted by the Company and deposited in the Central Zakat fund established under Section 7 of thatOrdinance.

BDO Ebrahim & Co.Chartered Accountants

2nd Floor, Block-C, Lakson Square Building No. 1,Sarwar Shaheed Road, Karachi-74200, Pakistan.Telephone: 5683030, 5683189, 5683498, 5683703Telefax : 5684239Email : [email protected] : http://www.bdoebrahim.com

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BALANCE SHEET AS AT JUNE 30, 2009

2009 2008NoteASSETS

NON CURRENT ASSETSProperty, plant and equipment

Operating fixed assets 3 2,422,693 2,316,478

Capital work in progress 4 32,919 104,377

2,455,612 2,420,855 Intangible assets 5 3,310 4,141

Investment properties 6 78,700 70,950

Long term investments 7 87,786 65,107

Deferred cost 8 - -

Long term deposits 9 11,321 11,475

2,636,729 2,572,528

CURRENT ASSETSStores, spares and loose tools 10 341,790 315,257

Stock in trade 11 105,732 144,335

Trade debts 12 573,001 297,437

Loans and advances 13 61,151 35,336 Trade deposits and short term prepayments 14 14,120 22,438 Other receivables 15 1,404 836 Tax refunds due from Government 16 45,723 439 Taxation - net 17 - 6 1,446Cash and bank balances 18 26,037 40,859

1,168,958 918,383 TOTAL ASSETS 3,805,687 3,490,911 EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVESAuthorized share capital

75,000,000 (2008: 75,000,000) shares of Rs. 10/- each 19.1 750,000 750,000 Issued, subscribed and paid up capital 19.2 360,000 360,000 Reserves 20 530,505 415,650

890,505 775,650 SURPLUS ON REVALUATION OF FIXED ASSETS 21 749,059 643,372

NON CURRENT LIABILITIESLong term financing 22 18,750 50,000 Long term diminishing musharaka 23 583,333 750,000 Long term murabaha 24 272,222 350,000 Liabilities against assets subject to finance lease 25 - 491 Deferred liabilities 26 357,528 294,525

1,231,833 1,445,016 CURRENT LIABILITIES

Trade and other payables 27 445,311 221,291 Markup accrued 28 72,387 60,191 Short term borrowings 29 130,143 294,969 Current portion of long term liabilities 30 276,193 50,422

Provision for taxation - net 31 10,256 -

934,290 626,873 CONTINGENCIES AND COMMITMENTS 32

TOTAL EQUITY AND LIABILITIES 3,805,687 3,490,911

The annexed notes from 1 to 50 form an integral part of these financial statements.

(Rupees in thousand)

Muhammad Siddique KhatriChief Executive

Abdul Sattar KhatriDirector

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PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED JUNE 30, 2009

2009 2008Note

Sales 33 3,568,352 2,685,176

Cost of sales 34 (2,747,957) (2,137,311) Gross profit 820,395 547,865 Selling and distribution expenses 35 (204,213) (139,213) General and administrative expenses 36 (100,292) (72,261) Other operating expenses 37 (20,620) (10,246) Other operating income 38 13,223 16,308

(311,902) (205,412) Operating profit 508,493 342,453 Financial charges 39 (239,586) (212,824) Fair value gain / (loss) on investment properties 7,750 (390)

Profit before taxation 276,657 129,239 Taxation 40 (107,481) (63,631) Profit after taxation 169,176 65,608

Earnings per share - basic and diluted (Rupees) 42 4.70 1.82

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





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CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2009

2009 2008

Cash flows from operating activitiesProfit before tax 276,657 129,239 Adjustments for items not involving movement of funds:

Depreciation 188,094 181,901 Amortization of intangible assets 1,823 655

Provision for gratuity 1,962 1,600 (Gain) / loss on sale of fixed assets (394) 53 (Gain) / loss on revaluation of investment property (7,750) 390 Foreign exchange gain (253) (156) Amortization of deferred cost - 901 Provision for doubtful debts 2,955 1,261 Bad debts written off 646 - Financial charges 239,586 212,824

Net cash flow before working capital changes 703,326 528,668 Decrease / (increase) in current assets

Stores, spares and loose tools (26,533) (25,251) Stock in trade 38,603 (42,050) Trade debts (278,912) 146,026 Loans and advances (25,815) (8,821) Trade deposits and short term prepayments 8,318 (14,595)Other receivables (568) (529)

(Decrease) / increase in current liabilities (284,907) 54,780 Trade and other payables 226,927 29,766

Cash generated from operations 645,346 613,214 Taxes paid (22,422) (17,085) Gratuity paid (507) - Financial charges paid (227,390) (203,639) Net cash inflow from operating activities 395,027 392,490

Cash flows from investing activitiesAdditions to operating fixed assets (60,167) (114,490) Additions to intangible assets (992) (3,258)Transferred from investment property - 11,190Additions to capital work in progress (57,313) (81,120) Proceeds from sale of fixed assets 710 228 Long term Investments (23,000) - Long term deposits 154 2,730

Net cash (outflow) from investing activities (140,608) (184,720)

Cash flows from financing activitiesRepayment of redeemable capital - (83,266) Proceeds from long term financing - 750,000 Repayments of long term financing (50,000) (699,253) Proceeds from long term murabaha - 350,000 Repayment of long term murabaha - (311,188) Liabilities against assets subject to finance lease (415) (373) Dividend paid (54,000) (54,000) Short term borrowings (164,826) (147,961)

Net cash (outflow) from financing activities (269,241) (196,041) Net (decrease) / increase in cash and cash equivalents (14,822) 11,729 Cash and cash equivalents at the beginning of the year 40,859 29,130 Cash and cash equivalents at the end of the year 26,037 40,859





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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2009

Issued,subscribed andpaid-up capital

Fair valuereserve

Unappropriatedprofits

Total

Balance as at July 01, 2007 360,000 1,134 4 03,343 764,477

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

Net profit for the year - - 65,608 65,608

Fair value gain / (loss) - ( 435) - (435)

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

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

Net profit for the year - - 169,176 169,176

Fair value gain / (loss) - ( 321) - (321)

Balance as at June 30, 2009 360,000 378 530,127 890,505





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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2009

1 LEGAL STATUS AND NATURE OF BUSINESS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

Ittehad Chemicals Limited (the Company) was incorporated on September 28, 1991 to takeoverthe assets of Ittehad Chemicals and Ittehad Pesticides under a Scheme of Arrangement datedJune 18, 1992 as a result of which the Company became a wholly owned subsidiary of FederalChemical and Ceramics Corporation (Private) Limited. The Company was privatized on July 03,1995.

The registered office of the Company is situated at 39 - Empress Road, Lahore. The Company isengaged in the business of manufacturing and selling caustic soda and other allied chemicals.

The Company was listed on Karachi Stock Exchange on April 14, 2003 when sponsors of theCompany offered 25% of the issued, subscribed and paid up shares of the Company to thegeneral public.

These financial statements represent the separate stand alone financial statements of IttehadChemicals Limited. The consolidated financial statements of the Company and its subsidiarycompany are presented separately.

Initial application

IFRS 7 – Financial Instruments: Disclosures (effective for annual periods beginning on or after28 April 2008) supersedes IAS 30 – Disclosures in the Financial Statements of Banks andSimilar Financial Institutions and the disclosure requirements of IAS 32 – Financial Instruments:Disclosure and Presentation. The application of the standard did not have significant impact onthe Company's financial statements other than increase in disclosures.

Initial Application of a Standard, Amendment or an Interpretation to an ExistingStandard and Forthcoming Requirements.

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

of Pakistan (SECP) differ with requirements of these standards, the requirements of CompaniesOrdinance, 1984 or the requirements of the said directives take precedence.

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2.2 Accounting convention

IFRIC 18 - Transfers of Assets from Customers (to be applied prospectively to transfers of assets from customers received on or after 01 July 2009).

The International Accounting Standards Board made certain amendments to existing standardsas part of its first annual improvements project. The effective dates for these amendments varyby standard and most will be applicable to the Company’s 2010 financial statements.

Amendment to IFRS 2 - Share-based Payment – Group Cash-settled Share-based PaymentTransactions (effective for annual periods beginning on or after 1 January 2010).

IFRIC 15 - Agreement for the Construction of Real Estate (effective for annual periodsbeginning on or after 1 October 2009).

IFRIC 16 - Hedge of Net Investment in a Foreign Operation (effective for annual periodsbeginning on or after 1 October 2008).

IFRIC 17 - Distributions of Non-cash Assets to Owners (effective for annual periodsbeginning on or after 1 July 2009).

These financial statements have been prepared under the historical cost convention except asmodified by fair value adjustment in investment properties, freehold land, investments andexchange differences as referred to in notes 2.6, 2.7 and 2.21 respectively.

Revised IFRS 3 - Business Combinations (applicable for annual periods beginning on or after1 July 2009).

IFRS 4 - Insurance Contracts (effective for annual periods beginning on or after 1 January2009).

Amendment to IFRS 7 - Improving disclosures about Financial Instruments (effective forannual periods beginning on or after 1 January 2009).

IFRS 8 - Operating Segments (effective for annual periods beginning on or after 1 January2009).

Amendment to IFRS 2 - Share-based Payment – Vesting Conditions and Cancellations(effective for annual periods beginning on or after 1 January 2009).

The International Accounting Standards Board made certain amendments to existing standardsas part of its second annual improvements project. The effective dates for these amendmentsvary by standard and most will be applicable to the Company’s 2010 financial statements.

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2.3 Functional and presentation currency

2.4 Property, plant and equipment

a) Owned assets

b)

Maintenance and normal repairs are charged to income as and when incurred while cost of majorreplacements and improvements, if any, are capitalized.

Leased assets

Depreciation on assets is charged from the month of addition while no depreciation is chargedfor the month in which assets are disposed off.

Gains and losses on disposal and retirement of an asset are included in the profit and lossaccount.

The preparation of financial statements in conformity with approved accounting standardsrequires management to make estimates, assumptions and use judgments that effect theapplication of policies and reported amounts, of assets and liabilities and income and expenses.Estimates, assumptions and judgments are continually evaluated and are based on historicalexperience and other factors, including reasonable expectations of future events. Revisions toaccounting estimates are recognized prospectively commencing from the period of revision.

These are stated at cost / revalued amount less accumulated depreciation and accumulatedimpairment losses, if any, except capital work-in-progress which is stated at cost. Cost comprisesof actual cost including, interest expense and trial run operational results.

Depreciation is charged on all fixed assets by applying the reducing balance method at the ratesspecified in note 3. The rates are determined to allocate the cost of an asset less estimatedresidual value, if not insignificant, over its useful life.

Judgments and estimates made by the management that may have a significant risk of materialadjustments to the financial statements in subsequent years are disclosed in note 41.

These financial statements are presented in Pak rupee, which is the functional and presentationcurrency for the Company.

Leases of property, plant and equipment where the Company has substantially all the risks andrewards of ownership are classified as finance lease. Assets subject to finance lease are stated atthe lower of present value of minimum lease payments under the lease agreement and the fairvalue of the assets acquired on lease. Outstanding obligations under the lease less financecharges allocated to future periods are shown as liability. Finance costs under lease agreementsare allocated to the period during the lease term so as to produce a constant periodic rate of financial cost on the remaining balance of principal liability for each period.

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c) Capital work in progress

2.5 Intangible assets

2.6 Investment properties

Investment properties are properties which are held either to earn rental income or for capitalappreciation or for both. Investment properties are initially recognized at cost, being the fairvalue of the consideration given. Subsequent to initial recognition these are stated at fair value.The fair value is determined annually by an independent approved valuer. The fair values arebased on market values being the estimated amount for which a property could be exchanged onthe date of valuation between knowledgeable and willing buyer and seller in an arms lengthtransaction.

Depreciation on additions to leased assets is charged from the month in which an asset isacquired while no depreciation is charged for the month in which asset is disposed off.

Assets acquired under a finance lease are depreciated over the useful life of the asset on reducingbalance method at the rates given in note 3. Depreciation on leased assets is charged to the profitand loss account.

Capital work-in-progress represents expenditure on fixed assets in the course of construction andinstallation. Transfers are made to relevant fixed assets category as and when assets are availablefor use. Capital work-in-progress is stated at cost.

Costs that are directly associated with identifiable software products controlled by the Companyand have probable economic benefits beyond one year are recognized as intangible assets. Theseare stated at cost less accumulated amortization and impairment losses, if any. Amortization isprovided on a straight line basis over the asset's estimated useful lives.

Any gain or loss arising from a change in fair value is recognized in the income statement.

Rental income from investment property is accounted for as described in note 2.24.

When an item of property, plant and equipment is transferred to investment property following achange in its use and differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognized in surplus on revaluation of

property, plant and equipment if it is a gain. Upon disposal of the item the related surplus onrevaluation of property, plant and equipment is transferred to retained earnings. Any loss arisingin this manner is recognized immediately in the income statement.

For a transfer from inventories to investment property that will be carried at fair value anydifference between the fair value of the property at that date and its previous carrying amountshall be recognized in the income statement.

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2.7 Investments

Investment in associates

2.8 Deferred cost

If an investment property becomes owner-occupied, it is reclassified as property, plant andequipment and its fair value at the date of reclassification becomes its cost for accountingpurposes.

Expenses incurred on issue of Term Finance Certificates (TFCs) are amortized over a period of five years from the date of issue of TFCs. No further deferred cost has been included in thesefinancial statements in pursuance of the Securities and Exchange Commission of PakistanCircular Number 01 of 2005 dated January 19, 2005.

Available for sale investments

Changes in carrying value are recognized in equity until the investment is sold or determined tobe impaired at which time the cumulative gain or loss previously recognized in equity is included

in profit and loss account for the year.

Investments in subsidiary

Investment in associates where the Company holds 20% or more of the voting power of theinvestee companies and where significant influence can be established are accounted for usingthe equity method. Investment in associates other than those described as above are classified as“available for sale”.

Investment in unquoted subsidiary is initially valued at cost. At subsequent reporting dates, thecompany reviews the carrying amount of the investment to assess whether there is any indicationthat such investments have suffered an impairment loss. If any such indication exist, therecoverable amount is estimated in order to determine the extent of the impairment loss, if any.

In case of investments accounted for under the equity method, the method is applied from thedate when significant influence is established until the date when that significant influenceceases.

