our energy annual report 2 0 1 3 Dawood Hercules Corporation Limited (DH Corp.) is an investment holding company with associated business interests which range from fertilizer and energy to food, chemicals manufacturing and storage, information technology, and financial services. our energy Energy in all its sustainable forms is the key to Pakistan’s future prosperity and well-being. It is crucial for industrial development and progress, and ultimately our survival. To endure and flourish, it is imperative for the country to develop a diversified and sustainable energy mix. The Dawood Hercules Group aims to be at the forefront of the energy revolution in the country. It is our commitment to encourage sustainable business practices which enhance economic growth while simultaneously protecting our nation’s human, natural and cultural resources. We firmly believe that this approach will ensure a brighter future for us all. © 2014, Dawood Hercules Corporation Limited All Rights Reserved. No part of this publication may be reproduced without the prior written permission of the publisher. Contents Vision 02 Market capitalization & book value 50 Mission 02 Appropriation 50 Business ethics and core values 04 Contribution to the national exchequer Performance highlights 08 and economy 50 Company information 13 Provident & gratuity funds 50 Board of Directors 16 Board of Directors 51 Director’s profiles 18 Board meetings 51 Committees 22 Statement of directors’ responsibility 51 Directors training programme 52 Operating Highlights 26 Related party transactions 52 Future outlook 52 Six years at a glance 26 Acknowledgment 53 Horizontal analysis (Balance sheet) 28 Statement of compliance 56 Vertical analysis (Balance sheet) 30 Review report on statement of compliance 58 Horizontal analysis (Profit & loss) 32 Vertical analysis (Profit & loss) 32 Financial Statements 59 Statement of value addition 34 Notice of annual general meeting 38 Auditor’s report to the members 61 Financial statements 62 Directors’ Report 46 Notes to the financial statements 67 Consolidated financial statements Economic overview - Pakistan 46 Auditor’s report 101 Fertilizer market overview 46 Consolidated financial statements 102 Business overview 47 Notes to the consolidated Financial performance 49 financial statements 107 Earnings per share 49 Pattern of shareholding 155 Auditors 49 Form of proxy Pattern of shareholding 50 Vision To be the leading investor and wealth creator of value driven businesses Mission We will maximize profit by investing in businesses that share our vision and fulfill our investment criteria to achieve growth and return aspirations on a consistent basis. We will create intrinsic value by incorporating efficiency and capability within our existing operations and through our investments. Business Ethics & Core Values This statement of Business Ethics and Core Values constitutes the basis on which Dawood Hercules Corporation Limited conducts its business. The Board of Directors and the employees of Dawood Hercules Corporation Limited are the custodians of the excellent reputation for conducting our business according to the highest principles of business ethics. Our reputation not only affects whether or not someone will do business with us, it also determines whether we are proud to be associated with this Company. We are committed to conducting our business activities in honest and sincere alignment with our Core Values and in full compliance with all the applicable laws and regulations. We also believe in treating our employees with the same principles in order to build mutual respect, confidence and trust based upon integrity, honesty, openness and competence. In order to maintain and enhance our reputation for integrity in our business, it is important for all of us individually and collectively to adhere to the highest moral, ethical and legal standards. 04 Dawood Hercules Corporation Limited Core Values At Dawood Hercules Corporation Limited, all our actions are based on and guided by the following values: Diversity Teamwork We respect the dignity, We are committed rights and views of others to work as a team and will provide unrestricted to achieve common opportunity for personal goals whilst fairly advancement to employees recognising and irrespective of gender, rewarding individual ethnicity, beliefs, cultures contributions on and religions. merit. Integrity Accountability Commitment We will conduct We will be accountable to ourselves with as individuals and as uncompromising employees for our Excellence ethics and honesty ethical conduct and We will drive and achieve at all times, in all for compliance with results while pursuing the situations, both applicable laws and highest standards and professionally and