Condensed Interim Balance Sheet (Unaudited) As at December 31, 2011 Equity and liabilities Note December 31, September 30, 2011 2011 Share capital and reserves Share capital - Authorised 20,000,000 (September 30, 2011: 20,000,000) Ordinary shares of Rs 10 each 200,000 200,000 - Issued, subscribed and fully paid-up 8,247,037 (September 30, 2011: 8,247,037) Ordinary shares of Rs 10 each 82,470 82,470 Reserves Capital 624,192 624,192 Revenue 5,940,503 5,902,044 6,564,695 6,526,236 Total equity 6,647,165 6,608,706 Non-current liabilities Retention money 37,127 53,384 Other non-current liabilities 29,696 28,959 66,823 82,343 Current liabilities Trade and other payables 5 6,169,839 6,819,367 Provisions 6 2,101,438 2,130,337 Short-term running finances 7 4,166,428 3,948,627 Taxation - net 1,717,909 1,749,572 14,155,614 14,647,903 Total liabilities 14,222,437 14,730,246 Contingencies and commitments 8 Total equity and liabilities 20,869,602 21,338,952 Page 1
For the three months period December 31, 2011 1. THE COMPANY AND ITS OPERATIONS Siemens (Pakistan) Engineering Company Limited (the Company) w as incorporated in Pakistan. The Company is a public limited company and its shares are quoted on the Karachi, Islamabad and Lahore Stock Exchanges. The Company is principally engaged in the execution of projects under contracts and in the manufacture, installation and sale of electronic and electrical capital goods. The Company's registered office is situated at B-72, Estate Avenue, S.I.T.E., Karachi. 2. BASIS OF PREPARATION 2.1 These condensed interim financial statements are unaudited and are being submitted to the shareholders as required under section 245 of the Companies Ordinance, 1984 and the listing regulations of the Karachi, Islamabad and Lahore Stock Exchanges and have been prepared in accordance w ith the requirements of the International Accounting Standard 34 'Interim Financial Reporting', as applicable in Pakistan. These condensed interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction w ith the Company's annual financial statements for the year September 30, 2011. 2.2 Functional and presentation currency These condensed interim financial statements are presented in Pakistan Rupees w hich is the functional currency of the Company and figures are rounded off to the nearest thousand of rupees unless otherw ise specified. 2.3 Use of estimates and judgements The preparation of condensed interim financial statements in conformity w ith approved accounting standards requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are review ed on an on-going basis. Revisions to accounting estimates are recognised in the period in w hich the estimate is revised and in any future periods affected. In preparing these condensed interim financial statements, the significant judgements made by the management in applying accounting policies include: - Warranty obligations - Provision for liquidated damages - Useful lives of property, plant and equipment - Provision against inventories, doubtful receivables and due against construction w ork in progress - Actuarial assumptions for the gratuity scheme and provision thereagainst - Provision for taxation and deferred taxation - Cost of completion of contracts in progress and their results 3. ACCOUNTING POLICIES 3.1 The accounting policies adopted in the preparation of these condensed interim financial statements are the same as those applied in the preparation of the annual financial statements of the Company for the year September 30, 2011. 3.2 Amendments to certain existing standards and new interpretations on approved accounting standards effective during the period either w ere not relevant or did not have any significant impact on the accounting policies of the Company. 3.3 Certain comparative information for the three months period December 31, 2010 has been restated due to change in accounting policy as more fully explained in note 3.20 (1) of the financial statements for the year September 30, 2011. Page 7
