Contents Company information Directors report to the shareholders on condensed interim financial information Condensed interim balance sheet Condensed interim profit and loss account Condensed interim statement of comprehensive income Condensed interim statement of changes in equity Condensed interim cash flow statement Notes to and forming part of the condensed interim financial information Packages Group condensed consolidated interim financial information Directors report to the shareholders on condensed consolidated interim financial information Condensed consolidated interim balance sheet Condensed consolidated interim profit and loss account Condensed consolidated interim statement of comprehensive income Condensed consolidated interim statement of changes in equity Condensed consolidated interim cash flow statement Notes to and forming part of the condensed consolidated interim financial information 2 4 8 10 11 12 13 14 25 26 32 34 35 36 37 38
COMPANY INFORMATION Board of Directors Towfiq Habib Chinoy (Chairman) (Non-Executive Director) Syed Hyder Ali (Chief Executive & Managing Director) (Executive Director) Asghar Abbas (Executive Director) Imran Khalid Niazi (Non-Executive Director) Josef Meinrad Mueller (Non-Executive Director) Muhammad Aurangzeb (Independent Director) Shamim Ahmad Khan (Non-Executive Director) Syed Aslam Mehdi (Non-Executive Director) Syed Shahid Ali (Non-Executive Director) Tariq Iqbal Khan (Non-Executive Director) Advisor Syed Babar Ali Chief Financial Officer Khurram Raza Bakhtayari Company Secretary Adi J. Cawasji Auditors A.F. Ferguson & Co. (Chartered Accountants) Legal Advisors Hassan & Hassan - Lahore Orr, Dignam & Co. - Karachi Shares Registrar FAMCO Associates (Pvt.) Ltd 8-F, Next to Hotel Faran Nursery, Block 6, P.E.C.H.S., Shahrah-e-Faisal, Karachi-75400 PABX : (021) 34380101-5 : (021) 34384621-3 Fax : (021) 34380106 Email : info.shares@famco.com.pk Bankers & Lenders Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al-Habib Limited Deutsche Bank A.G. Dubai Islamic Bank Pakistan Limited Habib Bank Limited Habib Metropolitan Bank Limited International Finance Corporation (IFC) JS Bank Limited MCB Bank Limited Meezan Bank Limited Samba Bank Limited Soneri Bank Limited Standard Chartered Bank (Pakistan) Limited The Bank of Punjab MUFG Bank Limited (Formerly The Bank of Tokyo- Mitsubishi UFJ, Ltd.) United Bank Limited Rating Agency PACRA Company Credit Rating Long Term : AA Short Term : A1+ 2
Head Office & Works Shahrah-e-Roomi, P.O. Amer Sidhu, Lahore - 54760, Pakistan PABX : (042) 35811541-46 Fax : (042) 35811195 Offices Registered Office & Regional Sales office 4 th Floor, The Forum Suite No. 416-422, G-20, Block 9, Khayaban-e-Jami, Clifton, Karachi-75600, Pakistan Zonal Sales Offices C-2, Hassan Arcade Nusrat Road, Multan Cantt. - 60000, Pakistan Tel & Fax : (061) 4504553 2 nd Floor Sitara Tower, Bilal chowk, Civil Lines, Faisalabad - Pakistan Tel : (041) 2602415 Fax : (041) 2629415 Web Presence www.packages.com.pk PABX : (021) 35874047-49 : (021) 35378650-51 : (021) 35831618, 35833011, 35831664 Fax : (021) 35860251 Regional Sales Office 2 nd Floor, G.D. Arcade 73-E, Fazal-ul-Haq Road, Blue Area, Islamabad-44000, Pakistan PABX : (051) 2348307-9 : (051) 2806267 Fax : (051) 2348310 3
DIRECTORS' REPORT ON CONDENSED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, The Directors of Packages Limited are pleased to submit the quarterly report along with the condensed interim un-audited financial information of the Company for the three months ended. Financial and Operational Performance A comparison of the un-audited financial results for the first quarter ended as against 2017 is as follows: Net sales 5,157 4,496 EBITDA - operations 690 579 Depreciation and amortisation (179) (171) EBIT - operations 511 408 Finance costs (89) (114) Other income / (expenses) - net 13 (102) Investment income 190 1,511 Earnings before tax 625 1,703 Taxation (92) (198) Earnings after tax 533 1,505 Basic earnings per share - Rupees 5.96 16.84 During the first quarter of, the Company achieved net sales of Rs. 5,157 million against net sales of Rs. 4,496 million in corresponding period of last year, representing sales and overall volume growth of 15% and 9% respectively. The Operations have generated Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) of Rs. 690 million during first quarter of against Rs. 579 million in the corresponding period of 2017, showing an increase of Rs. 111 million (19 %) mainly due to revenue growth, improved capacity utilisation and tighter controls over fixed costs. The Company's investment income decreased by Rs. 1,321 million in the current period as compared to the corresponding period of the last year due to timing difference of dividend declaration. This has resulted in decline in earnings after tax and earnings per share. A brief review of the operations of the Company's business divisions is as follows: Jan - March Jan - March 2017 (Rupees in million) 4
