Dear Shareholders,

It is a pleasure to welcome you to the 46th Annual General Meeting of the Company and place before you the Audited Financial Statement of the Company for the year ended June 30, 2011.

Financial and Operating Results

Sales for the year were Rs.18, 934 Million as compared to Rs. 11, 211 Million last year. This represents an increase of 68.89%. Profit for the year after tax is Rs. 824.586 Million after charging depreciation of Rs. 286.795 Million and contribution to Workers Profit Participation Fund of Rs. 56.535 Million. Earnings per share (EPS) is Rs. 43.97 (2010:Rs.28.08). EBITDA of Rs. 2,154 Million was generated. EBITDA per ordinary share is Rs. 114.83 (2010:Rs. 86.19).

Auditors have qualified valuation of investment in associated companies, which we have valued at cost. As explained previously, we are of the view that as your company is holding only 5.73% (2010: 5.73%) of total equity of the Company concerned, it does not exercise significant control over the Company concerned’s policies and profits. So in lieu of prudence, your company is following it’s policy of valuing investment in Associated Companies at cost and booking profits/gains only after they are realized.

Dividend of Rs. 35 Million (2010:Rs. 38 Million) on Preference Shares was approved for the year in accordance with the agreement reached with the Preference Share holders. This amount has been included in Financial Charges for the year. The auditors of the Company have qualified this treatment of dividend paid on preference shares. However, in our view, terms and conditions under which these Preference Shares have been issued result in qualification of the same as “Financial Liability” of the Company, and not as an Equity Instrument, as defined by IAS 32.

Your Directors and Chief Executive Officer, Chief Financial Officer, Company Secretary, their spouses and minor children have made following transaction in Company's shares.

Description Sh. Naseem Ahmad & Mst.Nighat Naseem Amir
Naseem Sh. & Minor Children
Rehman Naseem & Minor Children Fahad Mukhtar Fazal A.
Faisal Ahmed Company Secretary CFO
Opening Balance as on 01.07.2010 190,757 1,787,544 1,807,178 27,200 1,276,361 1,275,270 424 608
Purchase - - - - - - - -
Bonus - - - - - - - -
Inherited - - - - - - - -
Gift - - - - - - - -
Transfer as Gift - - - - - - - -
Closing Balance as on 30.06.2011 190,757 1,787,544 1,807,178 27,200 1,276,361 1,275,270 424 608

During the year 2010-2011, four board meetings were held which were attended as follow:

Sh. Naseem Ahmad Chairman/Chief Executive 4
Mr. Jamal Naseem Nominee of NIT Ltd. 4
Sh. Amir Naseem   4
Mr. Rehman Naseem   4
Mr. Fazal Ahmad Sheikh   3
Mr. Faisal Mukhtar   3
Mr. Fahd Mukhtar    2

Comparison of last six years of Operations

Salient features of the financial performance of the company for the last six years are reproduced below:

  2011 2010 2009 2008 2007 2006
Production in Kgs (000) 46,454 43,723 41,995 38,422 38,859 35,232
Sales net (Rs. In millions) 18,934 11,211 8,651 7,021 5,982 5,128
Gross Profit (Rs. In millions) 2,026 1,573 1,196 944 817 726
Net Profit before tax
(Rs. In millions)
1,050 729 180 340 183 181
Provision for taxation including
deferred tax
(Rs. In millions)
226 203 92 200 83 72
Profit after taxation
(Rs. In million)
825 527 87 141 100 109
Un-appropriated profit brought forward (Rs. In million) 1,703 1,135 1,006 768 693 599
Appropriation (Rs. in million) 2,290 1,612 1,043 909 793 708
Dividend / Bonus Shares %age   100% Nil 15% 10% 15%
Gross Profit ratio 10.70% 14.03% 13.83% 13.44% 13.66% 14.16%
Net profit ratio 4.36% 4.70% 2.08% 4.85% 3.06% 3.53%
Earnings before interest, tax and depreciation allowance (EBITDA)
(Rs. In million)
2,154 1,617 1,194 1,166 830 748

Corporate Governance:

As required by the code of corporate governance the board of directors hereby declares that:

  • The financial statements for the year ended June 30, 2011 present fairly the state of affairs, the result of its operations, cash flows and changes in equity;
  • Proper books of account have been maintained;
  • Appropriate accounting policies have been consistently applied in preparation of financial statements for the year ended June 30, 2011 and accounting estimates are based on reasonable and prudent judgment;
  • International Accounting Standards (IAS) as applicable in Pakistan, have been followed in preparation of financial statements;
  • The system of internal control is sound in design and has been effectively implemented and monitored;
  • There is no doubt about the Company to continue as going concern;
  • There has been no material departure from best practices of corporate governance as detailed in listing regulations;

Pattern of Shareholding:

The pattern of share holding as on June 30, 2011 is annexed.

Future Outlook:

After hitting a high of Rs. 13,500 in March 2011, raw cotton prices started falling sharply and touched a low of Rs. 4,700 in August 2011.  Although your Company had covered less cotton this year fearing such a situation, still the extent and pace at which cotton prices fell, caused large inventory losses.  Due to this, outlook for the July to September quarter is not good.  However, demand for yarn remains strong and your management expects situation to improve from October onwards.

Energy (gas and electricity) availability and cost remain the most important issue.  Gas availability in 2011 was lower than that in 2010.  However, during the days when gas was not available, electricity supply from utility companies was available by and large.  Due to this factor, production was not effected.  Your management hopes that Government of Pakistan continues to provide priority to the export oriented textile industry for supply of Gas and Electricity and resolves the energy crisis in Pakistan on urgent basis for smooth operation failing which textile industry will suffer huge losses.

Work on setting up a weaving unit with 117 looms and BMR/Expansion of spinning units of the company is continuing at a satisfactory pace.  Your management expects to complete these projects by December 2011.

Dividend Announcement

Your Directors have proposed to distribute @50% i.e 9,377,597 (2010:100%) quoted shares of Fatima Fertilizer Company Limited having face value of Rs. 10/-each to shareholders of the Company as specie dividend in the ratio of 1:1/2 (Half share of Fatima Fertilizer Company Limited for every one share of Fazal Cloth Mills Limited) and “Bonus Shares” in the proportion of 2.05 shares for every 10 ordinary shares held i.e. 20.50 % (2010: Nil%).


M/s.Yousaf, Adil, Saleem & Co., Chartered Accountants, auditors of the Company retire and being eligible offers themselves for reappointment for the year 2011-2012.


Management/Labour Relations:

The management/labour relations remained warm and cordial throughout the year under review. We place great importance on our employees. We continue to invest in the professional development and improvement of skills of our human resources, since we believe that by investing in our people we invest in our future. Company’s human resource policy is based on the underlying values of fairness, merit, equal opportunity and social responsibility. Complying with our human resource policies we do not hire any child labour.

The employees and management of the company continued to make joint efforts to keep up high standards of productivity. By the grace of Allah the Almighty, relationship of management and employees continued to remain in total harmony.

The board wishes to place on record its deep appreciation to all of them for their hard work and dedication to achieve these results.


Dated: October 05, 2011
Chairman / Chief Executive Officer