24th ANNUAL REPORT 2012

Transcription

1 24th ANNUAL REPORT 2012 Quality Textile Mills Limited 24, ALI BHAI CENTRE, 2ND FLOOR, 233A, P.E.C.H.S., BLOCK2, KARACHI, PAKISTAN. Phone : , , Fax: Web: yarn@qualitytextile.com, qualitytextilemills@yahoo.com YOUSUFI TRADERS Ph: Fax : Quality Textile Mills Limited

2 CONTENTS QUALITY TEXTILE MILLS LIMITED 24 TH ANNUAL REPORT 2012 F Company Information 2 F F F F F F F F F F F F F F F Notice of Annual General Meeting Directors Report Financial Highlights of Last Six Years Attendance of Board Meetings Categories of Shareholders as per Requirements of Code of Corporate Governance Pattern of Share Holding Statement of Compliance with the Code of Corporate Governance Review Report to the Members on Statement of Compliance with best Practices of Code of Corporate Governance Auditors Report to the Members Balance Sheet Profit and Loss Account Cash Flow Statement Statement of Changes in Financial Position Notes to the Accounts Proxy Form

3 Company Information Quality Textile Mills Limtied Board Of Directors: Mr. Noor Muhammad Hashim Mr. Tayyab Noor Muhammad Mr. Muhammad Younus Hashim Mr. Imran M. Younus Miss. Ambrin Noor Mohammad Mr. Kamran M. Younus Mr. Nadia Tayyab Chairman / Chief Executive Director Director Director Director Director Director Audit Committee: Mr. Tayyab Noor Muhammad Mr. Muhammad Younus Hashim Mr. Imran M. Younus Chairman Member Secretary Human Resourse & Remuneration Committee: Mr. Kamran M Younus Mr. Imran M Younus Miss Ambreen Noor Mohammad Chairman Member Member Chief Financial Officer / Company Secretary: Mr. Ali Asghar Bankers: Bank AlHabib Limited Habib Metropolitan Bank Limited Auditors: M. Yousuf Adil Saleem & Co. Chartered Accountants Legal Advisor: K. A. Wahab Advocate Share Registrar: F. D. Registrar Services (SMCPvt) Ltd. 1705, 17th Floor, Saima Trade TowerA, I.I. Chundrigar Road, Karachi. Tel # , Fax # Registered Office: 24, 2nd Floor, Ali Bhai Centre, 233A, P.E.C.H.S, Block2, Karachi. PABX : Fax : Website : qualitytextilemills@yahoo.com Business Office 15, 1st Floor, Ali Bhai Centre, 233A, P.E.C.H.S, Block2, Karachi. 2 Mills: ANNUAL REPORT KM, Sheikhupura Faisalabad Road, Ferozwattowan. Distt. Sheikhupura. Fax: Tel: & qualitytextilemillskp@yahoo.com

4 Notice of Annual General Meeting Notice is hereby given that the 24th Annual General Meeting of the shareholders of Quality Textile Mills Limited will be held on Wednesday November 28, 2012 at 09:00 A.M. at its Registered Office 24, Ali Bhai Centre, 2nd Floor, 233 A, Block2, P.E.C.H.S., ShahraheQuaideen, Karachi to transact the following business: 1. To confirm the minutes of last Annual General Meeting held on October 26, To receive, consider and adopt the Audited Accounts of the Company together with the Auditors and Directors reports thereon, for the year ended June 30, To approve the appointment of auditors and to fix their remuneration for the next year To approve 5% final cash dividend as recommended by the Board of Directors. This is in addition to 10% interim cash dividend already paid. The total dividend to be approved in AGM will be 15% for the year ended June 30, To transact any other business with the permission of the Chairman. By the order of the board ALI ASGHAR Karachi: Date: Company Secretary NOTES: 1. The Share Transfer Books of the Company will remain closed from November 22 to November 28, 2012 (both days inclusive), to determine the names of members entitled to attend the meeting. Transfer received in order, at the Share Registrar of the Company at the close of business on November 21, 2012 will be treated in time. 2. The member entitled to attend and vote at the above meeting may appoint a member as proxy to attend and vote in place of the member at the meeting. Proxies in order to be effective must be received at the Share Registrar of the company not later 48 hours before the time of the meeting. 3. Members are requested to notify the Company of any change in their addresses. 4. Those shareholders, whose shares are deposited with Central Depository Company of Pakistan Ltd. (CDC), are requested to bring their original Computerized National Identity Card (CNIC) along with participant's ID number and their account/subaccount numbers in CDC to facilitate identification at the time of Annual General Meeting. In case of Proxy, attested copies of proxy's CNIC or passport, Account and Participation's ID numbers must be deposited along with the Form of Proxy with Share Registrar of the Company. In case of Proxy for corporate members, the Board of Directors' Resolution /Power of Attorney with specimen signature of the nominee shall be produced at the time of the meeting (unless it has been provided earlier to the Share Registrar). 3 QUALITY TEXTILE MILLS LIMTIED

