maintaining the delicate balance of success Annual Report 2018 mehransugar.com maintaining the delicate balance of success The sugar industry is going through challenging times, but we are proud to say that our foresightedness and sold business strategy has kept us at the top of the game. Things are looking better. We have not only come out of the situation safely, but our timely right decisions have kept us in a profitable position. Let us share some of the reason we have kept our balance of success. Contents 04. Key Figures 51. DuPont Analysis 05. Our Core Values 54. Organogram 08. Vision & Mission 55. Chairman’s Review 12. Geographical Location 56. Directors’ Report 14. Our History 63. Corporate Governance Framework 16. Key Achievements 65. Corporate Social Responsibility 20. Company Information 69. Pattern of Shareholding 22. SWOT Analysis 76. Directors’ Report (Urdu) 26. Code of Conduct and Ethical Values 77. Notice of the Annual General Meeting 28. Business Strategy & Goals 84. Notice of the Annual General Meeting (Urdu) 29. Management Committees 85. Statement of Compliance with the CCG 30. Board of Directors 87. Review Report to the Members on 32. Investing in Mehran Sugar Statement of Compliance with the Code of Corporate Governance 34. Investor Relations 89. Auditors’ Report to the Members 36. Management Team 94. Unconsolidated Financial Statements 38. Horizontal & Vertical Analysis 136. Auditors’ Report to the Members 44. Our Mills Profile 141. Consolidated Financial Statements 45. How we Added Value Proxy Form 48. Six Years’ Review at a Glance 50. Six Years’ Sugarcane Trends Analysis Annual Report 2018 Mehran Sugar Mills maintaining the delicate balance of success 2 achieving targets Mehran was able to achieve the highest sucrose recovery in the history of the Company at 11.52% which was also the highest ever achieved by any mill in Pakistan. 3 Annual Report 2018 Mehran Sugar Mills Key Figures MAXIMIZING RETURNS Our shareholders are a key stakeholder and we continually strive to create value for them. We pay dividends on regular basis to our shareholders and we intend to be progressive. 01 Turnover (Rs.) Sucrose Recovery BINDING ASSOCIATIONS 5,031,443,964 11.52% We live by our principle of corporate social responsibility and make a difference through our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 02 TCF I and TCF II have combined enrolment of more than 1,000 students. Profit before tax (Rs.) Earnings per share (Rs.) EMPOWERING GROWERS We are committed to facilitate our growers and assist them in whatever way possible 429,722,766 12.89 within our resources. Our premium quality seed loan policy for pest managment is a reflection of this. We work with our farmer and support him in finding innovative and 03 progressive solutions to sugarcane farming. ENSURING SAFETY Sugar Production (M.Tons) Molasses production (M. Tons) We conduct our business with high regard for the health, safety and environment. We have established an HSE department and continually strive to make sure we can create 120,200 51,526 a conducive work environment. 04 CLEANER ENVIRONMENT We live by our principle of corporate social responsibility and make a difference through Bagasse Sold (M. Tons) Market Capitalization (Rs.) our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 05 48,200 3,387,304,159 TCF I and TCF II have combined enrolment of more than 1,000 students. PROVIDING EDUCATION We live by our principle of corporate social responsibility and make a difference through our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 06 TCF I and TCF II have combined enrolment of more than 1,000 students. 4 Our Core Values MAXIMIZING RETURNS Our shareholders are a key stakeholder and we continually strive to create value for them. We pay dividends on regular basis to our shareholders and we intend to be progressive. 01 BINDING ASSOCIATIONS We live by our principle of corporate social responsibility and make a difference through our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 02 TCF I and TCF II have combined enrolment of more than 1,000 students. EMPOWERING GROWERS We are committed to facilitate our growers and assist them in whatever way possible within our resources. Our premium quality seed loan policy for pest managment is a reflection of this. We work with our farmer and support him in finding innovative and 03 progressive solutions to sugarcane farming. ENSURING SAFETY We conduct our business with high regard for the health, safety and environment. We have established an HSE department and continually strive to make sure we can create a conducive work environment. 