The Dimensions of Progress! ANNUAL REPORT2016 The Dimensions of Progress The Dimensions of Progress give us the ability to accurately analyze and map out the success terrain around us from a corporate organization perspective, so that more intelligent decisions are made in complexities. We learn from our experiences, integrate them into our reasoning & decision-making and see how it can empower us and our Business partners, to move towards progress. CONTENTS Vision 2 Mission 3 Company Information 4 Group Structure 5 Nature of Business 6 Geographical Presence 7 Management Strategic Objectives 8 Board of Directors 10 Organisational Structure 14 Code of Conduct 15 Director’s Report 16 Key Operating and Financial Statistics of Six Years 33 Combined Pattern of CDC and Physical Shareholdings 34 Pattern of Shareholdings - CDC and Physical 35 Notice of Annual General Meeting 36 Major Events held during the year 2015-2016 48 Corporate Social Responsibility 49 Corporate Governance 52 Shareholders Engagement 64 Whistleblower Policy & IT Governance Policy 65 Quality Management 66 Additional Information 67 Financial Highlights 72 Unconsolidated Financial Statements 90 Consolidated Financial Statements 140 Dividend Mandate Form 193 Form of Proxy 195 Jama Punji 197 Vision To transform the Company into a modern and dynamic cement manufacturing unit fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan. 2 THATTA CEMENT Mission • To provide quality products to customers at competitive prices; and • To generate sufficient profit to add to the shareholder’s value. ANNUAL REPORT 2016 3 COMPANY INFORMATION BOARD OF DIRECTORS Mr. Khawaja Muhammad Salman Younis Chairman Mr. Muhammad Fazlullah Shariff Chief Executive Mr. Shahid Aziz Siddiqui Director Mr. Agha Sher Shah Director Mr. Wazir Ali Khoja Director Mr. Saleem Zamindar Director Mr. Attaullah A. Rasheed Director AUDIT COMMITTEE Mr. Wazir Ali Khoja Chairman Mr. Khawaja Muhammad Salman Younis Member Mr. Shahid Aziz Siddiqui Member Mr. Attaullah A. Rasheed Member HR & REMUNERATION COMMITTEE Mr. Saleem Zamindar Chairman Mr. Shahid Aziz Siddiqui Member Mr. Agha Sher Shah Member Mr. Muhammad Fazlullah Shariff Member CHIEF FINANCIAL OFFICER & COMPANY SECRETARY Muhammad Taha Hamdani STATUTORY AUDITOR REGISTERED OFFICE M/s Grant Thornton Anjum Rahman, Chartered Accountants Office No. 606-608A, Continental Trade Center, COST AUDITOR Block 8, Clifton, Karachi M/s Siddiqi & Co., Cost & Management Accountants UAN: 0092-21-111-842-882 Fax no: 0092-21-35303074-75 CORPORATE ADVISOR Website: www.thattacement.com M/s Shekha & Mufti, Chartered Accountants E-mail: [email protected] LEGAL ADVISOR FACTORY M/s Usmani & Iqbal Ghulamullah Road, Makli, District Thatta, Sindh 73160 BANKERS - Conventional Sindh Bank Limited SHARE REGISTRAR National Bank of Pakistan THK Associates (Pvt) Limited Summit Bank Limited 2nd Floor, State Life Building No. 3, Silk Bank Limited Dr. Ziauddin Ahmed Road, Karachi-75530 UAN: 111-000-322, Fax: 35655595 Website: www.thk.com.pk 4 THATTA CEMENT GROUP STRUCTURE The Group consists of Thatta Cement Company Limited (TCCL), the Holding Company and Thatta Power (Private) Limited (TPPL), the Subsidiary Company (together referred to as “the Group”) Thatta Cement Company Limited Holding Company Established in 1980 as a manufacturer of cement and became operative in 1982. The Company in its effort to be self sufficient to meet its energy requirement had invested in a Subsidiary Company which is engaged in the business of generating and supply of electricity. Thatta Power (Private) Limited Subsidiary Company Established as a private limited company on November 12, 2010 and principally engaged in generation and supply of electric power. TPPL is a 62.43% owned subsidiary of the Holding Company as on June 30, 2016. The commercial operations of the power plant commenced on December 12, 2012. The Company supplies electricity to the Holding Company for manufacturing of cement and to M/s Hyderabad Electric Supply Company Limited through the National Grid. ANNUAL REPORT 2016 5 NATURE OF BUSINESS Thatta Cement Company Limited was incorporated in 1980 as a public limited company. The Company's main business activity is manufacturing, marketing and sale of cement. The production facility of the Company is located at Ghulamullah Road, Makli, District Thatta. The Company’s annual installed clinker capacity was 450,000 tons that has been enhanced to 547,500 tons as a result of Balancing, Modernization and Rehabilitation completed in July 2015. The Company obtained listing on the Pakistan Stock Exchange (formerly Karachi Stock Exchange Limited) as a public limited company and has also obtained ISO 9001 certification in the year 2008 and API certification in the year 2013. 