5 Quality Textile Mills Limtied Directors Report For the Period Ended on June 30, 2012 Dear Members AssalamoAlekum On behalf of my colleagues on the Board, I welcome you to the 24th General Meeting of the Company and present before you the annual report, along with the audited financial statements of the Company, for the year ended June 30, OPERATING RESULTS Financial Year has proved to be challenging for the Company. The overall sales of the Company declined by 17.85% from Rs billion to Rs billion during the operations of the year ended June 30, Gross profit margin of the Company was 10.2% (2011: 15.2%). However by the grace of God, your Company has managed pretax profit of Rs. 86,192,773/ (2011: Rs. 243,654,404) after providing depreciation of Rs. 65,756,898/ and financial charges of Rs. 74,127,118/. The financial results for the year shows post tax profit of Rs. 66,403,328/ (2011: Rs. 201,186,133). Major factors contributing for the decrease in profit are highlighted below: Our exports (direct & Indirect) declined by 55.6 % in fiscal 2012, largely due to falling yarn prices, after having soared in the previous year due to skyrocketing international prices of cotton. Power shortages, high inflation and high interest rates have played havoc with textile sector growth.. We have got orders in hand and the capacity to produce, but energy and power shortages have forced us to operate on the basis of whatever energy and power is available. Cost of import of machineries & spare parts has risen due to a depreciating Rupee. Rise in inflation rate and high cost of financing have also affected the profitability of the company. The cost of production has also risen due to instant increases in electricity tariff. Such dramatic issues have decreased competitiveness of this industry in international market. FUTURE PROSPECTS Textile industry constitutes lion share of Pakistan exports through its various products including finished to raw material in different global market yet it is in great trouble to support the economy through foreign exchange earnings, generation of government revenues and jobs. The textile industry can't fetch $ 12 billion by the end of current financial year against the impossible target of $ 16 billion in the scenario of energy crisis and low demand in global markets. The persistent electricity and gas cut to the industry has crippled the production capacities of textile industry and is not allowing local manufacturers to meet delivery deadlines, which undermines the future relationship with these export markets. AUDITORS 4 The retiring Auditor M/s. Yousuf Adil Saleem & Co., Chartered Accountants, being eligible has offered themselves for reappointment for the ensuing year The audit committee in its meeting held on October 22, 2012 has recommended reappointment of the retiring auditors. ANNUAL REPORT 2012

6 DIVIDEND Directors Report The directors are pleased to recommend a final dividend of Rs. 0.5/ per share i.e. 5%. This will be paid to shareholders on company register of members at the close of business on November 21, The total dividend to be approved by shareholders at the AGM on November 28, 2012 will be Rs. 1.5 per share i.e. 15% for the year ended June 30, PATTERN OF SHARE HOLDING The pattern of share holding of the company as at June 30, 2012 is annexed. Statement On Corporate And Financial Reporting Framework a) The financial statements, prepared by the management of the Company, present fairly its state affairs, the result of its operations, cash flows and changes in equity. b) Proper books of accounts of the Company have been maintained. c) Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. e) The system of internal control is sound in design and has been effectively implemented and monitored. f) There are no significant doubts upon the Company's ability to continue as a going concern. g) There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. h) Key operating and financial data for the last six years have been summarized on page No.6 i) There are no overdue taxes and levies as on June 30, j) During the year five meetings of the Board of Director were held and attendance by each director is given on page No. 7. k) During the year under review, the trading in shares of the Company by the Director is as follows: Opening Balance As on Purchases Sales Closing Balance As on Mr. Noor M. Hashim Mr. Tayyab Noor Mohammad Miss Ambreen Noor Mohammad 5,343,146 4,474,080 1,432,715 1,958,266 1,065, ,285 7,301,412 5,540,000 1,774,000 ACKNOWLEDGEMENT The board is pleased to record its appreciation to its bankers for their continued support and also expresses appreciation for the sincerity and hard work of the staff and workers at Mill and Head office and also extends thanks to valued shareholders for their confidence and moral support to the Company. On Behalf of Board of Directors NOOR MUHAMMAD HASHIM Chairman / Chief Executive Karachi Dated: October 31, 2012 QUALITY TEXTILE MILLS LIMTIED 5

