Financial Statements for the Quarterand Nine Months ended September 30, 2009
Engro Polymer & Chemicals Ltd.
CONTENTS
Company Information
Directors’ Report to the shareholders on Unconsolidated Condensed Interim Financial Statements
Unconsolidated Condensed Interim Financial Statements
Directors’ Report to the shareholders on Consolidated Condensed Interim Financial Statements
Consolidated Condensed Interim Financial Statements
2
4
6
21
23
2
COMPANY INFORMATION
Chairman Asad Umar
President & Chief Executive Asif Qadir
Directors Isar AhmadShahzada DawoodMasaharu DomichiTakeshi HagiwaraShabbir HashmiWaqar A. MalikKhalid MansoorKhalid S. Subhani
Company Secretary Arshaduddin Ahmed
Board Audit Committee Isar AhmadMasaharu DomichiShabbir HashmiKhalid S. Subhani
Bankers Allied Bank Ltd.Askari Commercial Bank Ltd.Bank Al Falah Ltd.Bank Al Habib Ltd.Barclays Bank Plc., PakistanCitibank N.A.Deutsche Bank AGDubai Islamic Bank Ltd.Samba Bank Ltd. (Formerly Crescent Commercial Bank Ltd.)Faysal Bank Ltd.Habib Bank Ltd.Hongkong Shanghai Banking CorporationMCB Bank Ltd.Meezan Bank Ltd.National Bank of PakistanNIB Bank Ltd.Standard Chartered Bank (Pakistan) Ltd.United Bank Ltd.
Auditors A. F. Ferguson & Co., Chartered AccountantsState Life Building No. 1-C, I.I. Chundrigar Road, Karachi.
Registered Office First Floor, Bahria Complex I, 24 M.T. Khan Road, Karachi - 74000
Manufacturing Facility EZ/1/P-II-1, Eastern Zone, Bin Qasim, Karachi.
Share Registration Office FAMCO Associates (Private) Limited [Formerly Ferguson Associates (Private) Limited]1st Floor, State Life Building 1-A, I.I. Chundrigar Road, Karachi - 74000Tel: (92-21) 32427012, 32426597, 32425467
Website www.engropolymer.com
UAN 111-411-411
DIRECTORS’ REPORT &UNAUDITED CONDENSEDINTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
3
4
ENGRO POLYMER & CHEMICALS LIMITEDDIRECTORS’ REPORT TO THE SHAREHOLDERSON UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
On behalf of the Board of Directors of Engro Polymer & Chemicals Limited, we are pleased to present the unauditedunconsolidated accounts of the Company for the nine months ended September 30, 2009.
Business Review
During nine months ended September 30, 2009 the Company achieved highest ever PVC sales of 102,100 tonsas compared to 79,200 tons during same period last year. During the quarter, Company sold 28,600 tons in thedomestic market as compared to 22,300 tons in third quarter 2008. Growth in sales volumes is mainly becauseof increased demand arising out of public sector projects, agricultural sector and pipe exports to Afghanistan.
PVC production for third quarter was 30,500 tons and for nine months was 91,400 tons as compared to 24,900tons and 74,700 tons for respective periods last year. Production during the quarter was affected by limited availabilityof VCM from spot markets.
Successful launch of Caustic Soda resulted in sales volume of 14,700 DMT. Company also sold 18,000 tons ofEthylene Di-Chloride. Year to date production of Caustic Soda and Ethylene Di Chloride was 19,900 DMT and22,500 tons respectively. Company also produced 3,200 tons of Sodium Hypochlorite which was sold in the domesticmarket.
Company started sale of surplus power to Karachi Electric Supply Corporation towards the end of August 2009.
Chlor-alkali and Ethylene Di-Chloride plants along with Gas turbines and Utilities started commercial operationsfrom August 1, 2009. The VCM startup was delayed mainly because of the complexities involved in the processwhich have largely been rectified and the plant is expected to be commissioned in the fourth quarter. VCM planthas been started on October 23, 2009 and its operations are now being smoothened.
Revenue for the nine months was Rs. 8,164 million, an increase of 25% over same period 2008 and loss aftertax was Rs. 22 million as compared to profit after tax of Rs. 586 million for the nine months in 2008. Loss after taxfor the quarter was Rs. 29 million as compared to profit after tax of Rs.159 million in third quarter last year. Mainreasons for loss were squeeze in margin because of higher cost of spot VCM and increased depreciation andfinancial charges due to addition of units without having realized the full economic benefits of integrated operations.
KarachiOctober 26, 2009
5
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
ENGRO POLYMER & CHEMICALS LIMITEDDIRECTORS’ REPORT TO THE SHAREHOLDERSON UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Near Future Outlook
International prices of PVC are expected to decline slightly on account of weak demand in the region. Ethyleneprices will remain under pressure as supply is anticipated to remain long due to additional capacities in Middle Eastand North East Asia, however, rising oil prices will counter this pressure.
Outlook for domestic PVC demand continues to remain robust. On Caustic Soda front, the Company plans toenhance its market share by maintaining focus on product quality and customer service. The domestic CausticSoda market will continue to see a restructure as the Company pushes for market share. Sale of surplus powerto KESC is expected to continue and contribute to the revenue stream.
Margins of the Company will remain dependent upon smooth operation of the VCM plant. The Company intendsto continue to sell surplus EDC till such time VCM operations are smoothened out.
7
ENGRO POLYMER & CHEMICALS LIMITEDUNCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Note
13
14
15
16
17
Rupees
Net sales
Cost of sales
Gross profit
Distribution and marketing expenses
Administrative expenses
Other operating expenses
Other operating income
Operating profit
Finance costs
Profit / (Loss) before taxation
Taxation
Profit / (Loss) for the period
Earnings / (Loss) per share - basic and diluted
3,218,182)
(2,858,116)
360,066)
(141,714)
(55,085)
(64,376)
67,212)
166,103)
(222,973)
(56,870)
27,689)
(29,181)
(0.06)
2,167,314)
(1,733,610)
433,704)
(80,480)
(48,410)
(140,521)
44,607)
208,900)
(6,064)
202,836)
(43,865)
158,971)
0.31)
8,163,589)
(7,388,125)
775,464)
(323,671)
(133,223)
(151,940)
122,333)
288,963)
(341,978)
(53,015)
30,889)
(22,126)
(0.04)
6,536,068)
(5,190,710)
1,345,358)
(229,771)
(116,949)
(273,712)
133,027)
857,953)
(21,624)
836,329)
(250,263)
586,066)
1.13)
Nine months endedQuarter ended
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
[Amounts in thousand except for earnings / (loss) per share]
The annexed notes 1 to 23 form an integral part of this unconsolidated condensed interim financial information.