These are initially measured at cost, being the fair value of consideration given. At subsequentreporting dates, these investments are re-measured at fair value. For listed securities, fair value isdetermined on the basis of period end bid prices obtained from stock exchange quotations, whilefor unquoted securities, fair value is determined considering break up value of securities.

All purchases and sales of investments are recognized on the trade date which is the date that theCompany commits to purchase or sell the investment. Cost of purchase includes transaction cost.

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2.9 Stores, spares and loose tools

2.10 Stock-in-trade

Raw and packing -materials

Raw and packing -materials in transit

Work in process -

-

2.11 Trade debts and other receivables

2.12 Taxation

a) Current

These are valued at moving average cost except for items in transit, which are valued at costcomprising of invoice value plus other charges paid thereon. Provision is made for slow movingand obsolete items.

Net realizable value represents the estimated selling prices in the ordinary course of business lessexpenses incidental to make the sale.

Finished goods

These are valued at lower of cost and net realizable value. Cost is determined as follows:

Invoice value plus other expenses incurred thereon

Cost of material as above plus proportionate production overheads

Weighted average cost

Average cost of manufacture which includes proportionate productionoverheads including duties and taxes paid thereon, if any.

Trade debts and other receivables are carried at original invoice amount being the fair value of amount to be received, less an estimate made for doubtful receivables based on review of outstanding amounts at the year end, if any. Provision is made against those having no activityduring the last three years and is considered doubtful by the management. Balances consideredbad and irrecoverable are written off when identified.

The charge for current year is higher of the amount computed on taxable income at the currentrates of taxation after taking into account tax credits and rebates, if any, and minimum taxcomputed at the prescribed rate on turnover. The charge for current tax also includesadjustments, where considered necessary, to provision for tax made in previous years arisingfrom assessments framed during the year for such years.

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b) Deferred

2.13 Borrowings

2.14 Trade and other payables

2.15 Provisions

2.16 Cash and cash equivalents

2.17

2.18 Impairment

Loans and borrowings are recorded at the proceeds received. Financial charges are accounted foron accrual basis.

Deferred tax is computed using the balance sheet liability method providing for temporarydifferences between the carrying amounts of assets and liabilities for financial reporting purposesand the amounts used for taxation purposes. Deferred tax assets and liabilities are measured atthe tax rates that are expected to apply to the period when the liability is settled based on taxrates that have been enacted or substantively enacted at the balance sheet date. A deferred tax

asset is recognized only to the extent that it is probable that future taxable profit will be availableand the credits can be utilized.

Dividend and appropriation to reserve

Dividend distribution to the Company’s shareholders is recognized as a liability in theCompany’s financial statements in the period in which the dividends are approved.

Liabilities for trade and other amounts payable are carried at cost which is the fair value of theconsideration to be paid in the future for goods and services received.

Provisions are recognized when the Company has a present, legal or constructive obligation as aresult of past events and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate of the amount can be made.Provisions are reviewed at each balance sheet date and adjusted to reflect the current bestestimates.

For the purposes of cash flow statement, cash and cash equivalents consist of cash in hand andbalances with banks net of borrowings not considered as being in the nature of financingactivities.

The Company assesses at each balance sheet date whether there is any indication that an assetmay be impaired. If such indication exists, the carrying amounts of such assets are reviewed toassess whether they are recorded in excess of their recoverable amount. Where carrying valueexceeds recoverable amount, assets are written down to the recoverable amount.

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2.19 Financial instruments

2.20 Offsetting of financial assets and financial liabilities

2.21 Foreign currency transactions and translation

2.22 Staff retirement benefits

2.23 Compensated absences

2.24 Revenue recognition

The Company operates an un-funded gratuity scheme for its permanent employees. Provision isbased on actuarial valuation of the scheme carried out as at June 30, 2008 in accordance withIAS-19 "Employee Benefits" and the resulting vested portion of past service cost has beencharged to income in the current year.

Contribution is made to this scheme on the basis of actuarial recommendations. Actuarial gainsand losses at each valuation date are charged to profit and loss account. Gratuity is payable tostaff on completion of prescribed qualifying period of service under the scheme.

All the financial assets and financial liabilities are recognized at the time when the Companybecomes a party to the contractual provisions of the instrument. Any gains or losses on de-recognition of the financial assets and financial liabilities are taken to profit and loss accountcurrently.

A financial asset and a financial liability is offset and the net amount is reported in the balancesheet if the Company has a legally enforceable right to set-off the recognized amounts andintends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

A recognized provident fund scheme is also in operation, which covers all permanent employees.The Company and the employees make equal contributions to the fund.

Transactions in foreign currencies are translated into rupees at the rates of exchangeapproximating those prevailing on the date of transactions or at the contract rate. Monetary assetsand liabilities in foreign currencies are translated into rupees at the rates of exchangeapproximating those prevailing at the balance sheet date or at the contract rate. Exchange gainsand losses are included in profit and loss account currently.

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

Sales are recognized on dispatch of goods to customers.

Interest income is recognized on accrual basis.

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2.25 Related party transactions

2.26 Borrowing costs

2.27 Recoating expenses of DSA Plant

Dividend on equity investments is recognized as income when the right to receive payment isestablished.

Provision has been made in these financial statements for the erosion of coating on the anodesduring the year based on best estimates available. Anodes once recoated are used for a period of three years.

Interest and commitment charges on long term loans are capitalized for the period up to the dateof commencement of commercial production of the respective plant and machinery acquired outof the proceeds of such loans. All other interest and charges are treated as expenses during theyear.

Transactions with related parties are based on the policy that all transactions between theCompany and the related parties are carried out at arm's length. The prices are determined inaccordance with the methods prescribed in the Companies Ordinance, 1984.

Rental income is recognized on accrual basis.

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G FIXED ASSETS

g is the statement of operating fixed assets:

value basisune 30, 2009et book value (NBV) 670,093 78,786 5,109 1,514,440 6,871 3,524 10,624 25,908 2,315,355at cost) / revaluation 106,287 7,636 - 163,265 1,021 249 4,891 11,276 294,625 transfers (NBV) - - - - - - - ( 316) (316)

on charge - (8,311) (512) (167,597) (1,090) (361) ( 3,185) (6,813) (187,869)book value 776,380 78,111 4,597 1,510,108 6,802 3,412 12,330 30,055 2,421,795

ng value basisune 30, 2009

776,380 134,619 7,274 2,416,700 37,086 6,159 24,902 67,866 3,470,986ed depreciation - (56,508) (2,677) (906,592) (30,284) (2,747) (12,572) (37,811) (1,049,191)ue 776,380 78,111 4,597 1,510,108 6,802 3,412 12,330 30,055 2,421,795 value basisune 30, 2008et book value (NBV) 615,058 74,447 2,143 1,624,508 5,511 3,301 5,479 27,931 2,358,378

at cost) / revaluation 55,035 11,870 3,318 54,012 2,464 583 6,688 4,908 1 38,878 transfers (NBV) - - - - - - - ( 281) (281)

on charge - (7,531) (352) (164,080) (1,104) (360) ( 1,543) (6,650) (181,620)ook value 670,093 78,786 5,109 1,514,440 6,871 3,524 10,624 25,908 2,315,355 1

ng value basisune 30, 2008

670,093 126,983 7,274 2,253,435 36,065 5,910 20,011 57,906 3,177,677ed depreciation - (48,197) (2,165) (738,995) (29,194) (2,386) (9,387) ( 31,998) ( 862,322) ue 670,093 78,786 5,109 1,514,440 6,871 3,524 10,624 25,908 2,315,355 1

rate % per annum - 5 to 10 10 10 15 10 15 to 30 20 to 25 20

Furnitureand fixtures

Office andother

equipmentsDescription

Freeholdland

Buildings onfreehold

land

Railwaysidings


Vehicles TotalAss

subjefinance

d was revalued by an independent valuer M/s. Dimen Associates (Private) Limited as at June 30, 2009 on the basis of market value. Had there been no revaluation on th

ating fixed assets would have been lower by Rs. 720.278 million (2008: Rs. 614.591 million).

Plant andmachinery

Otherequipments

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Note 2009 200(Rupees in thousand)

The depreciation charge for the year has been allocated as follows:

Cost of sales 34 183,209 1 Selling and distribution expenses 35 832General and administrative expenses 36 4,053

188,094 18 The following operating fixed assets were disposed off during the year:

Accumulated Net book Sale Mode of depreciation value proceeds disposal

Vehicle

297 265 32 55 Negotiated




- - - 100 Negotiated

106 106 - 150 Negotiated

1,316 1,000 316 710 1,283 1,002 281 228

Description


Total - 2009Total - 2008

Malik Muhammad Nadee

Muhammad Saeed

Akmal Shahzad

Mohammad Saleem Qure

Muhammad Sohail

Particulars of buyersCost

Tanveer Iqbal

LXH-1452 Suzuki Bolan Van 1998

LXW-4495 Diahatsn Car 2002

LOS-6891 Suzuki Swift Car 1993

AAS-987 Suzuki Khyber Car 1996

LHP-971 Bed Ford Bus

LHO-1243 Mazda Bus

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2009 2008Note

4 CAPITAL WORK IN PROGRESS

This comprises of:Plant and machinery 32,487 103,611 Building 432 766

32,919 104,377

4.1

5 INTANGIBLE ASSETS

Software-ERP (SAP Business One) 5.1 3,310 4,141

5.1 Net carrying value basis:Opening balance as on July 01, 4,141 1,538 Additions during the year 992 3,258Amortization charge 36 (1,823) (655)Closing net book value 3,310 4,141

33.33% 33.33%

6 INVESTMENT PROPERTIES

Free hold land (commercial property) 6.1 61,200 52,950Free hold land (industrial property) 6.2 17,500 18,000

78,700 70,9506.1 The movement in this account is as follows:

Opening balance 52,950 53,340

8,250 (390)61,200 52,950


An amount of Rs. 128.771 million (2008: Rs. 24.422 million) has been transferred to operatingfixed assets during the year.

Amortization % per annum

This comprises commercial property that is free hold land held for capital appreciation. Thecarrying value of investment property is the fair value of the property as at June 30, 2009 asdetermined by approved independent valuer M/s. Dimen Associates (Pvt.) Limited. Fair valuewas determined having regard to recent market transactions for similar properties in the samelocation and condition.

Fair value gain/(loss) on revaluationshown in "Profit and loss account"

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2009 2008Note

6.2 The movement in this account is as follows:

Opening balance 18,000 28,800 Deletion / transfer during the year - (10,800)

(500) - 17,500 18,000

7 LONG TERM INVESTMENTS

Available for sale

Chemi Chloride Industries Limited8,740,000 (2008: 6,440,000) fully paidordinary shares of Rs.10/- each 87,400 64,400

Percentage of investment in equity held 95%(2008: 93.33%)

Chemi Visco Fiber Limited5,625,000 (2008: 5,625,000) fully paidordinary shares of Rs.10/- each 56,250 56,250

7.1 (56,250) (56,250) - -

Percentage of investment in equity held 7.91%(2008: 7.91%)(Chief Executive: Mr. Usman Ghani Khatri)

Investment in subsidiary company- unquoted

Relevant information:

(Chief Executive: Mr. Abdul Sattar Khatri)

Investment in related parties - unquoted

Less: Provision for diminution in valueof investment

Fair value (loss) on revaluation shown in" Profit and loss account"


This relates to land that has been rented out to Chemi Chloride Industries Limited, subsidiarycompany and shown under the head "Investment properties". The carrying value of investmentproperty is the fair value of the property as at June 30, 2009 as determined by approvedindependent valuer M/s. Dimen Associates (Pvt.) Limited. Fair value was determined havingregard to recent market transactions for similar properties in the same location and condition.

Relevant information:

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2009 2008Note

National Bank of Pakistan Limited5,750 (2008: 4,792) ordinary shares including4,967 (2008: 4,009) bonus shares of Rs. 10/- each 8 8 Add: Fair value gain 378 699

386 707 87,786 65,107

7.1

8 DEFERRED COST

Balance as at July 01, - 901 Less: Amortization for the year - 901

- - 9 LONG TERM DEPOSITS

Long term deposit 11,321 11,475

10 STORES, SPARES AND LOOSE TOOLS

Stores 137,213 118,660 Spares:

in hand 194,032 207,862 in transit 27,484 10,848

221,516 218,710 Loose tools 305 319

359,034 337,689 Less: Provision for obsolete stores and spares 10.2 17,244 22,432

341,790 315,257

10.1

10.2 Movement of provision for store and spares is as follows:

Opening balance 22,432 22,432 Adjustment on account of:

Write off during the year 5,188 -

17,244 22,432

This provision was made in earlier years as a matter of prudence since the project of the investeecompany is not operating and there is some uncertainty regarding future earnings and relatedcash flows.

(Rupees in thousand)Investment in others - quoted

Stores and spares also include items which may result in capital expenditure but are notdistinguishable at the time of purchase.

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2009 2008Note

11 STOCK IN TRADE

Raw materials:in hand 42,501 91,154 in transit 2,330 1,320

44,831 92,474 Packing materials 2,930 1,630 Work in process 34 4,384 3,694 Finished goods 34 53,587 46,537

105,732 144,335 12 TRADE DEBTS

SecuredConsidered good 269,095 110,540

UnsecuredConsidered good 12.1 303,906 186,897 Considered doubtful 22,093 24,366

325,999 211,263 595,094 321,803

Less: Provision for doubtful debts 12.2 22,093 24,366 573,001 297,437

12.1

7,153 453 Chemi Visco Fiber Limited - 438

30 469 7,183 1,360

12.2 Movement of provision for doubtful debts is as follows:


Doubtful debts written off (4,475) (110) Recovery of doubtful debts (753) - Provision for doubtful debts for the year 2,955 1,261 Net adjustment (2,273) 1,151

Closing balance 22,093 24,366

These include balances due from related parties and associated companies aggregating toRs. 7.183 million (2008: Rs. 1.36 million) comprising of the following:


Chemi Chloride industries Limited

Chemi Dyestuff Industries (Private) Limited

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2009 2008Note

13 LOANS AND ADVANCES

Advances - (unsecured - considered good)Against purchase of land 1,639 1,639 To employees 7,152 3,160 For supplies and services 38,078 11,032 Against import 1,012 261 To subsidiary company 13.1 13,270 18,790 Others - 454

61,151 35,336 Considered doubtful

For supplies and services 51 51 To employees 104 104

155 155 61,306 35,491

Less: Provision for doubtful advances 155 155 61,151 35,336

13.1

14 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS

Trade depositsConsidered good 11,279 20,931 Considered doubtful 193 504

11,472 21,435 Less: Provision for doubtful deposits 193 504

11,279 20,931 Prepayments 2,841 1,507

14,120 22,438 15 OTHER RECEIVABLES

(Considered good)Insurance claims receivable 12 21 Others 1,392 815

1,404 836


This represents advance to Chemi Chloride Industries Limited, a subsidiary company. The entirebalance of advance including mark up thereon shall be repaid in full within 60 days from theclosing of the financial year of the Company. The advance carries mark up at the weightedaverage borrowing cost of the Company prevailing on the first day of the quarter of financialyear to which the advance relates. Subsequent to the balance sheet date, this amount was repaidin full by the subsidiary company.

