Against All Odds Extreme heat and pressure transforms iron ore dust to a strong and resilient Steel. With vision, hard work and perseverance, Aisha has emulated characteristics of Steel. It stood defiant and steadfast against every challenge thrown its way. Under its exemplary leadership and committed team, Aisha Steel, Against All Odds, has made it this far and is determined to push new frontiers. Contents Aisha Steel Mills Limited Annual Report 2020 Table of Contents Company Overview Performance Analysis 04 106 05 Vision and Mission Statement 108 Analysis of Financial and 06 Company Information Non-Financial Performance 08 Company Profile and Nature of Business 112 Key Operational and Financial Data 16 Business Model 113 Economic Value Added 18 Code of Business Conduct and Ethical 114 Ratio Analysis Principles 118 DuPont Analysis 20 Organization Chart 120 Horizontal and Vertical Analysis 22 Core Values 122 Summary of Cash Flow Statement 24 Critical Performance Indicators 124 Results Reported in Interim Financial 27 Value Chain Statements and Final Accounts 29 Calendar of Notable Events 126 Graphical Presentation of Aisha Steel 30 Salient Policies in Place 129 Cash Flow Statement - Direct Method 130 Share Price Sensitivity Analysis Governance 133 Statement of Value Addition and 36 Distribution 38 Directors’ Profile 48 Directors’ Report Financial Statements 58 Statement of Shares Bought and Sold 134 136 Auditors’ Review Report to the 58 Attendance of Directors in Meetings Members of Aisha Steel 59 Pattern of Shareholding 137 Statement of Compliance with Listed 65 Evaluation of Performance of Board of Companies Regulations, 2019 Directors Including Chairman 139 Report of Board Audit Committee 66 From the Desk of Chairman 142 Auditors’ Report to the Members 67 Review Report by the Chairman 147 Financial Statements 69 Chairman’s Review of CEO’s Performance 70 CEO’s Message Other Information 71 Forward Looking Statement 194 73 Board and Management Committees 196 Shareholders’ Information 77 Additional Information 197 Notice of Sixteenth Annual General 83 Beneficial Ownership and Group Meeting Shareholding 202 Glossary of Terms 86 Award and Recognition 204 Proxy Form 87 Stakeholders’ Engagement 205 Proxy Form - Urdu 208 CEO’s Message - Urdu Strategy, Risks and Opportunity 209 From the Desk of Chairman - Urdu 92 223 Directors’ Report - Urdu 94 Corporate Strategy 95 Strategic Objectives, Strategies, Resources and KPIs 99 Risk and Opportunity Report 105 SWOT Analysis 03 2. Factory Address: DSU-45, Pakistan Steel, Down Stream Industrial Estate, Bin Qasim, Karachi, Pakistan 3. Lahore Liaison Office: 601-B, 6th Floor, City Tower, Main Boulevard, Gulberg II. Lahore, Pakistan 4. Multan Liaison Office: 606-A, 6th Floor, United Mall, Abdali Road. Multan, Pakistan Significant Factors Affecting External Environment Macro-economic Factors Affecting Business Fiscal Year 2019-20 showcased world dynamics, altering events beginning from an attempt to amend Hong Kong’s extradition law, impacting Chinese economy; Indian Government, abolishing autonomy of Indian-occupied Kashmir, leading to halt in trade between rival neighbors; United Kingdom’s exit from European Union; trade war between US and China, crash of Oil prices and lastly pandemic of COVID-19, paralyzing entire world trade. The pandemic not only resulted in loss of the human life but also impacted global economic activity. The global economy is expected to have been contracted by 3% during FY 2019-20. The Government introduced economic and structural reforms and made adjustments which included tightening of monetary policy, exchange rate adjustments, expenditure control and enhancement of regulatory duties on non-essential imports, to address economic instability. The reforms resulted in economic slowdown, rising inflation, low pace of job opportunities and impacted the low-income groups. However, by the end of second quarter of FY 2020, growth started to gain momentum as the current account deficit posted surplus in October 2019. By March 2020, fiscal deficit had reduced to 4% of GDP and current account deficit had reduced by 71%. The growth momentum got affected by rise of COVID-19 in Pakistan from February 2020 onwards, thereby, halting economic activities. The GDP growth rate for FY 2020 is negative 0.38% on the basis of 2.67, - 2.64 and -0.59 percent growth in agriculture, industrial and services sectors respectively. Due to pandemic, Private consumption reduced to 78.5% of GDP. To support the reducing demand and affected economy, the Government injected Rs. 1.24 trillion relief packages. While SBP reduced discount rate to 7% to support demand in the economy. By January 2020, average inflation had risen by 14.6%, compared to 5.6% recorded in same period last year. Other inflationary indicators like Consumer Price Index (CPI), Wholesale Price Index (WPI), and Core Inflation Company Overview “First comes thought; then organization of that thought, into ideas and plans; then transformation of those plans