For the three months period December 31, 2011 4. OPERATIONS IN UNITED ARAB EMIRATES The Board of Directors of the Companyin their meeting held on January22, 2010 decided that the Companywill cease to participate in further bidding in the United Arab Emirates (UAE) due to prevalent market situation. However, the Companywill continue to execute the orders in hand which are valued at Rs 2,490 million (September 30, 2011: Rs 3,063 million) as at December 31, 2011.The shareholders of the Company, in their Extra-ordinary General Meeting held on March 4, 2010, also approved the decision. 4.1 Results of the UAE Operations For the three For the three months period months period December 31, December 31, 2011 2010 Net sales and services 647,420 574,853 Cost of sales and services (638,117) (396,908) Gross profit 9,303 177,945 Marketing and selling expenses 14,138 (12,406) General administrative expenses (4,485) (5,603) Other operating loss (532) - 9,121 (18,009) Operating profit 18,424 159,936 Financial income - 13 Financial expenses (18,479) (23,119) Net finance costs (18,479) (23,106) (Loss) / profit before tax (55) 136,830 4.2 Cash flows from the UAE Operations Net cash flows from operating activities (278,869) (11,322) Net cash flows from investing activities 472 (56) Net cash flows from UAE Operations (278,397) (11,378) 4.3 Assets of the UAE Operations As at December As at September 31, 2011 30, 2011 Fixed assets Property, plant and equipment 1,094 5,846 Intangible assets - 45 1,094 5,891 Long-term loans and trade receivables 784,904 819,262 Inventories 13,977 20 Short-term trade receivables 5,055,416 4,837,280 Due against construction work in progress 2,249,335 2,526,642 Loans and advances 39,195 66,507 Deposits and short-term prepayments 7,459 6,902 Other receivables 450 6,240 8,151,830 8,268,744 4.4 Liabilities of the UAE Operations Long term retention money payable 37,116 51,823 Other non-current liabilities 795 898 Trade and other payables 1,652,825 2,224,236 Provisions 1,201,951 1,219,437 Short-term running finances 4,118,123 3,839,254 7,010,810 7,335,648 4.5 For segment reporting, the results of the UAE Operations have been reported as part of 'Energy Segment' (note 17). Page 8
For the three months period December 31, 2011 5. TRADE AND OTHER PAYABLES As at December As at September 31, 2011 30, 2011 Note Trade creditors 5.1 2,937,090 3,197,245 Accrued liabilities 1,261,905 1,283,482 Advances from customers - For goods 388,763 483,743 - For projects and services 877,830 1,114,408 Staff retirement benefit - gratuity 223,706 203,956 Accrued mark-up on running finances 1,152 3,578 Unearned portion of revenue and maintenance contracts 36,562 78,021 Workers' Profits Participation Fund 7,361 11,981 Workers' Welfare Fund 54,101 77,100 Unclaimed dividend 14,692 14,844 Derivative financial instruments 12,347 21,431 Withholding tax payable 15,923 12,008 Other liabilities 338,407 317,570 6,169,839 6,819,367 5.1 These include sums aggregating Rs 378 million (September 30, 2011: Rs 248 million), due to related parties. 6. PROVISIONS Warranties Liquidated Losses on sales Total damages contracts ---------------------------------------------------------------------------- Balance at beginning of the period 635,449 1,456,837 38,051 2,130,337 Additional provision 37,173 94,614 13,456 145,243 Reversal of utilised and unutilised amounts (84,125) (88,326) (1,691) (174,142) Balance at end of the period 588,497 1,463,125 49,816 2,101,438 7. SHORT-TERM RUNNING FINANCES As at December As at September 31, 2011 30, 2011 Note Unsecured - from an associate 7.1 3,980,842 3,716,440 - from others 7.2 137,281 122,814 4,118,123 3,839,254 Secured - from others 7.3 48,305 109,373 4,166,428 3,948,627 7.1 This facility is arranged w ith Siemens Financial Services (SFS) amounting to Rs 3,981 million (September 30, 2011: Rs 3,716 million), utilised in respect of the projects in the UAE. Mark-up on this facility ranges betw een 1.33% and 1.39% per annum (September 30, 2011: 0.64% and 1.33% per annum). 