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2009 2008Note

16 TAX REFUNDS DUE FROM GOVERNMENT

(Considered good)Income tax 16.1 45,723 439

16.1

17 TAXATION - NET

Advance income tax - 7 9,933Less: Provision for taxation - 1 8,487

- 6 1,44618 CASH AND BANK BALANCES

Cash in hand 2,080 629 23,957 40,230 26,037 40,859

19 SHARE CAPITAL

19.1 Authorized share capital

2009 2008

50,000,000 50,000,000 Ordinary shares of Rs. 10 each. 500,000 500,00025,000,000 25,000,000 Preference shares of Rs. 10 each. 250,000 250,00075,000,000 75,000,000 750,000 750,000

19.2

100,000 100,000 Fully paid in cash 1,000 1,000 24,900,000 24,900,000 Issued for consideration other than cash 249,000 249,000 11,000,000 11,000,000 Fully paid bonus shares 110,000 110,000 36,000,000 36,000,000 360,000 360,000

3,664,800 3,664,800 Shares held by associated companies 10.18% 10.18%


During the year, based on recommendations of Alternative Dispute Resolution Committee(ADRC), the matter in relation to demand for assessment year 1996-97 with respect todisallowance of expenses incurred on account of Golden Hand Shake (GHS) and of VoluntarySeparation Scheme (VSS) for reason of non deduction of tax on these payments was decided infavour of the Company and amounts determined as refundable have been accordingly recorded.

Cash at banks - current accounts

Issued, subscribed and paid up capital

Number shares

Number of ordinary sharesof Rs. 10/- each

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2009 2008Note

20 RESERVES

Fair value reserve 378 699 Unappropriated profit 530,127 414,951

530,505 415,650 21 SURPLUS ON REVALUATION OF FIXED ASSETS

Balance as at July 01, 643,372 643,372Surplus recorded during the year 21.1 105,687 -

749,059 643,372

21.1

22 LONG TERM FINANCING

SecuredBanking companies

KASB Bank Limited-Syndicated- I 22.1 6,250 18,750 The Bank of Punjab-Syndicated- I 22.2 6,250 18,750

12,500 37,500 Other Financial Institutions

Pak Libya Holding Company (Private)Limited-Syndicated- I 22.3 6,250 18,750 Pakistan Kuwait Investment Company(Private) Limited- Syndicated- II 22.4 31,250 43,750

37,500 62,500 50,000 100,000

Less: Current portion shown under current liabilities 30 31,250 50,000 18,750 50,000

22.1

22.2


This amount represents surplus arising on the revaluation of freehold land carried out onJune 30, 2009 by an independent valuer M/s. Dimen Associates (Private) Limited on the basisof market value.

These finances are secured against first pari passu charge on all present and future fixed assetsof the Company and carry mark up at six months average KIBOR Ask rate plus 1.80% (with

floor of 3% and cap of 9%) per annum. These loans were disbursed in November 2004 and arerepayable in sixteen equal quarterly installments commencing from January 2006.

These finances are secured against first pari passu charge on all present and future fixed assetsof the Company and carry mark up at six months average KIBOR Ask rate plus 1.80% (withfloor of 3% and cap of 9%) per annum. These loans were disbursed in November 2004 and arerepayable in sixteen equal quarterly installments commencing from January 2006.

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22.3

22.4

2009 2008Note

23 LONG TERM DIMINISHING MUSHARAKA

SecuredBanking Companies

Standard Chartered Bank (Pakistan) Limited 75,000 75,000 Askari Bank Limited 150,000 150,000 Dawood Islamic Bank Limited 50,000 50,000 United Bank Limited - Islamic Banking 250,000 250,000 Atlas Bank Limited 50,000 50,000

575,000 575,000 Financial Institutions

Pak Libya Holding Company (Private) Limited 150,000 150,000 UBL Fund Managers 25,000 25,000

175,000 175,000 750,000 750,000

Less: Current portion shown under current liabilities 30 166,667 - 583,333 750,000

23.1

24 LONG TERM MURABAHA


Faysal Bank Limited 24.1 350,000 350,000 Less: Current portion shown under current liabilities 30 77,778 -

272,222 350,000


The above finances are secured against first pari passu charge on fixed assets of the Companyand carry mark up at six months average KIBOR rate plus 200bps. These finances weredisbursed from August 22, 2007 to September 01, 2007 and are repayable in nine semi annualequal installments commencing from August 22, 2009 being the 24th month from the facilitydate.

This finance is secured against first pari passu charge on all present and future fixed assets of the Company and carries mark up at six months average KIBOR Ask rate plus 1.80 % (withfloor of 3% and cap of 9%) per annum. This loan was disbursed in November 2004 and isrepayable in sixteen equal quarterly installments commencing from January 2006.

This finance is secured against first pari passu charge on fixed assets of the Company andcarries mark up at six months average KIBOR Ask rate plus 2.25% per annum. This loan wasdisbursed in September 2006 and is repayable in eight semi annual equal installmentscommencing from September 2007.

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24.1

2009 2008Note

25 LIABILITIES AGAINST ASSETSSUBJECT TO FINANCE LEASE

SecuredPresent value of minimum lease payments 25.1 498 913Less: Current portion shown under current liabilities 30 498 422

- 491

25.1

Upto oneyear

One tofive years

Total2009

Total2008

522 - 522 1,010Less: Finance charges not yet due (24) - (24) (97)

498 - 498 913

(498) - (498) (422)- - - 491

26 DEFERRED LIABILITIES

Provision for recoating of DSA anodes 26.1 21,993 19,086 Deferred taxation 26.2 330,020 271,379 Provision for gratuity 26.3 5,515 4,060

357,528 294,525

The amount of future payments of the lease and the period in which these payments will becomedue are as follows:

Less: Current portion shownunder current liabilities

Minimum lease paymentsoutstanding


This finance is secured against first pari passu charge on fixed assets of the Company andcarries mark up at six months average KIBOR Ask rate plus 200bps. This loan was disbursed inAugust 31, 2007 and is repayable in nine semi annual equal installments commencing fromAugust 22, 2009.

Present value of minimumlease payments

The minimum lease payments have been discounted at an implicit interest rate of 12.57% toarrive at their present value. Rentals are paid in monthly installments.


Taxes, duties, registration costs, charges, levy / penalties, if any, applicable and insurance costsare to be borne by the Company.

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2009 2008

26.1

Balance brought forward 31,646 33,085Payments made against recoating of anodes (8,663) (8,897)Provision made / (reversed) during the year for recoating 14,571 7,458

37,554 31,646Less: Current portion included in accrued liabilities (15,561) (12,560)

21,993 19,08626.2 Deferred taxation

Deferred tax liability comprises as follows:Taxable temporary differences

Tax depreciation allowances 332,984 325,896

Deductible temporary differencesProvision for gratuity (1,930) (1,421) Provision for doubtful debts (1,034) (441) Unused tax losses - (52,655)

330,020 271,379 26.3 DEFINED BENEFIT PLAN

a. General description

b. Significant actuarial assumptions

Following are significant actuarial assumptions used in the valuation:

Discount rate 12% per annumExpected rate of increase in salary 11% per annum

Annual charge is based on actuarial valuation carried out as at June 30, 2008 using the ProjectedUnit Credit method.

Provision for Dimensionally Stable Anodes (DSAs)


The scheme provides for terminal benefits for all its permanent employees who qualify for thescheme. The defined benefit payable to each employee at the end of his service comprises of total number of years of his service multiplied by last drawn basic salary including cost of livingallowance.

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2009 2008Note

c. Reconciliation of payable to defined benefit plan

Present value of obligation 5,515 4,060 Liability recognized in balance sheet 5,515 4,060

d. Movement of liability recognized in the balance sheet

Present value of obligation at the start of the year 4,060 2,460 Current service cost 1,468 1,345 Interest cost 494 255 Contribution paid to outgoing employees (507) - Closing net liability 5,515 4,060

e. Charge for the year

Current service cost 1,468 1,345 Interest cost 494 255 Charge for the year 1,962 1,600

27 TRADE AND OTHER PAYABLES

Trade creditors 50,910 32,509 Accrued liabilities 27.1 323,208 136,662 Advances from customers 27,167 30,761 Retention money 647 632 Sales tax payable 18,771 3,392 Excise duty payable 2,652 4,583 Income tax deducted at source 527 1,900 Other liabilities 787 581 Workers' Profit Participation Fund 27.2 15,154 7,625 Workers ' welfare fund 5,488 2,646

445,311 221,291

27.1 These include a balance due to Chemi Multifabrics Limited, an associated company, amountingto Rs. 4.002 million (2008: Rs. 4.711 million).


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29.2

29.3

29.4

29.5

2009 2008Note

30 CURRENT PORTION OF LONGTERM LIABILITIES

Long term financing 22 31,250 50,000 Long term diminishing musharaka 23 166,667 - Long term murabaha 24 77,778 - Liabilities against assets subject to finance lease 25 498 422

276,193 50,422 31 PROVISION FOR TAXATION - NET

Provision for taxation 35,451 - Less: Advance income tax 25,195 -

10,256 - 32 CONTINGENCIES AND COMMITMENTS

32.1 Contingent liabilities

a)

This facility is secured against first pari passu charge over present and future current assets of the Company and carries mark-up at six months average KIBOR Ask rate plus 3% per annum(2008: Six months average KIBOR Ask rate plus 2.25% per annum). The limit of finance isRs. 40 million (2008: Rs. 40 million).

This facility is secured against first pari passu charge over all present and future current assetsof the Company and carries mark-up at three months average KIBOR Ask rate plus 3% perannum(2008: three months average KIBOR Ask rate plus 2% per annum). The limit of financeis Rs. 50 million (2008: Rs. 135 million).

The Company is facing claims, launched in the labour courts, pertaining to staff retirementbenefits. In the event of an adverse decision the Company would be required to pay an amountof Rs. 2.947 (2008: Rs. 4.680 million) against these claims.

This facility is secured against first pari passu charge over all present and future current assetsof the Company and carries mark-up at three months average KIBOR Ask rate plus 1.9% perannum (2008: Three months average KIBOR Ask rate plus 1.5% per annum). The limit of finance is Rs. 200 million (2008: Rs. 200 million).

This facility is secured against first pari passu charge upto the limit of Rs. 150 million on allpresent and future current assets of the Company and carries mark-up at three months averageKIBOR Ask rate plus 2.5% per annum with floor of 10% per annum (2008: Six monthsaverage KIBOR Ask rate plus 2.5% per annum with floor of 12%). The limit of finance isRs. 150 million (2008: Rs. 150 million).


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b)

32.2 Commitments

Commitments as on June 30, 2009 were as follows:

2009 2008Note

33 SALES

SalesManufacturing 33.1 4,195,962 3,154,370 Trading 558 2,686

4,196,520 3,157,056 Less: Sales tax 522,897 400,793

Commission to selling agents 72,587 44,315 Special excise duty 32,684 26,772

628,168 471,880 3,568,352 2,685,176

33.1

34 COST OF SALES

Raw materials consumedOpening stock 91,154 35,087 Purchases 360,611 417,934

451,765 453,021 Closing stock (42,501) (91,154)

409,264 361,867 Stores, spares and consumables 274,434 198,076 Packing materials consumed 10,760 9,863 Salaries, wages and other benefits 34.1 148,037 112,645 Fuel and power 1,678,677 1,220,966 Repair and maintenance 21,064 18,909

Against letters of credit amounting to Rs. 128.073 million (2008: Rs. 73.086 million).

Letters of guarantee outstanding as at June 30, 2009 were Rs. 198.240 million (2008:Rs. 207.997 million) and corporate guarantees on behalf of Chemi Chloride Industries Limited,subsidiary company amounted to Rs. 203 million (2008: Rs. 118 million).

Against purchase of land amounting to Rs. 1.838 million (2008: Rs. 1.838 million).


This amount includes export sales amounting to Rs. 110.629 million (2008: Rs. 29.094 million).

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2009 2008Note

Insurance 8,570 7,936 Depreciation 3.2 183,209 178,746 Vehicle running expenses 12,048 8,784 Postage, printing and stationery 1,239 2,345 Other expenses 2,650 2,603

2,340,688 1,760,873 Work in process

Opening 3,694 3,201 Closing 11 (4,384) (3,694)

(690) (493) Cost of goods manufactured 2,749,262 2,122,247 Cost of stores traded 5,745 2,289 Finished goods

Opening 46,537 59,312 Closing 11 (53,587) (46,537)

(7,050) 12,775 2,747,957 2,137,311

34.1

35 SELLING AND DISTRIBUTION EXPENSES

Salaries and other benefits 35.1 17,975 13,354 Traveling and conveyance 2,179 1,653 Vehicle running expenses 1,854 1,760 Advertisement 558 1,570 Telephone, telex and postage 1,080 1,177 Marketing service charges 35,887 26,994 Freight 135,425 88,294 Rent, rates and taxes 5,295 2,350 Printing and stationery 581 266 Fuel and power 1,377 747 Repair and maintenance 1,170 408 Depreciation 3.2 832 640

204,213 139,213

35.1

This amount includes Rs. 1.037 million (2008: Rs. 0.945 million) in respect of employees'retirement benefits.