7 Financial Highlights Quality Textile Mills Limtied A Profit & Loss Net Sales Gross Profit Profit Before Tax Profit / (Loss) After Tax 945,988,854 87,389,716 14,496,985 6,377,018 1,026,154,3941,220,867,283 94,994, ,489,931 21,544,699 10,877,372 (2,317,282) (2,007,599) 1,584,087, ,570, ,712,100 94,998,213 2,531,350, ,285, ,654, ,186,133 2,075,429, ,237,340 86,192,773 66,403,328 B Cash Out Flows Taxes paid Financial charges paid Fixed capital expenditure 4,818,684 49,386,130 5,795,363 3,053,371 50,963,892 6,038,850 8,949,275 69,438,520 25,860,840 23,550,798 70,505,183 20,086,635 45,381,097 95,785, ,024,932 25,107,572 67,117, ,382,033 C Balance Sheet Current Assets Current Liabilities Operating fixed assets Total assets Long term loans Shareholders' Equity 299,946, ,741, ,183, ,294,633 84,600, ,993, ,301, ,029, ,939, ,406,134 59,000, ,499, ,267, ,648, ,492, ,080,223 35,400, ,362, ,775, ,381, ,227, ,168,047 11,800, ,884, ,952, ,032, ,202,487 1,258,320, ,017, ,551, ,682, ,268,396 1,600,985, ,631,707 D Ratio Current ratio (As per SBP regulations) Gross Profit % Net profit % (before tax) Earning / (Loss) per share Dividend % 1: (0.40) 0% 1: (0.15) 0% 1: (0.13) 0% 1 : % 1 : % 1 : % E Production Data 1 No. of Spindles Worked 24,240 24,240 24,240 24,240 24,240 24,720 2 Installed capacity after conversion into 20/s countkgs. 3 Actual Production of Yarn after conversion into 20/s countkgs. 7,087,253 8,462,929 7,087,253 8,993,721 7,087,253 7,987,172 7,087,253 8,344,247 7,227,595 8,064,290 7,227,595 6,985,911 6 ANNUAL REPORT 2012

8 Attendance of Board Meeting DURING THE YEAR (July 2011 to June 2012) Name of Directors Total No. of Board Meeting No. of Meeting Attended 1 Mr. Noor Muhammad Hashim Mr. Tayyab Noor Muhammad Mr. Muhammad Younus Hashim Miss Ambrin Noor Mohammad Mr. Imran M. Younus Mr. Kamran M. Younus Mrs. Nadia Tayyab Gandhi 5 1 QUALITY TEXTILE MILLS LIMTIED 7

9 Detail of Pattern of Share Holding Quality Textile Mills Limtied AS PER REQUIREMENTS OF CODE OF CORPORATE GOVERNANCE NIT and ICP Investment Corporation of Paksitan Associated Company Noor Automobiles (Pvt.) Limited Directors, CEO and their Spouses and Minor Childern Noor Muhammad Hashim Tayyab Noor Muhammad Ambrin Noor Muhammad Muhammad Younus Hashim Imran M. Younus Kamran Younus Nadia Tayyab Total SHARES HELD ,000 7,301,412 5,540,000 1,774,000 26, ,487 5, TOTAL SHARES ,000 15,250,712 Joint Stock Companies Individual (Gernal Public) TOTAL SHARE CAPITAL 3, ,356 15,977,808 SUMMARY OF SHARE CAPITAL Associated Companies Director, CEO and their spouse and Minor Children s Banks, DFIs, NBFIs, Insurance Companies, Modaraba and Mutual Fund Joint Stock Companies Individual TOTAL SHARE CAPITAL No. of Shares Holders Shares Held 500,000 15,250, , ,356 15,977,808 Shareholders Holding 10% or More Noor Muhammad Hashim Tayyab Noor Muhammad Ambreen Noor Mohammad Shares Held 7,301,412 5,540,000 1,774,000 % AGE ANNUAL REPORT 2012