Consumer Products Division Consumer Products Division has registered net sales of Rs. 1,182 million during first three months of as compared to Rs. 1,158 million in corresponding period of 2017, reflecting marginal growth. The Company has geared up promotional activities to boost its growth and is hopeful to achieve much better result during remaining part of the year. Packaging Division Packaging Division has achieved net sales of Rs. 3,922 million during first three months of as compared to Rs. 3,282 million in corresponding period of year 2017 representing sales growth of 19% Resultanty, operating results improved by 41%. Comparative statement of production in the period under review and the corresponding period is as follows: Jan - March Jan - March 2017 Consumer products produced - tons 4,225 3,673 Carton Board & Consumer Products converted - tons 11,199 10,222 Plastics all sorts converted - tons 5,359 5,189 OmyaPack (Private) Limited The JV Company, Omya Pack (Private) Limited is in final stages of setting up a state of the art production facility in Kasur, Punjab. It would supply a range of high quality ground calcium carbonate products suitabl for marketing in local and regional markets. The Company expects commercial production to comence in Q2-. Future Outlook Despite rising competition in packaging and consumer product business, the Company is committed to improve shareholders' value by increasing and diversifying revenue and customer base, investing in new technology and improving production efficiencies. Company's Staff and Customers We wish to record our appreciation of the commitment of our employees to the Company and continued patronage of our customers. (Towfiq Habib Chinoy) Chairman Lahore, April 25, (Syed Hyder Ali) Chief Executive & Managing Director Lahore, April 25, 5
25 25 6
2017 4,496 579 (171) 408 (114) (102) 1,511 1,703 (198) 1,505 16.84 5,157 690 (179) 511 (89) 13 190 625 (92) 533 5.96 7
PACKAGES LIMITED CONDENSED INTERIM BALANCE SHEET (UN-AUDITED) as at EQUITY AND LIABILITIES CAPITAL AND RESERVES Note Un-audited December 31, 2017 Audited Authorised capital 150,000,000 (December 31, 2017: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000 22,000,000 (December 31,2017: 22,000,000) 10% non-voting preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000 Issued, subscribed and paid up capital 89,379,504 (December 31,2017: 89,379,504) ordinary shares of Rs. 10 each 893,795 893,795 8,186,842 (December 31,2017: 8,186,842) 10% non-voting preference shares / convertible stock of Rs. 190 each 606,222 606,222 Reserves 64,870,152 57,673,481 Un-appropriated profit 4,025,235 6,492,264 NON-CURRENT LIABILITIES 70,395,404 65,665,762 Long term finances 6 1,879,100 2,254,100 Liabilities against assets subject to finance lease - 13,195 Deferred taxation 7 350,673 343,673 Retirement benefits 368,312 358,264 Deferred liabilities 325,279 325,181 CURRENT LIABILITIES 2,923,364 3,294,413 Current portion of non-current liabilities 1,321,420 1,334,309 Finances under mark up arrangements - secured 719,288 299,596 Trade and other payables 3,637,370 3,104,993 Accrued finance costs 221,978 189,760 5,900,056 4,928,658 CONTINGENCIES AND COMMITMENTS 8 - - 79,218,824 73,888,833 8
ASSETS NON-CURRENT ASSETS Note December 31, 2017 Un-audited Audited Property, plant and equipment 9 5,276,479 5,184,739 Investment properties 133,504 134,696 Intangible assets 10 4,418 4,688 Investments 11 64,363,114 60,166,443 Long term loans and deposits 10,153 18,204 69,787,668 65,508,770 CURRENT ASSETS Stores and spares 435,070 422,218 Stock-in-trade 2,518,215 1,954,668 Trade debts 2,810,096 2,392,215 Loans, advances, deposits, prepayments and other receivables 819,843 728,868 Income tax receivable 12 2,713,331 2,699,887 Cash and bank balances 134,601 182,207 9,431,156 8,380,063 79,218,824 73,888,833 The annexed notes 1 to 21 form an integral part of this condensed interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 9
PACKAGES LIMITED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) for the three months ended Local sales 6,090,116 5,302,821 Export sales 3,087 8,279 Gross sales 6,093,203 5,311,100 Sales tax (935,850) (815,487) Net sales 5,157,353 4,495,613 Cost of sales 13 (4,068,306) (3,555,751) Gross profit 1,089,047 939,862 Administrative expenses (256,491) (242,835) Distribution and marketing costs (321,286) (288,659) Other operating expenses (55,502) (149,249) Other income 69,144 47,738 Profit from operations 524,912 306,857 Finance costs (89,519) (114,399) Investment income 189,578 1,510,712 Profit before taxation 624,971 1,703,170 Taxation 14 (92,000) (198,246) Profit for the period 532,971 1,504,924 Earnings per share Basic Rupees 5.96 16.84 Diluted Rupees 5.78 15.75 Note Three months ended 2017 Un-audited Un-audited The annexed notes 1 to 21 form an integral part of this condensed interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 10
PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) for the three months ended Profit for the period 532,971 1,504,924 Other comprehensive income Items that may be reclassified subsequently to profit or loss Three months ended 2017 Un-audited Un-audited Changes in fair value of available for sale financial assets 4,196,671 346,678 Total comprehensive income for the period 4,729,642 1,851,602 The annexed notes 1 to 21 form an integral part of this condensed interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 11
PACKAGES LIMITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) for the three months ended Issued, subscribed and paid up capital Ordinary share capital Preference shares / convertible stock Share premium Capital reserves Fair value reserve Reserves Capital redemption reserve General reserve Revenue reserves Un-appropriated profit ( R u p e e s i n t h o u s a n d ) Capital and reserves Total Balance as on January 01, 2017 (audited) 893,795 606,222 3,766,738 28,858,325 1,615,000 15,310,333 1,734,057 52,784,470 Appropriation of funds Transferr from general reserve - - - - - (1,000,000) 1,000,000 - Total comprehensive income for the period ended 2017 Profit for the period - - - - - - 1,504,924 1,504,924 Other comprehensive income Changes in fair value of available for sale financial assets - - - 346,678 - - - 346,678 Total comprehensive income for the period - - - 346,678 - - 1,504,924 1,851,602 Balance as on 2017 (un-audited) 893,795 606,222 3,766,738 29,205,003 1,615,000 14,310,333 4,238,981 54,636,072 Balance as on January 01, (audited) 893,795 606,222 3,766,738 37,981,410 1,615,000 14,310,333 6,492,264 65,665,762 Appropriation of funds Transfer to general reserve - - - - - 3,000,000 (3,000,000) - Total comprehensive income for the period ended Profit for the period - - - - - - 532,971 532,971 Other comprehensive income Changes in fair value of available for sale financial assets - - - 4,196,671 - - - 4,196,671 Total comprehensive income for the period - - - 4,196,671 - - 532,971 4,729,642 Balance as on (un-audited) 893,795 606,222 3,766,738 42,178,081 1,615,000 17,310,333 4,025,235 70,395,404 The annexed notes 1 to 21 form an integral part of this condensed interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 12
