ANNUAL REPORT 2010 CONTENTS - Sapphire · ANNUAL REPORT 2010 Sapphire Textile Mills Limited ......
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ANNUAL REPORT 2010
Sapphire Textile Mills Limited
CONTENTSCORPORATE INFORMATION 02
VISION/ MISSION 03
NOTICE OF ANNUAL GENERAL MEETING 04
DIRECTORS REPORT 06
SIX YEAR GROWTH AT A GLANCE 09
REVIEW REPORT 10
STATEMENT OF COMPLIANCE 11
AUDITOR’S REPORT 13
STATEMENT OF FINANCIAL POSITION 14
INCOME STATEMENT 15
STATEMENT OF COMPREHENSIVE INCOME
CASH FLOW STATEMENT 16
STATEMENT OF CHANGES IN EQUITY 17
NOTES TO THE FINANCIAL STATEMENTS 18
PATTERN OF SHARE HOLDINGS 66
FORM OF PROXY
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ANNUAL REPORT 2010
Sapphire Textile Mills Limited
BOARD OF DIRECTOR
COMPANY PROFILE
CHAIRMAN :
MR. MOHAMMAD ABDULLAH
CHIEF EXECUTIVE :
MR. NADEEM ABDULLAH
DIRECTOR :
MR. SHAHID ABDULLAH
MR. AMER ABDULLAH
MR. YOUSUF ABDULLAH
MR. MOHAMMAD YOUNUS
MR. MOHAMMAD YAMIN
AUDIT COMMITTEE
CHAIRMAN :
MR. SHAHID ABDULLAH
MEMBER :
MR. YOUSUF ABDULLAH
MR. MOHAMMAD YAMIN
CHIEF FINANCIAL OFFICER :
MR. ABDUL SATTAR
COMPANY SECRETARY :
MR. ZEESHAN
AUDITORS :
MUSHTAQ & COMPANYCHARTERED ACCOUNTANTS
MANAGEMENT CONSULTANT :
M. YOUSUF ADIL SALEEM & COMPANYCHARTERED ACCOUNTANTS
TAX CONSULTANTS :
MUSHTAQ & COMPANY
CHARTERED ACCOUNTANTS
LEGAL ADVISIOR :
A.K. BROHI & COMPANY
BANKERS :
HABIB BANK LIMITED
CITI BANK N.A.
STANDARD CHARTERED BANK
UNITED BANK LIMITED
MCB BANK LIMITED
REGISTERED OFFICE:
212, COTTON EXCHANGE BUILDING,
I.I.CHUNDRIGAR ROAD, KARACHI.
MILLS :
S.I.T.E KOTRI
S.I.T.E NOORIABAD
CHUNIAN, DISTRICT KASUR
FEROZE WATWAN,
BHOPATTIAN, LAHORE.
SHARE REGISTRARS
: HAMEED MAJEED ASSOCIATES (PVT) LTD., 5TH FLOOR, KARACHI CHAMBERS, HASRAT MOHANI ROAD, KARACHI.
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Sapphire Textile Mills Limited
To be one of the premier textile company recognized for leadership in technology,
flexibility, responsiveness and quality.
Our customers will share in our success through innovative manufacturing,
certifiable quality, exceptional services and creative alliances. Structured to
maintain in depth competence and knowledge about our business, our customers
and worldwide markets.
Our workforce will be the most efficient in industry through multiple skill
learning, the fostering of learning and the fostering of teamwork and the security
of the safest work environment possible recognised as excellent citizen in the local
and regional community through our financial and human resources support and
our sensitivity to the environment.
Vision
Our mission is to be recognised as premier supplier to the
markets we serve by providing quality yarns, fabrics and other
textile products to satisfy the needs of our customers.
Our mission will be accomplished through excellence in
customer service, sales and manufacturing supported by
teamwork of all associates.
We will continue our tradition of honesty, fairness and integrity
in relationship with our customers, associates, shareholders,
community and stakeholders.
Mission
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NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT 42nd Annual General Meeting of SAPPHIRE TEXTILE MILLS LIMITED will be held on Thursday the 28th day of October, 2010 at 11:45 a.m. at 212, Cotton Exchange Building, I.I.Chundrigar Road, Karachi to transact the following business:
ORDINARY BUSINESS
1. To confirm the minutes of the 41st Annual General Meeting.
2. To receive, consider and adopt the Audited Accounts together with Directors’ and Auditors’ Reports for the year ended 30th June, 2010.
3. To approve dividend as recommended by the Board of Directors.
4. To appoint auditors for the year ending 30th June, 2011 and fix their remuneration. The present Auditors, M/s Mushtaq & Company, Chartered Accountants retire and being eligible offer themselves for reappointment.