Sep 30,2009
Sep 30,2008
Sep 30,2009
Sep 30,2008
8
ENGRO POLYMER & CHEMICALS LIMITEDUNCONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Sep 30,2009
Sep 30,2008
Sep 30,2009
Sep 30,2008
Rupees
Profit / (Loss) for the period
Other comprehensive income / (loss):
Gain / (Loss) arising during the period
Less: - Reclassification adjustments for
losses included in profit and loss
- Adjustments for amounts transferred to initial carrying amount of hedged items
Income tax relating to hedging reserve
Other comprehensive income / (loss) for the period - net of tax
Total comprehensive income / (loss) for the period
Nine months endedQuarter ended
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
(Amounts in thousand)
The annexed notes 1 to 23 form an integral part of this unconsolidated condensed interim financial information.
(29,181)
(77,622)
9,161)
6,257)
21,772)
(40,432)
(69,613)
158,971
44,495)
–)
911)
(15,892)
29,514)
188,485)
(22,126)
(30,859)
10,085)
11,269)
3,327)
(6,178)
(28,304)
586,066)
59,249)
–)
–)
(20,737)
38,512)
624,578)
Hedging reserve
ENGRO POLYMER & CHEMICALS LIMITEDUNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Amounts in thousand)
The annexed notes 1 to 23 form an integral part of this unconsolidated condensed interim financial information.
9
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
Rupees
Balance as at December 31, 2007 (Audited)
Final dividend for the year ended December 31, 2007 - Re. 0.54 per share
Total comprehensive income for the nine months ended September 30, 2008
Share capital issued
Share issuance cost, net
Options granted during the period
Balance as at September 30, 2008 (Unaudited)
Total comprehensive loss for the three months ended December 31, 2008
Share issuance cost, net
Options granted during the period
Balance as at December 31, 2008 (Audited)
Total comprehensive loss for the nine months ended September 30, 2009
Unvested options lapsed during the period
Balance as at September 30, 2009 (Unaudited)
Sharecapital
4,436,000
–
–
767,677
–
–
5,203,677
–
–
–
5,203,677
–
–
5,203,677
Sharepremium
425,216)
–)
–)
614,141)
(65,354)
–)
974,003)
–)
1,435)
–)
975,438)
–)
–)
975,438)
Employees’share
compensationreserve
–)
–)
–)
–)
–)
9,625)
9,625)
–)
–)
233)
9,858)
–)
(266)
9,592)
Hedgingreserve
–)
–)
38,512)
–)
–)
–)
38,512)
(77,612)
–)
–)
(39,100)
(6,178)
–)
(45,278)
Unappropriatedprofit
315,603)
(252,896)
586,066)
–)
–)
–)
648,773)
(232,781)
–)
–)
415,992)
(22,126)
–)
393,866)
Total
5,176,819)
(252,896)
624,578)
1,381,818)
(65,354)
9,625)
6,874,590)
(310,393)
1,435)
233)
6,565,865)
(28,304)
(266)
6,537,295)
10
ENGRO POLYMER & CHEMICALS LIMITEDUNCONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
18
Note
RupeesCASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operationsFinance costs paidLong term loans and advancesProvisionsIncome tax paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipmentRetention money against project paymentsProceeds from disposal of operating assetsProceeds from sale of short term investmentsIncome on short term investments and bank deposits
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term financeRepayment of long term financeProceeds from issue of share capitalShare issuance cost - netRepayments of long term borrowingsShort term borrowingsDividend paid
Net cash inflow from financing activities
Net increase in cash and cash equivalentsCash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
1,375,835)(917,691)
42,408)10,968)
(183,748)
327,772)
(2,269,367)(418,622)
3,764)(894,556)
89,186)
(3,489,595)
4,107,722)–)–)–)
(130,000)–)–)
3,977,722)
815,899)(745,295)
70,604)
1,405,248) (54,270) (22,661) 73,450)
(129,862)
1,271,905)
(7,666,149) 428,268)
1,236) 1,705,862)
43,253)
(5,487,530)
5,306,877) (1,340,000)
327,465)(65,354)(65,429)354,022)
(252,896)
4,264,685)
49,060) 200,844)
249,904)
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
(Amounts in thousand)
19
The annexed notes 1 to 23 form an integral part of this unconsolidated condensed interim financial information.
Nine monthsended
Sep 30, 2008
Nine monthsended
Sep 30, 2009
11
ENGRO POLYMER & CHEMICALS LIMITEDNOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
1. LEGAL STATUS AND OPERATIONS
Engro Polymer & Chemicals Limited (the Company) was incorporated in Pakistan in 1997 under the Companies Ordinance,1984 as a public unlisted Company. The Company is listed on Karachi, Lahore and Islamabad stock exchanges.
The Company is a subsidiary of Engro Chemical Pakistan Limited. The address of its registered office is 1st Floor, BahriaComplex I, M. T. Khan Road, Karachi. The Company’s principal activity is to manufacture, market and sell Poly VinylChloride (PVC), PVC compounds, Caustic Soda and other related chemicals.
2. BASIS OF PREPARATION
This condensed interim financial information is unaudited and has been prepared in accordance with the requirements ofthe International Accounting Standard 34 – ‘Interim Financial Reporting’. This condensed interim financial information doesnot include all the information required for annual financial statements and should be read in conjunction with the financialstatements of the Company for the year ended December 31, 2008.
These condensed interim financial statements are un-audited and are being submitted to the shareholders as requiredby Section 245 of the Companies Ordinance, 1984.
3. ACCOUNTING POLICIES
3.1 Except as disclosed below, the accounting policies adopted in the preparation of this condensed interim financial informationare the same as those applied in the preparation of audited annual published financial statements of the Company for theyear ended December 31, 2008.
3.2 The following new standards and amendments to standards are mandatory for the first time for the financial year beginningJanuary 1, 2009:
- IAS 1 (revised), ‘Presentation of financial statements’. The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-
owner changes in equity’ to be presented separately from owner changes in equity. All ‘non-owner changes in equity’are required to be shown in a performance statement.
Companies can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the profit and loss account and the statement of comprehensive income).
The Company has elected to present two statements; a profit and loss account and a statement of comprehensiveincome. The condensed interim financial information has been prepared under the revised disclosure requirements.
- The SECP vide S.R.O. 411 (1) / 2008 dated April 28, 2008 notified the adoption of IFRS 7 ‘Financial Instruments: Disclosures’. IFRS 7 is mandatory for Company’s accounting periods beginning on or after the date of notification i.e.April 28, 2008. IFRS 7 has superseded IAS 30 – ‘Disclosures in the Financial Statements of Bank and Similar FinancialInstitutions’ and disclosure requirements of IAS 32 – ‘Financial Instruments: Disclosure and Presentation’. Adoptionof IFRS will only impact the format and extent of disclosures presented in the financial statements. The Company willconsider the requirements of IFRS 7 in the annual financial statements for the year ending December 31, 2009.