6 THATTA CEMENT GEOGRAPHICAL PRESENCE Cement companies in general have a natural sales catchment area within its immediate geographic location and the reach is mostly dependent on the size and output of the cement plant. Thatta Cement Company has a production capacity of 1825 tpd, and therefore it is economically viable to distribute its products within a radius of 125 kilometers. However, due to the nature and quality of some of its specialized products, the logistic cost barrier is broken by the discerning customers and our products manage to reach markets as far as Azad Kashmir. The exclusive Class G Oilwell Cement, which is used in some oil wells in distant locations in the country, is another such premium product. ANNUAL REPORT 2016 7 MANAGEMENT STRATEGIC OBJECTIVES We intend to increase the value in long term through sustainable and result-oriented growth by providing high-performance, innovative and cost effective solutions aimed at customers evolving needs. We aim to recruit the right talent to mentor future leaders, cascading knowledge to create a culture of values and competitiveness. We incorporate ecological and social targets in our business strategy to protect the climate and biodiversity, as well as our social responsibility Objectives and Strategies: Management's objectives, strategies for meeting those objectives and relationship between entity’s results and management objectives: OBJECTIVE 1: TO ENHANCE SALES Sales enhancement through Strategy: increased market share Status: Annual targets achieved Relationship between Company’s result and management objective: Company sales revenue increased by 23.51% as compared to the previous year, whereas sales volume increased by 34.66% OBJECTIVE 2: MAINTAIN AND IMPROVE INDUSTRY POSITION Technological advancements and continuously upgrade Strategy: its production facility to maximize efficiency Status: Ongoing process Relationship between Company’s result and management objective: The Company has spent an amount of Rs. 1.341 billion on BMR Project including normal additions during the year under review to convert the plant from conventional technology to the state of the art Pyro process technology equipped with mandatory equipment of environmental pollution abatement as well as energy conservation. 8 THATTA CEMENT OBJECTIVE 3 : COST REDUCTION To optimize resource Strategy: utilization by adopting cutting edge technology Status: Ongoing process Relationship between Company’s result and management objective: The Company has completed various improvement projects to achieve more efficient results. OBJECTIVE 4 : MAINTAINING BALANCE BETWEEN ECONOMIC PROGRESS, SOCIAL RESPONSIBILITY AND ENVIRONMENTAL PROTECTION To provide sustainable livelihood to the Strategy: society and to minimize the adverse affect on environment Status: Ongoing process Relationship between Company’s result and management objective: The Company is maintaining a Total Recordable Injury Rate (TRIR) of less than 2.0 and has invested huge capital on environmental impact control equipment and practices like dust cyclones, bag houses, damping down dust suppression, electrostatic precipitators and personal protective equipment. SIGNIFICANT CHANGES IN OBJECTIVES & STRATEGIES The strategies and objectives of the Company were well planned and no significant changes have occurred during the year affecting Company’s operations. ANNUAL REPORT 2016 9 BOARD OF DIRECTORS Mr. Khawaja Muhammad Salman Younis Chairman Dato' Khawaja Muhammad Salman Younis has over 30 years of experience in banking industry covering services, support, information technology, business development, corporate finance, advisory, risk management, re-structuring, process re-engineering, project management, asset management, private equity, regulatory and anti-money laundering compliance, administration and training. Prior to founding and joining the Al - Tayseer Group, Mr. Salman Younis was with one of the world's leading Islamic banks based out of the GCC where he was responsible for setting up the Bank's operations in Malaysia in 2005 in a record time of 5 months, and helming the bank as its Managing Director for 3 years during which time the Bank was voted as the Best Islamic Bank in the World by Islamic Finance News in 2006. He was also instrumental in setting up the Bank's representative offices in Australia and Singapore and its asset management was one of the first Islamic Fund Management Companies to be licensed by the Securities Commissions of Malaysia. He has worked for the Citi Group from November 1981 to August 2001. Between 1981 and 1996, he worked in various capacities with the Saudi American Bank, now knows as SAMBA. In areas of services, support and information technology and later with the corporate and investment group where