into reality. The beginning, as you will observe, is in your imagination.” - Napoleon Hill were recorded at 11.2%, 12.2%, and 7.8%, respectively. current year. Like previous years, an overview of fiscal performance exhibited decrease in revenues and increase in Education is covered as one of the key goals of Sustainable Development Goals (SDGs). According to PSLM Productivity of the Company is independent from seasonal fluctuations. However, same is managed by expenditures compared to targets. During the first nine months of the current fiscal year, the overall fiscal Further, to counter the impact of COVID-19, SBP introduced various relief measures including Refinance Survey 2018-19, literacy rate of population is 60% as compared to 58% in 2015-16. Total expenditure on adjusting stock levels and annual maintenance schedules. deficit reduced to 4.0 percent of GDP, against 5.1 percent of GDP recorded in the same period last year while Scheme for payment of wages and salaries, Temporary Economic Refinance Facility, and Refinance Facility for education sector increased by 4.7% to Rs. 868 billion. primary balance posted a surplus of Rs 194 billion during July-March, FY2020 against the deficit of Rs. 463 combating COVID-19. Micro Factors Affecting Business billion during the comparable period of FY2019. Total revenues grew by 30.9 % during July-March, FY2020 Pakistan Vision 2025, prepared by Federal and Provincial Governments, provides a road map for health and Macro-economic adjustment policies implemented by Government, to address the issue of prevailing nutrition in the country. It sets a vision of reducing widespread prevalence of communicable diseases, disease Business Model economic instability have brought some degree of stability. During July to March 2020 period, Pakistan’s surveillance, and addressing inadequacies in primary/secondary health care facilities. By 2018, public sector ASML is focused on customer satisfaction and aims to provide them with best quality of CRC and HDGC. We current account deficit declined to USD 2.8 billion, while trade deficit reduced to USD 14.7 billion. Import of hospitals increased to 1,279. Further, the total count of registered doctors is 233,300, 24,900 dentists and target for long-term mutually beneficial relationship which adds value for both customers and ASML. In order goods and services declined by 4.9% and 18.58%, respectively. By February 2020, exports had increased by 112,100 nurses bringing the current ratio of one doctor for 905 persons, 8,473 persons per dentist and to meet our mutual objectives we aim to achieve optimization of all processes from procurement to sales, and 3.6% compared to same period last year, however, COVID-19 impacted the export growth and by April 2020 availability of one hospital bed for 1,596 person. The number under each establishment has a rising trend. capitalize on synchronization of entire value chain. Pakistan, like other countries, has environmental challenges, and has experienced several adverse climate Competition impacts over the years and adaptation to these impacts is necessary for socio-economic development. To ASML is one of the largest producers of CRC and HDGC in Pakistan. Due to state-of-the-art technology, our improve the forest cover, the Government has countrywide launched Ten Billion Tree Tsunami Programme to quality gives us competitive edge over other producers and importers of CRC and HDGC. ASML, after combat global warming. coordinated team work and able guidance, has increased its rolling capacity to 700,000 tons, including 250,000 tons of HDGC. This already has and will further strengthen us against the competition. The international steel industry, like others, went through a tough patch. The demand fluctuated and the prices with it. The HRC price, in July 2019 was around US$ 500 per ton FOB China, came down to around Suppliers US$400 in September, then rising back to around US$ 500 in January 2020. The COVID-19 related slowdown The Company has built strong relationships with its suppliers. We have a competent procurement team which caused the prices to fall back again to US$ 400 levels. The prices, lately, have started to recover on account of is well versed in acquiring necessary raw material and other stores and spares at optimum rates. gradual opening up of business in China and Europe and is now around US$ 500 per ton. As the economy re-opens, it is expected that adverse impact of COVID-19 will be bottoming out. The local market is witnessing Raw Material ‘V’ shaped growth as the steps taken and gradual decline in COVID-19 related cases has substantially The raw material mainly consists of Hot Rolled Coils (HRC), which is imported mainly from Japan and Taiwan. against 0.04% growth during the same period of FY2019, on account of a substantial rise in both tax and improved business environment. The revival of two and three wheelers is well underway. The car, truck and bus Prices of HRC are linked with its international demand and supply.