10 Pattern of Share Holding AS ON JUNE 30, 2012 Number of Share Holders From Share Holding To Total Shares Held , , ,000 98, ,001 5,000 25, ,001 10,000 12, ,001 20,000 18, ,001 40,000 37, , , , , , , ,065,001 1,070,000 1,065, ,545,001 13,550,000 13,549, ,977,808 S.No. Categories of Share Holders Number of Share Holders Shares Held Percentage 1 INDIVIDUALS ,474, JOINT STOCK COMPANIES 4 503, INVESTMENT COMPNIES ,977, QUALITY TEXTILE MILLS LIMTIED 9

11 Quality Textile Mills Limtied Statement Of Compliance With Best Practices Of The Code Of Corporate Governance For the year ended June 30, 2012 This statement is being presented to comply with the Code of Corporate Governance (Code) contained in listing regulations of Karachi Stock Exchange Limited for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. At present, the Board includes: Category Names Executive Directors NonExecutive Directors Mr. Noor Muhammad Hashim Mr. Tayyab Noor Muhammad Ms. Ambrin Noor Muhammad Mr. Muhammad YounusHashim Mr. Imran M. Younus Mr. Kamran Younus Ms. Nadia Tayyab Gandhi The condition of clause 1(b) of the Code in relation to independent director will be applicable after election of next Board of Directors of the Company in October The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this Company. 3. All the directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. No casual vacancy in the Board occurred during the year. 5. The Company has prepared a "Code of Conduct" and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer (CEO) andother executive and nonexecutive directors, havebeen taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated The Board members are aware of their responsibilities, rules and regulations on laws affecting the Company as they are on the Board since many years. They have been kept aware of the changes in the corporate laws particularly in the Code of Corporate Governance, however no formal orientation courses was arranged by the company. ANNUAL REPORT 2012

12 10. The existing Chief Financial Officer (CFO), Company Secretary and Head of Internal Audit were appointed in the previous years with the approval of board of directors and there is no change to date. 11. The directors' report has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholdings. 14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The Board has formed an Audit Committee. It comprises of threemembers of whom two are nonexecutive directors. Chairman of the audit committee is executive director. 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the committee have been determined and approved by the Board of Directors and advised to the committee for compliance. 17. The Board has formed anhr and Remuneration Committee. It comprisesof threemembers, of whom two members including Chairman of the committee are nonexecutive directors. 18. The Board has set up an effective internal audit function. The inchargeof Internal Audit functionis considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the Company. The management is in process of strengthening the function. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The 'closed period', prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of Company's securities, was determined and intimated to directors, employees and stock exchanges. 22. Material/price sensitive information has been disseminated among all market participants at once through stock exchanges. 23. We confirm that all other material principles enshrined in the Code have been complied with. For and on behalf of the Board of Directors Statement of Compliance with the Code of Corporate Governance NOOR MUHAMMAD HASHIM Chief Executive Officer Karachi October 31, QUALITY TEXTILE MILLS LIMTIED

13 Quality Textile Mills Limtied Review Report To The Members on Statement of Compliance With Best Practices of Code of Corporate Governance We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of QUALITY TEXTILE MILLS LIMITED ("the Company") to comply with the Listing Regulations of the Karachi where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement of internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. Further, Listing Regulations of the Stock Exchange where the Company is listed, require the Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were under taken at arm's length price or not. Nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, Further, we draw attention to the following noncompliances observed during the year. 1. Refer para 9 of the statement of compliance, the company did not arrange any orientation course for its directors during the year. 2. Refer para 18 of the statement of compliance, the internal audit function established by the company needs to be strengthened by the Board. 12 ANNUAL REPORT 2012 Karachi October 31, 2012 M. Yousuf Adil Saleem & Co. Chartered Accountants Engagement Partner: Mushtaq Ali Hirani

