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ANNUAL REPORT 2015 Contents KOHINOOR TEXTILE MILLS LIMITED 2 Financial Highlights 3 Geographical Presence 4 Company Profile 6 Company Information 8 Vision Statement 8 Mission Statement 10 Code of Business Conduct and Ethical Principles 11 Statement of Strategic Objectives 12 Notice of Annual General Meeting 22 Organizational Chart 24 Directors’ Report 54 Brief Profile of Directors 56 Calendar of Notable Events 58 Board Committees 68 Report of the Audit Committee 78 Key Operating and Financial Data - Six Years Summary 83 DuPont Analysis 86 Value Added and How Distributed 87 Horizontal Analysis of Financial Statements 88 Vertical Analysis of Financial Statements 92 Statement of Compliance with Code of Corporate Governance 94 Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance 97 Auditors’ Report 98 Balance Sheet 100 Profit and Loss Account 101 Statement of Comprehensive Income 102 Cash Flow Statement 103 Statement of Changes in Equity 104 Notes to the Financial Statements 146 Pattern of Shareholding CONSOLIDATED FINANCIAL STATEMENTS 150 Directors’ Report on Consolidated Financial Statements 151 Auditors’ Report 152 Balance Sheet 154 Profit and Loss Account 155 Statement of Comprehensive Income 156 Cash Flow Statement 157 Statement of Changes in Equity 158 Notes to the Consolidated Financial Statements FORM OF PROXY 1 2 4% Sales Revenue 2015 Vs2014 Financial Highlights 13 Current Ratio % 30 Breakup Value Per Share % 30 Shareholders' Equity % 37 Return on Equity % 38 Gross Prot % 43 EBITDA % % 47 Return on Capital Employed % 56 Operating Prot % 78 Prot After Tax % 79 Earnings Per Share % 87% Prot Before Tax Geographical Presence Mills Mills Head office Mills Gulyana Road, Gujar Khan, Peshawar Road, 42 - Lawrence Road, 8 K.M., Manga Raiwind Road, District: Rawalpindi Rawalpindi Lahore District: Kasur 3 Company Profile and Group Structure ThenCompany & Now Information The Company commenced textile operations in Capital Limited (MLCL). MLCF & MLCL are subsidiary 1953 as a private limited company and became a companies of KTML. The initial capacity of its public limited company in 1968. The Company is a Rawalpindi unit comprised 25,000 spindles and 600 part of Kohinoor Maple Leaf Group (KMLG). KMLG looms. Later, fabric processing facilities were added structure comprises of two listed public limited and spinning capacity was augmented. Additional companies i.e. Kohinoor Textile Mills Limited (KTML) production facilities were acquired on the Raiwind- and Maple Leaf Cement Factory Limited (MLCF) and Manga Road near Lahore in District Kasur and on the one unlisted public limited company i.e. Maple Leaf Gulyana Road near Gujar Khan, by way of merger. The principal object of MLCL is to buy, sell, hold or market. The stitching facilities produce a diversified otherwise acquire or invest its capital in any sort of range of home textiles for the export market. Both the financial instruments. dyeing and stitching facilities are being augmented to take advantage of greater market access. Fully Nature of Business equipped laboratory facilities for quality control and process optimization have been setup at all three The Company’s production facilities now comprise sites. 156,528 ring spindles capable of spinning a wide range of counts using cotton and Man-made fibers. The Company has been investing heavily in Information The weaving facilities at Raiwind comprise 252 looms Technology, training of its human resources and capable of weaving a wide range of greige fabrics. The preparing its management to meet the challenges of processing facilities at the Rawalpindi unit are capable market integration. of dyeing and printing fabrics for the home textile 4 The Company continues to ensure that its current b) Textile Industry – The Textile Industry is again competitive position is maintained as well as flourishing due to favourable Government supporting the ongoing improvement process in our policies for supply of Power and Gas to Textile endeavor to maintain world’s best manufacturing sector on preferential basis. More over sharp practice. Operations of the Company are subject decline in oil prices has supported the Captive to different environmental and labour laws. The power producers favourably to minimize the Company is fully complying with all applicable power cost. environmental, labour, corporate and other relevant legal laws. c) Inflation – From the start of the year, Inflation on a year on year basis, decreased from 7% to 2.1% in April which is the lowest level since 2003-2004 (SBP Inflation Snapshot). However, towards the end of the financial year, it increased slightly to close at 3.2%. d) Fiscal Development – The fiscal deficit has decreased from 8.8% in 2013 to 5.3% in 