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2009 2008Note

36 GENERAL AND ADMINISTRATIVE EXPENSES

Salaries and other benefits 36.1 56,579 39,424 Traveling and conveyance 11,592 9,621 Vehicle running expenses 3,166 2,215 Telephone, telex and postage 1,654 1,496 Rent, rates and taxes 2,156 1,974 Printing and stationery 884 628 Fee and subscription 5,097 3,016 Legal and professional charges 1,869 1,347 Fuel and power 1,337 804 Provision for doubtful debts for the year 2,955 1,261 Repair and maintenance 2,593 1,359 Depreciation 3.2 4,053 2,515 Amortization of intangible assets 5.1 1,823 655 Amortization of deferred cost - 901 Bad debts written off 646 2,051 Donations 36.2 3,888 2,994

100,292 72,261

36.1

36.2 Donations

36.2.1 Interest of the Directors or their spouses in the donations made during the year is as follows:

36.2.2

Donation amounting to Rs. 1.306 million paid to Kiran Ibtadai School. Ms. Sabina Khatri w/oMr. Muhammad Siddique Khatri, Chairman and Chief Executive of the Company is the patronof the school.

Donations other than mentioned above were not made to any donee in which any director of theCompany or his spouse had any interest at any time during the year.



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2009 2008

40 TAXATION

Current 35,839 14,309 Prior year charge 13,001 1,893 Deferred 58,641 47,429

107,481 63,631 40.1 Relationship between tax expense and accounting profit:

Profit before taxation 276,657 -Tax at the applicable rate of 35% 96,830 -Tax effect of inadmissible expenses / losses 614 -Income taxed at different rates (4,164) -Prior year adjustment 13,001Others 1,200 -

107,481 -

40.2

41 ACCOUNTING ESTIMATES AND JUDGMENTS

Income taxes

Defined benefit plan

Certain actuarial assumptions have been adopted by external professional valuer (as disclosed innote 26.3) for valuation of present value of defined benefit obligations and fair value of planassets. Any changes in these assumptions in future years might affect unrecognized gains andlosses in those years.

As the tax charge of previous period represents minimum tax under the Income Tax Ordinance,2001, numerical reconciliation between the average effective tax rate and the applicable tax ratewas not prepared and presented.


The Company takes into account relevant provisions of the current income tax laws whileproviding for current and deferred taxes as explained in note 2.12 to these financial statements.

The Company's main accounting policies affecting its result of operations and financialconditions are set out in note 2. Judgments and assumptions have been required by themanagement in applying the Company's accounting policies in many areas. Actual results maydiffer from estimates calculated using these judgments and assumptions. Key sources of estimation, uncertainty and critical accounting judgments are as follows:

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Contribution to staff retirement

2009 2008

Relation with the Company Nature of transaction

Subsidiary company Loans and advances made 21,198 24,452 Subsidiary company Investment made 23,000 - Subsidiary company Mark up on loans and advances 1,614 1,904 Staff retirement fund

168 136 Directors and employees

48,205 33,028

45 FINANCIAL INSTRUMENTS

Financial risk management

- Credit risk - Liquidity risk - Market risk

45.1 Credit risk

Trade debts 573,001 297,437Loans and advances 61,151 35,336Trade deposits 11,279 20,931Other receivables 1,404 836Bank balances 26,037 40,230

benefit plansRemuneration to directors and keymanagement personnel

Credit risk represents the accounting loss that would be recognized at the reporting date if thecounter party fail completely to perform as contracted and arise principally from trade debts,loans and advances, trade deposits and other receivables. The carrying amount of financialassets represents the maximum credit exposure before any credit enhancements. The maximumexposure to credit risk at the reporting date is as follows:

The Company has exposure to the following risks from its use of financial instruments:

The Board of Directors has overall responsibility for the establishment and oversight of Company's risk management framework. The Board is also responsible for developing andmonitoring the Company's risk management policies.


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2009 2008

Export 30,552 -Domestic 542,449 297,437

573,001 297,437

Distributors 259,379 115,843End-user customers 313,622 181,594

573,001 297,437

The aging of trade receivables at the reporting date is as follows:

347,144 188,883136,970 64,405

68,785 39,82020,102 4,329

573,001 297,437

Past due 30-150 days

The maximum exposure to credit risk for trade debts at the balance sheet date by type of customer is as follows:

To manage exposure to credit risk in respect of trade receivables, management performs creditreviews taking into account the customer's financial position, past experience and other factors.Credit terms are approved by the approval committee. Where considered necessary, advancepayments are obtained from certain parties. The management has set a maximum credit periodof 30 days to reduce the credit risk.

Concentration of credit risk arises when a number of counter parties are engaged in similarbusiness activities or have similar economic features that would cause their abilities to meetcontractual obligation to be similarly effected by the changes in economic, political or otherconditions. The Company believes that it is not exposed to major concentration of credit risk.

The maximum exposure to credit risk for trade debts at the balance sheet date by geographicregion is as follows:

Not past duePast due 1-30 days

Past due more than 150 days

The Company's most significant customers, are distributors with balance amounting toRs. 155.631 million (2008: Rs. 58.626 million) of the total carrying amount as at June 30, 2009.


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45.2

Carrying Contractual Sixmonths Six totwelve One totwo Two tofiveamount cash flow or less months years years

2009

50,000 58,217 28,161 8,273 15,028 6,755

750,000 1,043,071 141,945 135,433 476,605 289,088

350,000 486,764 66,241 63,202 117,287 240,034

498 522 258 264 - -

445,311 445,311 445,311 - - -72,387 72,387 72,387 - - -

130,143 142,884 142,884 - - -1,798,339 2,249,156 897,187 207,172 608,920 535,877

On the prudence basis an amount of Rs. 2.955 million (2008: Rs. 1.261 million) has beencharged, as provision for doubtful debts, to profit and loss account.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations asthey fall due. The Company's approach to managing liquidity is to ensure as far as possible toalways have sufficient liquidity to meet its liabilities when due, under both normal and stressedconditions, without incurring unacceptable losses or risking damage to the Company'sreputation.

Trade and otherpayablesMarkup accrued

Financialliabilities

Long termmorabaha

Long termfinancing

-----------------------( Rupees in thousand )-----------------------

Long termdiminishingmusharaka

Liabilitiesagainst assetssubject to

Short termborrowing

Based on the past experience, consideration of financial position, past track records andrecoveries, the Company believes that no impairment allowance is necessary in respect of tradedebtors past due as some receivables have been recovered subsequent to the year end and forother receivables there are reasonable grounds to believe that the amounts will be recovered inshort course of time.

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Carrying ContractualSix

monthsSix totwelve

One totwo

Two tofive

amount cash flow or less months years years

2008

100,000 117,765 30,038 29,510 36,434 21,783

750,000 1,146,453 46,088 58,613 528,708 513,044

350,000 535,623 21,508 27,353 129,443 357,319

913 1,010 258 258 494 -

221,291 221,291 221,291 - - -60,191 60,191 60,191 - - -

294,969 311,096 311,096 - - -1,777,364 2,393,429 690,470 115,734 695,079 892,146

45.3

45.3.1

Liabilitiesagainst assetssubject to

Market risk

Markup accrued

Long termdiminishingmusharaka

The Company is exposed to currency risk on trade debts, import of raw materials and stores andspares and export sales that are denominated in a currency other than the respective functionalcurrency of the Company, primarily in U.S. dollar. The Company's exposure to foreign currencyrisk is as follows:

Currency risk

Long termmorabaha

Long termfinancing


Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market interest rates or the market price due to a change in credit rating of the issueror the instrument, change in market sentiments, speculative activities, supply and demand of securities, and liquidity in the market. The Company is exposed to currency risk and interest raterisk only.

Short termborrowing

Trade and otherpayables

Financialliabilities

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2009 2008

Trade debts 30,552 -Gross balance sheet exposure 30,552 -Outstanding letters of credit (128,073) (73,086)Net exposure (97,521) (73,086)

The following significant exchange rates were applied during the year:

2009 2008 2009 2008

USD to PKR 80.00 65.00 81.30 68.20

Sensitivity analysis

Effect on profit or loss2009 2008

Loss (3,055) -

45.3.2

45.4 Fair value of financial instruments

Average rate Reporting date rate

At reporting date, if the PKR had strengthened by 10% against the US dollar with all othervariables held constant, post tax profit for the year would have been lower by the amount shownbelow.

The carrying value of all the financial assets and financial liabilities approximate their fairvalues. Fair value is the amount for which an asset could be exchanged, or a liability settled,between knowledgeable, willing parties in an arm's length transaction.

Interest rate risk is the risk that fair value of future cash flows of financial instrument willfluctuate because of changes in market interest rates. The Company is not materially exposed tointerest rate risk.

Interest rate risk

The weakening of the PKR against US dollar would have had an equal but opposite impact onthe post tax profits / loss.



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46 REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

2009 2008 2009 2008 2009 2008

Managerial remuneration 2,400 1,500 4,000 2,067 25,737 18,452 House rent allowance 1,080 675 1,800 930 1 1,581 8,303 Medical expenses 120 75 200 103 1,287 923

3,600 2,250 6,000 3,100 38,605 27,678 Number of persons 1 1 2 2 44 37

46.1

47 CAPACITY AND PRODUCTION

2009 2008 2009 2008

Caustic soda 143,550 143,550 95,448 93,313 Liquid Chlorine 13,200 13,200 7,758 8,886 Hydrochloric acid 150,000 123,750 133,680 100,361 Sodium hypochlorite 49,500 49,500 31,035 37,979 Bleaching earth 3,300 3,300 2,253 2,532 Zinc sulphate 600 600 29 - Chlorinated parafin wax 3,000 3,000 261 196 Silphuric acid 3,300 3,300 60 599

48 CAPITAL MANAGEMENT

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor andmarket confidence and to sustain future development of the business. The Board of Directorsmonitor the return on capital, which the Company defines as net profit after taxation dividedby total shareholders' equity. The Board of Directors also monitor the level of dividend toordinary shareholders. There were no changes to the Company's approach to capitalmanagement during the year and the Company is not subject to externally imposed capitalrequirements.

Cautious production

strategy based on

Installed capacity Actual production

actual demands.

Reason forTons

The aggregate amount charged in the financial statements for the year for remuneration,including all benefits, to the Chief Executive, Directors and Executives of the Company are asfollows:

Tons

The Company also provides the Chief Executive and some of the Directors and Executiveswith free use of cars and mobile phones.

Chief Executive Directors Executives

------------------------ (Rupees in thousand) ------------------------

shortfall

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49

50 GENERAL

DATE OF AUTHORIZATION OF ISSUE

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

Previous year's figures have been re-arranged and re-classified wherever necessary for thepurpose of comparison, the effect of which is not material.

These financial statements were authorized for issue on September 25, 2009 by the Boardof Directors of the Company.



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Directors’ Report

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

CONTENTS OF CONSOLIDATED

FINANCIAL STATEMENTS

61

62

63

64

65

66

67

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DIRECTORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

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AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed consolidated financial statements of ITTEHAD CHEMICALSLIMITED (the holding company) and its subsidiary company (together “the Group”) comprisingthe consolidated balance sheet as at June 30, 2009 and the related consolidated profit and lossaccount, consolidated cash flow statement and consolidated statement of changes in equitytogether with the notes forming part thereof, for the year then ended. These financial statements are the responsibility of the holding company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. Thesestandards require that we plan and perform the audit to obtain reasonable assurance about whetherthe said statements are free of any material misstatement. An audit includes, examining, on a testbasis, evidence supporting the amounts and disclosures in the above said statements. An audit alsoincludes assessing the accounting policies and significant estimates made by management, as wellas, evaluating the overall presentation of the above said statements. We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly the consolidated financialposition of the Group as at June 30, 2009 and the consolidated results of its operations, itsconsolidated cash flows and consolidated changes in equity for the year then ended in accordancewith approved accounting standards as applicable in Pakistan.

BDO Ebrahim & Co.

Chartered Accountants2nd Floor, Block-C, Lakson Square Building No. 1,Sarwar Shaheed Road, Karachi-74200, Pakistan.Telephone: 5683030, 5683189, 5683498, 5683703Telefax : 5684239Email : [email protected] : http://www.bdoebrahim.com

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CONSOLIDATED BALANCE SHEETAS AT JUNE 30, 2009

ASSETSNON CURRENT ASSETS

Property, plant and equipmentOperating fixed assets 3 2,598,293 2,523,899

Capital work in progress 4 32,919 104,377

2,631,212 2,628,276

Intangible assets 5 3,310 4,141 Goodwill 6 6,445 6,445

Investment properties 7 61,200 52,950

Long term investments 8 386 707

Deferred cost 9 - -

Long term deposits 10 12,186 12,339

2,714,739 2,704,858

CURRENT ASSETSStores, spares and loose tools 11 344,471 317,191

Stock in trade 12 128,307 159,683

Trade debts 13 601,687 299,766

Loans and advances 14 50,511 18,477

Trade deposits and short term prepayments 15 14,409 27,635

Other receivables 16 12 21 Tax refunds due from Government 17 45,723 439 Taxation - net 18 - 62,897Cash and bank balances 19 26,494 42,070

1,211,614 928,179 TOTAL ASSETS 3,926,353 3,633,037 EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVESAuthorized share capital

75,000,000 (2008: 75,000,000) shares of Rs. 10/- each 20.1 750,000 750,000 Issued, subscribed and paid up capital 20.2 360,000 360,000 Reserves 21 478,408 379,123

838,408 739,123

Advance against future issue of shares - 1,811Minority interest 4,261 3,124 842,669 744,058

SURPLUS ON REVALUATION OF FIXED ASSETS 22 748,559 643,372

NON CURRENT LIABILITIESLong term financing 23 128,058 173,117 Long term diminishing musharaka 24 583,333 750,000 Long term murabaha 25 272,222 350,000 Liabilities against assets subject to finance lease 26 - 491 Deferred liabilities 27 357,528 294,525

1,341,141 1,568,133

CURRENT LIABILITIESTrade and other payables 28 448,247 237,717

Mark up accrued 29 74,560 63,663 Short term borrowings 30 152,327 294,969 Current portion of long term liabilities 31 309,263 81,125 Provision for taxation - net 32 9,587 -

993,984 677,474 CONTINGENCIES AND COMMITMENTS 33 - -

TOTAL EQUITY AND LIABILITIES 3,926,353 3,633,037


2009 2008Note (Rupees in thousand)



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CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED JUNE 30, 2009

2009 2008Note

Sales 34 3,633,404 2,698,036

Cost of sales 35 (2,792,628) (2,163,233) Gross profit 840,776 534,803 Selling and distribution expenses 36 (218,750) (142,121) General and administrative expenses 37 (101,284) (74,336) Other operating expenses 38 (20,713) (10,321) Other operating income 39 5,069 2,220

(335,678) (224,558) Operating profit 505,098 310,245 Financial charges 40 (250,907) (218,056)

