ANNUAL REPORT 2015 Food & E n e rg y Food & E n e rg y Dawood Hercules is a partner in Pakistan’s growth and prosperity, and this ethos serves as the foundation of our business operations. Energy, agriculture and food sectors are the strongest drivers of Pakistan’s economic growth, and are therefore the core areas of investment for our group. We are a holding company founded on family values. This allows us to deploy capital and invest in people and partnerships over a long period of time to solve two of the most pressing issues the world is facing today: making food and energy available, affordable and sustainable. About cover The creative image on the title is driven from our aim on Food and Energy. The combination of crops and energy bulb is an interesting juxtaposition the represents our core efforts. The theme is further carried inside in the same fashion. CONTENTS Vision 02 Appropriation 53 Purpose 02 Entity rating 53 Business ethics and core values 08 Contribution to the national exchequer Performance highlights 10 and economy 53 Company information 14 Provident & gratuity funds 53 Board of Directors 18 Board of Directors 54 Committees 26 Board meetings 54 Statement of directors’ responsibility 54 OPERATING HIGHLIGHTS 30 Directors training programme 55 Six years at a glance 30 Related party transactions 55 Horizontal analysis (Balance sheet) 32 Future outlook 55 Vertical analysis (Balance sheet) 34 Acknowledgment 55 Horizontal analysis (Profit & loss) 36 Statement of compliance 58 Vertical analysis (Profit & loss) 36 Review report on statement of Statement of value addition 38 compliance 64 Notice of annual general meeting 42 FINANCIAL STATEMENTS 66 Auditor’s report to the members 67 DIRECTOrs’ REPORT 50 Economic scenario 50 Financial statements 68 Business overview 50 Notes to the financial statements 73 Financial performance 52 Consolidated financial statements Change in accounting policy 52 Auditor’s report 107 Earnings per share 53 Consolidated financial statements 108 Auditors 53 Notes to the consolidated financial statements 115 Shares traded 53 Pattern of shareholding 220 Pattern of shareholding 53 Form of proxy Market capitalization & book value 53 All Rights Reserved. No part of this publication may be reproduced without the prior written permission of the publisher. © 2016, Dawood Hercules Corporation Limited Published by the Public Affairs Department, Dawood Hercules Corporation Limited. For questions regarding this report and its contents please email: Ronald Inayat, Manager Public Affairs & Corporate Communications ([email protected]) VISION To make food and energy available, affordable and sustainable for the developing world via pairing capital with capability and with ideas that will have the biggest impact. PURPOSE Food and Energy security is inextricably linked to economic empowerment Population and GDP growth is putting more pressure on the existing supply of food and energy. Thus we believe that achieving our vision will require supply side innovation to improve productivity We have a long track record of improving efficiencies and productivity in both these sectors We believe in deep collaboration between group companies that will allow us to innovate in ways others can’t, and we will only participate in markets where we can make a significant contribution. We are not going to settle for anything less than excellence in every aspect of our work OUR BUSINESSES Engro Foods Engro Powergen Engro Fertilizers Laraib Energy (Hubco) Sindh Engro Coal Mining Company Hubco Narowal Plant Engro Elengy Terminal Hub Power Plant, Hub Engro Vopak Terminal Engro Polymer & Chemicals Our CURRENT INPUT We supply over 30% of all farm nutrients in the country through our fertilizer business, helping 3 million farmers problem worth solving Despite being one of the largest crop producers in the world, Pakistan’s per acre yield is over 23% lower than the global average 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 in treating our employees whether or not someone will with the same principles in do business with us, it also order to build mutual respect, determines whether we are conf idence and trust based proud to be associated with this upon integrity, honesty, Company. openness and competence. We are committed to In order to maintain and conducting our business enhance our reputation for activities in honest and integrity in our business, sincere alignment with it is important for all of us our Core Values and in individually and collectively to full compliance with all adhere to the highest moral, the