Contents Company Information 2
Directors’ Report 4
Condensed Interim Balance Sheet 6
Condensed Interim Profit and Loss Account 8
Condensed Interim Statement of Comprehensive Income 9
Condensed Interim Statement of Changes in Equity 10
Condensed Interim Cash Flow Statement 11
Notes to and Forming Part of the Condensed Interim Financial Information 12
Packages Group Condensed Consolidated Interim Financial Information 20
Directors’ Report 21
Condensed Consolidated Interim Balance Sheet 22
Condensed Consolidated Interim Profit and Loss Account 24
Condensed Consolidated Interim Statement of Comprehensive Income 25
Condensed Consolidated Interim Statement of Changes In Equity 26
Condensed Consolidated Interim Cash Flow Statement 27
Notes to and Forming Part of the Condensed Consolidated Interim Financial Information 28 COMPANY INFORMATION
Board of Directors Remuneration and Appointments Towfiq Habib Chinoy Committee (Chairman) Towfiq Habib Chinoy - Chairman Syed Hyder Ali (Non-Executive Director) (Chief Executive & Managing Director) Syed Hyder Ali - Member Khalid Yacob (Executive Director) Matti Ilmari Naakka Syed Aslam Mehdi - Member Muhammad Aurangzeb (Executive Director) Shahid Aziz Siddiqui Asma Javed - Secretary Shamim Ahmad Khan Rating Agency: PACRA Syed Aslam Mehdi Syed Shahid Ali Company Rating Wazir Ali Khoja Long-Term: AA Ali Aslam Short-Term: A1+ (Alternate to Matti Ilmari Naakka) Auditors Advisor A.F. Ferguson & Co. Syed Babar Ali Chartered Accountants Company Secretary Legal Advisors Adi J. Cawasji Hassan & Hassan - Lahore Orr, Dignam & Co. - Karachi Executive Committee Syed Hyder Ali - Chairman Bankers & Lenders (Executive Director) Allied Bank Limited Syed Aslam Mehdi - Member Askari Bank Limited (Executive Director) Bank Alfalah Limited Khalid Yacob - Member Bank Al-Habib Limited (Executive Director) BankIslami Pakistan Limited Audit Committee Barclays Bank PLC, Pakistan Shamim Ahmad Khan - Chairman Citibank N.A. (Non-Executive Director) Deutsche Bank A.G. Matti Ilmari Naakka - Member Dubai Islamic Bank Pakistan Limited (Non-Executive Director) Faysal Bank Limited Muhammad Aurangzeb - Member Habib Bank Limited (Non-Executive Director) Habib Metropolitan Bank Limited Syed Shahid Ali - Member (Non-Executive Director) HSBC Bank Middle East Limited Wazir Ali Khoja - Member International Finance Corporation (IFC) (Non-Executive Director) JS Bank Limited Syed Aslam Mehdi - Member MCB Bank Limited (Executive Director) Meezan Bank Limited Adi J. Cawasji - Secretary National Bank of Pakistan (Company Secretary) NIB Bank Limited Samba Bank Limited Business Strategy Committee Syed Hyder Ali - Chairman Silk Bank Limited (Executive Director) Standard Chartered Bank (Pakistan) Limited Syed Aslam Mehdi - Member The Bank of Tokyo - Mitsubishi UFJ, Limited (Executive Director) United Bank Limited Khalid Yacob - Member (Executive Director) System and Technology Committee Syed Aslam Mehdi - Chairman (Executive Director) Khalid Yacob - Member (Executive Director) Suleman Javed - Member
2 Head Office & Works Zonal Sales Offices Shahrah-e-Roomi, C-2, Hassan Arcade Nusrat Road, P.O. Amer Sidhu, Multan Cantt. - 60000, Pakistan Lahore - 54760, Pakistan Tel. & Fax: (061) 4504553 PABX : (042) 35811541-46 : (042) 35811191-94 9th Floor State Life Building, Fax : (042) 35811195 2 - Liaquat Road, : (042) 35820147 Faisalabad, Pakistan Tel. : (041) 2540842 Factories Fax : (041) 2540815
Kasur Factory Uzair Enterprises Bulleh Shah Paper Mill (BSPM) Teer Chowk Bhuta Road, 10-km Kasur Kot Radhakishan Road, Sukkur - 65200, Pakistan District Kasur, Pakistan Tel. & Fax: (071) 5616138 Tel. : (049) 2717335-43 Fax : (049) 2717220 M. Hamza Traders 15-D Gul Plaza, Opp: Charsadda Bus Stand, Karachi Factory Peshawar-25000, Pakistan Plot No. 6 & 6/1, Sector 28, Cell : 03018650486 Korangi Industrial Area, Tel. : (091) 2043719 Karachi-74900, Pakistan Tel. : (021) 35045320, 35045310 Haq Brothers Fax : (021) 35045330 Tehsil Road, Jhelum-49600, Pakistan Cell : 03215332095 Offices : 03335179706
Registered Office & Regional Sales Office Shares Registrar 4th Floor, The Forum FAMCO Associates (Pvt.) Limited Suite No. 416 - 422, G-20, Block 9, 1st Floor, State Life Building No. 1-A Khayaban-e-Jami, Clifton, I. I. Chundrigar Road, Karachi-75600, Pakistan Karachi-74000, Pakistan PABX : (021) 35874047-49 PABX : (021) 32420755 : (021) 35378650-52 : (021) 32427012 : (021) 35831618, 35833011 : (021) 32425467 Fax : (021) 35860251 Fax : (021) 32426752
Regional Sales Office Web Presence 2nd Floor, G.D. Arcade www.packages.com.pk 73-E, Fazal-ul-Haq Road, Blue Area, Islamabad-44000, Pakistan PABX : (051) 2276765 : (051) 2276768 : (051) 2278632 Fax : (051) 2829411
3 DIRECTORS’ REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2011
The Directors of Packages Limited take pleasure in presenting to its shareholders, the quarterly report together with the un-audited financial statements of the Company for the first quarter ended March 31, 2011.
Financial and Operational Performance
The comparison of the un-audited results for the first quarter ended March 31, 2011 as against March 31, 2010 are as follows: Jan - March Jan - March 2011 2010 (Rupees in million)
Net sales 5,192 5,043
EBITDA - operations 516 462 Depreciation & amortisation (378) (381) EBIT - operations 138 81 Finance costs (351) (300) Other operating income / (expenses) - net 4 3 Investment income 642 750
Earnings before tax 433 534
During the first quarter of 2011, your Company has achieved net sales of Rs. 5,192 million with improved operating results. The Company generated EBITDA of Rs. 516 million during the quarter under review against Rs. 462 million of corresponding period of 2010 representing 11% growth emanating from better product mix, operating cost control and price rationalisation. The investment income has declined by Rs. 108 million over the corresponding period of 2010 mainly on account of timing differences in receipt of dividend income from related parties.