PACKAGES LIMITED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) for the three months ended Cash flows from operating activities Note Three months ended 2017 Un-audited Un-audited Cash generated from operations 16 263,216 207,732 Finance cost paid (57,301) (99,132) Income tax paid (98,444) (345,905) Payments for accumulating compensated absences (11,902) (8,579) Retirement benefits paid (4,828) - Net cash inflow / (outflow) from operating activities 90,727 (245,884) Cash flows from investing activities Fixed capital expenditure (286,494) (276,197) Long term loans and deposits - net 8,051 3,230 Proceeds from disposal of operating fixed assets 18,706 14,622 Dividends received 104,578 1,510,712 Net cash (outflow) / inflow from investing activities (155,159) 1,252,367 Cash flows from financing activities Repayment of long term finances - secured (375,000) - Liabilities against assets subject to finance lease - net (26,084) (3,435) Dividends paid (1,782) (182) Net cash outflow from financing activities (402,866) (3,617) Net (decrease) / increase in cash and cash equivalents (467,298) 1,002,866 Cash and cash equivalents at the beginning of the period (117,389) (1,286,421) Cash and cash equivalents at the end of the period 17 (584,687) (283,555) The annexed notes 1 to 21 form an integral part of this condensed interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 13
PACKAGES LIMITED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) for the three months ended 1. Legal status and nature of business Packages Limited (the 'Company') is a public limited company incorporated in Pakistan and is listed on Pakistan Stock Exchange Limited. It is principally engaged in the manufacture and sale of packaging materials and tissue products. The registered office of the Company is situated at 4th floor, the Forum, Suite No. 416-422, G-20, Block 9, Khayaban-e-Jami, Clifton, Karachi, Pakistan. Head office and factory is located at Shahrah-e-Roomi, P.O. Amer Sidhu, Lahore, Pakistan. The Company also holds investments in companies engaged in the manufacture and sale of inks, flexible packaging material, paper, paperboard and corrugated boxes, biaxially oriented polypropylene ('BOPP') film and cast polypropylene ('CPP') film, production and sale of ground calcium carbonate products, and companies engaged in insurance, power generation and real estate business. This condensed interim financial information is the separate condensed interim financial information of the Company. Condensed consolidated interim financial information is prepared separately. 2. Basis of preparation This condensed interim financial information is un-audited and has been prepared in accordance with the accounting and reporting standards as applicable in Pakistan for interim financial reporting. The accounting and reporting standards as applicable in Pakistan for interim financial reporting comprise of the International Accounting Standard ('IAS') 34 'Interim Financial Reporting' and provisions of and directives issued under the Companies Act, 2017. In case where requirements differ, the provisions of or directives issued under the Companies Act, 2017 have been followed. This condensed interim financial information does not include all the information required for annual financial statements and therefore should be read in conjunction with the annual financial statements for the year ended December 31, 2017. 3. Significant accounting policies 3.1 The accounting policies adopted for the preparation of this condensed interim financial information are the same as those applied in the preparation of preceding annual published financial statements of the Company for the year ended December 31, 2017. 3.2 Initial application of standards, amendments or an interpretation to existing standards The following amendments to existing standards have been published that are applicable to the Company's financial statments covering annual periods, beginning on or after the following dates. 3.2.1 Standards, amendments and interpretations to approved accounting standards that are effective in the current period Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periods beginning on January 01,, but are considered not to be relevant or to have any significant effect on the Company s operations (although they may affect the accounting for future transactions and events) and are, therefore, not detailed in this condensed interim financial information. 14