(Amounts in thousand)
4. ACCOUNTING ESTIMATES
The preparation of this condensed interim financial information in conformity with the approved accounting standardsrequires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the Company's accounting policies.Estimates and judgments are continually evaluated and are based on historical experience and other factors, includingexpectation of future events that are believed to be reasonable under the circumstances. Actual results may differ fromthese estimates.
In preparing this condensed interim financial information, the significant judgments made by management in applying theCompany's accounting policies and the key sources of estimation and uncertainty are the same as those that apply toannual financial statements for the year ended December 31, 2008.
Unaudited AuditedSeptember 30, December 31,
2009 2008 Rupees
5. PROPERTY, PLANT AND EQUIPMENT
Operating assets, at net book value - notes 5.1 and 5.2 14,352,457 1,987,643Capital work-in-progress 4,587,737 14,147,123
18,940,194 16,134,766
5.1 Additions to operating assets during the period/year were as follows, which mainly relate to the expansion and back integration project of the Company:
Leasehold land – 3,348Building on leasehold land 168,221 Plant and machinery 12,124,276 Pipelines 357,309 Furniture, fixtures and office equipment 18,740 19,940Vehicles 21,432 20,384
12,689,978 43,672
12
5.2 During the period, assets costing Rs. 8,316 (December 31, 2008: Rs. 9,936), having net book value of Rs. 2,203 (December 31, 2008: Rs. 3,622) were disposed off for Rs. 3,764 (December 31, 2008: Rs. 3,971).
(Amounts in thousand)
–––
13
Unaudited AuditedSeptember 30, December 31,
2009 2008Rupees
(Amounts in thousand)
Raw and packing materials - note 6.1 945,092 327,670Work-in-progress 19,989 21,293Finished goods 576,158 810,355
1,541,239 1,159,318
6.1 This includes stock-in-transit amounting to Rs. 292,385 (December 31, 2008: Rs. 155,925), stocks held at the storagefacilities of related parties, namely, Engro Vopak Terminal Limited amounting to Rs. 366,114 (December 31, 2008:Rs. 22,148) and Dawood Hercules Chemicals Limited amounting to Rs. 6,556 (December 31, 2008: Nil).
7. BORROWINGS
During the period:
- the Company entered into a Syndicated Term Finance Agreement with a consortium of local banks on February 21,2009 for Rs. 1,500,000. The facility is repayable in thirteen semi annual installments commencing six months fromCommercial Operations date of the Project or six months from December 30, 2009 (whichever is earlier). The facilitycarries mark-up at the rate of 3% over six months KIBOR and monitoring fee of Rs. 300 for the first year and Rs. 500per annum, thereafter. Commitment fee at the rate of 0.15% per annum is also payable on that part of the finance thathas not been drawn. During the period, Company has fully drawn down Rs. 1,500,000 against the facility.
- the Company has drawn down the remaining balance of US$ 30,000 against the loan agreement/facility with InternationalFinance Corporation (IFC). There is no change in the terms and conditions of the loan.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has entered into interest rate swap agreements for notional amounts aggregating to US$ 40,000, with banksto hedge its interest rate exposure on floating rate foreign currency borrowings from International Finance Corporation(IFC). Under the swap agreements, the Company would receive six month USD-LIBOR on respective notional amountsand will pay fix rates, which will be settled semi annually. Details of the swap agreements are as follows:
6. STOCK-IN-TRADE
Fixed Rate%
3.3853.0052.7952.800
TerminationDate
June 15, 2017June 15, 2017June 15, 2017June 15, 2017
EffectiveDate
December 15, 2008June 15, 2009June 15, 2009June 15, 2009
NotionalAmounts
US $
15,0005,000
15,0005,000
40,000
Rupees
Fair value loss asat December 31, 2008
60,154–––
60,154
Fair value loss asat September 30, 2009
44,1807,917
12,4615,101
69,659
14
UnauditedSeptember 30,
2009
AuditedDecember 31,
2008Rupees
(Amounts in thousand)
9. DEFERRED INCOME TAX
Credit/(Debit) balances arising due to:
- accelerated depreciation allowance
- net borrowing costs capitalized
- recoupable carried forward tax losses and minimum turnover tax
- unrealized foreign exchange losses and provision for retirement and other service benefits
- provision against custom duty
- fair value of hedging instruments
- share issuance cost, net to equity
10. TRADE AND OTHER PAYABLES
Trade and other creditorsAccrued liabilitiesAdvances from customersCurrent portion of retention moneyAccrued finance costs - long term borrowings - short term financesDepositsWorkers’ profits participation fundWorkers’ welfare fundOthers
3,060,317)
123,992)
(2,739,376)
(53,722)
(7,733)
(24,381)
(51,566)
307,531)
2,045,350)551,905)102,507)659,384)
434,567)1,320)
20,610)24,625)9,357)1,994)
3,851,619)
548,080)
160,054)
(221,243)
(25,243)
(6,454)
(21,054)
(51,566)
382,574)
797,208)317,536)118,173)239,033)
157,678)9,590)2,510)
24,625)9,357)2,293)
1,678,003)
11. PROVISIONS
As at September 30, 2009, the Company had paid Rs. 95,163 (December 31, 2008: Rs. 91,616) on account of SpecialExcise Duty (SED) on import of plant and machinery for the Project. Out of this amount it has adjusted Rs. 58,476(December 31, 2008: Rs. 54,929) in the monthly sales tax returns against SED on goods produced and sold by theCompany. The Company had approached the Federal Board of Revenue to obtain a clarification in respect of the adjustmentof SED made by the Company in monthly sales tax returns. Pending such clarification the Company based on prudencehad made provision for the amount adjusted of Rs. 58,476 and for the balance remaining of Rs. 36,687 included in loans,advances, deposits, prepayments and other receivables. However, during the period, the Company received show causenotices from the Additional Collector (Adjudication) – Federal Board of Revenue, stating that the Company, by adjustingthe aforementioned SED, has violated the provisions of the Federal Excise Act, 2005 and the Federal Excise Rules, 2005read with SRO 655(1)/2007 and that the amount adjusted is recoverable from the Company under the Federal Excise Act,2005 along with default surcharge and penalty. In response to these notices the Company has filed a Constitutional Petitionbefore the Honourable High Court, Sindh, on May 18, 2009. The High Court is in the process of evaluating the ConstitutionalPetition. The Company is confident that the ultimate outcome of the matter will be in its favour, however, based on prudenceis maintaining the aforementioned provision. Further, a provision of Rs. 7,421 for surcharge and penalty thereagainst hasalso been made.