The production statistics for the period under review along with its comparison with the corresponding period are given below: Jan - March Jan - March 2011 2010
Paper and paperboard produced - tons 34,411 43,394 Paper and paperboard converted - tons 30,064 25,792 Plastics all sorts converted - tons 3,082 2,632
A review of the operations of different business units is as follows:
Packaging Operations
The Packaging Operations has registered sales of Rs. 3,321 million during the first quarter of 2011 as compared to Rs. 2,254 million of the corresponding period representing sales growth of 47%. Packaging Operations has achieved EBITDA growth of Rs. 289 million resulting from the revenue growth, better product mix and product price rationalisation.
4 Paper & Board Operations
During the first quarter of 2011, external sales of Paper & Board Operations dropped by Rs. 1,022 million over corresponding values of 2010 resulting into corresponding decrease in EBITDA by Rs. 161 million. This decline in sales volume is attributable to a number of factors including:
• Planned shut down of Brown Paper Machine (PM-6) for capacity expansion by 30,000 tons to enable production of high value added liquid packaging and bleached board on the machine. Paper Machine (PM-6) re-build project is expected to be completed in time and the machine will be in commercial production in second quarter of 2011.
• Energy is the second highest cost component in paper & paperboard manufacturing. Continued shortage of natural gas caused severe disruption in production and use of alternate fuel results in negative effect on the competitiveness.
• The writing and printing paper being produced on Paper Machine (PM-7) is facing unfair competition from imported paper that is being sold at dumping prices. Such unfair competition is adversely impacting profit margins and the Company has initiated a number of measures to counter such unfair practices including filing of application for imposition of anti-dumping and regulatory duties on the paper being imported.
Consumer Products Division
The Consumer Products Division has registered sales of Rs. 591 million during the first quarter of 2011 as compared to Rs. 497 million of the corresponding period of 2010 representing sales growth of 19%.
Future Outlook
In consideration of the current economic situation, rising raw material prices and energy shortages, the management will continue its focus to improve shareholder's value through price rationalisation, product and process optimisation, reduction of operating costs and efficient working capital management.
Company's Staff and Customers
We wish to record our appreciation of the commitment of our employees to the Company and continued patronage of our customers.
(Towfiq Habib Chinoy) (Syed Hyder Ali) Chairman Chief Executive & Managing Director Karachi, April 19, 2011 Karachi, April 19, 2011
5 PACKAGES LIMITED CONDENSED INTERIM BALANCE SHEET (UN-AUDITED) as at March 31, 2011
Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand) EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 150,000,000 (2010: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000 22,000,000 (2010: 22,000,000) 10 % non-voting cumulative preference shares / convertible stock of Rs.190 each 4,180,000 4,180,000 Issued, subscribed and paid up capital 84,379,504 (2010: 84,379,504) ordinary shares of Rs. 10 each 843,795 843,795 Reserves 27,598,326 24,218,774 Preference shares / convertible stock reserve 1,605,875 1,605,875 Unappropriated profit 887,718 261,441 30,935,714 26,929,885 NON-CURRENT LIABILITIES Long-term finances 5 7,956,291 7,956,291 Deferred income tax liabilities 2,415,000 2,168,000 Retirement benefits 167 167 Deferred liabilities 162,942 149,173 10,534,400 10,273,631 CURRENT LIABILITIES Current portion of long-term finances - secured 5 14,286 14,286 Finances under mark up arrangements - secured 909,389 141,231 Trade and other payables 1,630,901 1,794,059 Accrued finance cost 788,591 471,712 3,343,167 2,421,288
CONTINGENCIES AND COMMITMENTS 6 - -
44,813,281 39,624,804
6 Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand) ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 7 17,493,119 17,861,486 Intangible assets 2,152 2,392 Investment property 31,176 31,588 Capital work-in-progress 8 1,558,971 753,328 Investments 16,098,589 12,219,037 Long-term loans and deposits 129,194 128,429 Retirement benefits 94,557 94,557
35,407,758 31,090,817
CURRENT ASSETS
Stores and spares 1,044,572 1,049,950 Stock-in-trade 3,906,389 3,669,151 Trade debts 2,258,484 1,643,275 Loans, advances, deposits, prepayments and other receivables 627,260 265,361 Income tax receivable 828,321 766,107 Cash and bank balances 740,497 1,140,143
9,405,523 8,533,987
44,813,281 39,624,804
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
7 PACKAGES LIMITED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 Note (Rupees in thousand)
Local sales 6,135,099 5,500,467 Export sales 84,770 399,344
6,219,869 5,899,811
Less: Sales tax and excise duty 1,022,915 846,956 Commission 4,759 9,636
1,027,674 856,592
5,192,195 5,043,219 Cost of sales 9 (4,769,658) (4,691,727)
Gross profit 422,537 351,492
Administrative expenses (143,571) (121,965) Distribution and marketing costs (141,796) (147,797) Other operating expenses (32,219) (42,023) Other operating income 36,544 44,623
Profit from operations 141,495 84,330
Finance costs (350,711) (299,785) Investment income 642,493 749,869
Profit before taxation 433,277 534,414
Taxation (307,000) (214,000)
Profit after taxation 126,277 320,414
Earnings per share Basic Rupees 1.50 3.80 Diluted Rupees 1.50 3.80
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
8 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 (Rupees in thousand)
Profit after taxation 126,277 320,414
Other comprehensive income
Surplus on re-measurement of available for sale financial assets 3,879,552 124,220
Total comprehensive income for the period 4,005,829 444,634
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
9 PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) for the three months ended March 31, 2011
Preference shares / Unappro- Share Share Fair value General convertible priated capital premium reserve reserve stock reserve profit Total (Rupees in thousand)
Balance as on December 31, 2009 (audited) 843,795 2,876,893 561,912 13,660,333 1,605,875 3,868,099 23,416,907
Appropriation of funds Transferred from profit and loss account - - - 3,000,000 - (3,000,000) -
Profit for the period - - - - - 320,414 320,414
Other comprehensive income Surplus on re-measurement of available for sale financial assets - - 124,220 - - - 124,220
Balance as on March 31, 2010 (un-audited) 843,795 2,876,893 686,132 16,660,333 1,605,875 1,188,513 23,861,541
Transactions with owners Final dividend for the year ended December 31, 2009 Rs. 3.25 per share - - - - - (274,233) (274,233)
Loss for the period - - - - - (652,839) (652,839)
Other comprehensive income Surplus on re-measurement of available for sale financial assets - - 3,995,416 - - - 3,995,416
Balance as on December 31, 2010 (audited) 843,795 2,876,893 4,681,548 16,660,333 1,605,875 261,441 26,929,885
Appropriation of funds Transferred to profit and loss account - - - (500,000) - 500,000 -
Profit for the period - - - - - 126,277 126,277
Other comprehensive income Surplus on re-measurement of available for sale financial assets - - 3,879,552 - - - 3,879,552
Balance as on March 31, 2011 (un-audited) 843,795 2,876,893 8,561,100 16,160,333 1,605,875 887,718 30,935,714
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