2015. This has been possible by the reforms of the present Government on both revenue and expenditure side. The Government further expects to decrease this to 4.3% for the year 2015-2016. e) Money & Credit – The discount rate has reduced from 10% in 2013 to 6.5% in 2015. Balance of payments also improved at the backing of reduced import bill and steady growth in workers’ remittances. Foreign exchange reserves closed at $13.5 billion as on 30th June 2015. f) Main Market – The main market of the Company is the domestic market but is ably supported by exports which are in America, Euorpe, Australia and other Asian countries. The operations of the Company are subject to different environmental, corporate and labor laws and it is fully complying with these and other relevant laws. Macro Factors Affecting the Business: Micro Factors Affecting the Business: a) Pakistan’s Economy - The revival of growth that started in 2013-14 has accelerated in 2014- a) Business model for the Company – The 15 as per indicators released by the National business model of the Company is to increase Accounts Committee. The factors contributing retention, reduce the cost of production and this momentum in growth include the reform increase customer satisfaction. initiatives, commitment to a calibrated fiscal and monetary management and an overall b) Product portfolio – Kohinoor is producing improvement in the macro economic situation. various products in order to meet the demand The impact of these factors was strengthened of various users. by a steep decline in oil prices, rise in foreign exchange buffers, growth in remittances and proceeds from privatization. 5 Company Information Board of Directors Legal Adviser Mr. Tariq Sayeed Saigol Chairman Mr. Muhammad Salman Masood Mr. Taufique Sayeed Saigol Chief Executive Advocate High Court Mr. Sayeed Tariq Saigol Mr. Waleed Tariq Saigol Registered Office Mr. Danial Taufique Saigol 42-Lawrence Road, Lahore. Mr. Shafiq Ahmed Khan Tel: (92-042) 36302261-62 Mr. Arif Ijaz Fax: (92-042) 36368721 Syed Mohsin Raza Naqvi Share Registrar Audit Committee Vision Consulting Ltd Mr. Shafiq Ahmed Khan Chairman 3-C, LDA Flats, Mr. Arif Ijaz Member Lawrence Road, Lahore. Mr. Sayeed Tariq Saigol Member Tel: (92-042) 36283096-97 Fax: (92-042) 36312550 Human Resource & E-mail:[email protected] Remuneration Committee Website: www.vcl.com.pk Mr. Arif Ijaz Chairman Mr. Sayeed Tariq Saigol Member Bankers Mr. Danial Taufique Saigol Member Al Baraka Bank (Pakistan) Limited Allied Bank Limited Chief Financial Officer Askari Bank Limited Syed Mohsin Raza Naqvi Bank Alfalah Limited Bank Al-Habib Limited Company Secretary Faysal Bank Limited Mr. Muhammad Ashraf MCB Bank Limited Meezan Bank Limited Chief Internal Auditor National Bank of Pakistan Mr. Bilal Hussain NIB Bank Limited Silk Bank Limited Auditors Standard Chartered Bank (Pakistan) Limited M/s. Riaz Ahmad & Company The Bank of Punjab Chartered Accountants United Bank Limited Mills • Peshawar Road, Rawalpindi Tel: (92-051) 5495328-32 Fax: (92-051) 5471795 • 8 K.M., Manga Raiwind Road, District Kasur Tel: (92-042) 35394133-35 Fax: (92-042) 35394132 • Gulyana Road, Gujar Khan, District Rawalpindi Tel: (92-0513) 564472-74 Fax: (92-0513) 564337 Website: • www.kmlg.com Note: KTML’s Financial Statements are also available at the above website. 6 Leading the way 7 Our Vision The Kohinoor Textile Mills Limited stated vision is to achieve and then remain as the most progressive and profitable Company in Pakistan in terms of industry standards and stakeholders interest. Our Mission The Company shall achieve its mission through a continuous process of having sourced, developed, implemented and managed the best leading edge technology, industry best practice, human resource and innovative products and services and sold these to its customers, suppliers and stakeholders. 8 Weaving Dreams 9 Code of Business Conduct and Ethical Principles The following principles constitute the code of conduct which all Directors and employees of Kohinoor Textile Mills Limited are required to apply in their daily work and observe in the conduct of Company’s business. While the Company will ensure that all employees are fully aware of these principles, it is the responsibility of each employee to implement the Company’s policies. Contravention is viewed as misconduct. The code emphasizes the need for a high standard of honesty and integrity which are vital for the success of any business. ETHICAL PRINCIPLES 1. Directors and employees are expected not to engage in any activity which can cause conflict between their personal interest and the interest of the Company such as interest in an organization supplying goods/services to the Company or purchasing its products. In case a relationship with such