3.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company There are certain standards, amendments to the approved accounting standards and interpretations that are mandatory for the companies having accounting periods beginning on or after July 01, / January 1, 2019 but are considered not to be relevant or to have any significant effect on the Company's operations and are, therefore, not detailed in this condensed interim financial information, except for the following: IFRS 9, Financial instruments': (effective for periods beginning on or after January 1, ). This standard has been notified by the SECP to be effective for annual periods beginning on or after July 1,. This standard replaces the guidance in IAS 39, 'Financial instruments: Recognition and measurement'. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. The Company is yet to assess the full impact of the standard. IFRS 15, Revenue from contracts with customers : (effective for periods beginning on or after January 1, ). This standard has been notified by the SECP to be effective for annual periods beginning on or after July 1,. This standard deals with revenue recognition and establishes principles for reporting useful information to users of the financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18, Revenue, and IAS 11, Construction contracts, and related interpretations. The Company is yet to assess the full impact of the standard. IFRS 16, 'Leases': (effective for periods beginning on or after January 1, 2019). This standard is yet to be notified by the SECP. This standard replaces the current guidance in IAS 17, 'Leases' and is a far reaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts. The IASB has included an optional exemption for certain short term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. The Company is yet to assess the full impact of this standard. IFRIC 23, 'Uncertainty over income tax treatments': (effective for periods beginning on or after 1 January 2019). This IFRIC clarifies how the recognition and measurement requirements of IAS 12 Income taxes, are applied where there is uncertainty over income tax treatments. The IFRIC explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. The IFRIC applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. The Company is yet to assess the full impact of the interpretation. 15
4. Income tax expense comprises current and deferred tax. SECP vide its certificate dated December 14, 2017, has registered the Company and its wholly-owned subsidiary Bulleh Shah Packaging (Private) Limited ('BSPPL') (together the 'Group') as a Group and has also, vide its certificate dated January 1,, designated the Group for the purpose of group taxation under Section 59AA of the Income tax Ordinance, 2001. Consequent to the filing of declaration for group taxation for the tax year 2019 by the Company and BSPPL, the Group will be taxed as one fiscal unit for the tax year 2019. Income tax expense is recognised based on management s best estimate of the weighted average annual income tax rate expected for the full financial year. Current and deferred taxes based on the consolidated results of the Group are allocated within the Group on the basis of separate return method, modified for determining realisability of tax credits and tax losses which are assessed at Group level. Any adjustments in the current and deferred taxes of the Company on account of group taxation are credited or charged to profit and loss account in the year in which they arise. 5. The preparation of this condensed interim financial information 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. In preparing this condensed interim financial information, the significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended December 31, 2017, with the exception of changes in estimates that are required in determining the provision for income taxes as referred to in note 4. 6. Long term finances Note December 31, 2017 Un-audited Audited Local currency loans - secured 6.1 2,267,870 2,642,870 Preference shares / convertible stock - unsecured 932,650 932,650 3,200,520 3,575,520 Current portion shown under current liabilities (1,321,420) (1,321,420) 6.1 Local currency loan - secured 1,879,100 2,254,100 Opening balance 2,642,870 3,214,290 Repayments during the period / year (375,000) (571,420) Closing balance 2,267,870 2,642,870 16
7. Deferred tax asset on tax losses representing minimum tax available for carry forward under section 113 of the Income Tax Ordinance, 2001 is recognised to the extent that the realisation of related tax benefits through future taxable profits of the Group is probable. The Company has not recognised deferred tax asset of Rs. 11.657 million (2017: Rs. 11.657 million), set to lapse in the accounting year 2022, in respect of minimum tax available for carry forward arisen after the formation of the Group, as sufficient taxable profits would not be available to the Group to utilise these in the foreseeable future. Deferred tax asset has also not been recognised on aggregate minimum taxes prior to the formation of the Group amounting to Rs. 212.759 million (2017: Rs. 212.759 million) as the same can not be realised against the taxable profits of the Group. However, in case the Company opts out of the Group, these minimum tax credits will become available for realisation against the taxable profits of the Company. Out of these minimum tax credits, Rs. 159.834 million is set to lapse in the accounting year and Rs. 52.925 million is set to lapse in the accounting year 2021. 8. Contingencies and commitments 8.1 Contingencies (i) (ii) Claims against the Company by ex-employees not acknowledged as debts aggregating Rs. 28.294 million (December 31, 2017: Rs. 28.294 million). Standby letter of credit issued by Habib Bank Limited Pakistan ('HBL Pakistan') in favor of Habib Bank Limited Bahrain ('HBL Bahrain') on behalf of the Company amounting to Rs. 1,278.915 million (December 2017: PKR 1,223.503 million), to secure long term finance facility provided by HBL Bahrain to Anemone Holdings Limited ('AHL') (wholly-owned subsidiary of the company). The standby letter of credit is secured agains pledge of Nestle Pakistan Limited's shares owned by the company. (iii) Letters of guarantees issued to various parties aggregating Rs. 188.234 million (December 31, 2017: Rs. 189.474 million). 