15
12. CONTINGENCIES AND COMMITMENTS
12.1 Commitments
- Capital expenditure for the Project referred to in note 1, under the contracts signed as at September 30, 2009 but notyet incurred amounts to Rs. 66,881 (December 31, 2008: Rs. 1,305,738).
- Performance guarantees issued by banks on behalf of the Company as at September 30, 2009 amounts to Rs. 405,450(December 31, 2008: Rs. 264,200).
(Amounts in thousand)
13. COST OF SALES
Opening stock of work-in-progress 18,780 14,018 21,293 22,861)
Raw and packing materials consumed 2,602,032 1,844,959 5,928,825 4,656,691)Salaries, wages and staff welfare 64,680 28,301 151,483 75,752)Fuel, power and gas 262,621 46,388 438,452 113,566)Repairs and maintenance 5,041 4,932 26,484 9,663)Depreciation 162,607 41,932 302,096 125,879)Consumable stores 22,775 5,351 42,426 14,191)Purchased services 7,569 5,022 17,587 14,730)Storage and handling 104,780 36,332) 191,907 100,570)Training and travelling expenses 1,361 3,973) 3,089 6,469)Communication, stationery and other office expenses 743 1,157 1,599 1,890)Insurance 18,472 2,443 38,902 7,306)Other expenses 4,856 190 9,774 2,386)
3,257,537 2,020,980 7,152,624 5,129,093)
Closing stock of work-in-progress (19,989) (18,178) (19,989) (18,178)
Cost of goods manufactured 3,256,328 2,016,820 7,153,928 5,133,776)
Opening stock of finished goods 177,946 300,173 810,355 640,170)Closing stock of finished goods (576,158) (584,473) (576,158) (584,473)
(398,212) (284,300) 234,197 55,697)
Cost of sales - own manufactured product 2,858,116 1,732,520 7,388,125 5,189,473) - purchased product – 1,090 –) 1,237)
2,858,116 1,733,610 7,388,125 5,190,710)
Sep 30,2009
Rupees
Sep 30,2008
Quarter ended
Sep 30,2009
Sep 30,2008
Nine months ended
16
Sep 30, 2009 Sep 30, 2008 Sep 30, 2009 Sep 30, 2008
Rupees
14. DISTRIBUTION AND MARKETING EXPENSES
Salaries, wages and staff welfare 13,313 12,457 39,786 31,537Advertising, sales promotion and entertainment 11,305 5,940 32,122 21,652Product transportation and handling 110,084 54,134 234,466 152,665Rent, rates and taxes 692 1,818 2,566 3,569Purchased services 1,598 2,302 2,388 6,649Insurance 227 292 779 646Depreciation 1,707 1,098 3,614 3,090Training and travelling expenses 2,044 2,112 4,929 6,126Communication, stationery and other office expenses 530 (9 1,495 1,817Others 214 336 1,526 2,020
141,714 80,480 323,671 229,771
15. ADMINISTRATIVE EXPENSES
Salaries, wages and staff welfare 21,182 28,520 53,972 68,170Rent, rates and taxes 4,791 3,930 12,539 9,414Purchased services 3,194 1,729 11,702 4,886Insurance 308 108 516 152Depreciation and amortization 1,385 1,349 4,674 4,374Training and travelling expenses 15,229 5,100 31,061 13,506Communication, stationery and other office expenses 6,970 3,983 12,328 7,264Others 2,026 3,691 6,431 9,183
55,085 48,410 133,223 116,949
16. OTHER OPERATING EXPENSES
Legal and professional charges 4,581 1,698 6,886 1,908Auditors' remuneration 524 254 791 694Donations 2,746 793 4,121 1,243Provision against custom duty refundable – _ – 18,043Sales tax receivable written off – _ – 219Workers' profit participation fund (206 10,905 – 44,964Workers' welfare fund (78 4,363 – 17,986Foreign exchange loss - net 56,809 122,508 140,142 188,655
64,376 140,521 151,940 273,712
Quarter ended Nine months ended
(Amounts in thousand)
)
))
17
Quarter ended Nine months ended Sep 30, 2009 Sep 30, 2008 Sep 30, 2009 Sep 30, 2008
Rupees
Quarter ended
(Amounts in thousand)
17. FINANCE COSTS
Interest/Mark-up on: - long term borrowings - short term financesBank charges and others
219,5131,3142,146
222,973
3,3591,2171,488
6,064
317,50118,012
6,465
341,978
13,3173,4934,814
21,624
Sep 30, 2009 Rupees
18. CASH GENERATED FROM OPERATIONS
(Loss) / Profit before taxation (53,015) 836,329)Adjustments for non cash charges and other items: Provision for staff retirement and other service benefits 2,123) 8,336) Depreciation charge 310,384) 133,344) Amortization of deferred employees’ compensation expense 3,050) 9,625) Income on deposits (89,853) (42,434) Finance costs 341,978) 21,624) Profit on disposal of operating assets (1,561) (358) Operating assets written off –) 243) Working capital changes - note 18.1 862,729) 438,539)
1,375,835) 1,405,248)18.1 Working capital changes
(Increase) / Decrease in current assets: Stores, spares and loose tools (67,814) (10,560) Stock-in-trade (381,921) (374,682) Trade debts (694,000) (72,490) Loans, advances, deposits, prepayments
and other receivables (net) 107,624) 89,852)(1,036,111) (367,880)
Nine months ended
Sep 30, 2008
Increase in current liabilities: Trade and other payables 806,419)
438,539)
1,898,840)
862,729)
18
20. SEGMENT ANALYSIS
Commercial production of the Caustic Soda Plant of the Company was declared from August 1, 2009. Based on themanagement reporting approach under IFRS 8 Operating Segments, Caustic Soda has been identified as a reportablesegment, results and assets of which are shown below:
(Amounts in thousand)
19. CASH AND CASH EQUIVALENTS
Cash and bank balancesShort term borrowings
97,273)(842,568)
(745,295)