7.2 These facilities arranged w ith various banks in the UAE aggregated to Rs 728 million (September 30, 2011: Rs 714 million) at mark-up rates ranging betw een 4.18% and 4.25% per annum (September 30, 2011: 4.10% and 5.54% per annum). 7.3 These facilities arranged w ith various banks aggregated to Rs 1,770 million (September 30, 2011: Rs 1,770 million). Mark-up on these facilities ranges betw een 13.08% and 14.44% per annum (September 30, 2011: 13.56% and 15.34% per annum). These facilities are secured against the joint hypothecation of inventories of finished goods, w ork-in-process, raw materials and components and present and future trade receivables. Page 9
For the three months period December 31, 2011 8. CONTINGENCIES AND COMMITMENTS 8.1 Contingencies: There has been no change in the status of contingencies as stated in notes 11.1.1 to 11.1.3 to the annual financial statements of the Companyfor the year September 30, 2011. 8.2 Commitments: 8.2.1 As at December 31, 2011 capital expenditure contracted for but not incurred amounted to Rs 10.041 million (September 30, 2011: Rs 78.254 million). 8.2.2 The following amounts of forward exchange contracts relating to the Company's operations have been taken to hedge the foreign currency liabilities: As at December As at September 31, 2011 30, 2011 Forward exchange contracts - Purchase value 966,652 1,130,512 - Fair value 961,211 1,128,272 Swaps - Purchase value 764 1,329 - Fair value 764 1,330 Options - Purchase value 74,462 185,007 - Fair value 70,872 172,140 9. PROPERTY, PLANT AND EQUIPMENT Operating assets - at net book value 1,579,834 1,553,469 Capital work in progress - at cost 13,892 77,572 1,593,726 1,631,041 9.1 Following is the cost of operating assets that have been added / disposed off: Additions Disposals For the three For the three For the three For the three months period months period months period months period December 31, December 31, December 31, December 31, 2011 2010 2011 2010 Land and building - 1,302 - - Plant and machinery 71,972 52,964 31 - Tools and patterns 1,342 2,601-41 Furniture and equipment 3,654 4,273 8,111 847 Vehicles 1,510 7,006 13,853 1,911 78,478 68,146 21,995 2,799 10. INVENTORIES As at December As at September 31, 2011 30, 2011 Note Raw materials and components 1,244,438 1,266,499 Work-in-process 1,176,835 1,476,900 Finished goods 10.1 969,732 814,287 3,391,005 3,557,686 Provision for slow moving and obsolete items (523,122) (552,095) 2,867,883 3,005,591 Goods-in-transit 334,708 319,484 3,202,591 3,325,075 10.1 These include items, costing Rs 4.944 million (September 30, 2011: Rs 2.347 million), valued at their net realisable value of Rs 4.132 million (September 30, 2011: Rs 1.891 million). Page 10
For the three months period December 31, 2011 11. TRADE RECEIVABLES As at December As at September Considered good Note 31, 2011 30, 2011 Due from related parties 11.1 55,831 593,137 Due from others 8,862,726 8,290,031 8,918,557 8,883,168 Considered doubtful - others 1,137,707 1,106,970 10,056,264 9,990,138 Provision for doubtful receivables (1,137,707) (1,106,970) 8,918,557 8,883,168 11.1 These represent amounts due from the associates of the Company. 12. CASH AND BANK BALANCES With banks in - Current accounts 199,798 300,940 - Deposit accounts 12.1 528,030 290,470 Cheques in hand 234,434 123,978 Cash in hand 4,702 3,980 966,964 719,368 12.1 The rate of mark-up on these accounts ranges betw een 9.50% and 9.75% per annum (September 30, 2011: 9.00% and 10.75% per annum). 13. BASIC AND DILUTED EARNINGS PER SHARE For the three For the three months period months period December 31, December 31, 2011 2010 (Restated) There is no dilutive effect on the basic earnings per share of the Company, w hich is based on: Net profit for the period 38,459 206,303 (Number of shares) Weighted average number of Ordinary shares 8,247,037 8,247,037 (Rupees) Basic and diluted earnings per share 4.66 25.02 Page 11