applicable laws and ethical and legal standards. regulations. We also believe 8 Dawood Hercules Corporation Limited CORE VALUES At Dawood Hercules Corporation Limited, all our actions are based on and guided by the following values: Diversity We respect the dignity, rights and views of others and will provide unrestricted opportunity Accountability for personal advancement to We will be accountable as employees irrespective of gender, individuals and as employees ethnicity, beliefs, cultures and for our ethical conduct and for religions. compliance with applicable laws and policies and directives of the Teamwork management. We are committed to work as a team to achieve common goals whilst fairly recognising and rewarding individual contributions on merit. Commitment to Excellence Integrity We will drive and achieve We will conduct ourselves results while pursuing the with uncompromising ethics and honesty at all highest standards and times, in all situations, maximizing the use of both professionally and personally. resources. Annual Report 2015 9 PERFORMANCE HIGHLIGHTS CONSOLIDATED Revenue +2.8% Key Figures PKR 179,629 Million PKR 2014 184,592 Profit after tax Million +187% 2015 PKR 7,454 Million PKR 2014 21,364 Million Share Price 2015 +41% PKR 84.51 PKR 2014 119.14 2015 10 Dawood Hercules Corporation Limited Shareholders equity +25% PKR 74,459 Million PKR 2014 92,866 Million PACRA Rating 2015 (Long Term) A+ 2014 AA- Distribution 2015 PKR 1/Share PKR 2014 16/Share 2015 Annual Report 2015 11 @ WORK COMPANY INFORMATION Board of Directors Mr. Hussain Dawood Chairman Mr. Samad Dawood - Chief Executive Officer Mr. M. Abdul Aleem - Director Mr. Shahzada Dawood - Director Ms. Sabrina Dawood - Director Mr. Parvez Ghias - Director Mr. Shabbir Hussain Hashmi - Director Mr. Frank Murray Jones - Director Mr. Hasan Reza Ur Rahim - Director Mr. Saad Raja - Director Board Compensation Committee Mr. Hussain Dawood - Chairman Board Audit Mr. M. Abdul Aleem - Member Committee Mr. Parvez Ghias - Member Mr. M. Abdul Aleem - Chairman Mr. Parvez Ghias - Member Mr. Hasan Reza Ur Rahim - Member Chief Financial Registered Officer & Company Office Secretary Mr. Shafiq Ahmed Dawood Centre, M.T. Khan Road Karachi-75530 Tel: +92 (21) 35686001 Fax: +92 (21) 35633972 Email: [email protected] Website: www.dawoodhercules.com Bankers Bank Al-Habib Limited Habib Bank Limited Auditors Allied Bank Limited A.F. Ferguson & Co. United Bank Limited Chartered Accountants Habib Metropolitan Bank Limited State Life Building No 1-C MCB Islamic Bank Limited I.I. Chundrigar Road P.O. Box 4716, Karachi- 74000 Tel: +92 (21) 32426682-6 Fax: +92 (21) 32415007, 32427938 Shares Registrar FAMCO Associates (Private) Limited 8-F, Next to Hotel Faran, Nursery, Block 6 P.E.C.H.S, Shahrah-e-Faisal, Karachi Tel: +92 (21) 34380101-2, Fax: +92 (21) 34380106 Tax Consultants A.F. Ferguson & Co. Chartered Accountants State Life Building No 1-C I.I. Chundrigar Road P.O. Box 4716, Karachi- 74000 Tel: +92 (21) 32426682-6 Legal Advisors Fax: +92 (21) 32415007, 32427938 HaidermotaBNR & Co. (Barristers at law) D-79, Block – 5, Clifton KDA Scheme No.5 Karachi- 75600 Tel: +92 (21) 111520000, 35879097 Fax: +92 (21) 35862329, 35871054 problem worth solving Over 40% children are undernourished mainly due to lack of protein Our CURRENT INPUT Provide over 5 million consumers with good quality dairy products everyday Board of Directors CHAIRMAN Hussain Dawood is a Pakistani industrialist and ardent philanthropist. He chairs an array of profit and not-for-profit ventures namely Dawood Hercules Corporation Ltd. the group’s flagship holding arm with investments in foods and energy, Engro Corporation Ltd.; Hub Power Company Ltd., the largest Independent Power Producer in Pakistan; Karachi Education Initiative, which funds the graduate management school Karachi School of Business & Leadership, and The Dawood Foundation, with its legacy of establishing various education and health institutions across the country. His social responsibilities include Memberships of the World Economic Forum and its Global Agenda Councils of Anti-Corruption and Education. He was conferred the award “Ufficiale Ordine Al merito della Repubblica Italiana” by the Republic of Italy. Hussain Dawood holds an MBA from the Kellogg School of Management, Northwestern University, USA, and is a graduate in Metallurgy from Sheffield University, UK. CHIEF EXECUTIVE Samad Dawood is a graduate in Economics from University College London, UK and a Certified Director of Corporate Governance from the Pakistan Institute of Corporate Governance. He