5. To transact any other business with the permission of the Chair.
By Order of the BoardKarachi. (ZEESHAN) Dated : 06th October, 2010 Secretary
NOTES
1. The share transfer books of the Company shall remain closed for entitlement of Dividend from 22nd October, 2010 to 28th October, 2010 (both days inclusive). Transfers received in order, by the Hameed Majeed Associates (Private) Limited, 5th Floor, Karachi Chambers, Hasrat Mohani Road, Karachi, up to 21st October, 2010, will be considered in time for the payment of dividend.
2. A member entitled to attend and vote at this meeting may appoint another member as his/her proxy to attend and vote on his/her behalf. Proxies in order, to be valid must be deposited at the Registered Office of the Company not less than 48 hours before the time of the meeting.
3. CDC shareholders desiring to attend the meeting are requested to bring their original National Identity Cards, Account/Sub Account and particular of participants I.D. numbers and account numbers in CDS, for identification purpose, and in case of proxy, to enclose an attested copy of his/her National Identity Card.
4. Shareholders are requested to notify the Company of any change in their addresses.
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ANNUAL REPORT 2010
Sapphire Textile Mills Limited
The Directors of Sapphire Textile Mills Limited have pleasure in presenting their Report together with the audited financial statements of the Company for the year ended June 30, 2010.
DIRECTOR’S REPORT
to the Shareho lders
FINANCIAL HIGHLIGHTS
2010 2009
Sales & Services 14,428,081 11,744,248
Gross Profit 2,736,048 1,731,374
Profit from Operations 920,759 120,834
Other Opeating Income 194,854 153,230
Profit before taxation 1,115,614 274,064
Profit after taxation 1,015,544 179,842
Rupees in Thousand
REVIEW OF OPERATIONS
The year under review was a year of record profitability. The Major factor was cotton prices and consequently the yarn prices increased substantially during the year, which resulted in high profit margin, as cotton had been purchased at lower levels. In addition, there was greater emphasis on exports. The over all sales increased to Rs.14.428 billion from Rs.11.744 billion in the previous year, which means a 22.85% increased. The export sales were 72.24% of sales compared to 55.55% in the pervious year. The gross profit in the current year was 18.96% of sales compared to 14.74% in the pervious year. The company was also able to cross the Rs.10 billion export mark in the current Year.
The company has also made a provision for bad debts of Rs.119 million on account of receivables in the local market and efforts are under way for recovery of this amount.
Appropriation of Profit
Rupess In Thousand
Profit Before Taxation 1,115,614
Less: Taxation (100,070)
Profit after taxation 1,015,544
Add: Unappropriated profit brought forward 3,134,522
Profit available for appropriation 4,150,066
AppropriationsProposed cash dividend @ 50% (2009 15%) 100,416
Unappropirated profit carried forward 4,049,650
DIVIDEND
The Board of Directors of the company is pleased to recommend a cash dividend of 50% for the year ended June 30, 2010 (2009:15%).
EARNING PER SHARE
The earning per share on June 30, 2010 was Rs.50.57 as compared to Rs.8.95 on June 30, 2009.
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FUTURE PROSPECTS
Flooding in various parts of the country has adversely affected size of the cotton corp. In addition the international prices of cotton are very high. This will remain a serious challenge to the textile industry particularly in Pakistan. In addition the increased load shedding of gas for power generation and increased energy prices coupled with high interest rate may affect the profitability in the future.
Another factor which may affect the profitability of the company is the imposition of additional taxes and withdrawal of zero rating for cotton and textile products. This may result in huge liquidity problems for exporters as the sales tax refund mechanism is very slow and inefficient. However management is striving its best for achieving good results in coming year.
SUBSIDIARIES OF SAPPHIRE TEXTILE MILLS LIMITED
There are four 100% subsidiaries of Sapphire Textile Mills Limited.
1. Sapphire Wind Power Company Limited: The Company is under implementation stage, 1372 acres of land has been allocated, for setting-up of 50 MW Wind Energy project. The Mast (Wind Turbine Power Performance Testing instrument) has been installed at the project, sub-lease document has been signed with the Alternative Energy Development Board. Further the technical feasibility has been approved by AEDB and bankable documents will be submitted to financial Institution shortly.
2. Sapphire Renewable Solutions (Private) Limited: The management of the company is planning to close the business of the company. Therefore, Mr. Nadeem Abdullah Director of company has filed the application under Companies Easy Exit Scheme on 3rd September, 2010.