UnauditedSeptember 30,
2009
AuditedDecember 31,
2008
70,604–
70,604
Rupees
20.1 Segment assets consist primarily of property, plant and equipment, stock-in-trade and trade debts.
Turnover
Segment profit before unallocated expenses
Unallocated expenses
Administrative expenses
Other operating expenses
Other operating income
Finance costs
Taxation
Loss after taxation
Quarter ended Sep 30, 2009 Nine months ended Sep 30, 2009Poly Vinyl
Chloride andAllied
Chemicals
2,911,667
148,853
CausticSoda and
AlliedChemicals
306,515
69,499
Total
3,218,182)
218,352)
(55,085)
(64,376)
67,212)
(222,973)
27,689)
(29,181)
Poly VinylChloride and
AlliedChemicals
7,857,074
382,294
CausticSoda and
AlliedChemicals
306,515
69,499
Total
8,163,589)
451,793)
(133,223)
(151,940)
122,333)
(341,978)
30,889)
(22,126)
SEGMENT RESULTSRupees
Total segment assets
Unallocated assets
Total assets
September 30, 2009 December 31, 2008Poly Vinyl
Chloride andAllied
Chemicals
13,047,822
CausticSoda and
AlliedChemicals
6,378,428
Total
19,426,250
3,661,991
23,088,241
Poly VinylChloride and
AlliedChemicals
9,776,440
CausticSoda and
AlliedChemicals
5,177,659
Total
14,954,099
3,325,011
18,279,110
SEGMENT ASSETS
20
and its subsidiary company
DIRECTORS’ REPORT &UNAUDITED CONSOLIDATED CONDENSEDINTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
21
ENGRO POLYMER & CHEMICALS LIMITEDDIRECTORS’ REPORT TO THE SHAREHOLDERSON CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
On behalf of the Board of Directors of Engro Polymer & Chemicals Limited, we are pleased to present the unauditedconsolidated accounts of the Company for the nine months ended September 30, 2009.
Business Review
During nine months ended September 30, 2009 the Company achieved highest ever PVC sales of 93,000 tonsas compared to 78,000 tons during same period last year. During the quarter, Company sold 28,600 tons in thedomestic market as compared to 22,300 tons in third quarter 2008. Growth in sales volumes is mainly becauseof increased demand arising out of public sector projects, agricultural sector and pipe exports to Afghanistan.
PVC production for third quarter was 30,500 tons and for nine months was 91,400 tons as compared to 24,900tons and 74,700 tons for respective periods last year. Production during the quarter was affected by limited availabilityof VCM from spot markets.
Successful launch of Caustic Soda resulted in sales volume of 14,700 DMT. Company also exported 18,000 tonsof Ethylene Di-Chloride. Year to date production of Caustic Soda and Ethylene Di Chloride was 19,900 DMT and22,500 tons respectively. Company also produced 3,200 tons of Sodium Hypochlorite which was sold in the domesticmarket.
Company started sale of surplus power to Karachi Electric Supply Corporation towards the end of August 2009.
Chlor-alkali and Ethylene Di-Chloride plants along with Gas turbines and Utilities started commercial operationsfrom August 1, 2009. The VCM startup was delayed mainly because of the complexities involved in the processwhich have largely been rectified and the plant is expected to be commissioned in the fourth quarter. VCM planthas been started on October 23, 2009 and its operations are now being smoothened.
Revenue for the nine months was Rs. 8,185 million, an increase of 25% over same period 2008 and loss aftertax was Rs. 19 million as compared to profit after tax Rs. 589 million for the nine months in 2008. Loss after taxfor the quarter was Rs. 32 million as compared to profit after tax of Rs. 161 million in third quarter last year. Mainreasons for loss were squeeze in margin because of higher cost of spot VCM and increased depreciation andfinancial charges due to addition of units without having realized the full economic benefits of integrated operations.
KarachiOctober 26, 2009
22
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
ENGRO POLYMER & CHEMICALS LIMITEDDIRECTORS’ REPORT TO THE SHAREHOLDERSON CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Near Future Outlook
International prices of PVC are expected to decline slightly on account of weak demand in the region. Ethyleneprices will remain under pressure as supply is anticipated to remain long due to additional capacities in Middle Eastand North East Asia, however, rising oil prices will counter this pressure.
Outlook for domestic PVC demand continues to remain robust. On Caustic Soda front, the Company plans toenhance its market share by maintaining focus on product quality and customer service. The domestic CausticSoda market will continue to see a restructure as the Company pushes for market share. Sale of surplus powerto KESC is expected to continue and contribute to the revenue stream.
Margins of the Company will remain dependent upon smooth operation of the VCM plant. The Company intendsto continue to export surplus EDC till such time VCM operations are smoothened out.
24
ENGRO POLYMER & CHEMICALS LIMITEDCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Note
13
14
15
16
17
Rupees
Net sales
Cost of sales
Gross profit
Distribution and marketing expenses
Administrative expenses
Other operating expenses
Other operating income
Operating profit
Finance costs
Profit / (Loss) before taxation
Taxation
Profit / (Loss) for the period
Earnings / (Loss) per share - basic and diluted
Nine months endedQuarter ended
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
[Amounts in thousand except for earnings / (loss) per share]
The annexed notes 1 to 23 form an integral part of this consolidated condensed interim financial information.
6,536,068)
(5,189,061)
1,347,007)
(229,771)
(115,836)
(276,134)
135,999)
861,265)
(21,626)
839,639)
(250,263)
589,376)
1.14)
8,185,429)
(7,388,154)
797,275)
(336,468)
(133,223)
(148,151)
125,105)
304,538)
(344,628)
(40,090)
21,469)
(18,621)
(0.04)
2,167,314)
(1,732,521)
434,793)
(80,480)
(47,198)
(141,733)
45,466)
210,848)
(6,065)
204,783)
(43,865)
160,918)
0.31)
3,219,957)
(2,858,145)
361,812)
(141,714)
(55,085)
(60,537)
64,449)
168,925)
(223,665)
(54,740)
22,868)
(31,872)
(0.06)
Sep 30,2008
Sep 30,2009
Sep 30,2008
Sep 30,2009
25
ENGRO POLYMER & CHEMICALS LIMITEDCONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Rupees
Profit / (Loss) for the period
Other comprehensive income / (loss):
Gain / (Loss) arising during the period
Less: - Reclassification adjustments for
losses included in profit and loss
- Adjustments for amounts transferred to initial carrying amount of hedged items
Income tax relating to hedging reserve
Other comprehensive income / (loss) for the period - net of tax
Total comprehensive income / (loss) for the period
Nine months endedQuarter ended
(31,872)
(77,622)
9,161)
6,257)
21,772)
(40,432)
(72,304)
160,918)
44,495)
–)
911)
(15,892)
29,514)
190,432)
(18,621)
(30,859)
10,085)
11,269)
3,327)
(6,178)
(24,799)
589,376)
59,249)
–)
–)
(20,737)
38,512)
627,888)
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
(Amounts in thousand)
The annexed notes 1 to 23 form an integral part of this consolidated condensed interim financial information.
Hedging reserve
Sep 30,2009
Sep 30,2008
Sep 30,2009
Sep 30,2008
ENGRO POLYMER & CHEMICALS LIMITEDCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Amounts in thousand)
The annexed notes 1 to 23 form an integral part of this consolidated condensed interim financial information.