04 CLEANER ENVIRONMENT We live by our principle of corporate social responsibility and make a difference through our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 05 TCF I and TCF II have combined enrolment of more than 1,000 students. PROVIDING EDUCATION We live by our principle of corporate social responsibility and make a difference through our social development programs. Education in the rural sector is direly needed and we continue to play a strong role in ensuring to fulfill this need. Our three schools i.e. DMS, 06 TCF I and TCF II have combined enrolment of more than 1,000 students. 5 Annual Report 2018 Mehran Sugar Mills maintaining the delicate balance of success 6 finding solutions We continue to find solutions to diversify our revenue base by investing in energy efficiency. Over the years from being a net consumer of furnace oil we have become an exporter of power to the National grid. Along with the export of power this season we saved and sold a record volume of Bagasse totaling over 50,000 Tons. 7 Annual Report 2018 Mehran Sugar Mills Our Vision We remain focused on being one of Pakistan’s leading and largest sugar producers. A modern sugar mill must utilise its raw materials efficiently to produce sugar, ethanol and power at the most competitive pricing. Our vision remains to be the most economical producer of sugar by utilising these raw materials effectively. 8 Our Mission Our Mission remains to ensure we can provide sustainable results and consistent growth to our shareholder. Our objective is to achieve this by utilising sugar and it’s by products to add value and grow our business. Basic Purpose: The basic purpose of our Enterprise is to perpetuate as a Public Limited Company engaged in manufacturing and marketing white refined cane sugar and brown sugar while utilising its sugar byproducts such as molasses and Baggasse to produce ethanol and power respectively. To ensure sustainability we also look to make long term investments in industries which we feel add value to our shareholder and to the country. 9 maintaining the delicate balance of success contributing through international trade Our export volume was the highest ever for the company at 74,000 Tons. Even though our production is geared towards the local market we were able to export more than 50 percent of our production this year. We are proud to have played our role in earning foreign exchange for the country of over Approx. USD 30.0 Million. 11 Annual Report 2018 Mehran Sugar Mills Geographical Location Unifood - Baking Plant Hub 12 13 Annual Report 2018 Mehran Sugar Mills Our History 1965 The Company is incorporated as a public limited company. Shares of the Company listed on the Karachi Stock Exchange. Plant commences trial production with a crushing capacity of 1,500 TCD. Complete plant is procured from 1968 M/s Mitsubishi Japan. 1978 Steady re-engineering increase the crushing capacity to 3,500 TCD. Recognised by the Karachi Stock Exchange as one of the Top 25 Company Award for the year. 1983 1986 Again selected by the Karachi Stock Exchange for its Top 25 Company Award for the year. Company starts commercial production of second parallel milling unit, thus increasing crushing capacity to 7,000 TCD. 1994 1998 The Company is awarded ISO-9002 - QMS Certification. Sales cross Rs. 1.0 Billion. 2001 2006 The Company crosses the Rs. 2.0 Billion sales milestone. The joint venture distillery, Unicol Limited commences commercial production. 2007 2010 The Company crosses the Rs. 4.0 Billion sales milestone. Company first time ever crossed sucrose recovery of 11 percent. The Company crossed the100,000 M. tons milestone production for the first time. 2013 14 2014 Record highest sugar production of 123,210 M. tons. Sales crossed Rs. 6.0 Billion. Associated Company Unicol Limited doubled its ethanol production to 200,000 LPD. Record highest sucrose recovery of 11.42 percent, which was the highest achieved in the country. Company crossed half a billion profit before tax. 2015 Started supply of co-generated electricity to the National Grid. 2016 The company crosses the Rs. 7.0 billion sales milestone. Company paid its highest dividend of 57.5% translating into Rs. 184 million for the year. Sucrose Recovery of 11.06% was amongst highest in the country. Bagasse Savings reached level of 35,000 Tons this year.