10 PACKAGES LIMITED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 Note (Rupees in thousand) Cash flow from operating activities
Cash (used in) / generated from operations 12 (594,816) 1,047,360 Finance cost paid (33,832) (5,348) Taxes paid (122,214) (224,367) Payments for accumulating compensated absences (2,730) (9,343)
Net cash (used in) / generated from operating activities (753,592) 808,302
Cash flow from investing activities
Fixed capital expenditure (816,725) (84,854) Investment - net 2,629 8,357 Net increase in long-term loans and deposits (765) (733) Proceeds from sale of property, plant and equipment 4,649 8,072 Dividends received 396,000 568,526
Net cash (used in) / generated from investing activities (414,212) 499,368
Cash flow from financing activities - -
Net (decrease) / increase in cash and cash equivalents (1,167,804) 1,307,670 Cash and cash equivalents at the beginning of the period 998,912 369,224
Cash and cash equivalents at the end of the period 13 (168,892) 1,676,894
The annexed notes 1 to 16 form an integral part of this condensed interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
11 PACKAGES LIMITED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) for the three months ended March 31, 2011
1. Legal status and nature of business
Packages Limited (The Company) is a public limited Company incorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in the manufacture and sale of paper, paperboard, packaging materials and tissue products.
2. Basis of preparation
This condensed interim financial information is un-audited and is being submitted to the members as required by section 245 of The Companies Ordinance, 1984 and the listing regulations of Karachi, Lahore and Islamabad Stock Exchanges. This condensed interim financial information has been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 - 'Interim Financial Reporting'. This condensed interim financial information does not include all the information required for annual financial statements and therefore, should be read in conjunction with the annual financial statements for the year ended December 31, 2010.
3. Significant accounting policies
The accounting policies adopted for the preparation of this condensed interim financial information are the same as those applied in the preparation of preceding annual published financial statements of the Company for the year ended December 31, 2010. There are following amendments to published standards that are effective in current year and their impacts,where relevant, are reflected in this condensed interim financial information:
- IAS1 (Amendments), now requires an entity to present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements, accordingly, the Company has presented analysis of other comprehensive income for each component of equity in the statement of changes in equity.
- IAS 24 (Revised), ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. IAS 24 (Revised) is mandatory for periods beginning on or after January 01, 2011.The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The adoption of this amendment does not have any impact on the Company's condensed interim financial information.
- IAS 32 (Amendments),‘Classification of right issues’, issued in October 2009. The amendment applies to annual periods beginning on or after February 01, 2010. The amendment addresses the accounting for right issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such right issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’. The adoption of this amendment does not have any impact on the Company's condensed interim financial information.
12 - IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’, effective July 01, 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The adoption of this amendment does not have any impact on the Company's condensed interim financial information.
- IFRIC 14 (Amendments),‘Prepayments of a minimum funding requirement’. The amendments correct an unintended consequence of IFRIC 14, ‘IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise some voluntary prepayments for minimum funding contributions as an asset. This was not intended when IFRIC 14 was issued, and the amendments correct this. The amendments should be applied retrospectively to the earliest comparative period presented. The adoption of this amendment does not have any impact on the Company's condensed interim financial information.
4. The provision for taxation for the three months ended March 31, 2011 has been made using the tax rate that would be applicable to expected total annual earnings.
5. Long-term finances Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand)
Opening balance Local currency loans - secured 5,500,000 5,500,000 Preference shares / convertible stock - unsecured 2,470,577 2,470,577
7,970,577 7,970,577 Current portion shown under current liabilities Local currency loans - secured (14,286) (14,286)
Closing balance 7,956,291 7,956,291
6. Contingencies and commitments
6.1 Contingencies
i) Claims against the Company not acknowledged as debts Rs. 18.290 million (December 31, 2010: Rs. 17.952 million).
(ii) Against a sales tax refund aggregating Rs. 12.827 million determined by the Sales Tax Officer (STO) on the basis of the orders of the Appellate Assistant Commissioner (AAC) for the assessment years 1977-78 through 1980-81 and recognised in the accounts in 1985, the STO filed an appeal in 1986 with the Income Tax Appellate Tribunal (ITAT) against the Orders of the AAC for these years. The orders of the AAC were based on a decision already given by the ITAT on the Company's appeal for application of a lower rate of sales tax on self consumed material for earlier years. Pending the outcome of the appeal filed by STO no adjustment has been made for the refunds recognised in the accounts as the management is of the view that the appeal of the STO will not be upheld by the ITAT.
13 (iii) Post dated cheques not provided in the condensed interim financial information have been furnished by the Company in favour of the Collector of Customs against custom levies aggregated to Rs. 130.615 million (December 31, 2010: Rs. 88.769 million) in respect of goods imported.
(iv) In 1987, the Income Tax Officer (ITO) re-opened the Company’s assessments for the accounting years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Company under section 107 of the Income Tax Ordinance, 1979. The tax credit amounting to Rs. 36.013 million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Company’s undertaking which did not qualify for tax credit under this section in view of the Company’s location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years. The Company had filed an appeal against the revised orders of the ITO before the Commissioner of Income Tax (Appeals) [CIT(A)], Karachi.
The Commissioner has, in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO has filed an appeal against the Commissioner’s order with the Income Tax Appellate Tribunal (ITAT). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT (A), has issued notices under section 65 of the Income Tax Ordinance, 1979 and the Company has filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending. The management is of the view that outcome shall be in favour of the Company.
6.2 Commitments in respect of
(i) Letters of credit and contracts for capital expenditure Rs. 156.920 million (December 31, 2010: Rs. 782.605 million).
(ii) Letters of credit and contracts other than for capital expenditure Rs. 978.734 million (December 31, 2010: Rs. 761.100 million).