8.2 Commitments in respect of (i) (ii) Letters of credit and contracts for capital expenditure aggregating Rs. 569.157 million (December 31, 2017: Rs. 353.626 million). Letters of credit and contracts other than for capital expenditure aggregating Rs. 549.276 million (December 31, 2017: Rs. 458.930 million). 9. Property, plant and equipment Un-audited December 31, 2017 Audited Operating assets - at net book value Owned assets 4,238,685 4,168,989 Assets subject to finance lease - 29,021 9.2 4,238,685 4,198,010 Capital work-in-progress 9.3 976,225 925,160 Major spare parts and stand-by equipment 61,569 61,569 5,276,479 5,184,739 9.1 A portion of the land on which the Company s factory is situated has been on lease from the Government of Punjab for the past 60 years. The term of this lease has expired in December 2015 and the Company has filed an application with the relevant authorities for its renewal. Note 17
9.2 Operating assets Note Un-audited December 31, 2017 Audited Opening net book value 4,198,010 4,093,392 Additions during the period / year 9.2.1 233,105 828,475 Disposals during the period / year at book value (14,511) (55,140) Depreciation charged during the period (177,919) (668,717) (192,430) (723,857) Closing net book value 4,238,685 4,198,010 9.2.1Additions during the period / year Freehold land - 121,247 Buildings on freehold land 11,035 47,490 Plant and machinery 165,853 444,675 Furniture and fixtures - 4,719 Other equipment 39,743 103,814 Vehicles 16,474 106,530 9.3 Capital work-in-progress 233,105 828,475 Civil works 122,052 107,797 Plant and machinery 727,347 769,549 Others 9,719 - Advances 117,107 47,814 10. Intangible assets 976,225 925,160 Opening book value 4,688 9,866 Additions during the period / year 115 - Amortisation charged during the period / year (385) (6,204) Intangible assets under development - 1,026 Closing book value 4,418 4,688 11 Investments Opening balance 60,166,443 50,077,782 Investments made in related parties during the period / year - 965,577 Changes in fair value of available for sale financial assets 4,196,671 9,123,084 Closing balance 64,363,114 60,166,443 18
11.1 As of, an aggregate of 775,000 (2017: 775,000) shares of Nestle Pakistan Limited having market value Rs. 9,803.750 million (2017: Rs. 8,912.492 million) have been pledged in favor of HBL Pakistan. Out of aggregate shares pledged, 410,000 (2017: 410,000) shares are pledged against issuance of standby letter of credit in favour of HBL Bahrain as referred to in note 8.1 and the remaining 365,000 shares (2017: 365,000) are pledged against the term finance loan from HBL Pakistan. 12. Income tax receivable 12.1 In 1987, the Income Tax Officer ('ITO') re-opened the Company s assessments for the accounting years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Company under section 107 of the Income Tax Ordinance, 1979. The tax credit amounting to Rs. 36.013 million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Company s undertaking which did not qualify for tax credit under this section in view of the Company s location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years. The Company had filed an appeal against the revised orders of the ITO before the then Commissioner of Income Tax (Appeals) ['CIT(A)'], Karachi. CIT(A) in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO filed an appeal against the CIT(A) s order with the then Income Tax Appellate Tribunal ('ITAT'). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT(A), had issued notices under section 65 of the Income Tax Ordinance, 1979 and the Company had filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending. The amount recoverable of Rs. 36.013 million represents the additional taxes paid as a result of the disallowance of the tax credits on reframing of the assessments. The Company has not made any provision against the above order as the management is confident that the ultimate outcome of the writ petition would be in favor of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. 12.2 In respect of tax year 2014, the department has, against taxable loss of Rs. 706.039 million as per return filed by the Company, assessed a taxable income of Rs. 2,614.710 million and amended the deemed order for the year raising a tax demand of Rs. 606.328 million. The Company being aggrieved of this order filed an appeal before the Commissioner Inland Revenue (Appeals) ['CIR(A)']. CIR(A) through order dated March 2, has accepted all the contentions of the Company except nontaxation of the transfer of paper and paperboard and corrugated business segments to Bulleh Shah Packaging (Private) Limited under section 97 of the Income Tax Ordinance, 2001. Such transfer has been taxed as capital gain on the value of assets transferred. The Company is in process of filing an appeal against the above order before Appellate Tribunal Inland Revenue ('ATIR') and has not made any provision against the above demand or disallowances as the management is confident that the ultimate outcome of the appeal would be in favor of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. 12.3 In respect of tax year 2016, the department has, against taxable income of Rs. 1,157.926 million as per return filed by the Company, assessed a taxable income of Rs. 2,437.836 million and amended the deemed order for the year raising a tax demand of Rs. 464.187 million. The Company being aggrieved of the said order filed the appeal before CIR(A). CIR(A), through order dated December 11, 2017, has accepted all the contentions of the Company except the allowability of provision for workers' profit participation fund on payment rather than accrual basis thereby reducing the tax refundable claimed by the Company from Rs. 331.817 million to Rs. 328.320 million. The Company has filed an appeal before ATIR against the issues maintained by CIR(A) and has not made any 19