Fair value gain / (loss) on investment property 7 8,250 (390) Profit before taxation 262,441 91,799 Taxation 41 (107,698) (63,733) Profit after taxation 154,743 28,066

Attributable to:Profits attributable to equity holders of holding company 153,606 29,081 Minority interest - Share of profit / (loss) 1,137 (1,015)

154,743 28,066 Earnings per share - basic and diluted (Rupees) 43 4.27 0.81

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





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CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2009

Cash flows from operating activitiesProfit before tax 262,441 91,799 Adjustments for items not involving movement of funds:

Depreciation 206,274 192,494 Amortization of intangible assets 1,823 655 Provision for gratuity 1,962 1,600 (Gain) / loss on sale of operating fixed assets (394) 53 (Gain) / loss on revaluation of investment property (8,250) 390 (Gain) / loss on foreign exchange (385) 1,510 Amortization of deferred cost - 964 Provision for doubtful debts 2,955 1,261 Bad debts written off 646 - Financial charges 250,907 218,056 Net cash flow before working capital changes 717,979 508,782

Decrease / (increase) in current assets

Stores, spares and loose tools (27,280) (25,709) Stock in trade 31,376 (46,800) Trade debts (305,269) 145,665

Loans and advances (32,034) 13,058 Trade deposits and short term prepayments 13,226 (13,319)

Other receivables 9 287 (319,972) 73,182

(Decrease) / increase in current liabilitiesTrade and other payables 224,995 27,861

Cash generated from operations 623,002 609,825 Taxes paid (21,857) (17,213) Gratuity paid (507) -

Financial charges paid (240,010) (208,503) Net cash inflow from operating activities 360,628 384,109

Cash flows from investing activitiesAdditions to operating fixed assets (60,263) (114,706)

Additions to intangible assets (992) (3,258)

Transfer from investment properties - 11,190

Acquisition of subsidiary - 1,150

Additions to capital work in progress (57,313) (81,595)

Proceeds from sale of fixed assets 710 228

Long term deposits 153 2,731

Net cash (outflow) from investing activities (117,705) (184,260)

Cash flows from financing activities

Repayment of redeemable capital - ( 83,266)Proceeds from long term financing 6,000 35,160

Repayments of long term financing (67,442) (706,387)

Proceeds from long term musharaka - 750,000Proceeds from long term murabaha - 350,000Repayments of long term murabaha - (311,188)

Liabilities against assets subject to finance lease (415) (373)

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

Short term borrowings (142,642) (166,855)

Net cash (outflow) from financing activities (258,499) (186,909)

Net (decrease) / increase in cash and cash equivalents (15,576) 12,940

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

Cash and cash equivalents at the end of the year 19 26,494 42,070


2009 2008Note (Rupees in thousand)



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DATED STATEMENT OF CHANGES IN EQUITYYEAR ENDED JUNE 30, 2009

Issued, subscribedand paid-up capital

Capital reserve -fair value reserve

Unappropriatedprofits

TotalMinority - share

capitalMinority - share of

profit / (loss)Total

y 01, 2007 360,000 1,134 403,343 764,477 - - -

- - (54,000) (54,000) - - -

year - - 29,081 29,081 4,600 (1,476) 3,124

- (435) - (435) - - -

e 30, 2008 360,000 699 378,424 739,123 4,600 (1,476) 3,124

- - (54,000) (54,000) - - -

year - - 153,606 153,606 - 1,137 1,137

- (321) - (321) - - -

e 30, 2009 360,000 378 478,030 838,408 4,600 (339) 4,261

s from 1 to 53 form an integral part of these financial statements.

( Rupees in thousand )

iddique Khatrixecutive

Ab

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2009

1 LEGAL STATUS AND NATURE OF BUSINESS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of presentation and consolidation

The consolidated financial statements include Ittehad Chemicals Limited and all companies inwhich it directly or indirectly controls, beneficially owns or holds more than 50% of the votingsecurities or otherwise has power to elect and appoint more than 50% of its directors.Subsidiaries are consolidated as from the date of acquisition using the purchase method. Underthis method, the cost of an acquisition is measured at the fair value of assets given, equityinstruments issued and liabilities assumed at the date of the exchange, plus costs directlyattributable to the acquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at their fair values at theacquisition date, irrespective of the extent of any minority interest. The excess of cost of acquisition over the fair value of the group's share of the identifiable net assets is recorded asgoodwill. If the cost of acquisition is less than the fair value of net assets of the subsidiaryacquired, the difference is recognized directly in profit and loss account.

These consolidated financial statements have been prepared from the information available inthe audited financial statements of the holding and subsidiary company for the year endedJune 30, 2009.

The registered office of the Company is situated at 39, Empress Road, Lahore. The Company isengaged in the business of manufacturing and selling caustic soda and other allied chemicals.

During the year the Company acquired further shares as investment in Chemi ChlorideIndustries Limited (CCIL) (the subsidiary) as a result of which the Company's holding hasincreased from 93.33% to 95% of the shares issued, subscribed and paid up capital of thesubsidiary. The subsidiary was incorporated in Pakistan as a public limited company under theCompanies Ordinance, 1984 on July 03, 1999. The principal activity of the subsidiary ismanufacturing and sale of calcium chloride prills.

Ittehad Chemicals Limited (the Company) was incorporated on September 28, 1991 to takeoverthe 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 FederalChemical and Ceramics Corporation (Private) Limited. The Company was privatized on03 July 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 theCompany offered 25% of the issued, subscribed and paid up shares of the Company to thegeneral public.

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2.2 Statement of compliance

Initial Application of a Standard, Amendment or an Interpretation to an ExistingStandard and Forthcoming Requirements

Initial application

Intercompany transactions, balances and unrealized gains on transactions between groupcompanies are eliminated. Details of the subsidiaries are given in note 50.

IFRS 7 - Financial Instruments: Disclosures (effective for annual periods beginningon or after28 April 2008) supersedes IAS 30 – Disclosures in the Financial Statements of Banks andSimilarFinancial Institutions and the disclosure requirements of IAS 32 – Financial Instruments:Disclosure and Presentation. The application of the standard did not have significant impact onthe Company's financial statements other than increase in disclosures.

IAS 29 - Financial Reporting in Hyperinflationary Economies (effective for annual periodsbeginning on or after 28 April 2008). The Company does not have any operations inHyperinflationary Economies and therefore the application of the standard did not affect theCompany's financial statements.

IFRIC 13 - Customer Loyalty Programmes (effective for annual periods beginning on or after01 July 2008) addresses the accounting by entities that operate or otherwise participate incustomer loyalty programmes under which the customer can redeem credits for awards such asfree or discounted goods or services. The application of IFRIC 13 did not affect the Company'sfinancial statements.

IFRIC 14 and IAS 19 - The Limit on Defined Benefit Asset, MinimumFunding Requirements andtheir interaction (effective for annual periods beginning on or after 1 January 2008) clarifieswhen refunds or reductions in future contributions in relation to defined benefit assets should beregarded as available and provides guidance on minimum funding requirements for such asset.

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

Minority interests are that part of the net results of operations and of net assets of thesubsidiaries attributable to interests which are not owned by the holding company.

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•

•

Revised IAS 1 - Presentation of financial statements (effective for annual periods beginningon or after 1 January 2009).

• Amended IAS 27 - Consolidated and Separate Financial Statements (effective for annualperiods beginning on or after 1 July 2009).

The followingstandards, amendments and interpretations of approved accounting standards areonly effective for accounting periods beginningfrom the dates specified below. These standardsare either not relevant to the Company’s operations or are not expected to have significantimpact on the Company’s financial statements other than increased disclosures in certain cases:

Forthcoming

Revised IAS 23 - Borrowing costs (effective for annual periods beginning on or after01 January 2009).

•

•

•

•

•

•

•

•

•

Amendments to IAS 32 - Financial instruments: Presentation and IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009).

Amendments to IAS 39 - Financial Instruments: Recognition and Measurement – Eligiblehedged Items (effective for annual periods beginning on or after 1 July 2009).

Amendment to IFRS 2 -Share-based Payment – Vesting Conditions and Cancellations(effective for annual periods beginning on or after 1 January 2009).

Revised IFRS 3 - Business Combinations (applicable for annual periods beginningon or after1 July 2009).

Amendments to IAS 39 and IFRIC 9 - Embedded derivatives (effective for annual periodsbeginning on or after 1 January 2009).

Amendment to IFRS 2 - Share-based Payment – Group Cash-settled Share-based PaymentTransactions (effective for annual periods beginning on or after 1 January 2010).

Amendment to IFRS 7 - Improving disclosures about Financial Instruments (effective forannual periods beginning on or after 1 January 2009).

IFRS 8 - Operating Segments (effective for annual periods beginning on or after 1 January2009).

IFRS 4 - Insurance Contracts (effective for annual periods beginning on or after 1 January2009).

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2.5 Property plant and equipment

a) Owned assets

b)

c) Capital work in progress

Assets acquired under a finance lease are depreciated over the useful life of the asset onreducing balance method at the rates given in note 3. Depreciation on leased assets is charged tothe 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 asset is disposed off.

Depreciation on assets is charged from the month of addition while no depreciation is chargedfor the month in which assets are disposed off.

Leased assets

Maintenance and normal repairs are charged to income as and when incurred while cost of major replacements and improvements, if any, are capitalized.

These are stated at cost / revalued amount less accumulated depreciation and accumulatedimpairment losses, if any, except capital work-in-progress which is stated at cost. Costcomprises of actual cost including, interest and charges and trial run operational results.

Gains and losses on disposal and retirement of an asset are included in the profit and lossaccount.

Leases of property, plant and equipment where the Company has substantially all the risks andrewards of ownership are classified as finance lease. Assets subject to finance lease are stated atthe lower of present value of minimum lease payments under the lease agreement and the fairvalue of the assets acquired on lease. Outstanding obligations under the lease less financecharges allocated to future periods are shown as liability. Finance costs under lease agreementsare allocated to the periods during the lease term so as to produce a constant periodic rate of financial cost on the remaining balance of principal liability for each period.

Capital work-in-progress represents expenditure on fixed assets in the course of constructionand installation. Transfers are made to relevant fixed assets category as and when assets areavailable for use. Capital work-in-progress is stated at cost.

Depreciation is charged on all fixed assets by applying the reducing balance method at the ratesspecified in note 3. The rates are determined to allocate the cost of an asset less estimatedresidual value, if not insignificant, over its useful life.

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2.6

2.7 Intangible assets

2.8 Investment properties

Any gain or loss arising from a change in fair value is recognized in the income statement.

Goodwill

If an investment property becomes owner-occupied, it is reclassified as property, plant andequipment and its fair value at the date of reclassification becomes its cost for accountingpurposes.

When an item of property, plant and equipment is transferred to investment property followinga change in its use and differences arisingat the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognized in surplus on revaluation of property, plant and equipment if it is a gain. Upon disposal of the item the related surplus onrevaluation of property, plant and equipment is transferred to retained earnings. Any loss arisingin this manner is recognized immediately in the income statement.

Rental income from investment property is accounted for as described in note 2.26.

Investment properties are properties which are held either to earn rental income or for capitalappreciation or for both. Investment properties are initially recognized at cost, being the fairvalue of the consideration given. Subsequent to initial recognition these are stated at fair value.The fair value is determined annually by an independent approved valuer. The fair values arebased on market values being the estimated amount for which a property could be exchangedon the date of valuation between knowledgeable and willingbuyer and seller in an arms lengthtransaction.

Costs that are directly associated with identifiable software products controlled by the Companyand have probable economic benefits beyond one year are recognized as intangible assets.These are stated at cost less accumulated amortization and impairment losses, if any.Amortization is provided on a straight line basis over the asset's estimated useful lives.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group'sshare of the net identifiable assets of the acquired subsidiary at the date of acquisition.Separately recognised goodwill is tested annually for impairment and carried at cost lessaccumulated impairment losses. Impairment losses on goodwill are not reversed.

For a transfer from inventories to investment property that is carried at fair value any difference

between the fair value of the property at that date and its previous carrying amount isrecognized in the income statement.

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2.9 Investments

Investment in associates

2.10 Deferred cost

2.11 Stores, spares and loose tools

These are valued at moving average cost except for items in transit, which are valued at costcomprising invoice value plus other charges paid thereon. Provision is made for slow movingand obsolete items.

In case of investments accounted for under the equity method, the method is applied from thedate when significant influence is established until the date when that significant influenceceases.

Expenses incurred on issue of Term Finance Certificates (TFCs) are amortized over a period of five years from the date of issue of TFCs. No further deferred cost has been included in thesefinancial statements in pursuance of the Securities and Exchange Commission of PakistanCircular number 01 of 2005 dated January 19, 2005.

Available for sale investments

These are initially measured at cost, being the fair value of consideration given. At subsequentreporting dates, these investments are re-measured at fair value. For listed securities, fair valueis determined on the basis of period end bid prices obtained from stock exchange quotations,while for unquoted securities, fair value is determined considering break up value of securities.

All purchases and sales of investments are recognized on the trade date which is the date thatthe Company commits to purchase or sell the investment. Cost of purchase includes transaction

Changes in carrying value are recognized in equity until the investment is sold or determined tobe impaired at which time the cumulative gain or loss previously recognized in equity isincluded in profit and loss account for the year.

Investment in associates where the Company holds 20% or more of the voting power of theinvestee company and where significant influence can be established are accounted for usingthe equity method. Investment in associates other than those described as above are classifiedas “available for sale”.

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2.12 Stock-in-trade

Weighted average cost

Work in process -

-

2.13 Trade debts and other receivables

2.14 Taxation

a) Current

b) Deferred

The charge for current year is higher of the amount computed on taxable income at the currentrates of taxation after taking into account tax credits and rebates, if any, and minimum taxcomputed at the prescribed rate on turnover. The charge for current tax also includesadjustments, where considered necessary, to provision for tax made in previous years arisingfrom assessments framed during the year for such years.

Deferred tax is computed using the balance sheet liability method providing for temporarydifferences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. Deferred tax assets and liabilities aremeasured at the tax rates that are expected to apply to the period when the liability is settledbased on tax rates that have been enacted or substantively enacted at the balance sheet date. Adeferred tax asset is recognized only to the extent that it is probable that future taxable profitwill be available and the credits can be utilized.

Net realizable value represents the estimated selling prices in the ordinary course of businessless expenses incidental to make the sale.