policies and directives of maximizing the use of personally. the management. resources. Annual Report 2013 05 GAS Natural gas is a combustible mixture of hydrocarbon gases. Formed primarily of methane, it can also include ethane, propane, butane and pentane. Natural gas is an energy source used extensively for heating, cooking, electricity generation, and chemical feedstock for manufacturing fertilizers. Performance highlights Key Figures Total investment value (Long term plus short term) Total assets (PKR million) (PKR million) +15% +16% 39,066 35,727 34,109 30,816 2012 2013 2012 2013 Market capitalization (PKR million) +73% 27,010 15,661 2012 2013 08 Dawood Hercules Corporation Limited Sales (PKR million) +5% 4,840 4,602 2012 2013 EBITDA Earnings per share (PKR million) (PKR per share) +129% +267% 7.49 5,119 2,231 2.04 2012 2013 2012 2013 Annual Report 2013 09 electricity Electrical power is the backbone of modern industrial societies. Its extraordinary versatility means it can be put to an almost limitless set of applications which include transport, heating, lighting, and communications. The Hub Power Company Ltd (in picture) is one of the largest private- sector power companies in Pakistan, producing over 1,200 MW of electricity with generation facilities located in Hub, Narowal, and Mangla. DH Corp. HQ Company Information Board of Directors Bankers Mr. Hussain Dawood Chairman Bank Al-Habib Limited Mr. Shahid Hamid Pracha Chief Executive Officer Barclays Bank PLC, Pakistan Mr. Javed Akbar Director Allied Bank Limited Mr. M. Abdul Aleem Director United Bank Limited Mr. M. Aliuddin Ansari Director Mr. A. Samad Dawood Director Auditors Mr. Shahzada Dawood Director A.F. Ferguson & Co. Mr. Parvez Ghias Director Chartered Accountants Mr. Saad Raja Director State Life Building No. 1-C I.I. Chundrigar Road Board Audit Committee P.O. Box 4716 Karachi-74000 Mr. M. Abdul Aleem Chairman Tel: +92 (21) 32426682-6 Mr. Javed Akbar Member Fax: +92 (21) 32415007, 32427938 Mr. Parvez Ghias Member Shares Registrar Board Compensation Committee M/s. FAMCO Associates (Pvt.) Ltd. Mr. Hussain Dawood Chairman 8-F, Next to Hotel Faran, Nursery, Block - 6, Mr. M. Aliuddin Ansari Member P.E.C.H.S, Shahrah-e-Faisal, Karachi Mr. A. Samad Dawood Member Tel: +92 (21) 34380101-2 Mr. Parvez Ghias Member Fax: +92 (21) 34380106 Board Investment Committee Tax Consultants Mr. A. Samad Dawood Chairman A.F. Ferguson & Co. Mr. Shahid Hamid Pracha Member Chartered Accountants Mr. Ali Aamir Member State Life Building No. 1-C I.I. Chundrigar Road Company Secretary P.O. Box 4716 Karachi-74000 Mr. Shafiq Ahmed Tel: +92 (21) 32426682-6 Fax: +92 (21) 32415007, 32427938 Chief Financial Officer Mr. Ali Aamir Legal Advisors M/s. HaidermotaBNR & Co. Registered Office (Barristers at law) Dawood Centre, M.T. Khan Road D-79, Block-5, Clifton, Karachi-75530 KDA Scheme No.5 Tel: +92 (21) 35686001 Karachi 75600 Fax: +92 (21) 35693416 Tel: +92 (21) 111520000, 35879097 Email: [email protected] Fax: +92(21) 35862329, 35871054 Web: www.dawoodhercules.com Annual Report 2013 13 Solar panels on the roof of Dawood Centre SOLAR Solar power is the conversion of sunlight into electricity, either directly using photovoltaics (PV), or indirectly using concentrated solar power (CSP). With sunshine throughout the year, the potential for generating solar energy in Pakistan is immense. Board of Directors M. Aliuddin Ansari Shahid H. Pracha Hussain Dawood Director Chief Executive Officer Chairman Saad Raja Shahzada Dawood Director Director 16 Dawood Hercules Corporation Limited M. Abdul Aleem Parvez Ghias Javed Akbar Director Director Director A. Samad Dawood Director Annual Report 2013 17 Directors’ Profiles Hussain Dawood Chairman Mr. Hussain Dawood is the Chairman of Dawood Hercules Corporation Limited. He is also the Chairman of Engro Corporation Limited, The Hub Power Company Limited, Pakistan Poverty Alleviation Fund, Karachi Education Initiative (KEI) and The Dawood Foundation. His social responsibilities include Chairmanship of the International Advisory Council of the Cradle to Cradle Institute in San Francisco, and Karachi Education Initiative’s Karachi School for Business & Leadership. Mr. Dawood also serves as a Director of the Pakistan Business Council, Pakistan Centre for Philanthropy, Beaconhouse National University and iCare Foundation. He is the Patron of the Pakistani Entrepreneurs of North America and is a Global Charter Member of The Indus Entrepreneurs (TiE). Mr. Dawood is the Honorary Consul of Italy in Lahore and was conferred the award “Ufficiale Ordine Al merito della Repubblica Italiana” by the Italian Government. He is an MBA from the Kellogg School of Management, Northwestern University, USA, and a graduate in Metallurgy from Sheffield University,