(iii) The amount of future payments under operating leases and Ijarah financing and the period in which these payments will become due are as follows: Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand)
Not later than one year 352,855 219,612 Later than one year and not later than five years 975,364 1,118,159
1,328,219 1,337,771
7. Property, plant and equipment
Opening book value 17,861,486 19,161,332 Additions during the period 7.1 11,082 244,972 Transferred from investment property (at book value) - 20,970
Disposals during the period (at book value) (2,001) (36,073) Depreciation charged during the period (377,448) (1,529,715)
(379,449) (1,565,788) Closing book value 17,493,119 17,861,486
14 7.1 Following is the detail of additions during the period Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand)
Freehold land - 13,495 Buildings on freehold land 480 14,226 Plant and machinery 1,902 123,717 Other equipment 2,861 41,686 Furniture and fixtures - 186 Vehicles 5,839 51,662 11,082 244,972
8. Capital work-in-progress Civil works 24,938 19,695 Plant and machinery [including in transit Rs. 13.661 million (2010: Rs. 301.537 million)] 1,533,216 570,995 Advances - 162,302 Others 817 336 1,558,971 753,328
Three months ended March 31, March 31, 2011 2010 (Rupees in thousand) 9. Cost of sales Opening work-in-process 209,916 145,140 Materials consumed 2,596,525 2,187,602 Salaries, wages and amenities 310,824 244,699 Fuel and power 900,944 723,961 Production supplies 104,290 104,943 Excise duty and sales tax 187 841 Rent, rates and taxes 86,821 34,488 Insurance 20,072 19,140 Repairs and maintenance 134,490 111,615 Packing expenses 34,058 31,857 Depreciation on property, plant and equipment 371,428 374,609 Amortisation on intangible assets 4 4 Technical fee and royalty 3,666 2,252 Other expenses 63,902 60,573 4,837,127 4,041,724 Closing work-in-process (269,644) (152,187) Cost of goods produced 4,567,483 3,889,537 Opening stock of finished goods 1,786,201 2,034,987 Cost of goods available for sale 6,353,684 5,924,524 Closing stock of finished goods (1,584,026) (1,232,797) 4,769,658 4,691,727
15 10. Earnings per share Three months ended March 31, March 31, 2011 2010 (Rupees in thousand)
10.1 Basic earnings per share
Profit for the period Rupees in thousand 126,277 320,414
Weighted average number of ordinary shares Numbers 84,379,504 84,379,504
Basic earnings per share Rupees 1.50 3.80
10.2 Diluted earnings per share
Profit for the period Rupees in thousand 126,277 320,414
Return on preference shares / convertible stock - net of tax Rupees in thousand 81,202 82,330
207,479 402,744
Weighted average number of ordinary shares Numbers 84,379,504 84,379,504
Weighted average number of notionally converted preference shares / convertible stock Numbers 21,686,842 21,686,842
106,066,346 106,066,346
Diluted earnings per share Rupees 1.96 3.80
The effect of the conversion of the preference shares / convertible stock into ordinary shares is anti-dilutive, accordingly the diluted EPS is restricted to the basic EPS.
16 11. Transactions with related parties Three months ended March 31, March 31, 2011 2010 (Rupees in thousand) Relationship with the Nature of transactions Company
i. Subsidiaries Purchase of goods and services 186,034 151,313 Sale of goods and services 4,082 3,563 Dividend income 34,386 40,527 Rental income 3,139 2,725 Management and technical fee 4,988 5,361
ii. Associated undertakings Purchase of goods and services 186,653 95,924 Sale of goods and services 7,982 8,166 Dividend income 100,000 100,000 Insurance claims 302 197 Insurance premium 46,979 30,430 Commission earned 542 616
iii. Other related parties Purchase of goods and services 63,539 19,686 Sale of goods and services 858,187 1,421,193 Dividend income 505,477 600,985 Rental income 8,881 7,597 Investment made 550,000 - Proceeds from sale of investment 552,392 -
iv. Post employment benefit plans Expense charged in respect of retirement benefits plans 37,900 30,205
v. Key management personnel Salaries and other employee benefits 14,537 12,210
All transactions with the related parties have been carried out on commercial terms and conditions.
Period-end balances Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand) Receivable from related parties 199,921 241,471 Payable to related parties 147,768 92,773
These are in the normal course of business and are interest free.
17 12. Cash generated from operations Three months ended March 31, March, 2011 2010 (Rupees in thousand)
Profit before taxation 433,277 534,414 Adjustments for: Depreciation on property, plant and equipment 377,448 380,542 Amortisation on intangible assets 240 26 Depreciation on investment property 412 714 Provision for accumulating compensated absences 16,499 12,103 Net profit on disposal of property, plant and equipment (2,648) (3,253) Finance costs 350,711 299,785 Dividend income (639,864) (741,512) Gain on sale of short-term investments (2,629) (8,357)
Profit before working capital changes 533,446 474,462
Effect on cash flow due to working capital changes
Decrease / (increase) in stores and spares 5,378 (30,042) (Increase) / decrease in stock-in-trade (237,238) 936,892 Increase in trade debts (615,209) (372,764) Increase in loans, advances, deposits, prepayments and other receivables (118,035) (29,394) (Decrease) / increase in trade and other payables (163,158) 68,206
(1,128,262) 572,898
(594,816) 1,047,360
13. Cash and cash equivalents
Cash and bank balances 740,497 1,837,626 Finances under mark up arrangements - secured (909,389) (160,732)
(168,892) 1,676,894
14. Date of authorisation for issue
This condensed interim financial information was authorised for issue on April 19, 2011 by the Board of Directors of the Company.
15. Events after balance sheet date
The Board of Directors have proposed a final cash dividend for the year ended December 31, 2010 of Rs. 3.25 per share (2009: Rs. 3.25 per share), amounting to Rs. 274.233 million ( 2009 : Rs. 274.233 million) at their meeting held on February 18, 2011 for approval of the shareholders at the Annual General Meeting to be held on April 20, 2011, accordingly, dividend appropriation has not been recognised in these financial statements as dividend has not been approved by shareholders as of the date of authorisation of this condensed interim financial information.
18 16. Corresponding figures
In order to comply with the requirements of International Accounting Standard 34 - 'Interim Financial Reporting', the condensed interim balance sheet and condensed interim statement of changes in equity have been compared with the balances of annual audited financial statements of preceding financial year, whereas, the condensed interim profit and loss account, condensed interim statement of comprehensive income and condensed interim cash flow statement have been compared with the balances of comparable period of immediately preceding financial year.