Trade debts and other receivables are carried at original invoice amount being the fair value of amount to be received, less an estimate made for doubtful receivables based on review of outstanding amounts at the year end, if any. Provision is made against those having no activityduring the last three years and is considered doubtful by the management. Balances consideredbad and irrecoverable are written off when identified.

Average cost of manufacture which includesproportionate production overheadsincluding duties and taxes paid thereon, if

Finished goods

Cost of material as above plus proportionateproduction overheads

These are valued at lower of cost and net realizable value. Cost is determined as follows:

Raw and packing materials in transit - Invoice value plus other expenses incurredthereon

Raw and packing materials -

any.

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2.15 Borrowings

2.16 Trade and other payables

2.17 Provisions

2.18 Cash and cash equivalents

2.19

2.20 Impairment

2.21 Financial instruments

Dividend and appropriation to reserve

For the purposes of cash flow statement, cash and cash equivalents consist of cash in hand andbalances with banks net of borrowings not considered as being in the nature of financingactivities.

Dividend distribution to the Company’s shareholders is recognized as a liability in theCompany’s financial statements in the period in which the dividends are approved.

The Company assesses at each balance sheet date whether there is any indication that an assetmay be impaired. If such indication exists, the carrying amounts of such assets are reviewed toassess whether they are recorded in excess of their recoverable amount. Where carrying valueexceeds recoverable amount, assets are written down to the recoverable amount.

Loans and borrowings are recorded at the proceeds received. Financial charges are accountedfor on accrual basis.

Provisions are recognized when the Company has a present, legal or constructive obligation as aresult of past events and it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate of the amount can bemade. Provisions are reviewed at each balance sheet date and adjusted to reflect the currentbest estimates.

Liabilities for trade and other amounts payable are carried at cost which is the fair value of theconsideration to be paid in the future for goods and services received.

All the financial assets and financial liabilities are recognized at the time when the Companybecomes a party to the contractual provisions of the instrument. Any gains or losses on de-recognition of the financial assets and financial liabilities are taken to profit and loss accountcurrently.

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2.22 Offsetting of financial assets and financial liabilities

2.23 Foreign currency transactions and translation

2.24 Staff retirement benefits

2.25 Compensated absences

2.26 Revenue recognition

A recognized provident fund scheme is also in operation, which covers all permanentemployees. The Company and the employees make equal contributions to the fund.

The Company operates an un-funded gratuity scheme for its permanent employees. Provision isbased on actuarial valuation of the scheme carried out as at June 30, 2008 in accordance withIAS-19 "Employee Benefits" and the resulting vested portion of past service cost has beencharged to income in the current year.

A financial asset and a financial liability is offset and the net amount is reported in the balancesheet if the Company has a legally enforceable right to set-off the recognized amounts andintends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Contribution is made to this scheme on the basis of actuarial recommendations. Actuarial gainsand losses at each valuation date are charged to profit and loss account. Gratuity is payable tostaff on completion of prescribed qualifying period of service under the scheme.

Interest income is recognized on accrual basis.

Transactions in foreign currencies are translated into rupees at the rates of exchangeapproximating those prevailing on the date of transactions or at the contract rate. Monetaryassets and liabilities in foreign currencies are translated into rupees at the rates of exchangeapproximating those prevailing at the balance sheet date or at the contract rate. Exchange gainsand losses are included in profit and loss account currently.

Sales are recognized on dispatch of goods to customers.

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

Dividend on equity investments is recognized as income when the right to receive payment isestablished.

Rental income is recognized on accrual basis.

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2.27 Related party transactions

2.28 Borrowing costs

2.29 Recoating expenses of DSA Plant

Transactions with related parties are based on the policy that all transactions between theCompany and the related parties are carried out at arm's length. The prices are determined inaccordance with the methods prescribed in the Companies Ordinance, 1984.

Provision has been made in these financial statements for the erosion of coating on the anodesduring the year based on best estimates available. Anodes once recoated are used for a period of three years.

Interest and commitment charges on long term loans are capitalized for the period up to the dateof commencement of commercial production of the respective plant and machinery acquiredout of the proceeds of such loans. All other interest and charges are treated as expenses duringthe year.

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NG FIXED ASSETS

wing is the statement of operating fixed assets:

ng value basis

d June 30, 2009 net book value (NBV) 688,093 98,909 5,109 1,681,237 8,281 3,558 10,852 26,737 2 ,522,776 1

ns (at cost) / revaluation 105,787 7,636 - 163,265 1,021 249 4,987 11,276 294,221ls / transfers (NBV) - - - (13,237) - - - (316) ( 13,553) ation charge - (10,322) (511) (183,342) (1,302) (364) (3,230) (6,978) (206,049) et book value 793,880 96,223 4,598 1,647,923 8,000 3,443 12,609 30,719 2,597,395

ying value basisd June 30, 2009

793,880 155,801 7,274 2,579,559 38,611 6,195 25,242 68,800 3 ,675,362 1lated depreciation - (59,578) (2,676) (931,636) (30,611) (2,752) (12,633) (38,081) ( 1,077,967)

value 793,880 96,223 4,598 1,647,923 8,000 3,443 12,609 30,719 2,597,395

ng value basisd June 30, 2008

net book value (NBV) 615,058 74,447 2,143 1,624,508 5,511 3,301 5,479 27,931 2 ,358,378 1ns (a t cost) / revaluat ion 73,035 33,052 3,318 230,108 3,988 619 6,932 5,840 356,892 ls / transfers (NBV) - - - - - - - (281) (281)ation charge - ( 8 ,590) (352) (173,379) (1,218) (362) (1,559) (6,753) (192,213) et book value 688,093 98,909 5,109 1,681,237 8,281 3,558 10,852 26,737 2,522,776

ying value basisd June 30, 2008

688,093 148,165 7,274 2,429,531 37,590 5,946 20,255 58,840 3 ,395,694 1lated depreciation/impairment - (49,256) (2,165) (748,294) (29,309) (2,388) (9,403) (32,103) (872,918)

value 688,093 98,909 5,109 1,681,237 8,281 3,558 10,852 26,737 2,522,776on rate % per annum - 5 to 10 10 10 15 10 15 to 30 20 to 25 20

Plant andmachinery

Otherequipments

Furnitureand fixtures

Office andother

equipments

land was revalued by an independent valuer M/s. Dimen Associates (Private) Limited as at June 30, 2009 on the basis of market value. Had there been no revaluation on that date, the value of operatingld have been lower by Rs. 720.278 million (2008: Rs. 614.591 million).

Vehicles TotalAsse

subjecfinance

DescriptionFreehold

landBuildings onfreehold land

Railwaysidings


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Note 2009 (Rupees in thou

epreciation charge for the year has been allocated as follows:

t of sales 35 201,176 ing and distribution expenses 36 831

neral and administrative expenses 37 4,267206,274

ollowing operating fixed assets were disposed off during the year:

Accumulated Net Book Sale Mode of depreciation value proceeds disposal

e

1452 Suzuki Bolan Van 1998 297 265 32 55 Negotiated Malik Muhammad Na

-4495 Diahatsn Car 2002 444 370 74 100 Negotiated Muhammad Saeed

6891 Suzuki Swift Car 1993 236 229 7 80 Negotiated Akmal Shahzad

987 Suzuki Khyber Car 1996 233 30 203 225 Negotiated Mohammad Saleem Q

971 Bed Ford Bus - - - 100 Negotiated Muhammad Sohail

1243 Mazda Bus 106 106 - 150 Negotiated Tanveer Iqbal

1,316 1,000 316 710

1,283 1,002 281 228

iption


- 2009

- 2008

Cost Particulars of buyers

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2009 2008Note

4 CAPITAL WORK IN PROGRESS

This comprises of:Plant and machinery 32,487 103,611 Building 432 766

32,919 104,377

5 INTANGIBLE ASSETS

Software-ERP (SAP Business One) 5.1 3,310 4,141

5.1 Net carrying value basis:Opening balance as on July 01, 4,141 1,538Additions during the year 992 3,258Amortization charge 37 (1,823) (655)Closing net book value 3,310 4,141

33.33% 33.33%

6 GOODWILL

Balance as at July 01, 6,445 - Acquisition of subsidiary - 6,445Balance as at June 30, 6,445 6,445

7 INVESTMENT PROPERTIES

Free hold land (Commercial property) 7.1 61,200 52,950

7.1 Opening balance 52,950 53,340

8,250 (390)61,200 52,950

Fair value gain/(loss) on revaluation shown in

"income

statement"


Amortization % per annum

This comprises commercial property that is free hold land held for capital appreciation. Thecarrying value of investment property is the fair value of the property as at June 30, 2009 asdetermined by approved independent valuer M/s. Dimen Associates (Pvt.) Limited. Fair valuewas determined having regard to recent market transactions for similar properties in the samelocation and condition.

An amount of Rs. 128.771 million (2008: Rs. 24.422 million) has been transferred to operatingfixed assets.

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2009 2008Note

8 LONG TERM INVESTMENTS

Available for saleInvestment in related parties - unquoted

Chemi Visco Fiber Limited5,625,000 (2008: 5,625,000) fully paidordinary shares of Rs.10/- each 56,250 56,250

8.1 ( 56,250) (56,250) - -

Relevant information:Percentage of investment in equity held 7.91%(2008: 7.91%)(Chief Executive: Mr. Usman Ghani Khatri )

Investment in others - quotedNational Bank of Pakistan Limited5,750 (2008: 4,792) ordinary shares including4,967 (2008: 4,009) bonus shares of Rs. 10/- each 8 8 Add: Fair value gain 378 699

386 707 386 707

8.1

9 DEFERRED COST

Balance as at July 01, - 901 Less: Amortization for the year - 901

- - 10 LONG TERM DEPOSITS

Long term deposit 12,186 12,339

11 STORES, SPARES AND LOOSE TOOLS

Stores 139,694 120,594 Spares:

in hand 194,032 207,862 in transit 27,484 10,848

221,516 218,710

Less: Provision for diminution in valueof investment

This provision was made in earlier years as a matter of prudence since the project of theinvestee company is not operating and there is some uncertainty regarding future earnings and

related cash

flows.


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2009 2008Note

Loose tools 505 319 361,715 339,623

Less: Provision for obsolete stores and spares 11.2 17,244 22,432 344,471 317,191

11.1

11.2 Movement of provision for stores and spares is as follows:


Write off during the year 5,188 - 17,244 22,432

12 STOCK IN TRADE

Raw materials:in hand 35 43,946 98,677 in transit 2,330 1,320

46,276 99,997 Packing materials 6,367 7,236 Work in process 35 4,384 3,694 Finished goods 35 71,280 48,756

128,307 159,683 13 TRADE DEBTS

SecuredConsidered good 297,993 112,129

UnsecuredConsidered good 13.1 303,694 187,637 Considered doubtful 22,093 24,366

325,787 212,003 623,780 324,132

Less: Provision for doubtful debts 13.2 22,093 24,366 601,687 299,766

13.1

Chemi Visco Fiber Limite d - 438 30 469 30 907

Stores and spares also include items which may result in capital expenditure but are notdistinguishable at the time of

purchase.


These include balances due from related parties and associated companies aggregating toRs. 0.03 million (2008: Rs. 0.907 million) comprising of the following:

Chemi Dyestuff Industries (Private) Limited

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(Rupees

in thousand)2009 2008

13.2 Movement of provision for doubtful debts is as follows:


Doubtful debts written off (4,475) (110) Recovery of doubtful debts (753) - Provision for doubtful debts for the year 2,955 1,261 Net adjustment (2,273) 1,151

Closing balance 22,093 24,366

14 LOANS AND ADVANCES

Advances - (unsecured - considered good)Against purchase of land 1,639 1,639 To employees 7,280 3,274 For supplies and services 40,580 12,163 Against import 1,012 938 Others - 463

50,511 18,477

Considered doubtfulFor supplies and services 51 51 To employees 104 104

155 155

50,666 18,632 Less: Provision for doubtful advances 155 155 50,511 18,477

15 TRADE DEPOSITS AND SHORT TERM PREPAYMENTS

Trade depositsConsidered good 11,444 25,879 Considered doubtful 193 504

11,637 26,383

Less: Provision for doubtful deposits 193 504 11,444 25,879

Prepayments 2,965 1,756 14,409 27,635

16 OTHER RECEIVABLES

(Considered good)Insurance claims receivable 12 21

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2009 2008Note

21 RESERVES

Fair value reserve 378 699 Unappropriated profit 478,030 378,424

478,408 379,123

22

Balance as at July 01, 643,372 643,372Surplus arising during the year 22.1 105,187 -

748,559 643,372

22.1

23 LONG TERM FINANCING


KASB Bank Limited-Syndicated- I 23.1 6,250 18,750 The Bank of Punjab-Syndicated- I 23.2 6,250 18,750 United Bank Limited-LTF 23.3 42,500 47,500

55,000 85,000

Other Financial InstitutionsPak Libya Holding Company (Private)Limited-Syndicated- I 23.4 6,250 18,750 Pakistan Kuwait Investment Company(Private) Limited- Syndicated- II 23.5 31,250 43,750 Saudi Pak industrial and Agricultural InvestmentCompany Limited-LTF (EOP) 23.3 53,693 61,953 Saudi Pak industrial and Agricultural InvestmentCompany Limited. 23.6 16,375 20,557

107,568 145,010

UnsecuredDirectors 23.7 8,250 4,850 Ittehad Developers 23.7 10,660 9,660 Others 23.7 10,900 9,300

29,810 23,810 192,378 253,820

31 64,320 80,703 128,058 173,117

This amount represents surplus arising on the revaluation of freehold land carried out onJune 30, 2009 by an independent valuer M/s. Dimen Associates (Private) Limited on the basis of

market value.

Less: Current portion shown under currentliabilities

SURPLUS ON REVALUATIONOF FIXED ASSETS


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23.1

23.2

23.3

23.4

23.5

23.6

23.7

2009 2008

24


Standard Chartered Bank 75,000 75,000 Askari Bank Limited 150,000 150,000 Dawood Islamic Bank 50,000 50,000 United Bank Limited Ameen 250,000 250,000 Atlas Bank Limited 50,000 50,000

575,000 575,000

These finances are secured against first pari passu charge on all present and future fixed assetsof the Company and carry mark up at six months average KIBOR Ask rate plus 1.80% (with

floor of 3% and cap of 9%) per annum. These loans were disbursed in November 2004 and arerepayable in sixteen equal quarterly installments commencing from January 2006.