14 Auditors' Report To The Members We have audited the annexed balance sheet of QUALITY TEXTILE MILLS LIMITED (the Company) as at June 30, 2012 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a. in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; b. in our opinion: i. the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; ii. the expenditure incurred during the year was for the purpose of the Company's business; and iii. the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; c. in our opinion, and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with the approved accounting standards as applicable in Pakistan, and give the information required by the Companies Ordinance, 1984 in the manner so required, and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2012 and of the profit, its cash flows and changes in equity for the year then ended; and d. in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the company and deposited in the central Zakat Fund established under section 7 of that ordinance. Karachi October 31, 2012 M. Yousuf Adil Saleem & Co. Chartered Accountants Engagement Partner: Mushtaq Ali Hirani 13 QUALITY TEXTILE MILLS LIMTIED

15 Quality Textile Mills Limtied Balance Sheet As At June 30, 2012 SHARE CAPITAL AND RESERVES Note Share capital Unappropriated profit 3 159,778, ,853, ,631, ,778, ,239, ,017,910 SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT 4 228,153, ,826,393 NON CURRENT LIABILITIES Deferred liabilities 5 105,517,839 96,443,985 CURRENT LIABILITIES Trade and other payables 6 101,255,409 64,386,514 Interest / markup accrued 7 16,125,971 9,116,711 Short term borrowings 8 599,946, ,796,652 Liabilities against import of machinery 9 72,403,020 Current portion of long term financing 11,800,000 Provision for taxation 20,354, ,682,884 31,529, ,032,205 CONTINGENCIES AND COMMITMENTS 10 1,600,985,486 1,258,320,493 The annexed notes form an integral part of these financial statements 14 Noor Muhammad Hashim CHIEF EXECUTIVE OFFICER Tayyab Noor Muhammad DIRECTOR ANNUAL REPORT 2012

16 NON CURRENT ASSETS Note Property, plant and equipment ,268, ,202,487 Long term deposits 2,165, ,433,497 2,165, ,367,588 CURRENT ASSETS Stores and spares 12 8,223,372 9,100,148 Stockintrade ,069, ,885,144 Trade debts ,501, ,791,951 Loans and advances 15 3,093, ,786 Trade deposits and shortterm prepayments , ,000 Advance income tax 23,221,487 33,111,345 Income tax refundable 7,092,470 8,272,710 Sales tax refundable 13,049,079 6,560,467 Cash and bank balances 17 1,512, ,551,989 2,052, ,952,905 1,600,985,486 1,258,320,493 The annexed notes form an integral part of these financial statements Noor Muhammad Hashim CHIEF EXECUTIVE OFFICER Tayyab Noor Muhammad DIRECTOR 15 QUALITY TEXTILE MILLS LIMTIED

17 Quality Textile Mills Limtied Profit And Loss Account Note Sales 18 2,075,429,391 2,531,350,888 Cost of goods sold 19 (1,863,192,051) (2,144,065,442) Gross profit 212,237, ,285,446 Distribution cost 20 (30,714,266) (27,389,308) Administrative expenses 21 (14,257,045) (11,312,030) Other operating expenses 22 (11,682,623) (20,880,049) Finance cost 23 (74,127,118) (95,418,805) Profit from trading activities 24 10,032,132 Other operating income 25 4,736,485 1,337,018 Profit before taxation 86,192, ,654,404 Provision for taxation 26 (19,789,445) (42,468,271) Profit after taxation 66,403, ,186,133 Other comprehensive income Total comprehensive income the year 66,403, ,186,133 Earnings per share Basic & diluted The annexed notes form an integral part of these financial statements Noor Muhammad Hashim CHIEF EXECUTIVE OFFICER Tayyab Noor Muhammad DIRECTOR 16 ANNUAL REPORT 2012