3. Sapphire Holding Company: The Company is an unlisted public limited company incorporated in Pakistan on April 21st, 2010 under The Companies Ordinance, 1984 as wholly owned subsidiary of Sapphire Textile Mills Limited. The principal object of forming this company is de-merger of Sapphire Textile Mills Limited by transferring the Investments in M/s.Sapphire Fibres Limited, M/s.Diamond Fabrics Limited and M/s.Sapphire Finishing Mills Limited to Sapphire Holding Company.
4. Sapphire Home Inc.: The Company is incorporated in United State of America. The Company is wholly owned subsidiary of Sapphire Textile Mills Limited. The company is principally engaged in marketing services in United State of America.
REMUNERATION OF CHIEF EXECUTIVE AND DIRECTOR
The Board of Directors has revised the monthly remuneration of Chief Executive of the Company Mr.Nadeem Abdullah to Rs.750,000/- and Director Mr.Mohammad Abdullah to Rs.500,000/- per month, which includes house rent and utilities, w.e.f July 01, 2010. Other benefit remain unchanged.
STATEMENT ON CORPORATE AND FINANCIAL REPORTING FRAME WORK
The Board of Directors periodically reviews the Company's strategic direction. Business plans and targets are set by the Chief Executive and reviewed by the Board. The Board is committed to maintain a high standard of corporate governance. The Board has reviewed the Code of Corporate Governance and confirms that:
1. The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flow and changes in equity.
2. The company has maintained proper books of accounts.
3. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.
4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.
5. The system of internal control, which was in place, is being continuously reviewed by the internal audit and other such procedures. The process of review and monitoring will continue with the object to improve it further.
6. All liabilities in regard to the payment on account of taxes, duties, levies and charges have been fully
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provided and will be paid in due course or where claim was not acknowledged as debt the same is disclosed as contingent liabilities in the notes to the accounts.
7. There in no doubt about the company's ability to continue as a going concern.
8. There has been no material departure form the best practice of corporate governance, as detailed in listing regulations.
9. The Board in compliance to the Code of Corporate Governance has established an Audit Committee and the following directors are its members:
Mr. Shahid Abdullah ChairmanMr. Yousuf Abdullah MemberMr. Muahmmad Yamin Member
10. Operating and financial data and key ratios of six years are annexed.
11. The Company established Management Staff Gratuity Fund from July 1, 2005 which is initially for the Head office and will gradually applicable to the other units/mills of the Company. The company has also introduced Employees' Provident Fund for the staff from July 1, 2006. The persons join the Provident Fund will not be eligible for gratuity fund. Provision has been made in the accounts accordingly.
12. No trade in the shares of the Company were carried out by the Directors, Chief Executive Officer, Chief financial Officer, Company Secretary, their spouses and minor children.
13. During the Year =18= meetings of the Board of Directors were held. Attendance by each Director is as follow:
Mr. Muahmmad Abdullah 16Mr. Shahid Abdullah 14Mr. Nadeem Abdullah 16Mr. Amer Abdullah 14Mr. Yousuf Abdullah 14Mr. Mohammad Younus 13Mr. Mohammad Yamin 13
14. Code of Ethics and Business Practices has been developed and are communicated and acknowledged by each Director and employee of the company
PATTERN OF SHAREHOLDING:
The Pattern of share holding of the company as at June 30, 2010 is annexed. This statement is prepared in accordance with the Code of Corporate Governance and the Companies Ordinance, 1984.
AUDITORS:
The present Auditors, M/s.Mushtaq & Company (Chartered Accountants) retires and being eligible, offer themselves for re-appointment for the year 2010-2011. Audit Committee and Board of Directors have also recommended their appointment as Auditor for the year ended June 30, 2011.
ACKNOWLEDGMENT
The Management would like to place on record its appreciation for the support of Board of Directors, regulatory authorities, shareholders, customers, financial institutions, suppliers and dedication and hard work of the Staff and Workers.