26
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
Rupees
Balance as at December 31, 2007 (Audited)
Final dividend for the year ended December 31, 2007 - Re. 0.54 per share
Total comprehensive income for the nine months ended September 30, 2008
Share capital issued
Share issuance cost, net
Options granted during the period
Balance as at September 30, 2008 (Unaudited)
Total comprehensive loss for the three months ended December 31, 2008
Share issuance cost, net
Options granted during the period
Balance as at December 31, 2008 (Audited)
Total comprehensive income for the nine months ended September 30, 2009
Unvested options lapsed during the period
Balance as at September 30, 2009 (Unaudited)
Total
5,177,628)
(252,896)
627,888)
1,381,818)
(65,354)
9,625)
6,878,709)
(316,635)
1,435)
233)
6,563,742)
(24,799)
(266)
6,538,677)
Unappropriatedprofit
316,412)
(252,896)
589,376)
–)
–)
–)
652,892)
(239,023)
–)
–)
413,869)
(18,621)
–)
395,248)
Hedgingreserve
–)
–)
38,512)
–)
–)
–)
38,512)
(77,612)
–)
–)
(39,100)
(6,178)
–)
(45,278)
Employees’share
compensationreserve
Sharepremium
Sharecapital
4,436,000
–
–
767,677
–
–
5,203,677
–
–
–
5,203,677
–
–
5,203,677
–)
–)
–)
–)
–)
9,625)
9,625)
–)
–)
233)
9,858)
–)
(266)
9,592)
425,216)
–)
–)
614,141)
(65,354)
–)
974,003)
–)
1,435)
–
975,438)
–)
–)
975,438)
27
ENGRO POLYMER & CHEMICALS LIMITEDCONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
18
Note
RupeesCASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operationsFinance costs paidLong term loans and advancesProvisionsIncome tax paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipmentRetention money against project paymentsProceeds from disposal of operating assetsProceeds from sale of short term investmentsIncome on short term investments and bank deposits
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term financeRepayment of long term financeProceeds from issue of share capitalShare issuance cost - netRepayments of long term borrowingsShort term borrowingsDividend paid
Net cash inflow from financing activities
Net increase in cash and cash equivalentsCash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
1,290,570)(920,341)
42,408)10,968)
(188,482)
235,123)
(2,269,367)(418,622)
3,764)(850,908)
91,958)
(3,443,175)
4,107,722)–)–)–)
(130,000)–)–)
3,977,722)
769,670)(743,183)
26,487)
1,406,236) (54,269) (22,661) 73,450)
(129,862)
1,272,894)
(7,666,149) 428,268)
1,236) 1,705,861)
46,225)
(5,484,559)
5,306,877) (1,340,000)
327,465)(65,354)(65,429)354,022)
(252,896)
4,264,685)
53,020) 247,856)
300,876)
Asif Qadir Masaharu DomichiPresident & Chief Executive Director
(Amounts in thousand)
19
The annexed notes 1 to 23 form an integral part of this consolidated condensed interim financial information.
Nine monthsended
Sep 30, 2008
Nine monthsended
Sep 30, 2009
28
ENGRO POLYMER & CHEMICALS LIMITEDNOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
1. LEGAL STATUS AND OPERATIONS
The Group consists of Engro Polymer & Chemicals Limited (the Company) and it’s wholly owned subsidiary companyEngro Polymer Trading (Private) Limited.
The Company was incorporated in Pakistan in 1997 as a public unlisted company under the Companies Ordinance, 1984.The Company is listed on Karachi, Lahore and Islamabad stock exchanges.
The Company is a subsidiary of Engro Chemical Pakistan Limited. The address of its registered office is 1st Floor, BahriaComplex I, M. T. Khan Road, Karachi. The Company’s principal activity is to manufacture, market and sell Poly VinylChloride (PVC), PVC compounds, Caustic Soda and other related chemicals.
2. BASIS OF PREPARATION
This consolidated condensed interim financial information is unaudited and has been prepared in accordance with therequirements of the International Accounting Standard 34 – ‘Interim Financial Reporting’. This consolidated condensedinterim financial information does not include all the information required for annual financial statements and should beread in conjunction with the financial statements of the Company for the year ended December 31, 2008.
These consolidated condensed interim financial statements are un-audited and are being submitted to the shareholdersas required by Section 245 of the Companies Ordinance, 1984.
3. ACCOUNTING POLICIES
3.1 Except as disclosed below, the accounting policies adopted in the preparation of this consolidated condensed interimfinancial information are the same as those applied in the preparation of audited annual financial statements of the Companyfor the year ended December 31, 2008.
3.2 The following new standards and amendments to standards are mandatory for the first time for the financial year beginningJanuary 1, 2009:
- IAS 1 (revised), ‘Presentation of financial statements’. The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-
owner changes in equity’ to be presented separately from owner changes in equity. All ‘non-owner changes in equity’are required to be shown in a performance statement.
Companies can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the profit and loss account and the statement of comprehensive income).
The Company has elected to present two statements; a profit and loss account and a statement of comprehensiveincome. The condensed interim financial information has been prepared under the revised disclosure requirements.
- The SECP vide S.R.O. 411 (1) / 2008 dated April 28, 2008 notified the adoption of IFRS 7 ‘Financial Instruments: Disclosures’. IFRS 7 is mandatory for Company’s accounting periods beginning on or after the date of notification i.e.April 28, 2008. IFRS 7 has superseded IAS 30 – ‘Disclosures in the Financial Statements of Banks and Similar FinancialInstitutions’ and disclosure requirements of IAS 32 – ‘Financial Instruments: Disclosure and Presentation’. Adoptionof IFRS will only impact the format and extent of disclosures presented in the financial statements. The Company willconsider the requirements of IFRS 7 in the annual financial statements for the year ending December 31, 2009.
(Amounts in thousand)
4. ACCOUNTING ESTIMATES
The preparation of this consolidated condensed interim financial information in conformity with the approved accountingstandards requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the Company's accounting policies.Estimates and judgments are continually evaluated and are based on historical experience and other factors, includingexpectation of future events that are believed to be reasonable under the circumstances. Actual results may differ fromthese estimates.
In preparing this consolidated condensed interim financial information, the significant judgments made by managementin applying the Company's accounting policies and the key sources of estimation and uncertainty are the same as thosethat apply to annual financial statements for the year ended December 31, 2008.