18 A. CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for: Depreciation of property, plant and equipment Gain on disposal of property, plant and equipment Provision for gratuity Finance cost Operating cash flows before movements in working capital Cash Flow Statement ,192,773 65,756,898 (1,756,952) 7,103,686 74,127, ,423, ,654,404 49,414,209 (1,047,401) 5,107,948 95,418, ,547,965 Changes in working capital Decrease / (increase) in current assets Stores and spares Stockintrade Trade debts Loans and advances Trade deposits and short term prepayments Sales tax refundable Increase in current liabilities Trade and other payables Cash generated from operations Finance cost paid Income taxes paid Gratuity paid Net cash (used in) / from operating activities B. CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Proceed from disposal of property, plant and equipment Net cash used in investing activities C. CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long term financing Repayment of liabilities against import of machinery Finance obtained for import of machinery Increase in short term borrowings Dividend paid Net cash (used in) / from financing activities Net (decrease) / increase in cash and cash equivalents (A+B+C) Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 876,776 (184,184,165) (59,709,619) (2,139,926) (563,405) (6,488,612) 36,868,895 (215,340,056) 16,083,467 (67,117,858) (25,107,572) (3,473,283) (79,615,246) (109,382,033) 4,410,538 (104,971,495) (11,800,000) (72,403,020) 101,153,899 (71,900,136) (54,949,257) (239,535,998) (121,146,774) (360,682,772) 3,279,112 (81,954,454) (93,224,971) 730,887 1,239,332 (4,360,080) 24,992,370 (149,297,804) 243,250,161 (95,785,402) (45,381,097) (3,244,601) 98,839,061 (141,024,932) 3,550,000 (137,474,932) (23,600,000) (73,977,395) 72,403,020 77,163,304 (7,988,904) 44,000,025 5,364,154 (126,510,928) (121,146,774) Cash and cash equivalents Cash and bank balances Running finances The annexed notes form an integral part of these financial statements 1,512,585 (362,195,357) (360,682,772) 2,052,354 (123,199,128) (121,146,774) Noor Muhammad Hashim CHIEF EXECUTIVE OFFICER Tayyab Noor Muhammad DIRECTOR 17 QUALITY TEXTILE MILLS LIMTIED

19 Quality Textile Mills Limtied Statement Of Changes In Equity Share capital Unappropriated profit Total..... Balance at July 01, ,778, ,106, ,884,702 Comprehensive Income Profit for the year ended June 30, 2011 Other comprehensive income net of tax Transactions with owners Final cash dividend for the year ended June 30, Re. 0.5 per share Transfer from surplus on revaluation of property, plant and equipment on account of incremental depreciation for the year net off deferred tax Balance at June 30, ,778, ,186, ,186,133 (7,988,904) 8,935, ,239, ,186, ,186,133 (7,988,904) 8,935, ,017,910 Comprehensive Income Profit for the year ended June 30, 2012 Other comprehensive income net of tax Transactions with owners Final cash dividend for the year ended June 30, Rs. 3.5 per share Interim dividend for the period ended 31 December Re. 1 per share Transfer from surplus on revaluation of property, plant and equipment on account of incremental depreciation for the year net off deferred tax Balance at June 30, ,778,080 66,403,328 66,403,328 (55,922,328) (15,977,808) 8,110, ,853,627 66,403,328 66,403,328 (55,922,328) (15,977,808) 8,110, ,631,707 The annexed notes form an integral part of these financial statements Noor Muhammad Hashim CHIEF EXECUTIVE OFFICER Tayyab Noor Muhammad DIRECTOR 18 ANNUAL REPORT 2012

20 1. GENERAL INFORMATION 1.1 Quality Textile Mills Limited (the company) was incorporated in Pakistan on May 03, 1988 as a public limited company under the Companies Ordinance, The company is currently listed on Karachi Stock Exchange. The principal activity of the company is manufacturing and sale of yarn. The registered office of the company is situated at 2nd floor, Ali Bhai Centre P.E.C.H.S. Block2, Karachi in the province of Sindh. The company's manufacturing facilities are located at Ferozwattowan in the province of Punjab. 1.2 The financial statements are presented in Pak, which is the company's functional and presentation currency. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Statement of compliance Notes To The Financial Statements These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 2.2 Adoption of New Standards, and Amendments and Interpretations to the published approved accounting standards: During the year, the following standards, amendments to standards and interpretations including amendments to interpretations became effective, however, the application of these amendments and interpretations did not have material impact on the financial statements of the Company: Standards/Amendments/Interpretations Effective for periods beginning on or after IAS 1 Presentation of Financial Statements (Amendment) January 1, 2011 IAS 24 Related Party Disclosures (Revised) January 1, 2011 IAS 34 Interim Financial Reporting (Amendment) January 1, 2011 IFRS 7 Disclosures Transfer of Financial Assets (Amendment) July 1, 2011 IFRIC 13 Customer Loyalty Programmes (Amendment) January 1, 2011 IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) January 1, Standards, interpretations and amendments to the published approved accounting standards not yet effective: The following Standards, amendments and interpretations are only effective for accounting periods, beginning on or after the date mentioned against each of them. These standards, interpretations and the amendments are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements other than certain additional disclosures. 19 QUALITY TEXTILE MILLS LIMTIED