On behalf of the Board
NADEEM ABDULLAHCHIEF EXECUTIVE
KarachiDated : 6th October, 2010
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Sapphire Textile Mills Limited
SIX YEAR GROWTH AT A GLANCE
YEARS 2010 2009 2008 2007 2006 2005
Sales 14428.081 11744.248 9769.322 9152.456 8292.709 5586.722
Gross Profit 2736.048 1731.374 1128.027 1191.203 1091.173 852.193
Profit Before Tax 1115.613 274.064 670.600 319.708 263.459 381.673
Profit After Tax 1015.544 179.842 617.730 216.263 134.535 288.773
Share Capital 200.831 200.831 200.831 200.831 200.831 200.831
Shareholder's Equity 5992.070 4459.857 5577.492 6018.868 3893.928 2797.114
Fixed Assets - Net 4029.813 4092.598 4214.718 4104.842 3926.179 3294.346
Total Assets 11579.966 10189.525 12324.265 11126.004 9218.390 7317.921
DIVIDEND - Cash % 50.000 15.000 7.500 15.000 12.500 15.000
DIVIDEND - Specie % - - 4.500 - - -
RATIOS:
Profitability
Gross Profit % 18.96 14.74 11.55 13.02 9.60 11.32
Profit Before Tax % 7.73 2.33 6.86 3.49 3.31 7.15
Profit After Tax % 7.04 1.53 6.32 2.36 1.69 5.41
Return To Shareholders
R.O.E-Before Tax % 18.62 6.15 12.02 5.31 6.76 13.65
R.O.E After Tax % 16.95 4.03 11.08 3.59 3.45 10.32
Basic E.P.S-After Tax Rs. 50.57 8.95 30.76 10.77 6.70 14.37
Activity
Sales To Total Assets Times 1.25 1.15 0.79 0.82 0.86 0.73
Sales To Fixed Assets Times 3.58 2.87 2.32 2.23 2.03 1.61
Liquidity/Leverage
Current Ratio Times 1.09:1 1.19:1 1.28:1 1.66:1 1.21:1 1.21:1
Debt Equity Ratio Times 0.09 0.16 0.08 0.12 0.24 0.42
Total Liabilities to Equity. Times 0.93 1.28 1.21 0.85 1.36 1.62
Break up value per share Rs. 298.36 222.07 277.72 299.70 193.89 139.27
(Rupees in Million)
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Sapphire Textile Mills Limited
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 Sapphire Textile Mills Limited to comply with
the Listing Regulation No. 37 of the Karachi Stock Exchange (Guarantee) Limited 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 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 have
not carried out any special review of the internal control system to enable us to express an opinion as to
whether the Board’s statement on internal control covers all controls and the effectiveness of such
internal controls.
Based on our review, 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, 2010.
Karachi. MUSHTAQ & COMPANYDated: October 6, 2010 Chartered Accountants
Engagement Partner:Shahabuddin A. Siddiqui
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Sapphire Textile Mills Limited
This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulations of the Stock Exchanges 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. The Company encourages representation of independent non-executive directors and directors representing minority interests on its Board of Directors. At present the Board includes five non-executive Directors.
2. The Directors have confirmed that none of them is serving as a director in more than ten listed companies, including this company.
3. The Directors have declared that all the resident 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 a NBFI. None of the Directors is a member of a stock exchange.
4. During the year no casual vacancies occurred in the Board of Directors.
5. The Board have developed and adopted a ‘Statement of Ethics and Business Practice’, which has been signed by all the directors and employees of the company.
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 polices along with the dates on which they were approved or amended has been maintained.
7. All the power of Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other Executive Directors, have been taken by the Board.
8. The meetings of the Board, which were held during the year were presided by the Chairman and in his absence, by a director elected by the Board for this purpose and Board met at least once in every Quarter. Written notice 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 in time.
9. The Board arranged one orientation course for its directors during the year to apprise them of their duties and responsibilities and briefed them regarding amendments in the Companies Ordinance/ Corporate Laws.
10. There was no new appointment of CFO/Company Secretary during the year.
11. The Directors’ Report for this year 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 shareholding.
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 three members, of whom all are non-executive Directors.
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 prepared in the light of the Code of Corporate Governance and advised to the Committee for compliance.
17. The Board has set up an effective Internal Audit Function.
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
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18. The statutory auditors of the Company have confirmed that they have given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan, 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 Institute of Chartered Accountants of Pakistan.
19. 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.
20. In compliance with the requirements of Listing Regulation number 35 of the Karachi Stock Exchange (Guarantee) Limited, the related party transactions have been placed before the Audit Committee and approved by the Board of Directors.