Corresponding figures have been re-classified, wherever necessary, for the purposes of comparison. Significant re-classifications made are as follows:
(Rupees in thousand)
Re-classification of salaries, wages and amenities from cost of sales to :
Distribution and marketing costs 3,128 Administrative expenses 5,998
Re-classification of gain on sale of short-term investments from other operating income to investment income 8,357
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
19 Packages Group Condensed Consolidated Interim Financial Information DIRECTORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011
The Directors of Packages Limited are pleased to present the un-audited consolidated financial statements of the Group for the first quarter ended March 31, 2011.
Group results
The comparison of the un-audited results for the quarter ended March 31, 2011 as against March 31, 2010 are as follows: Jan - March Jan - March 2011 2010 (Rupees in thousand) Net sales 5,722 5,602 Profit from operations 216 200 Share of profit of associates 125 55 Investment income 508 609 Profit before tax 484 551
During the current period, the Group achieved sales of Rs. 5,722 million with profit from operations of Rs. 216 million. However, profit before tax is lower by Rs. 67 million over corresponding period of 2010 due to timing differences on realisation of dividend income from related parties.
A brief review of the operational performance of the Group subsidiaries is as follows:
DIC PAKISTAN LIMITED
DIC Pakistan Limited has registered sales of Rs. 442 million during the first quarter of 2011 as compared to Rs. 426 million of corresponding period of 2010. The Company has generated profit before tax of Rs. 41 million during first quarter of 2011 as against Rs. 53 million generated during corresponding period of 2010. This decline in profitability is mainly attributable to increase in imported raw material prices that could not be fully passed on to the customers. In addition to price rationalisation, Company is also focussing on tighter operating cost control and efficient working capital management to improve margins in the coming months.
PACKAGES LANKA (PRIVATE) LIMITED
Packages Lanka (Private) Limited has achieved sales of SLR 342 million during first quarter of 2011 as compared to SLR 367 million for the corresponding period of 2010. Company has managed to generate profit before tax of SLR 31 million during the first quarter of 2011 as against SLR 66 million for the corresponding period of 2010. This decline in profit is mainly attributable to increase in raw material prices which could not be passed on completely to the customers. The Company is now focusing on maximising the utilisation of existing assets and exploring new markets.
(Towfiq Habib Chinoy) (Syed Hyder Ali) Chairman Chief Executive & Managing Director Karachi, April 19, 2011 Karachi, April 19, 2011
21 PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UN-AUDITED) as at March 31, 2011
Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand) EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 150,000,000 (2010: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000 22,000,000 (2010: 22,000,000) 10% non-voting cumulative preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000 Issued, subscribed and paid up capital 84,379,504 (2010: 84,379,504) ordinary shares of Rs. 10 each 843,795 843,795 Reserves 27,612,466 24,238,689 Preference shares / convertible stock reserve 1,605,875 1,605,875 Unappropriated profit 1,177,059 577,487 31,239,195 27,265,846 NON-CONTROLLING INTEREST 216,975 213,718 31,456,170 27,479,564 NON-CURRENT LIABILITIES Long-term finances 5 7,956,291 7,956,291 Deferred income tax liabilities 2,592,454 2,348,704 Retirement benefits 167 167 Deferred liabilities 178,545 163,853 10,727,457 10,469,015 CURRENT LIABILITIES Current portion of long-term finances - secured 14,286 14,286 Finances under mark up arrangements - secured 1,289,954 511,439 Trade and other payables 1,720,678 1,896,664 Accrued finance cost 794,852 475,249 Provision for taxation 56,329 46,094 3,876,099 2,943,732 CONTINGENCIES AND COMMITMENTS 6 - - 46,059,726 40,892,311
22 Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand) ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 7 17,826,254 18,209,643 Intangible assets 15,169 16,099 Investment property 5,508 5,589 Capital work-in-progress 8 1,559,009 753,328 Investments in associates 9 3,517,358 3,530,286 Other long-term investments 10 12,560,736 8,681,184 Long-term loans and deposits 138,992 139,943 Retirement benefits 94,557 94,557
35,717,583 31,430,629
CURRENT ASSETS
Stores and spares 1,069,118 1,080,181 Stock-in-trade 4,411,990 4,163,403 Trade debts 2,555,317 1,947,316 Loans, advances, deposits, prepayments and other receivables 611,718 282,616 Income tax receivable 883,231 821,717 Cash and bank balances 810,769 1,166,449
10,342,143 9,461,682
46,059,726 40,892,311
The annexed notes 1 to 20 form an integral part of this condensed consolidated interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
23 PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 Note (Rupees in thousand)
Local sales 6,682,437 6,081,843 Export sales 87,258 422,245 6,769,695 6,504,088 Less: Sales tax and excise duty 1,043,200 890,881 Commission 4,884 11,640 1,048,084 902,521 5,721,611 5,601,567 Cost of sales 11 (5,182,095) (5,092,559) Gross profit 539,516 509,008 Administrative expenses (165,766) (142,985) Distribution and marketing costs (155,323) (160,561) Other operating expenses (35,479) (45,991) Other operating income 33,026 40,571 Profit from operations 215,974 200,042 Finance costs (365,562) (312,547) Investment income 508,106 609,342 Share of profit of associates 125,284 54,561 Profit before taxation 483,802 551,398 Taxation Group (334,035) (248,487) Associates (38,212) (16,182) (372,247) (264,669) Profit after taxation 111,555 286,729 Attributable to: Equity holders of the parent 99,572 264,540 Non-controlling interest 11,983 22,189 111,555 286,729 Combined earnings per share Basic Rupees 12 1.18 3.14 Diluted Rupees 12 1.18 3.14
The annexed notes 1 to 20 form an integral part of this condensed consolidated interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
24 PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 (Rupees in thousand)
Profit after taxation 111,555 286,729
Other comprehensive income
Exchange differences on translation of foreign subsidary (7,304) 5,184
Surplus on re-measurement of available for sale financial assets 3,879,552 124,220
Other comprehensive income for the period 3,872,248 129,404
Total comprehensive income for the period 3,983,803 416,133
Attributable to:
Equity holders of the parent 3,973,350 392,859
Non-controlling interest 10,453 23,274
3,983,803 416,133
The annexed notes 1 to 20 form an integral part of this condensed consolidated interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
