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FSPE311213.Pdf Contents Company information------------------------------------ 02 Directors' report to the shareholders ---------------- 03 Auditor's report to Members --------------------------- 04 Balance sheet --------------------------------------------- 05 Profit and loss account --------------------------------- 06 Statement of comprehensive income -------------- 07 Cash flow statement ------------------------------------ 08 Statement of changes in equity ---------------------- 09 Notes to the financial statements -------------------- 10 1 CHENAB LIMITED Company information Chief Executive Officer Mian Muhammad Latif Directors Mian Muhammad Javaid Iqbal Mr. Muhammad Naeem Mr. Muhammad Faisal Latif Mr. Muhammad Farhan Latif Mr. Muhammad Zeeshan Latif Mst. Shahnaz Latif Bankers/Financial Institutions (In Company InformationAlphabetic Order) Allied Bank Limited. Askari Bank Limited. AlBaraka Bank (Pakistan) Limited. (ABBL) Bank Alfalah Limited. Citibank, N.A. Faysal Bank Limited. First Credit & Investment Bank Limited First Punjab Modaraba. Habib Bank Limited. Habib Metropolitan Bank Limited. KASB Bank Limited. National Bank of Pakistan. NIB Bank Limited Orix Leasing (Pakistan) Limited. Pak Oman Investment Company Ltd. Pak Kuwait Investment Company (Pvt.) Ltd. Pak Libya Holding Company (Pvt.) Ltd. Saudi Pak Industrial & Agricultural Investment Company (Pvt.) Ltd. SILK Bank Limited. Standard Chartered Bank (Pakistan) Limited Summit Bank Limited. The Bank of Punjab United Bank Limited. Company Secretary/ Chief Financial Officer Mr. Muhammad Arshad Audit Committee Mr. Muhammad Farhan Latif - Chairman Mr. Muhammad Zeeshan Latif - Member Mst. Shahnaz Latif - Member Auditors Avais Hyder Liaquat Nauman Chartered Accountants Legal Advisor Ch. Shahid Mehmood (Advocate) Registered Office Registered Office N i s h a t a b a d , F a isalabad. Tel:041-8754472-8 Fax:041-8752400, 8752700 E-mail Address [email protected] Website Address www.chenabgroup.com Works - Spinning Unit - Toba Tek Singh. -Weaving Unit - Kharianwala, Distt., Sheikhupura. -Weaving Unit - Shahkot, Distt., Nankana Sahib. -Processing & Stitching Units - Nishatabad, Faisalabad. 2 CHENAB LIMITED DIRECTORS’ REPORT TO THE SHAREHOLDERS The directors’ take the opportunity in placing before you the un-audited/reviewed financial statements together with notes for the half year ended December 31 2013. SALES AND SERVICES REVENUE Sales revenue of Rs.886.170 million and revenue from services of Rs.173.705 million aggregating to Rs.1,059.170 million was earned during the period under report as compared to the sales and services revenue of Rs.1097.776 million achieved during the same period of the preceding year. FINANCIAL RESULTS AND REASONS FOR LOSS During the period under report, the company has sustained financial loss of Rs.214.138 million as compared with financial loss of Rs.342.801 million in the preceding period as hang over of the continuing energy crisis. The working capital of the company has liquefied owing to these perennial losses whereas the banks are not extending requisite financial assistance for smooth restoration of its operational activities on optimum level. FUTURE OUTLOOK (i) Presently, demand for Pakistani textile products has emerged in the international market yet in view of grant of GSP plus status by European Union to Pakistani exporters commencing from January, 2014, this demand is likely to increase tremendously in view of these developments yet this opportunity can be availed only if the Government of Pakistan provides a comprehensive package for the revival of value added textile industry alongwith interruption free requisite supply of electricity/gas to utilize optimum level of production capacity coupled with help from financial institutions in providing additional working capital and restructuring financial facilities on economical rate of mark up and suitable moratorium in the repayment of long term loan. (ii) In case of this company, the situation has not yet normalised in view of hang over of the impending crisis which is likely to take time to settle down. AUDITORS’ OBSERVATIONS (i) Due to adverse market circumstances, the company has not been able to comply with terms of certain loan agreements and consequently certain banks and financial institutions have filed cases for recovery and winding up of the company which the management is defending apart from approaching them for amicable decision. The litigation has also adversely affected to process of negotiations with banks for extension and re-scheduling of credit facilities. Certain lenders have re-structured the credit facilities on soft terms and has provided fresh working capital limit. Other lenders are considering the restructuring requests and it is expected that the remaining liabilities will also be re- structured as requested by the company. The management is confident that the litigations banks/financial institutions will be finalized in the best interest of the company considering the negotiation with the lenders. (ii) The matter of issue of ordinary shares in the event of first default for redemption of preference shares is pending before SECP for want of a verdict from competent court involved in it and one of the investors is pursuing the matter. The matter for second default shall be taken in hand subsequently upon resolution of the matter pertaining to first default. (iii) The management is following up the recovery of past due trade debts and is confident of their full recovery. (iv) The management is hopeful that with the assurance of Government of Pakistan given from time to time to improve supply position of electricity/gas operations of the company shall rise to the optimum level further augmented by the coal based self generated energy source. In view of the above, the management is confident that it will be successful in its efforts and the company will be able to continue as a going concern. ACKNOWLEDGEMENT The directors are thankful to the shareholders, financial institutions and customers of the company who have always extended their support in one way or the other to its cause. They also place on record their appreciation of the dedicated services rendered by its employees during this period. Board of Directors For and on behalf of Date: 28-02-2014 (MIAN MUHAMMAD LATIF) Place: Faisalabad CHIEF EXECUTIVE OFFICE 3 CHENAB LIMITED Auditors’ Report on Review of Interim Financial Information to the Members Introduction We have reviewed the accompanying condensed interim balance sheet of Chenab Limited (the company) as at December 31, 2013 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement, condensed interim statement of changes in equity and notes to the accounts for the six months period then ended (here-in-after referred to as the “interim financial information"). Management is responsible for the preparation and presentation of this interim financial information in accordance with the approved accounting standards as applicable in Pakistan. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim profit and loss account and condensed interim statement of comprehensive income for the quarter ended December 31, 2013 and 2012 have not been reviewed, as we are required to review only the cumulative figures for the six months period ended December 31, 2013. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Basis for Adverse Conclusion As described in Note 1.3 to the accounts, the interim financial information has been prepared on going concern basis. The company incurred loss of Rs. 214.14 million (2012 : Rs. 342.80 million) for the period ended December 31, 2013. As at December 31, 2013 its accumulated loss is Rs. 7,159.92 million (June 30, 2013: Rs. 6,960.39 million), shareholders’ equity is negative by Rs. 4,607.07 million (June 30, 2013: Rs. 4,407.55 million) and the company’s current liabilities exceed its current assets by Rs. 7,500.46 million (June 30, 2013: Rs. 7,177.51 million). The company is facing operational and financial problems. There is doubt as to feasibility and ultimate outcome of management’s plans to improve the current situation of the company. In our view, the going concern assumption used in the preparation of this interim financial information is inappropriate, therefore, the company may not be able to realize its assets and discharge its liabilities in the normal course of business. The company is not providing for mark up since July 2011 in respect of certain long term financing and short term borrowings in view of its requests to the respective lenders to convert all outstanding liabilities into non serviceable loans / loans subject to reduced rate of mark up (Refer Note 4 and 10 to the accounts). Had the mark
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