Unaudited AuditedSeptember 30, December 31,
2009 2008Rupees
5. PROPERTY, PLANT AND EQUIPMENT
Operating assets, at net book value - notes 5.1 and 5.2 14,352,457 1,987,643Capital work-in-progress 4,587,737 14,147,123
18,940,194 16,134,766
5.1 Additions to operating assets during the period/year were as follows, which mainly relate to the expansion and back integration project of the Company:
Leasehold land – 3,348Building on leasehold land 168,221 –Plant and machinery 12,124,276 –Pipelines 357,309 –Furniture, fixtures and office equipment 18,740 19,940Vehicles 21,432 20,384 12,689,978 43,672
29
5.2 During the period, assets costing Rs. 8,316 (December 31, 2008: Rs. 9,936), having net book value of Rs. 2,203 (December 31, 2008: Rs. 3,622) were disposed off for Rs. 3,764 (December 31, 2008: Rs. 3,971).
(Amounts in thousand)
30
Unaudited AuditedSeptember 30, December 31,
2009 2008Rupees
(Amounts in thousand)
6.1 This includes stock-in-transit amounting to Rs. 292,385 (December 31, 2008: Rs. 155,925), stocks held at the storagefacilities of related parties, namely, Engro Vopak Terminal Limited amounting to Rs. 366,114 (December 31, 2008:Rs. 22,148) and Dawood Hercules Chemicals Limited amounting to Rs. 6,556 (December 31, 2008: Nil).
7. BORROWINGS
During the period:
- the Company entered into a Syndicated Term Finance Agreement with a consortium of local banks on February 21,2009 for Rs. 1,500,000. The facility is repayable in thirteen semi annual installments commencing six months fromCommercial Operations date of the Project or six months from December 30, 2009 (whichever is earlier). The facilitycarries mark-up at the rate of 3% over six months KIBOR and monitoring fee of Rs. 300 for the first year and Rs. 500per annum, thereafter. Commitment fee at the rate of 0.15% per annum is also payable on that part of the finance thathas not been drawn. During the period, Company has fully drawn down Rs. 1,500,000 against the facility.
- the Company has drawn down the remaining balance of US$ 30,000 against the loan agreement/facility with InternationalFinance Corporation (IFC). There is no change in the terms and conditions of the loan.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has entered into interest rate swap agreements for notional amounts aggregating to US$ 40,000, with banksto hedge its interest rate exposure on floating rate foreign currency borrowings from International Finance Corporation(IFC). Under the swap agreements, the Company would receive six month USD-LIBOR on respective notional amountsand will pay fix rates, which will be settled semi annually. Details of the swap agreements are as follows:
Fair value loss as atDecember 31, 2008
60,154–––
60,154
Fair value loss as atSeptember 30, 2009
44,1807,917
12,4615,101
69,659
Fixed Rate%
3.3853.0052.7952.800
TerminationDate
June 15, 2017June 15, 2017June 15, 2017June 15, 2017
EffectiveDate
December 15, 2008June 15, 2009June 15, 2009June 15, 2009
NotionalAmounts
US $
15,0005,000
15,0005,000
40,000
Rupees
Raw and packing materials - note 6.1 945,092 327,670Work-in-progress 19,989 21,293Finished goods - own manufactured product 576,158 810,355 - purchased product 220 155
1,541,459 1,159,473
6. STOCK-IN-TRADE
31
UnauditedSeptember 30,
2009
AuditedDecember 31,
2008Rupees
(Amounts in thousand)
9. DEFERRED INCOME TAX
Credit/(Debit) balances arising due to:
- accelerated depreciation allowance
- net borrowing costs capitalized
- recoupable carried forward tax losses and minimum turnover tax
- unrealized foreign exchange losses and provision for retirement and other service benefits
- provision against custom duty
- fair value of hedging instruments
- share issuance cost, net to equity
3,060,317)
123,992)
(2,739,376)
(53,722)
(7,733)
(24,381)
(51,566)
307,531)
548,080)
160,054)
(221,243)
(25,243)
(6,454)
(21,054)
(51,566)
382,574)
10. TRADE AND OTHER PAYABLES
Trade and other creditorsAccrued liabilitiesAdvances from customersCurrent portion of retention moneyAccrued finance costs - long term borrowings - short term financesDepositsWorkers’ profits participation fundWorkers’ welfare fundOthers
2,067,830554,128102,507659,384
434,5671,320
20,61024,625
9,3571,994
3,876,322
797,211317,713118,232239,033
157,6789,5902,510
24,6259,3572,293
1,678,242
11. PROVISIONS
As at September 30, 2009, the Company had paid Rs. 95,163 (December 31, 2008: Rs. 91,616) on account of SpecialExcise Duty (SED) on import of plant and machinery for the Project. Out of this amount it has adjusted Rs. 58,476(December 31, 2008: Rs. 54,929) in the monthly sales tax returns against SED on goods produced and sold by theCompany. The Company had approached the Federal Board of Revenue to obtain a clarification in respect of theadjustment of SED made by the Company in monthly sales tax returns. Pending such clarification the Company basedon prudence had made provision for the amount adjusted of Rs. 58,476 and for the balance remaining of Rs. 36,687included in loans, advances, deposits, prepayments and other receivables. However, during the period, the Companyreceived show cause notices from the Additional Collector (Adjudication) – Federal Board of Revenue, stating that theCompany, by adjusting the aforementioned SED, has violated the provisions of the Federal Excise Act, 2005 and theFederal Excise Rules, 2005 read with SRO 655(1)/2007 and that the amount adjusted is recoverable from the Companyunder the Federal Excise Act, 2005 along with default surcharge and penalty. In response to these notices the Companyhas filed a Constitutional Petition before the Honourable High Court, Sindh, on May 18, 2009. The High Court is inthe process of evaluating the Constitutional Petition. The Company is confident that the ultimate outcome of the matterwill be in its favour, however, based on prudence is maintaining the aforementioned provision. Further, a provision ofRs. 7,421 for surcharge and penalty thereagainst also been made.
32
12. CONTINGENCIES AND COMMITMENTS
12.1 Commitments
- Capital expenditure for the Project referred to in note 1, under the contracts signed as at September 30, 2009 but notyet incurred amounts to Rs. 66,881 (December 31, 2008: Rs. 1,305,738).
- Performance guarantees issued by banks on behalf of the Company as at September 30, 2009 amounts to Rs. 513,622(December 31, 2008: Rs. 264,200).