provision against the above disallowance as the management is confident that the ultimate outcome of the appeal would be in favour of the Company, inter alia on the basis of the advice of the tax consultant and the relevant law and the facts. 13. Cost of sales Un-audited 2017 Un-Audited 14. Taxation Materials consumed 3,057,193 2,431,385 Salaries, wages and amenities 349,849 344,388 Travelling 4,180 4,642 Fuel and power 224,240 178,364 Production supplies 98,486 113,131 Rent, rates and taxes 8,747 8,038 Insurance 8,208 7,201 Repairs and maintenance 78,111 75,940 Packing expenses 82,596 78,103 Depreciation on property plant & equipment 164,347 155,116 Amortisation of intangible assets 163 2,574 Technical fee and royalty 11,802 4,805 Other expenses 68,713 61,837 4,156,635 3,465,524 Opening work-in-process 218,569 219,626 Closing work-in-process (253,600) (249,825) Cost of goods produced 4,121,604 3,435,325 Opening stock of finished goods 538,888 564,573 Closing stock of finished goods (592,186) (444,147) 4,068,306 3,555,751 Current 85,000 233,246 Deferred 7,000 (35,000) 92,000 198,246 14.1 Through the Finance Act, 2017, an amendment has been made to section 5A of the Income Tax Ordinance, 2001 whereby 'tax on undistributed reserves' has been substituted by 'tax on undistributed profits'. As per the amended provision, income tax at the rate of 7.5% of accounting profit before tax for tax year 2017 and onwards is applicable where the Company does not distribute at least 40% of its after tax profits, whether in the form of cash or bonus shares, within nine months of the end of tax year 2017, i.e. September 30, 2017, and within six months of the end of tax year and onwards. Liability in respect of such income tax, if any, is recognised when the prescribed time period for distribution expires. The Company has already distributed 40% of its after tax profits for the tax year 2017. 20
15. Transactions with related parties Significant transactions and balances with related parties other than those disclosed in respective notes are as follows: Three months ended 2017 Un-audited Un-audited Relationship with the Company Nature of transactions i. Subsidiaries Purchase of goods and services 1,197,782 253,747 Sale of goods and services 26,007 28,473 Dividend income 85,000 115,037 Rental and other income 32,329 5,864 Management and technical fee 20,769 14,590 ii. Joint ventures Purchase of goods and services - 498,900 Sale of goods and services 15,870 24,466 Rental and other income 62 18,225 Sales of property, plant & equipment - 1,168 iii. Associates Purchase of goods and services 331,505 234,410 Sale of goods and services 4,603 8,917 Insurance premium 49,206 44,377 Commission earned 3,449 1,007 Insurance claims received 54 62 Rental and other income 4,723 2,567 Dividend income 104,578 - iv. Retirement benefit Expense charged in respect Obligations of retirement benefit plans 38,510 30,730 v. Key management personnel Salaries and other employee benefits 43,134 29,716 vi. Other related party Donations made 3,700 15,628 All transactions with related parties have been carried out on mutually agreed terms and conditions. There are no transactions with key management personnel other than under the terms of employment. Period / year end balances Receivable from related parties Subsidiaries 236,191 132,636 Joint venture 22,683 3,714 Associates 18,593 14,127 Payable to related parties Subsidiaries 464,295 370,147 Associates 71,790 67,209 Retirement funds 22,496 17,165 These are in the normal course of business and are interest free. December 31, 2017 Un-audited Audited 21
16. Cash generated from operations Three months ended 2017 Un-audited Un-audited Profit before tax 624,971 1,703,170 Adjustments for: Depreciation on operating assets 177,920 166,542 Depreciation on investment property 1,192 1,743 Amortisation on intangible assets 385 2,772 Provision for accumulating compensated absences 12,000 20,166 Provision for retirement benefits 14,890 4,080 Net profit on disposal of property, plant and equipment (4,195) (1,727) Exchange loss 10,063 7,391 Finance costs 89,519 114,399 (Reversal of provision) / provision for doubtful debts (808) 903 Provision against pending claims 2,270 - Capital work-in-progress charged to profit and loss 2,208 - Provisions and unclaimed balances written back (140) (384) Dividend income (189,578) (1,510,712) Profit before working capital changes 740,697 508,343 Effect on cash flow due to working capital changes Increase in trade debts (419,343) (31,925) Increase in stores and spares (12,852) (4,182) Increase in stock-in-trade (563,547) (200,780) Increase in loans, advances, deposits, prepayments and other receivables (5,975) (143,082) Increase in trade and other payables 524,236 79,358 17. Cash and cash equivalents (477,481) (300,611) 263,216 207,732 Cash and bank balances 134,601 114,153 Finances under mark up arrangements - secured (719,288) (397,708) 18. Financial risk management 18.1 Financial risk factors (584,687) (283,555) The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at December 31, 2017. There have been no significant changes in the risk management policies since the year end. 22