These finances are secured against first pari passu charge on all present and future fixed assetsof the Company and carry mark up at six months average KIBOR Ask rate plus 1.80% (withfloor of 3% and cap of 9%) per annum. These loans were disbursed in November 2004 and arerepayable in sixteen equal quarterly installments commencing from January 2006.

LONG TERM DIMINISHING MUSHARAKA

This finance is secured against first pari passu charge on fixed assets of the Company andcarries mark up at six months average KIBOR Ask rate plus 2.25% per annum. This loan wasdisbursed in September 2006 and is repayable in eight semi annual equal installmentscommencing from September 2007.

These finances are sanctioned under LTF-EOP Scheme of the State Bank of Pakistan for aperiod of five years including grace period of one year and carry markup at State Bank`sdeclared rate for the Scheme plus 2% per annum. These are secured against first pari passucharge by way of hypothecation over all present and future fixed assets of the Companyexcluding land and building.

This finance is secured against first pari passu charge on all present and future fixed assets of

the Company and carries mark up at six months average KIBOR Ask rate plus 1.80% (withfloor of 3% and cap of 9%) per annum. This loan was disbursed in November 2004 and isrepayable in sixteen equal quarterly installments commencing from January 2006.


This finance is sanctioned for the period of five years including grace period of one year and

carries markup at six months KIBOR plus 3% per annum. This loan is secured against first paripassu charge by way of hypothecation over all present and future fixed assets of the Companyexcluding land and building.

These are interest free loans and repayable in a period of 2 years starting from July 2009.

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2009 2008Note

Financial InstitutionsPak Libya Holding Company (Private) Limited 150,000 150,000 UBL Fund Manager 25,000 25,000

175,000 175,000 750,000 750,000

31 166,667 - 583,333 750,000

24.1

25 LONG TERM MURABAHA

SecuredBanking company

Faysal Bank Limited 25.1 350,000 350,000

31 77,778 - 272,222 350,000

25.1

26 LIABILITIES AGAINST ASSETSSUBJECT TO FINANCE LEASE

Present value of minimum lease payments 26.1 498 913

31 498 422- 491

26.1 The minimum lease payments have been discounted at an implicit interest rate of 12.57% toarrive at their present value. Rentals are paid in monthly installments .



The above finances are secured against first pari passu charge on fixed assets of the Companyand carry mark up at six months average KIBOR rate plus 200bps. These finances weredisbursed from 22 August 2007 to 01 September 2007 and are repayable in nine semi annualequal installments commencing from 22 August 2009 being the 24th month from the FacilityDate.



Secured

Taxes, duties, registration costs, charges, levy/ penalties, if any, applicable and insurance costsare to be borne by the Company.

This finance is secured against first pari passu charge on fixed assets of the Company andcarries mark up at six months average KIBOR Ask rate plus 200bps. This loan was disbursed inAugust 31, 2007 and is repayable in nine semi annual equal installments commencing fromAugust 22, 2009.

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Upto oneyear

one to fiveyears

Total2009

Total2008

522 - 522 1,010

(24) - (24) (97)

498 - 498 913

(498) - (498) (422)

- - - 491

2009 2008Note

27 DEFERRED LIABILITIES

Provision for recoating of DSA anodes 27.1 21,993 19,086 Deferred taxation 27.2 330,020 271,379 Provision for gratuity 27.3 5,515 4,060

357,528 294,525

27.1

Balance brought forward 31,646 33,085Payments made against recoating of anodes (8,663) (8,897)Provision made / (reversed) during the year for recoating (net) 14,571 7,458

37,554 31,646Less: Current portion included in accrued liabilities (15,561) (12,560)

21,993 19,08627.2 Deferred taxation

Deferred tax liability comprises as follows:

Taxable temporary differencesTax depreciation allowances 332,984 325,896

Deductible temporary differencesProvision for gratuity (1,930) (1,421) Provision for doubtful debts (1,034) (441) Unused tax losses - (52,655)

330,020 271,379

Less: Current portionshown under currentliabilities



Less: Finance charges notyet due

Minimum lease paymentsoutstanding

The amount of future payments of the lease and the period in which these payments willbecome due are as follows :

Provision for Dimensionally Stable Anodes (DSAs)

Present value of minimumlease payments

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27.3 Defined benefit plan

a. General description

2009 2008Note

b. Significant actuarial assumptions

Following are significant actuarial assumptions used in the valuation:

Discount rate 12% per annumExpected rate of increase in salary 11% per annum

c.Present value of obligation 5,515 4,060 Liability recognized in balance sheet 5,515 4,060

d. Present value of obligation at the start of the year 4,060 2,460 Current service cost 1,468 1,345 Interest cost 494 255 Contribution paid to outgoing employees (507) - Closing net liability 5,515 4,060

e. Charge for the yearCurrent service cost 1,468 1,345 Interest cost 494 255

Charge for the year 1,962 1,600

28 TRADE AND OTHER PAYABLES

Trade creditors 55,860 47,337 Accrued liabilities 28.1 327,712 137,547 Advances from customers 27,309 30,818

Movement of liability recognized in the balance sheet

The scheme provides for terminal benefits for all its permanent employees who qualify for thescheme. The defined benefit payable to each employee at the end of his service comprises of total number of years of his service multipliedby last drawn basic salary including cost of living

allowance.

Reconciliation of payable to defined benefit

plan


Annual charge is based on actuarial valuation carried out as at 30 June 2008 using theProjected Unit Credit method.

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2009 2008Note

Retention money 647 632 Sales tax payable 11,694 3,392 Excise duty payable 2,652 4,583 Income tax deducted at source 944 2,556Other liabilities 787 581 Workers' Profit Participation Fund 28.2 15,154 7,625 Workers ' welfare fund 5,488 2,646

448,247 237,717

28.1

28.2

Balance as at July 01, 7,625 12,678 Interest at prescribed rate - -

7,625 12,678 Less: Amount paid to fund 6,913 12,015

712 663 Current year's allocation at 5% 38 14,442 6,962

15,154 7,625

29 MARK UP ACCRUED

Accrued mark up / interestSecured

Long term financing 45,614 38,696 Long term murabaha 19,724 15,166 Short term borrowings 9,222 9,801

74,560 63,663 30 SHORT TERM BORROWINGS


Running financesMCB Bank Limited 30.1 32,529 88,954 Askari Bank Limited 30.2 41,217 88,162

Workers' profit participation fund balancescomprise as follows:

These include a balance due to Chemi Multifabrics Limited, an associated company, amountingto Rs. 4.002 million (2008: Rs. 4.711 million).

The Company retains the allocation of this fund for its business operations till the amounts are


paid.

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2009 2008Note

The Bank of Punjab Limited 30.3 28,000 49,679 KASB Bank Limited 30.4 10,581 68,174

Murabaha financeFaysal Bank Limited 30.5 40,000 -

152,327 294,969

30.1

30.2

30.3

30.4

30.5

31 CURRENT PORTION OF LONG

TERM LIABILITIES

Long term financing 23 64,320 80,703 Long term diminishing musharaka 24 166,667 Long term murabaha 25 77,778 - Liabilities against assets subject to finance lease 26 498 422

309,263 81,125

This facility is secured against first pari passu charge upto the limit of Rs. 150 million on allpresent and future current assets of the Company and carries mark-up at three months averageKIBOR Ask rate plus 2.5% per annum with floor of 10% per annum (2008: Six monthsaverage KIBOR Ask rate plus 2.5% per annum with floor of 12%). The limit of finance isRs. 150 million (2007: Rs. 150 million).

This facility is secured against first pari passu charge over present and future current assets of the Company and carries mark-up at six months average KIBOR Ask rate plus 3% per annum(2008: Six months average KIBOR Ask rate plus 2.25% per annum). The limit of finance isRs. 40 million (2008: Rs. 40 million).

This facility is secured against first pari passu charge over present and future current assets of the Company and hypothecation of stock of chemicals. The facility carries mark-up at threemonths average KIBOR Ask rate plus 2.5% spread with floor of 12.00% per annum (2008:1.5% with floor of 10%). The limit of finance is Rs. 90 million (2008: Rs. 90

million).


This facility is secured against first pari passu charge over all present and future current assetsof the Company and carries mark-up at three months average KIBOR Ask rate plus 1.9% perannum (2008: Three months average KIBOR Ask rate plus 1.5% per annum). The limit of finance is Rs. 200 million (2008: Rs. 200 million).

This facility is secured against first pari passu charge over all present and future current assetsof the Company and carries mark-up at three months average KIBOR Ask rate plus 3% perannum(2008: three months average KIBOR Ask rate plus 2% per annum). The limit of financeis Rs. 50 million (2008: Rs. 135 million).

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2009 2008Note

32 PROVISION FOR TAXATION - NET

Provision for taxation 35,451 - Less: Advance income tax 25,864 -

9,587 -

33 CONTINGENCIES AND COMMITMENTS

33.1 Contingent liabilities

a)

b)

33.2 Commitments

Commitments as on June 30, 2009 were as follows:

34 SALES

SalesManufacturing 34.1 4,264,757 3,168,303 Trading 558 2,686

4,265,315 3,170,989 Less: Sales tax 526,420 401,799

Commission to selling agents 72,587 44,315 Special Excise duty 32,904 26,839

631,911 472,953 3,633,404 2,698,036

34.1

Against letters of credit amounting to Rs. 128.073 million (2008: Rs. 73.086 million).

The Company is facing claims, launched in the labour courts, pertaining to staff retirementbenefits. In the event of an adverse decision the Company would be required to pay an amountof Rs. 2.947 (2008: Rs. 4.680 million) against these claims.

Against purchase of land amounting to Rs. 1.838 million (2008: Rs. 1.838

million).


Letters of guarantee outstanding as at 30 June 2009 were Rs. 198.240 million (2008:Rs. 207.997 million).

This amount includes export sales amounting to Rs. 177.241 million (2008: Rs. 44.081 million).

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2009 2008Note

35 COST OF SALES

Raw materials consumedOpening stock 98,677 37,706 Purchases 359,134 424,426

457,811 462,132 Closing stock 12 (43,946) (98,677)

413,865 363,455 Stores, spares and consumables 284,758 201,211 Packing materials consumed 16,104 10,518 Salaries, wages and other benefits 35.1 155,060 115,087 Fuel and power 1,691,808 1,222,373 Repair and maintenance 22,211 19,115 Insurance 9,126 8,183 Depreciation 3.2 201,176 189,218 Vehicle running expenses 12,048 8,784 Postage, printing and stationery 1,291 2,366 Other expenses 2,650 2,771

2,396,232 1,779,626 Work in process

Opening 3,694 3,201 Closing 12 (4,384) (3,694)

(690) (493) Cost of goods manufactured 2,809,407 2,142,588

Cost of stores traded 5,745 2,289 Finished goodsOpening 48,756 67,112 Closing 12 (71,280) (48,756)

(22,524) 18,356 2,792,628 2,163,233

35.1

36 SELLING AND DISTRIBUTION EXPENSES

Salaries and other benefits 36.1 17,975 13,354 Traveling and conveyance 2,183 1,705 Vehicle running expenses 1,854 1,761 Advertisement and export expenses 14,139 3,646 Telephone, telex and postage 1,085 1,194 Marketing service charges 35,887 26,994 Freight 136,353 89,041



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2009 2008Note

Rent, rates and taxes 5,295 2,350 Printing and stationery 581 280 Fuel and power 1,377 748 Repair and maintenance 1,190 408 Depreciation 3.2 831 640

218,750 142,121

36.1

37 GENERAL AND ADMINISTRATIVE EXPENSES

Salaries and other benefits 37.1 57,211 39,710 Traveling and conveyance 11,592 9,684 Vehicle running expenses 3,166 2,215 Telephone, telex and postage 1,658 1,496 Rent, rates and taxes 2,156 1,974 Printing and stationery 892 630 Fee and subscription 5,221 3,039 Legal and professional charges 1,879 1,349 Fuel and power 1,337 804 Provision for doubtful debts 2,955 1,261 Repair and maintenance 2,593 1,360

Depreciation 3.2 4,267 2,636 Amortization of intangible assets 5.1 1,823 655 Amortization of deferred cost - 964 Bad debts written off 646 2,051Loss on foreign exchange - 1,510Donations 37.2 3,888 2,994 Others - 4

101,284 74,336

37.1

37.2 Donations

37.2.1 Interest of the Directors or their spouses in the donations made during the year is as follows:


Donation of Rs. 1.306 million paid to Kiran Ibtadai School. Ms. Sabina Khatri w/o Mr.Muhammad Siddique Khatri, Chairman & Chief Executive of the Company is the patron of thesaid school.

This amount includes Rs. 0.584 million (2008: Rs. 0.490 million) in respect of employees'

retirement benefits.


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37.2.2

2009 200838 OTHER OPERATING EXPENSES Note

Auditors' remunerationAudit fee 543 425 Half yearly review fee 100 100 Tax and certification charges 100 100 Out of pocket expenses 40 35

783 660 Loss on sale of fixed assets - 53 Workers' profit participation fund 28.2 14,442 6,962 Workers ' welfare fund 5,488 2,646

20,713 10,321 39 OTHER OPERATING INCOME

Income from financial assetsDividend income 28 33 Return on bank deposits 473 - Gain on foreign exchange 385 -

Income from non- financial assetsGain on sale of fixed assets 394 - Sale of scrap 3,036 2,187

753 - 4,183 2,187 5,069 2,220

40 FINANCIAL CHARGES

Markup/interest on:Long term financing 133,805 108,025 Long term morabaha 53,548 41,777 Redeemable capital - 6,994Finance lease 101 126 Short term borrowings 59,466 49,739

246,920 206,661 Bank charges and commission 3,987 11,395

250,907 218,056 41 TAXATION

For the year:Current 36,056 14,411 Prior year charge 13,001 1,893 Deferred 58,641 47,429

107,698 63,733

Recovery of doubtful debts

Donations other than that mentioned above were not made to any donee in which any directorof the Company or his / her spouse had any interest at any time during the year.


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42 ACCOUNTING ESTIMATES AND JUDGMENTS

Income taxes

Defined benefit plan

Property, plant and equipment

2009 2008

43 EARNINGS PER SHARE - BASIC AND DILUTED

36,000 36,000 Profit after taxation (Rupees) 153,606 29,081

Earnings per share (Rupees) 4.27 0.81

There is no dilutive effect on the basic earnings per share of the Company.