21 Quality Textile Mills Limtied Notes To The Financial Statements Standard Effective date beginning on or after IAS 1 Presentation of Financial Statements Presentation of July 1, 2012 Items of Other Comprehensive Income (Amendment) IAS 12 Income Taxes Deferred Tax: July 1, 2012 Recovery of Underlying Assets (Amendment) IAS 19 Employee Benefits (Amendment) January 1, 2013 IFRIC 20 Stripping Costs in the Production Phase January 1, 2013 of a Surface Mine (Amendment) Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board (IASB) has also issued the following standards which have not been considered by the Company as the standards and their relevant amendments have not been adopted locally by the Securities and Exchange Commission of Pakistan: IFRS 1 First Time Adoption of International Financial Reporting Standards IFRS 9 Financial Instruments IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 27 Separate Financial Statements due to nonadoption of IFRS 10 and IFRS 11 (Revised) IAS 28 Investments in Associates and Joint Ventures due to non adoption of IFRS 10 and IFRS 11 (Revised) The potential impact of standards, amendments and interpretations not yet effective on the financial statements on the Company is as follows: The amendments to IAS 19 Employee Benefits are effective for annual period beginning on or after January 1, The amendments eliminate the corridor approach and therefore require an entity to recognize changes in defined benefit plans obligations and plan assets when they occur. All actuarial gains or losses in other comprehensive income arising during the year are recognized immediately through other comprehensive income. The amendments also require additional disclosures and retrospective application with certain exceptions. Management anticipates that the amendments will be adopted in the Company s financial statements for annual period beginning on or after January 1, 2013, and the application of amendments may have impact on amounts reported in respect of defined benefit plans. However, management has not performed detailed analysis of the impact of the application of the amendments and hence yet not quantified the extent of the impact. 2.4 The financial statements have been prepared under the historical cost convention modified by: revaluation of certain property, plant and equipment certain financial instruments at fair value recognition of certain employees retirement benefits at present value 2.5 The principal accounting policies adopted are set out below: Leases 20 Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. ANNUAL REPORT 2012

22 Notes To The Financial Statements As Lessee Assets held under finance leases are recognized as assets of the company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as liabilities against assets subject to finance lease. The liabilities are classified as current and longterm depending upon the timing of payment. Lease payments are apportioned between finance charges and reduction of the liabilities against assets subject to finance lease so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit and loss account, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the company's general policy on borrowing costs Employees Benefits Cost Defined benefit plan "The Company operates unfunded gratuity scheme for nonmanagement employees who have completed the minimum qualifying period of service as defined under the respective scheme. Contributions are made to cover the obligations under the schemes on the basis of actuarial valuation and are charged to income. The Company carried out actuarial valuation as at June 30, 2012 using the 'projected unit credit method". Actuarial gains and losses are recognized immediately in accordance with IAS19. Detail of the scheme is given in note 6.2 to financial statements. Compensated absences The Company provides for compensated absences of its employees on unavailed balance of leave in the period in which the leave is earned Trade and other payables Liabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received whether billed to the Company or not Provisions Provisions are recognized when the Company has a present, legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate Property, plant and equipment Property, plant and equipment except land and building are stated at cost less accumulated depreciation and impairment in value, if any. Land and building are stated at revalued amount. Depreciation is charged to income applying the reducing balance method. In respect of additions and disposals during the year, depreciation is charged from the month of property, plant and equipment is available for use and up to the month preceding the disposal respectively. Assets residual value, if significant and their useful life are reviewed and adjusted, if appropriate, at each balance sheet date. 21 QUALITY TEXTILE MILLS LIMTIED