18.2 Fair value estimation The different levels for fair value estimation used by the Company have been explained as follows: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Company s material financial assets and liabilities that are measured at fair value as at. Un-audited Level 1 Level 2 Level 3 Total Assets Recurring fair value measurements Available for sale investments 46,162,987 - - 46,162,987 Liabilities - - - - The following table presents the Company s material financial assets and liabilities that are measured at fair value as at December 31, 2017. Audited Level 1 Level 2 Level 3 Total Assets Recurring fair value measurements Available for sale investments 41,966,316 - - 41,966,316 Liabilities - - - - During the period, there were no significant changes in the business or economic circumstances that affect the fair value of the Company s financial assets and financial liabilities. Furthermore, there were no reclassifications of financial assets. 19. Date of authorisation for issue This condensed interim financial information was authorised for issue on April 25, by the Board of Directors of the Company. 20. Events after the balance sheet date The Board of Directors has proposed a final cash dividend for the year ended December 31, 2017 of Rs. 30.00 per share (2016: Rs. 25.00 per share), amounting to Rs. 2,681.385 million (2016: Rs. 2,234.488 million) at their meeting held on February 28, which has been approved by the members at the Annual General Meeting held on April 19,. Reference to the ordinary dividend proposed by the Board, the Board has further proposed such amount of additional preference dividend to be paid to IFC as per the terms of subscription agreement. 23
21. Corresponding figures In order to comply with the requirements of International Accounting Standard 34 - Interim Financial Reporting, the condensed interim balance sheet has been compared with the balances of annual audited financial statements of preceding financial year, whereas, the condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim statement of changes in equity and condensed interim cash flow statement have been compared with the balances of comparable period of immediately preceding financial year. Corresponding figures have been rearranged and reclassified, wherever necessary, for the purposes of comparison. However, no significant reclassifications have been made. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director Khurram Raza Bakhtayari Chief Financial Officer 24
Packages Group Condensed Consolidated Interim Financial Information
DIRECTORS' REPORT ON CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, The Directors of Packages Limited are pleased to submit the un-audited condensed consolidated financial informations of the Group for the first quarter ended. Group results The comparison of the un-audited results in the first quarter ended as against 2017 is as follows Jan - March Jan - March 2017 (Rupees in million) Invoiced sales - net 13,468 6,466 Profit from operations 737 513 Share of profit in associates and joint ventures - net of tax 29 37 Investment income - 1,395 Profit after tax 245 1,541 During the first quarter of, Group has achieved net sales of Rs. 13,468 million against net sales of Rs. 6,466 million achieved during corresponding period of last year. In October 2017, Bulleh Shah Packaging Private Limited ( BSPPL ) status was changed from being a Joint Venture ( JV ) to a fully owned subsidiary of the Parent Company. For consolidation purposes, as the JV, equity accounting was applied in line with accounting principles and only the JV's proportionate share of profit / loss was recognised. As the subsidiary, each individual line item of the Balance Sheet and Profit and Loss Account are being added. Consequently, at the Group level, sales achieved by BSPPL amounting to Rs. 5.7 billion have been included in the results of the current quarter. Further, Packages Mall, a project of Packages Construction (Private) Limited was inaugurated in April of 2017 and sales for first quarter of amounting to Rs. 797 million have been included in the accounts. The Group had an operating profit of Rs. 737 million compared to Rs. 513 million generated during the corresponding period of the last year. This increase in profit is primarily attributable to the improved performance of the Parent Company on account of higher sales. The Group is exercising strict cost controls and is in the process of implementing various initiatives to bring down fixed costs and to increase sales volume. The Group's finance cost has increased by Rs. 265 million which is primarily due to the fact that finance cost of BSPPL is not included in the comparative for the reason explained above. Further, the finance cost being incurred by the Mall prior to inauguration was being capitalised and not expensed out in line with accounting principles. The Group's investment income in the current period is nil due to timing difference of dividend declaration which has correspondingly resulted in decrease in earnings after tax. A brief review of the operational performance of the Group subsidiaries is as follows: 26
Bulleh Shah Packaging (Private) Limited Bulleh Shah Packaging (Private) Limited is principally engaged in the manufacturing and conversion of paper, paperboard and corrugated boxes. The Company has achieved sales of Rs. 5,745 million during the first quarter of as compared to Rs. 4,509 million during 2017 representing sales growth of 27%. The Company has recorded operating profit of Rs. 36 million during the quarter as compared to Rs. 84 million in 2017. The decline is primarily due to increases in raw material and fuel prices. The Company has also filed an application against anti-dumping practices in the market. DIC Pakistan Limited DIC Pakistan Limited is a non-listed public limited subsidiary of Packages Limited. It is principally engaged in manufacturing, processing and selling of industrial inks. The Company has achieved net sales of Rs. 1 billion during the first quarter of the year as compared to Rs. 955 million of the corresponding period of last year representing sales growth of 5%. The Company generated profit before tax of Rs. 118 million during the first quarter of the