25 PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) for the three months ended March 31, 2011 Exchange Preference difference on shares / translation convertible Unappro- Non- Share Share of foreign Fair Value General stock priated controlling Total capital premium subsidiary reserve reserve reserve profit Total interest Equity (Rupees in thousand) Balance as on Decmeber 31, 2009 (audited) - restated 843,795 2,876,893 5,230 561,912 13,660,333 1,605,875 4,003,965 23,558,003 186,388 23,744,391 Appropriation of funds Transferred from profit & loss account - - - - 3,000,000 - (3,000,000) - - - Transactions with the owner Final dividend for the year ended December 31, 2009 Rs. 12 per share ------(33,183) (33,183) Profit for the period ------264,540 264,540 22,189 286,729 Other comprehensive income Surplus on re-measurement of available for sale financial assets - - - 124,220 - - - 124,220 - 124,220 Exchange difference on translation of foreign subsidiary - - 4,099 - - - - 4,099 1,085 5,184 Balance as on March 31, 2010 (un-audited) - restated 843,795 2,876,893 9,329 686,132 16,660,333 1,605,875 1,268,505 23,950,862 176,479 24,127,341 Transactions with the owner Final dividend for the year ended December 31, 2009 Rs. 3.25 per share ------(274,233) (274,233) - (274,233) Interim dividend for the half year ended June 30, 2010 SLR 0.50 per share ------(4,464) (4,464) (Loss) / profit for the period ------(416,785) (416,785) 38,901 (377,884) Other comprehensive income Surplus on re-measurement of available for sale financial assets - - - 3,995,416 - - - 3,995,416 - 3,995,416 Exchange difference on translation of foreign subsidiary - - 10,586 - - - - 10,586 2,802 13,388 Balance as on December 31, 2010 (audited) 843,795 2,876,893 19,915 4,681,548 16,660,333 1,605,875 577,487 27,265,846 213,718 27,479,564 Appropriation of funds Transferred to profit & loss account - - - - (500,000) - 500,000 - - - Transactions with the owner Final dividend for the year ended December 31, 2010 SLR. 1 per share ------(7,197) (7,197) Profit for the period ------99,572 99,572 11,983 111,555 Other comprehensive income Surplus on re-measurement of available for sale financial assets - - - 3,879,552 - - - 3,879,552 - 3,879,552 Exchange difference on translation of foreign subsidiary - - (5,775) - - - - (5,775) (1,529) (7,304) Balance as on March 31, 2011 (un-audited) 843,795 2,876,893 14,140 8,561,100 16,160,333 1,605,875 1,177,059 31,239,195 216,975 31,456,170
The annexed notes 1 to 20 form an integral part of this condensed consolidated interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
26 PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT (UN-AUDITED) for the three months ended March 31, 2011
Three months ended March 31, March 31, 2011 2010 Note (Rupees in thousand) Cash flow from operating activities
Cash (used in) / generated from operations 14 (520,218) 1,143,239 Finance cost paid (45,959) (28,477) Taxes paid (141,566) (244,970) Payments for accumulating compensated absences (3,676) (9,343)
Net cash (used in) / generated from operating activities (711,419) 860,449
Cash flow from investing activities
Fixed capital expenditure (820,437) (98,552) Investment - net 2,629 8,357 Net decrease / (increase) in long-term loans and deposits 951 (829) Proceeds from sale of property, plant and equipment 5,278 9,772 Dividends received 396,000 528,000
Net cash (used in) / generated from investing activities (415,579) 446,748
Cash flow from financing activities
Payment of finance lease liabilities - (2,391) Dividend paid to non-controlling interest (7,197) (33,183)
Net cash used in financing activities (7,197) (35,574)
Net (decrease) / increase in cash and cash equivalents (1,134,195) 1,271,623 Cash and cash equivalents at the beginning of the period 655,010 66,805
Cash and cash equivalents at the end of the period 15 (479,185) 1,338,428
The annexed notes 1 to 20 form an integral part of this condensed consolidated interim financial information.
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
27 PACKAGES GROUP NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) for the three months ended March 31, 2011
1. Legal status and nature of business Packages Limited (the Parent Company) and its subsidiaries, DIC Pakistan Limited, Packages Lanka (Private) Limited and Packages Construction (Private) Limited (together, ‘The Group’) are engaged in the following businesses: Packaging: Representing manufacture and sale of paper, paperboard, packing materials and tissue products. Inks: Representing manufacture and sale of finished and semi finished inks. Construction: Representing all type of construction activities and development of real estate. 2. Basis of preparation This condensed interim financial information is un-audited and is being submitted to the members as required by section 245 of The Companies Ordinance, 1984 and the listing regulations of Karachi, Lahore and Islamabad Stock Exchanges. This condensed interim financial information has been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 - 'Interim Financial Reporting'. This condensed interim financial information does not include all the information required for annual financial statements and therefore should be read in conjunction with the annual financial statements for the year ended December 31, 2010. 3. Significant accounting policies The accounting policies adopted for the preparation of this condensed interim financial information are the same as those applied in the preparation of preceding annual published financial statements of the Group for the year ended December 31, 2010. There are following amendments to published standards that are effective in current year and their impacts,where relevant, are reflected in this condensed interim financial information: - IAS1 (Amendments), now requires an entity to present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements, accordingly, the Group has presented analysis of other comprehensive income for each component of equity in the statement of changes in equity. - IAS 24 (Revised), ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. IAS 24 (Revised) is mandatory for periods beginning on or after January 01, 2011.The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The adoption of this amendment does not have any impact on the Group's condensed interim financial information. - IAS 32 (Amendments),‘Classification of right issues’, issued in October 2009. The amendment applies to annual period beginning on or after February 01, 2010. The amendment addresses the accounting for right issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such right issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’. The adoption of this amendment does not have any impact on the Group's condensed interim financial information. - IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’, effective July 01, 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments
28 should be measured to reflect the fair value of the financial liability extinguished. The adoption of this amendment does not have any impact on the Group's condensed interim financial information. - IFRIC 14 (Amendments),‘Prepayments of a minimum funding requirement’. The amendments correct an unintended consequence of IFRIC 14, ‘IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise some voluntary prepayments for minimum funding contributions as an asset. This was not intended when IFRIC 14 was issued, and the amendments correct this. The amendments should be applied retrospectively to the earliest comparative period presented. The adoption of this amendment does not have any impact on the Group's condensed interim financial information. 4. The provision for taxation for the three months ended March 31, 2011 has been made using the tax rate that would be applicable to expected total annual earnings.