23 Quality Textile Mills Limtied Notes To The Financial Statements Repairs and maintenance costs are charged to income as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Assets are derecognised when disposed or when no future economic benefits are expected from its use or disposal. Gains or losses on disposal of assets, if any, are recognised as and when incurred. Surplus arising on revaluation is credited to surplus on revaluation of property, plant and equipment. The surplus on revaluation of land and building to the extent of incremental depreciation charged on related assets is transferred by the company to its unappropriated profit net of deferred tax. All expenditure connected with specific assets incurred during installation and construction period are carried under capital workinprogress. These are transferred to specific assets as and when these assets are available for use Assets held under finance lease Assets subject to finance lease are depreciated on the same basis as owned assets Stores, spares and loose tools These are valued at the cost. The cost is determined on moving average basis less allowance for obsolete and slow moving items. Items in transit are valued at invoice values plus other charges incurred thereon upto balance sheet date Stock in trade These are valued at lower of cost and net realizable value. Cost is determined on the following basis: Raw material in hand Raw material in transit Work in process Finished goods Waste Weighted average cost Invoice value and other charges incurred thereon upto the balance sheet date Average manufacturing cost Average manufacturing cost Net realizable value Finished goods and workinprocess consist of cost of direct materials, labour and a proportion of manufacturing overheads based on normal capacity. Cost is determined on average manufacturing cost. Net realizable value (NRV) represents the estimated selling price at which the inventories can be realized in the normal course of business after allowing for the cost of conversion from their existing state to finished condition and for the estimated cost necessary to make the sale. Where NRV charge subsequently reverses, the carrying value of the inventory is also increased to the extent that the revised carrying value does not exceed the amount that would have been determined had no NRV charge been recognized. A reversal of NRV is recognized in the profit and loss account. Goods in transit are valued at cost accumulated to the balance sheet date Trade debts and other receivables 22 Trade debts and other receivables are carried at original invoice amount less an estimate made for doubtful receivables based on review of outstanding amounts at the year end. Balances considered bad and irrecoverable are written off when identified. ANNUAL REPORT 2012

24 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand, balances with banks and shortterm running finance Impairment Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. Nonfinancial assets The company assesses at each balance sheet date whether there is any indication that assets except deferred tax assets and investment property may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in profit and loss account. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Where impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised recoverable amount but limited to the extent of the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior years. Reversal of impairment loss is recognized as income Financial instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument and derecognized when the Company loses control of the contractual rights that comprise the financial asset and in case of financial liability when the obligation specified in the contract is discharged, cancelled or expired Offsetting of financial assets and financial liabilities A financial asset and a financial liability is offset and the net amount reported in the balance sheet, if the Company has a legal enforceable right to set off the transaction and also intends either to settle on a net basis or to realize the asset and settle the liability simultaneously Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in the normal course of business. The following specific recognition criteria must also be met before revenue is recognised: Sales of goods Revenue from the sale of goods, net off returns, trade discounts and volume discounts, is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Interest income Notes To The Financial Statements Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount. 23 QUALITY TEXTILE MILLS LIMTIED

25 Quality Textile Mills Limtied Notes To The Financial Statements Taxation Current The charge for current taxation is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates position taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred Deferred income tax is provided using the liability method for all temporary differences at the balance sheet date between tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In this regard, the effects on deferred taxation of the portion of income subject to final tax regime is also considered in accordance with the requirement of Technical Release 27 of Institute of Chartered Accountants of Pakistan. Deferred income tax asset is recognized for all deductible temporary differences and carry forward of unused tax losses, if any, to the extent that it is probable that taxable profit will be available against which such temporary differences and tax losses can be utilized. Deferred income tax assets and liabilities are measured at the tax rate that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date Dividend distribution Dividend distribution to the company s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the company s shareholders Foreign Currencies Transactions in currencies other than Pakistani are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the year Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of the respective assets, until such time as the assets are \ substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation Key accounting judgment and estimate The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the 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, including expectation of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgment was exercised in application of accounting policies are as follows: i. Assumptions used for calculation of gratuity ii. Useful lives of property, plant and equipment iii. Impairment in property, plant and equipment 24 iv. Provision for tax and deferred tax v. Net realisable value of stock in trade ANNUAL REPORT 2012