year as against Rs. 109 million generated during corresponding period of 2017. Packages Lanka (Private) Limited Packages Lanka (Private) Limited is a Sri Lanka based subsidiary of Packages Limited. It is primarily engaged in production of flexible packaging solutions. During the first quarter of, the Company has achieved sales of SLR 633 million as compared to SLR 576 million of the corresponding period of last year representing increase in sales of 10%. The Company has generated profit before tax of SLR 67 million during the first quarter of the year as against SLR 94 million generated during corresponding period of 2017. The decline is mainly due to growing competition as well as increase in raw material costs. Moving forward, the Company will focus on improving operating results through tighter operating cost control, product diversification and price rationalisation. Flexible Packages Convertors (Pty) Limited Flexible Packages Convertors (Pty) Limited is private limited company based in South Africa. It is principally engaged in the manufacture of flexible packaging material. During the first quarter of, the Company achieved net sales revenue of USD 10.7 million as compared to USD 8.6 million of the corresponding period of last year. Operating results of the Company have increased from USD 0.538 million in quarter 1 of 2017 to USD 1.032 million in the current quarter. This is primarily on account of higher sales and tighter operating cost controls. Packages Construction (Private) Limited Packages construction (Private) Limited is a subsidiary of Packages Limited. It is primarily engaged in the business of construction, development and operation of real estate. It is currently operating Packages Mall. The Company has achieved sale of Rs. 797 million during the first quarter of and has generated profit from operations of Rs. 205 million. 27
Moving forward, the Board believes that this investment will bring considerable benefit to the shareholders in the form of dividend income and capital gains. Packages Power (Private) Limited Packages Power (Private) Limited is a wholly owned subsidiary of Packages Limited duly formed for the purpose of setting up a 3.1 MW hydropower project as advertised by the Punjab Power Development Board (PPDB). The Company has moved forward with the requisite studies and approvals and is in liaison with the relevant Government authorities to take the project forward. Omyapack (Private) Limited As part of asset and income diversification strategy, the JV Company, Omya Pack (Private) Limited has set up a state of the art production facility in Kasur, Punjab. It would supply a range of high quality ground calcium carbonate products suitble for marketing in local and regional markets. Primary users being the paper, paints and pharmaceuticals industries. The construction of the plant is in its final phases and commercial production is expected to commence in Q2-. (Towfiq Habib Chinoy) Chairman Lahore, April 25, (Syed Hyder Ali) Chief Executive & Managing Director Lahore, April 25, 28
25 25 29
30
2017 6,466 513 37 1,395 1,541 13,468 737 29-245 31
PACKAGES GROUP CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UN-AUDITED) as at EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 150,000,000 (December 31, 2017: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000 22,000,000 (December 31, 2017: 22,000,000) 10% non-voting preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000 Issued, subscribed and paid up capital 89,379,504 (December 31, 2017: 89,379,504) ordinary shares of Rs. 10 each 893,795 893,795 8,186,842 (December 31, 2017 : 8,186,842) 10% non-voting preference shares / convertible stock of Rs. 190 each 606,222 606,222 Reserves 70,338,299 62,382,915 Equity portion of loan from shareholder of the Parent Company 6 171,187 171,187 Un-appropriated profit 8,260,653 11,087,931 Capital and reserves attributable to owners of the Parent Company 80,270,156 75,142,050 NON-CONTROLLING INTEREST 2,234,827 2,117,100 TOTAL EQUITY 82,504,983 77,259,150 NON-CURRENT LIABILITIES Long term finances 7 13,255,154 14,626,258 Loan from shareholder of the Parent Company - unsecured 409,380 409,380 Liabilities against assets subject to finance lease 40,992 49,391 Deferred taxation 8 2,517,908 2,565,506 Retirement benefits 528,045 516,586 Rental security deposits 436,990 277,655 Deferred liabilities 544,441 633,171 CURRENT LIABILITIES 17,732,910 19,077,947 Current portion of non- current liabilities 3,403,054 3,427,251 Finances under mark up arrangements - secured 7,025,846 5,091,722 Trade and other payables 8,706,664 7,512,233 Accrued finance costs 352,795 495,278 Provision for taxation 121 22,176 19,488,480 16,548,660 CONTINGENCIES AND COMMITMENTS 9 - - Note Un-audited December 31, 2017 Audited 119,726,373 112,885,757 32
ASSETS Note December 31, 2017 Un-audited Audited NON-CURRENT ASSETS Property, plant and equipment 10 25,833,078 25,992,806 Intangible assets 11 296,884 286,621 Investment property 12,140,320 12,342,428 Investments accounted for under equity method 12 10,431,323 9,802,130 Other long term investments 13 46,177,719 41,981,048 Long term loans and deposits 146,343 157,208 95,025,667 90,562,241 CURRENT ASSETS Stores and spares 1,680,009 1,707,667 Stock-in-trade 9,561,558 8,439,160 Trade debts 7,211,112 5,946,606 Loans, advances, deposits, prepayments and other receivables 1,413,241 1,138,978 Income tax receivable 14 4,135,678 4,002,315 Cash and bank balances 699,108 1,088,790 24,700,706 22,323,516 119,726,373 112,885,757 The annexed notes 1 to 24 form an integral part of this condensed consolidated interim financial information. Syed Hyder Ali Chief Executive & Managing Director Asghar Abbas Director 33 Khurram Raza Bakhtayari Chief Financial Officer