5. Long-term finances Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand) Opening balance Local currency loans - secured 5,500,000 5,500,000 Preference shares / convertible stock - unsecured 2,470,577 2,470,577 7,970,577 7,970,577 Current portion shown under current liabilities Local currency loans - secured (14,286) (14,286) Closing balance 7,956,291 7,956,291 6. Contingencies and commitments 6.1 Contingencies
(i) Claims against the Group not acknowledged as debts Rs. 18.290 million (December 31, 2010: Rs. 17.952 million). (ii) Against a sales tax refund aggregating Rs 12.827 million determined by the Sales Tax Officer (STO) on the basis of the orders of the Appellate Assistant Commissioner (AAC) for the assessment years 1977-78 through 1980-81 and recognized in the financial statements in 1985, the STO filed an appeal in 1986 with the Income Tax Appellate Tribunal (ITAT) against the Orders of the AAC for these years. The orders of the AAC were based on a decision already given by the ITAT on the Parent Company's appeal for application of a lower rate of sales tax on self consumed material for earlier years. Pending the outcome of the appeal filed by STO no adjustment has been made for the refunds recognised in the financial statements as the management is of the view that the appeal of the STO will not be upheld by the ITAT. (iii) Post dated cheques and guarantees not provided in the condensed interim financial information have been furnished by the Group in favour of the Collector of Customs (Pakistan) and Director General of Customs (Sri Lanka) against custom levies aggregated to Rs. 130.615 million (December 31, 2010 : Rs. 88.769 million) and Rs. 5.633 million (December 31, 2010 : Nil) respectively in respect of goods imported. (iv) In 1987, the Income Tax Officer (ITO) re-opened the Parent Company's assessments for the accounting years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Parent Company under section 107 of the Income Tax Ordinance, 1979. The tax credit amounting to Rs. 36.013 million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Parent Company's undertaking
29 which did not qualify for tax credit under this section in view of the Parent Company's location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years The Parent Company had filed an appeal against the revised orders of the ITO before the Commissioner of Income Tax (Appeals) [CIT(A)], Karachi. The Commissioner has, in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO has filed an appeal against the Commissioner’s order with the Income Tax Appellate Tribunal (ITAT). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT (A), has issued notices under section 65 of the Income Tax Ordinance, 1979 and the Parent Company has filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending. The management is of the view that outcome shall be in favour of the Parent Company.
6.2 Commitments in respect of (i) Letters of credit and contracts for capital expenditure Rs.178.920 million (December 31, 2010: Rs. 782.605 million). (ii) Letters of credit and contracts other than for capital expenditure Rs. 1,006.724 million (December 31, 2010: Rs. 812.150 million). (iii) The amount of future payments under operating leases and Ijarah financing and the period in which these payments will become due are as follows: Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand)
Not later than one year 352,855 232,167 Later than one year and not later than five years 975,364 1,130,762
1,328,219 1,362,929
7. Property, plant and equipment
Opening book value 18,209,643 19,513,093
Additions during the period 7.1 14,756 278,153 Transfer in (at book value) - 51,270 Exchange adjustment on opening cost (11,285) 29,611
3,471 359,034
18,213,114 19,872,127
Disposals during the period (at book value) (2,112) (60,880) Depreciation charged during the period (390,558) (1,582,728) Exchange adjustment on opening accumulated depreciation 5,810 (18,876)
(386,860) (1,662,484)
Closing book value 17,826,254 18,209,643
30 7.1 Following is the detail of additions during the period Un-audited Audited March 31, December 31, 2011 2010 Note (Rupees in thousand) Freehold land - 13,495 Buildings on freehold land 480 14,226 Plant and machinery 1,902 145,472 Other equipment 5,608 44,839 Furniture and fixtures 64 1,312 Vehicles 6,702 58,809 14,756 278,153 8. Capital work-in-progress Civil works 24,938 19,695 Plant and machinery [including in transit Rs. 13.661 million (2010: Rs. 301.537 million)] 1,533,254 570,995 Advances - 162,302 Others 817 336 1,559,009 753,328 9. Investments in associates Cost 3,758,386 3,758,386 Post acquisition loss brought forward (228,100) (348,378) 3,530,286 3,410,008 Profit for the period before taxation 125,284 324,219 Provision for taxation (38,212) (80,430) 87,072 243,789 3,617,358 3,653,797 Dividends received during the period (100,000) (123,511) Closing balance 9.2 3,517,358 3,530,286 9.1 In equity instruments of associated companies Quoted IGI Insurance Limited 7,625,294 (2010: 7,625,294) fully paid ordinary shares of Rs. 10 each Market value - Rs. 762.453 million (2010: Rs 738.815 million) 1,158,795 1,135,713 Tri-Pack Films Limited 10,000,000 (2010: 10,000,000) fully paid ordinary shares of Rs. 10 each Market value - Rs. 1,520 million (2010: Rs. 1,221.600 million) 2,321,386 2,357,450 IGI Investment Bank Limited 4,610,915 (2010: 4,610,915) fully paid ordinary shares of Rs. 10 each Market value - Rs. 9.221 million (2010: Rs. 13.510 million) 37,177 37,123 3,517,358 3,530,286
31 10. Other long-term investments Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand) Quoted Nestle Pakistan Limited 3,649,248 (2010: 3,649,248) fully paid ordinary shares of Rs. 10 each 12,546,005 8,666,453 Unquoted Tetra Pak Pakistan Limited 1,000,000 (2010: 1,000,000) fully paid non-voting ordinary shares of Rs. 10 each 10,000 10,000 Pakistan Tourism Development Corporation Limited 2,500 (2010: 2,500) fully paid ordinary shares of Rs. 10 each 25 25 Orient Match Company Limited 1,900 (2010: 1,900) fully paid ordinary shares of Rs. 100 each - - Coca-Cola Beverages Pakistan Limited 500,000 (2010: 500,000) fully paid ordinary shares of Rs. 10 each 4,706 4,706 12,560,736 8,681,184 Nestle Pakistan Limited, Tetra Pak Pakistan Limited and Coca-Cola Beverages Pakistan Limited are associated undertakings under The Companies Ordinance 1984. However, for the purpose of measurement, these have been classified as available for sale investments as the Group does not have a significant influence over their operations. 11. Cost of sales Three months ended March 31, March 31, 2011 2010 (Rupees in thousand) Opening work-in-process 269,221 227,609 Materials consumed 2,919,414 2,495,488 Salaries, wages and amenities 334,752 265,871 Fuel and power 916,951 739,977 Production supplies 111,032 110,158 Excise duty and sales tax 187 841 Rent, rates and taxes 86,689 35,420 Insurance 20,354 19,862 Repairs and maintenance 144,043 119,787 Packing expenses 43,794 40,007 Depreciation on property, plant and equipment 381,892 385,955 Amortisation on intangible assets 4 4 Technical fee and royalty 13,944 13,056 Traveling and conveyance 721 271 Other expenses 73,131 63,744 5,316,129 4,518,050 Closing work-in-process (338,285) (232,712) Cost of goods produced 4,977,844 4,285,338 Opening stock of finished goods 1,826,462 2,071,058 Cost of goods available for sale 6,804,306 6,356,396 Closing stock of finished goods (1,622,211) (1,263,837) 5,182,095 5,092,559
32 12. Combined earnings per share Three months ended March 31, March 31, 2011 2010 (Rupees in thousand)
12.1 Combined basic earnings per share
Profit for the period Rupees in thousand 99,573 264,540
Weighted average number of ordinary shares Numbers 84,379,504 84,379,504
Combined basic earnings per share Rupees 1.18 3.14
12.2 Combined diluted earnings per share
Profit for the period Rupees in thousand 99,573 264,540
Return on preference shares / convertible stock - net of tax Rupees in thousand 81,202 82,330
180,775 346,870
Weighted average number of ordinary shares Numbers 84,379,504 84,379,504
Weighted average number of notionally converted preference shares / convertible stock Numbers 21,686,842 21,686,842
106,066,346 106,066,346
Combined diluted earnings per share Rupees 1.70 3.27
The effect of the conversion of the preference shares / convertible stock into ordinary shares is anti-dilutive, accordingly the diluted EPS is restricted to the basic EPS.