The Company's main accounting policies affecting its result of operations and financialconditions are set out in Note 2. Judgments and assumptions have been required by themanagement in applying the Company's accounting policies in many areas. Actual results maydiffer from estimates calculated using these judgments and assumptions. Key sources of estimation, uncertainty and critical accounting judgments are as follows:

The estimates for revalued amounts, if any, of different classes of property, plant andequipment, are based on valuation performed by external professional valuers andrecommendation of technical teams of the Company. Further, the Company reviews the valueof the assets for possible impairment on an annual basis. Any change in the estimates in futureyears might affect the carrying amounts of the respective items of property, plant andequipment with a corresponding effect on the depreciation charge and impairment. As explainedin note 22 to these financial statements, the Company has revalued its free hold land as onJune 30, 2009 resulting in a revaluation surplus of Rs. 105.187 million.

Certain actuarial assumptions have been adopted by external professional valuer (as disclosedin note 27.3) for valuation of present value of defined benefit obligations and fair value of planassets. Any changes in these assumptions in future years might affect unrecognized gains andlosses in those years.

The Company takes into account relevant provisions of the current income tax laws whileproviding for current and deferred taxes as explained in note 2.14 to these financial statements.

Weighted average number of ordinary shares (in thousand)

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


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44 NON ADJUSTING EVENTS

45 TRANSACTIONS WITH RELATED PARTIESINCLUDING ASSOCIATED UNDERTAKINGS

2009 2008

Nature of transaction

Associated company Marketing service charges 35,888 26,994 Associated companies Sale of goods 7,771 2,947 Associated company Loan received 1,000 9,660 Staff retirement fund

168 136 Directors and employees

49,489 33,040 Loan received from directors 3,400 3,200

Others Loan received from others 1,600 9,300

46 FINANCIAL INSTRUMENTS

Financial risk management

- Credit risk - Liquidity risk - Market risk

The related parties comprise of related group companies, local associated companies, staff retirement funds, directors and key management personnel. Transactions with related partiesand remuneration and benefits to key management personnel under the terms of theiremployment are as follows:

Contribution to staff retirementbenefit plans

The Board of Directors has overall responsibility for the establishment and oversight of Company's risk management framework. The Board is also responsible for developing andmonitoring the Company's risk management policies.

Relation with theCompany

The Company has exposures to the following risks from its use of financial instruments:

Remuneration to directors and keymanagement personnel


The Board of Directors of the Company has recommended a 5% final cash dividend (2008: 15%final cash dividend) in their meeting held on September 25, 2009 in addition to the 10% interimdividend declared in the meeting held on July 31, 2009.

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46.1 Credit risk

2009 2008

Trade debts 601,687 299,766Loans and advances 50,511 18,477Trade deposits 11,444 25,879Other receivables 12 21Bank balances 24,077 40,903

Domestic 542,239 298,177Export 59,448 1,589

601,687 299,766

Distributor 259,378 115,843

End-user customers 342,309 183,923601,687 299,766

The maximum exposure to credit risk for trade debts at the balance sheet date by geographic region isas follows:

The maximum exposure to credit risk for trade debts at the balance sheet date by type of customer is asfollows:

Credit risk represents the accounting loss that would be recognized at the reporting date if the counterparty fails completely to perform as contracted and arise principally from trade debts, loans andadvances, trade deposits and other receivables. The carrying amount of financial assets represents themaximum credit exposure before any credit enhancements. The maximum exposure to credit risk at thereporting date is as follows:

To manage exposure to credit risk in respect of trade receivables, management performs credit reviewstaking into account the customer's financial position, past experience and other factors. Credit terms areapproved by the approval committee. Where considered necessary, advance payments are obtainedfrom certain parties. The management has set a maximum credit period of 30 days to reduce the creditrisk.

Concentration of credit risk arises when a number of counter parties are engaged in similar businessactivities or have similar economic features that would cause their abilities to meet contractualobligation to be similarly effected by the changes in economic, political or other conditions. TheCompany believes that it is not exposed to major concentration of credit risk.


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2009 2008

The aging of trade receivable at the reporting date is:Not past due 375,830 191,212Past due 1-30 days 136,970 64,405Past due 30-150 days 68,785 39,820

Past due more than 150 days 20,102 4,329601,687 299,766

46.2

Carrying Contractual Six months Six to twelve One to two Two to five

amount cash flow or less months years years

2009

Financial liabilities

Long term financing 192,378 209,072 38,953 32,223 62,092 75,804

750,000 1,043,071 141,945 135,433 476,605 289,088

Long term morabaha 350,000 486,764 66,241 63,202 117,287 240,034

498 522 258 264 - -

Trade and other payables 448,247 448,247 448,247 - - -

Markup accrued 74,560 74,560 74,560 - - -

Short term borrowing 152,327 165,068 165,068 - - -

1,968,010 2,427,304 935,272 231,122 655,984 604,926

The Company's most significant customers are distributors from whom the receivable was Rs. 155.631million (2008: Rs. 58.626 million) of the total carrying amount as at 30 June 2009.


Liquidity risk

Based on the past experience, consideration of financial position, past track records and recoveries, theCompany believes that no impairment allowance is necessary in respect of trade debtors past due assome receivables have been recovered subsequent to the year end and for other receivables there arereasonable grounds to believe that the amounts will be recovered in short course of time.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they falldue. The Company's approach to managing liquidity is to ensure as far as possible to always havesufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, withoutincurring unacceptable losses or risking damage to the Company's reputation.

Liabilities against assets subject to

On the prudence basis an amount of Rs. 2.955 million (2008: Rs. 1.261 million) has been charged, as

finance lease

provision for doubtful debts, to profit and loss account.

Long term diminishing musharaka


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Carrying Contractual Six months Six to twelve One to two Two to fiveamount cash flow or less months years years

2008

Long term financing 253,820 284,038 41,855 37,818 73,176 131,189750,000 1,146,453 46,088 58,613 528,708 513,044

Long term morabaha 350,000 535,623 21,508 27,353 129,443 357,319

913 1,010 258 258 494 -Trade and other payables 237,717 237,717 237,717 - - -Markup accrued 63,663 63,663 63,663 - - -Short term borrowing 294,969 311,096 311,096 - - -

1,951,082 2,579,600 722,185 124,042 731,821 1,001,552

46.3

46.3.1

2009 2008

Trade debts 59,448 1,589Gross balance sheet exposure 59,448 1,589Outstanding letters of credit (128,073) (73,086)Net exposure (68,625) (71,497)

The following significant exchange rates applied during the year:

2009 2008 2009 2008

USD to PKR 80.00 65.00 81.30 68.20

Sensitivity analysis

Reporting date rate

Liabilities against assets subject tofinance lease

Market risk

Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes inmarket interest rates or the market price due to a change in credit rating of the issuer or the instrument,change in market sentiments, speculative activities, supply and demand of securities, and liquidity inthe market. The Company is exposed to currency risk and interest rate risk only.

Currency risk

The Company is exposed to currency risk on trade debts, import of raw materials and stores and sparesand export sales that are denominated in a currency other than the respective functional currency of the

Financial liabilities

Company, primarily in U.S. dollar. The Company's exposure to foreign currency risk is as follows:

Average rate

At reporting date, if the PKR had strengthened by 10% against the US dollar with all other variables

Long term diminishing musharaka

held constant, post tax profit for the year would have been lower by the amount shown below.



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2009 2008

Effect on profit or lossLoss (5,945) (159)

46.3.2

46.4 Fair value of financial instruments

47

48

48.1

REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

The Company also provides the Chief Executive and some of the Directors and Executives with freeuse of cars and mobile phones.

The aggregate amount charged in the financial statements for the year for remuneration, including allbenefits, to the Chief Executive, Directors and Executives of the Company are as follows:

Interest rate risk

Interest rate risk is the risk that fair value of future cash flows of financial instrument will fluctuatebecause of changes in market interest rates. The Company is not materially exposed to interest raterisk.

CAPITAL MANAGEMENT

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and marketconfidence and to sustain future development of the business. The Board of Directors monitor thereturn on capital, which the Company defines as net profit after taxation divided by total shareholders'equity. The Board of Directors also monitor the level of dividend to ordinary shareholders. There wereno changes to the Company's approach to capital management during the year and the Company is notsubject to externally imposed capital requirements.

The carrying value of all the financial assets and financial liabilities approximate their fair values. Fairvalue is the amount for which an asset could be exchanged, or a liability settled, between

knowledgeable, willing parties in an arm's length transaction.

The weakening of the PKR against US dollar would have had an equal but opposite impact on the posttax profits / loss.

2009 2008 2009 2008 2009 2008

Managerial remuneration 2,400 1,500 4,000 2,079 26,593 18,452 House rent allowance 1,080 675 1,800 930 11,966 8,303

Medical expenses 120 75 200 103 1,330 923 3,600 2,250 6,000 3,112 39,889 27,678

Number of persons 1 1 2 2 46 37

Executives


DirectorsChief Executive


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49 CAPACITY AND PRODUCTION

50 DETAIL OF SUBSIDIARY

Name of subsidiaryAccounting

year endPercentageof holding

Country of Incorporation

Chemi Chloride Industries Limited 30-Jun-09 95% Pakistan

51 DATE OF AUTHORIZATION OF ISSUE

52 CORRESPONDING FIGURES

53 GENERAL

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

These financial statements were authorized for issue on September 25, 2009 by the Board of

Directors of the Company.

Previous year's figures have been re-arranged and re-classified wherever necessary for thepurpose of comparison, the effect of which is not material.

2009 2008 2009 2008

Caustic soda 143,550 143,550 95,448 93,313

Liquid chlorine 13,200 13,200 7,758 8,886 Hydrochloric acid 150,000 123,750 133,680 100,361 Sodium Hypochlorite 49,500 49,500 31,035 37,979 Bleaching earth 3,300 3,300 2,253 2,532 Chlorinated parafin wax 3,000 3,000 261 196 Sulphuric acid 3,300 3,300 60 599 Calcium Chloride Prills 20,000 20,000 5,702 1,238

Interruption due to utilityshortage and technical issues.

Cautious production strategybased on actual demands.

Actual productionInstalled capacityTons Tons Reason for shortfall



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PATTERN OF SHAREHOLDINGAs At June 30, 2009

No. of Shareholders From To Total Shares held15 1 100 69521 101 500 7,059

60 501 1,000 44,876128 1,001 5,000 432,056165 5,001 10,000 1,180,840

6 10,001 15,000 67,8965 15,001 20,000 94,5731 20,001 25,000 20,2803 25,001 30,000 81,5975 35,001 40,000 179,3001 45,001 50,000 49,5001 55,001 60,000 55,2002 70,001 75,000 144,0001 75,001 80,000 79,2001 85,001 90,000 86,4003 140,001 145,000 432,0003 155,001 160,000 473,0401 175,001 180,000 176,0001 190,001 195,000 194,4001 215,001 220,000 216,0003 250,001 255,000 756,0002 280,001 285,000 567,3603 315,001 320,000 959,0401 320,001 325,000 324,0002 345,001 350,000 698,4324 350,001 355,000 1,411,2002 355,001 360,000 715,680

1 365,001 370,000 367,2002 370,001 375,000 747,0641 395,001 400,000 396,0001 405,001 410,000 406,0801 410,001 415,000 413,2801 445,001 450,000 446,4001 460,001 465,000 460,8001 465,001 470,000 468,0001 475,001 480,000 478,0801 540,001 545,000 541,8601 790,001 795,000 792,0001 845,001 850,000 846,670

1 935,001 940,000 936,0001 1,230,001 1,235,000 1,231,5001 1,685,001 1,690,000 1,686,2401 1,975,001 1,980,000 1,978,5601 2,155,001 2,160,000 2,155,680

2,255,001 2,260,000 2,257,3221 2,430,001 2,435,000 2,432,1601 2,755,001 2,760,000 2,757,6001 4,750,001 4,755,000 4,754,880

463 36,000,000

Shareholding

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PATTERN OF SHAREHOLDINGAs required under Code of Corporate Governance

As At June 30, 2009

No. of Shares held Percentage

ASSOCIATED COMPANIES1 CHEMITEX INDUSTRIES LTD. 1,978,560 5.4960%2 JHELUM SILK MILLS (PVT.) LTD. 1,686,240 4.6840%

3,664,800 10.1800%

DIRECTORS, CEO AND THEIR SPOUSE AND MINOR CHILDREN1 MR. ABDUL GHAFOOR 460,800 1.2800%2 MR. ABDUL SATTAR KHATRI 2,155,680 5.9880%3 MR. MANSOOR AHMED 324,000 0.9000%4 MRS. FARHANA 319,680 0.8880%5 MR. MUHAMMAD SIDDIQ 144,000 0.4000%

MR. MUHAMMAD SIDDIQ (CDC) 4,754,880 13.2080%

6 MST. NOOR-UL-HUDA (CDC) 55,200 0.1533%7 MR. FAWAD YOUSUF 374,400 1.0400%MR. FAWAD YOUSUF (CDC) 25,597 0.0711%

8 MRS. MAH-E-DARAKHSHAN W/O MANSOOR AHMED 144,000 0.4000%9 MRS. SABINA W/O MUHAMMAD SIDDIQ 352,800 0.9800%

10 MRS. FAREEDA W/O ABDUL GHAFOOR 283,680 0.7880%9,394,717 26.0964%

PUBLIC SECTOR COMPANIES & CORPORATION1 NATIONAL FERTILIZER CORP. OF PAKISTAN 11,110 0.0309%2 ADEEL & NADEEM SECURITIES (PVT.) LTD. (CDC) 2,136 0.0059%3 HUM SECURITIES LIMITED. (CDC) 1,400 0.0039%

4 M.R. SECURITIES (PVT.) LIMITED. (CDC) 2,640 0.0073%5 N. H. SECURITIES (PVT.) LTD. (CDC) 1,440 0.0040%6 NETWORTH SECURITIES (PVT.) LTD. (CDC) 7,200 0.0200%7 SITARA CHEMICAL INDUSTRIES LTD. (CDC) 36,000 0.1000%

61,926 0.1720%

FINANCIAL INSTITUTIONS 0 0.0000%

GENERAL PUBLIC 22,878,557 63.5515%

TOTAL 36,000,000 100.0000%

SHAREHOLDERS HOLDING 10% OR MORE SHARESHolding Percentage

MR. MUHAMMAD SIDDIQ 4,898,880 13.6080%

Shareholders' Category

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FSA_59 ICL_2009

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