(Amounts in thousand)
13. COST OF SALES
Opening stock of work-in-progress 18,780 14,018 21,293 22,861
Raw and packing materials consumed 2,602,281 1,844,026 5,929,074 4,655,758Salaries, wages and staff welfare 64,680 28,301 151,483 75,752Fuel, power and gas 262,621 46,388 438,452 113,566Repairs and maintenance 5,041 4,932 26,484 9,663Depreciation 162,607 41,932 302,096 125,879Consumable stores 22,775 5,351 42,426 14,191Purchased services 7,569 5,022) 17,587 14,730Storage and handling 104,780 36,332) 191,907 100,570Training and travelling expenses 1,361 3,973) 3,089 6,469Communication, stationery and other office expenses 743 1,157 1,599 1,890Insurance 18,472 2,443 38,902 7,306Other expenses 4,856 1,279 9,774 2,386
3,257,786 2,021,136 7,152,873 5,128,160
Closing stock of work-in-progress (19,989) (18,178) (19,989) (18,178Cost of goods manufactured 3,256,577 2,016,976 7,154,177 5,132,843
Opening stock of finished goods 177,946 300,173 810,355 640,170Closing stock of finished goods (576,378) (584,628) (576,378) (584,628
(398,432) (284,455) 233,977 55,542
Cost of sales - own manufactured product 2,858,145 1,732,521 7,388,154 5,188,385 - purchased product – – –) 676
2,858,145 1,732,521 7,388,154 5,189,061
Sep 30,2009
Rupees
Sep 30,2008
Quarter ended
Sep 30,2009
Sep 30,2008
Nine months ended
)
)
33
Sep 30, 2009 Sep 30, 2008 Sep 30, 2009 Sep 30, 2008
Rupees
14. DISTRIBUTION AND MARKETING EXPENSES
Salaries, wages and staff welfare 13,313 12,457 39,786 31,537Advertising, sales promotion and entertainment 11,305 5,940 32,122 21,652Product transportation and handling 110,084 54,134 247,263 152,665Rent, rates and taxes 692 1,818 2,566 3,569Purchased services 1,598 2,302 2,388 6,649Insurance 227 292 779 646Depreciation 1,707 1,098 3,614 3,090Training and travelling expenses 2,044 2,112 4,929 6,126Communication, stationery and other office expenses 530 (9 1,495 1,817Others 214 336 1,526 2,020
141,714 80,480 336,468 229,771
15. ADMINISTRATIVE EXPENSES
Salaries, wages and staff welfare 21,182 28,520 53,972 68,170Rent, rates and taxes 4,791 3,929 12,539 9,414Purchased services 3,194 517 11,702 3,675Insurance 308 108 516 250Depreciation and amortization 1,385 1,350 4,674 4,374Training and travelling expenses 15,229 5,100 31,061 13,506Communication, stationery and other office expenses 6,970 3,983 12,328 7,264Others 2,026 3,691 6,431 9,183
55,085 47,198 133,223 115,836
16. OTHER OPERATING EXPENSES
Legal and professional charges 4,581 2,893 6,886 3,104Auditors' remuneration 474 254 791 709Donations 2,746 793 4,121 1,243Provision against custom duty refundable – _ – 18,043Sales tax receivable written off – _ – 219Workers' profit participation fund (206 10,905 – 44,964Workers' welfare fund (78 4,363 – 17,986Foreign exchange loss - net 122,508 135,677 188,654Others 136 17 676 1,212
60,537 141,733 148,151 276,134
Quarter ended Nine months ended
(Amounts in thousand)
)
))
52,884
34
Quarter ended Nine months ended
(Amounts in thousand)
Sep 30, 2009 Sep 30, 2008 Sep 30, 2009 Sep 30, 2008
Rupees
Quarter ended
(Amounts in thousand)
Sep 30, 2009 Sep 30, 2008Rupees
18. CASH GENERATED FROM OPERATIONS
(Loss) / Profit before taxation (40,090) 839,639)
Adjustments for non cash charges and other items: Provision for staff retirement and other service benefits 2,123 8,336) Depreciation charge 310,384 133,344) Amortization of deferred employee compensation expense 3,050 9,625) Income on deposits (92,625) (45,406) Finance costs 344,628) 21,624) Profit on disposal of operating assets (1,561) (358) Operating assets written off –) 243) Working capital changes - note 18.1 764,661 439,189)
1,290,570 1,406,236)18.1 Working capital changes
(Increase) / Decrease in current assets: Stores, spares and loose tools (67,814) (10,560) Stock-in-trade (381,986) (374,153) Trade debts (717,739) (72,490)
Loans, advances, deposits, prepayments and other receivables (net) 8,896 89,990)
(1,158,643) (367,213)
Nine months ended
Increase in current liabilities: Trade and other payables 806,402))
439,189))
1,923,304
764,661
17. FINANCE COSTS
Interest/Mark-up on: - long term borrowings - short term financesBank charges and others
219,5131,9922,160
223,665
3,3591,2171,489
6,065
317,50118,690
8,437
344,628
13,3173,4934,816
21,626
35
(Amounts in thousand)
20.1 Segment assets consist primarily of property, plant and equipment, stock-in-trade and trade debts.
Turnover
Segment profit before unallocated expenses
Unallocated expenses
Administrative expenses
Other operating expenses
Other operating income
Finance Costs
Taxation
Loss after taxation
Quarter ended Sep 30, 2009 Nine months ended Sep 30, 2009Poly Vinyl
Chloride andAllied
Chemicals
2,913,442
150,599
CausticSoda and
AlliedChemicals
306,515
69,499
Total
3,219,957)
220,098)
(55,085)
(60,537)
64,449)
(223,665)
22,868)
(31,872)
Poly VinylChloride and
AlliedChemicals
7,878,914
391,308
CausticSoda and
AlliedChemicals
306,515
69,499
Total
8,185,429)
460,807)
(133,223)
(148,151)
125,105)
(344,628)
21,469)
(18,621)
SEGMENT RESULTSRupees
Total segment assets
Unallocated assets
Total assets
September 30, 2009 December 31, 2008Poly Vinyl
Chloride andAllied
Chemicals
13,047,822
CausticSoda and
AlliedChemicals
6,378,428
Total
19,426,250
3,838,076
23,264,326
Poly VinylChloride and
AlliedChemicals
9,776,440
CausticSoda and
AlliedChemicals
5,177,659
Total
14,954,099
3,323,127
18,277,226
SEGMENT ASSETS
20. SEGMENT ANALYSIS
Commercial production of the Caustic Soda Plant of the Company was declared from August 1, 2009. Based on themanagement reporting approach under IFRS 8 Operating Segments, Caustic Soda has been identified as a reportablesegment, results and assets of which are shown below:
19. CASH AND CASH EQUIVALENTS
Cash and bank balancesShort term borrowings
Rupees
UnauditedSeptember 30,
2009
AuditedDecember 31,
2008
99,385)(842,568)
(743,183)
176,487)(150,000)
26,487)
Engro Polymer & Chemicals Ltd.
Head Office: First Floor, Bahria Complex I, 24 M.T. Khan Road, Karachi-74000, Pakistan.UAN: 111 411 411 PABX: +92-21-35610610, 35610743, 35610753 Fax: +92-21-35611690
Website: www.engropolymer.com
JWT