33 13. Transactions with related parties Three months ended March 31, March 31, 2011 2010 (Rupees in thousand)
Relationship with the Nature of transactions Group
i. Associated Undertakings Purchase of goods and services 186,653 95,924 Sale of goods and services 7,982 8,166 Dividend income 100,000 100,000 Insurance premium 49,106 31,956 Insurance claim 302 197 Commission earned 571 616
ii. Other related parties Purchase of goods and services 88,671 56,879 Sale of goods and services 983,626 1,439,225 Dividend income 505,477 600,985 Rental income 8,881 7,597 Royalty & technical fee 10,198 10,626 Investment made 550,000 - Proceeds from sale of investments 552,392 - Rebate received 414 -
iii. Post employment benefit plans Expenses charged in respect of retirement benefit plans 39,811 31,943
iv. Key management personnel Salaries and other employee benefits 16,886 14,857
All transactions with related parties have been carried out on commercial terms and conditions.
Period-end balances Un-audited Audited March 31, December 31, 2011 2010 (Rupees in thousand)
Receivable from related parties 211,946 263,741 Payable to related parties 73,261 36,563
These are in the normal course of business and are interest free.
34 14. Cash generated from operations Three months ended March 31, March, 2011 2010 (Rupees in thousand) Profit before taxation 483,802 551,398 Adjustments for: Depreciation on property, plant and equipment 390,558 393,757 Amortisation on intangible assets 930 1,451 Depreciation on investment property 81 385 Depreciation on assets subject to finance lease - 63 Provision for accumulating compensated absences and staff gratuity 18,368 15,178 Exchange adjustments (1,828) 9,644 Profit on disposal of property, plant and equipment (3,166) (4,224) Finance costs 365,562 312,547 Dividend income from other investments (505,477) (600,985) Share of profit from associated companies (125,284) (54,561) Gain on sale of short-term investments (2,629) (8,357) Profit before working capital changes 620,917 616,296 Effect on cash flow due to working capital changes Decrease / (increase) in stores and spares 11,063 (25,448) (Increase) / decrease in stock-in-trade (248,587) 879,510 Increase in trade debts (608,001) (407,161) Increase in loans, advances, deposits, prepayments and other receivables (119,624) (15,026) (Decrease) / increase in trade and other payables (175,986) 95,068 (1,141,135) 526,943 (520,218) 1,143,239 15. Cash and cash equivalents Cash and bank balances 810,769 1,888,467 Finances under mark up arrangements - secured (1,289,954) (550,039) (479,185) 1,338,428 16. Segment Information Packaging Division Paper & Board Division Ink Division General & Others Total March 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31, 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 (Rupees in thousand) Revenue from external customers 3,574,001 2,531,253 1,838,803 2,766,984 275,977 281,388 32,830 21,942 5,721,611 5,601,567 Intersegment revenue 190,244 119,610 2,076,061 1,074,464 166,007 144,516 49,201 21,614 2,481,513 1,360,204 3,764,245 2,650,863 3,914,864 3,841,448 441,984 425,904 82,031 43,556 8,203,124 6,961,771 Segment profit/ (loss) before tax 520,332 290,162 (732,092) (471,120) 40,972 52,700 666,536 765,621 495,748 637,363
March 31, Dec 31, March 31, Dec 31, March 31, Dec 31, March 31, Dec 31, March 31, Dec 31, 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Segment assets 6,147,823 5,459,523 20,239,046 19,592,348 817,287 757,953 547,539 633,392 27,751,695 26,443,216
March 31, March 31, 2011 2010 Reconciliation of profit: (Rupees in thousand) Total profit for reportable segments 495,748 637,363 Income / (loss) from Associates - Net 25,284 (45,439) Intercompany consolidation adjustment (37,230) (40,526) Profit before tax 483,802 551,398
35 17. Detail of subsidiaries Accounting Percentage of Country of Name of the subsidiaries year end holding incorporation
Packages Lanka (Private) Limited December 31 79.07% Sri Lanka DIC Pakistan Limited December 31 54.98% Pakistan Packages Construction (Private) Limited December 31 99.99% Pakistan
18. Date of authorisation for issue This condensed consolidated interim financial information was authorised for issue on April 19, 2011 by the Board of Directors of the Parent Company.
19. Events after balance sheet date The Board of Directors of Parent Company have proposed a final cash dividend for the year ended December 31, 2010 of Rs. 3.25 per share (2009 Rs. 3.25 per share), amounting to Rs. 274.233 million (2009 Rs. 274.233 million) at their meeting held on February 18, 2011 for approval of the members at the Annual General Meeting to be held on April 20, 2011, accordingly, dividend appropriation has not been recognised in these financial statements as dividend has not been approved by the members as of the date of authorisation of this condensed interim financial information.
20. Corresponding figures In order to comply with the requirements of International Accounting Standard 34 - 'Interim Financial Reporting', the condensed interim balance sheet and condensed interim statement of changes in equity have been compared with the balances of annual audited financial statements of preceding financial year, whereas, the condensed interim profit and loss account, condensed interim statement of comprehensive income and condensed interim cash flow statement have been compared with the balances of comparable period of immediately preceding financial year. Corresponding figures have been re-classified, wherever necessary, for the purposes of comparison. Significant re-classification made are as follows:
(Rupees in thousand)
Re-classification of salaries, wages and amenities from cost of sales to :
Distribution and marketing costs 3,128 Administrative expenses 5,998
Re-classification of gain on sale of short-term investments from other operating income to investment income 8,357
Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director
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