For the three months period December 31, 2011 14. CASH GENERATED FROM OPERATIONS For the three For the three months period months period December 31, December 31, 2011 2010 (Restated) Note Profit before tax 78,495 328,754 Adjustment for non-cash expenses: Depreciation and amortisation 48,487 55,783 (Reversal of provision) / provision for slow moving and obsolete inventories (28,973) 17,495 Provision for doubtful trade receivables 12,330 30,624 (Reversal of provision) / provision for doubtful construction work in progress (8,345) 2,595 (Reversal of provision) / provision for doubtful deposits (2,624) 3,043 Reversal of provision for doubtful other receivables (4,677) - Provision for Workers' Profits Participation Fund 4,268 17,753 Profit on sale of property, plant and equipment (3,357) (415) Financial expenses 38,349 76,634 Financial income (5,525) (15,213) Adjustment for other items: Long-term loans and trade receivables 101,659 69,855 Long-term deposits (95) - Retention money payable (16,257) (22,865) Other non-current liabilities 737 (190) Working capital changes 14.1 (75,634) 385,126 138,838 948,979 14.1 Working capital changes (Increase) / decrease in current assets Inventories 151,457 159,079 Trade receivables (66,126) 1,046,147 Due against construction in progress 501,443 (110,870) Loans and advances 607 109,326 Deposits and short-term prepayments 26,395 19,473 Other receivables (18,029) (6,075) 595,747 1,217,080 Decrease in current liabilities Trade and other payables (642,482) (750,002) Provisions (28,899) (81,952) (671,381) (831,954) (75,634) 385,126 15. CASH AND CASH EQUIVALENTS As at December As at December 31, 2011 31, 2010 Cash and bank balances 966,964 2,324,462 Short-term running finances (4,166,428) (4,247,742) (3,199,464) (1,923,280) Page 12
For the three months period December 31, 2011 16. TRANSACTIONS WITH RELATED PARTIES Related parties comprise of Siemens Aktiengesellschaft (Siemens AG), its subsidiaries and associates and other companies w ith common directorship w ith significant influence on other companies, employees retirement benefit funds and key management employees. Transactions w ith related parties can be summarised as follow s: Note For the three For the three months period months period December 31, December 31, 2011 2010 Parent company (Siemens AG) Sales of goods and rendering of services 3,276 8,325 Purchases of goods and receipt of services 406,035 508,506 Commission and allow ances earned 2,101 5,932 Dividends - 327,067 Associated companies Sales of goods and rendering of services 8,645 47,284 Purchases of goods and receipt of services 74,403 315,088 Commission and allow ances earned 8,213 6,576 Financial expenses 12,591 7,204 Financial income - 13 Others Dividends - 30 Contribution to employees retirement benefit funds 31,173 31,476 Compensation to key management personnel 16.1 26,976 74,977 16.1 The details of compensation to key management personnel are as follow s: Short-term employee benefits 25,391 63,052 Post employment benefits 1,469 4,174 Other long-term benefits 116 214 Accrual / (reversal of accrual) for share based payments - 7,537 26,976 74,977 16.2 Amounts due from and due to related parties are disclosed in the relevant notes. Page 13
For the three months period December 31, 2011 17. INFORMATION ABOUT BUSINESS SEGMENTS Energy Industry Infrastructure & Cities (All rupees in '000) Healthcare Eliminations Company as a whole REVENUE ------------------------For the three months period December 31, 2011------------------------ Sales to external customers 2,143,850 854,600 308,741 162,728-3,469,919 Inter-segment sales 65,882 27,783 38,535 - (132,200) - Total revenue 2,209,732 882,383 347,276 162,728 (132,200) 3,469,919 RESULT Segment result 140,685 (20,069) (28,998) 4,375-95,993 Unallocated expenses (5,870) 90,123 Interest expense (16,145) Interest income 4,315 Other operating income 202 Income tax expense (40,036) Net profit for the period 38,459 OTHER INFORMATION Capital expenditure 1,435 5,911 3,063 40 - Depreciation and amortisation 21,611 7,850 8,293 905 - Non-cash expenses other than depreciation and amortisation 809 618 705 5 - ASSETS AND LIABILITIES --------------------------------------------------As at December 31, 2011-------------------------------------------- Segment assets 12,560,308 2,705,069 1,662,510 374,382-17,302,269 Segment liabilities 9,549,470 1,454,319 643,018 128,542-11,775,349 REVENUE ----------------------------For the three months period December 31, 2010---------------------------- (Restated) Sales to external customers 2,616,959 885,062 823,038 63,581-4,388,640 Inter-segment sales 153,116 67,682 61,808 6,227 (288,833) - Total revenue 2,770,075 952,744 884,846 69,808 (288,833) 4,388,640 RESULT Segment result 293,341 60,676 22,554 (22,932) - 353,639 Unallocated expenses (24,402) 329,237 Interest expense (16,139) Interest income 15,213 Other operating income 443 Income tax expense (122,451) Net profit for the period 206,303 OTHER INFORMATION Capital expenditure 18,939 2,804 4,781 170 - Depreciation and amortisation 21,064 9,401 10,195 2,070 - Non-cash expenses other than depreciation and amortisation 269 67 (22) (343) - ASSETS AND LIABILITIES ---------------------------------------As at September 30, 2011 -------------------------------------- Segment assets 12,882,638 2,092,062 2,180,844 300,623-17,456,167 Segment liabilities 9,891,444 1,284,646 842,050 134,215-12,152,355 Page 14
For the three months period December 31, 2011 17.1 The Company is operating through four business segments, namely Energy, Industry, Infrastructure & Cities and Healthcare. The energy segment mainly relates to supply and installation of transformers and other related power generation, transmission, and distribution equipment and related services. Industry segment includes designing, engineering and construction services, information technology services and supply and installation of diesel generating sets, motors, alternators and drives etc. Infrastructure & Cities segment includes designing, engineering and construction services in electrical field, supply and installation of sub-station automation and telecommunication systems and switchboards. Healthcare segment includes supply and services of health care and related equipment. The Company has changed the composition of its reportable segment and a new sector, Infrastructure & Cities has been included in the organisation with effect from October 1, 2011. Accordingly, the comparative segment information relating to revenue, results and certain other information for the three months period December 31, 2010 and assets and liabilities as at September 30, 2011 has been restated to bring it in line with the current organisation structure of the Company. 17.2 Geographical information Sales to external customers For the three For the three months period months period December 31, December 31, 2011 2010 Pakistan 2,773,886 2,916,027 United Arab Emirates 654,822 615,989 Afghanistan 29,530 441,097 Germany 3,380 26,045 Others 8,301 389,482 3,469,919 4,388,640 The revenue information above is based on the location of customers. Non-current assets As at December As at September 31, 2011 30, 2011 Pakistan 1,621,374 1,702,803 United Arab Emirates 785,998 825,153 Afghanistan 1,941 2,011 2,409,313 2,529,967 Non-current assets for this purpose consist of property, plant and equipment, intangible assets and long-term receivables except for deferred tax asset. 17.3 Segment assets and liabilities Reportable segments' assets are reconciled to total assets as follows: As at December As at September 31, 2011 30, 2011 Segment assets for reportable segments 17,302,269 17,456,167 Corporate assets 965,665 972,177 Unallocated Deferred tax asset 1,408,838 1,420,257 Cash and bank balances 966,964 719,368 Others 225,866 770,983 Total assets as per balance sheet 20,869,602 21,338,952 Page 15