21. We confirm that all other material principles contained in the Code have been complied with.
For and on behalf of the BoardKarachi NADEEM ABDULLAHDated: 06th October, 2010 CHIEF EXECUTIVE
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Sapphire Textile Mills Limited
AUDITOR’S REPORT
to the Members
We have audited the annexed Statement of financial position of Sapphire Textile Mills Limited as at June 30, 2010
and the related income statement, statement of comprehensive income, statement of cash flows 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
purpose 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, 1984. 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 the 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 verifications, we report that;
(a) in our opinion, proper books of accounts have been kept by the company as required by the Companies
Ordinance, 1984;
(b) in our opinion;
(i) the statement of financial position and income statement 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 accounts 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 statement
of financial position, income statement, statement of comprehensive income, statement of cash flow and
statement of changes in equity together with the notes forming part thereof conform with 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, 2010 and of the profit, comprehensive income, 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. MUSHTAQ & COMPANYDate: October 6, 2010 Chartered Accountants
Engagement Partner: Shahabuddin A. Siddiqui
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Sapphire Textile Mills Limited
STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 2010
2010 2009Note Rupees Rupees
NON CURRENT ASSETS
Property, plant and equipment 4 3,874,111,094 3,946,481,814 Investment property 5 149,781,134 138,710,299 Intangible assets 6 5,920,410 7,405,379 Long term investments 7 2,387,356,936 1,918,613,264 Long term loans and advances 8 27,965,768 20,348,044 Long term deposits 9 9,130,379 5,628,783
6,454,265,721 6,037,187,583
CURRENT ASSETS
Inventories 10 2,984,818,873 2,593,837,522 Trade debts 11 1,251,651,314 1,106,859,860 Loans and advances 12 23,769,068 33,647,217 Trade deposits and short term prepayments 13 9,354,035 5,148,290 Other receivables 14 46,209,909 27,152,028 Other financial assets 15 490,144,239 140,003,514 Income tax and sales tax 16 199,416,301 158,448,855 Cash and bank balances 17 120,336,926 87,240,488
5,125,700,665 4,152,337,774
TOTAL ASSETS 11,579,966,386 10,189,525,357
EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES
Authorized capital 35,000,000 ordinary shares of Rs. 10 each 350,000,000 350,000,000
Issued, subscribed and paid-up capital 18 200,831,400 200,831,400 Reserves 5,791,239,538 4,259,025,132 Reserves 5,791,239,538 4,259,025,132
5,992,070,938 4,459,856,532
NON CURRENT LIABILITIES
Long term finances 19 544,445,367 702,714,283 Deferred liabilities 20 360,453,927 434,800,133
904,899,294 1,137,514,416
CURRENT LIABILITIES
Trade and other payables 21 671,879,859 398,727,296 Accrued interest / mark-up 22 74,723,521 155,845,558 Short term borrowings 23 3,478,194,630 3,732,160,433 Current portion of long term finance 19 273,423,918 228,566,450 Provision for taxation 24 184,774,226 76,854,672
4,682,996,154 4,592,154,409
Contingencies and Commitments 25
11,579,966,386 10,189,525,357
The annexed notes form an integral part of these financial statements.
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
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Sapphire Textile Mills Limited
INCOME STATEMENTFOR THE YEAR ENDED JUNE 30, 2010
2010 2009
Note Rupees Rupees
Sales and services 26 14,428,081,425 11,744,248,108
Cost of sales and services 27 (11,692,032,939) (10,012,874,520)
Gross profit 2,736,048,486 1,731,373,588
Selling and distribution expenses 28 (668,532,787) (573,602,972)
Administrative expenses 29 (135,365,980) (118,903,787)
(803,898,767) (692,506,759)
1,932,149,719 1,038,866,830
Finance cost 30 (748,615,774) (847,805,304)
Other operating expenses 31 (262,774,544) (70,227,903)
(1,011,390,318) (918,033,207)
Profit from operations 920,759,401 120,833,622
Other operating income 32 194,854,305 153,230,031
Profit before taxation 1,115,613,706 274,063,653
Taxation 33 (100,069,589) (94,221,893)
Profit after taxation 1,015,544,117 179,841,760Profit after taxation 1,015,544,117 179,841,760
Earnings per share - basic and diluted 34 50.57 8.95
The annexed notes form an integral part of these financial statements.
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009
Rupees Rupees
Profit for the year after taxation 1,015,544,117 179,841,760
Other comprehensive income:
Unrealized gain / (loss) on remeasurement of 549,342,369 (1,248,273,498)
available for sale investments
Unrealized gain / (loss) on remeasurement of (1,028,290) 2,544,108
forward foreign currency contracts
Unrealized (loss) on remeasurement of (1,519,080) (5,957,855)
derivative financial instruments
Other comprehensive income for the year 546,794,999 (1,251,687,245)
Total comprehensive income/(loss) for the year 1,562,339,116 (1,071,845,485)
The annexed notes form an integral part of these financial statements.
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
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Sapphire Textile Mills Limited
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009Note Rupees Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 35 1,877,080,513 2,288,138,025
Long term loans and deposits (11,119,320) (7,366,882)Interest paid (834,013,649) (899,002,012)Gratuity paid (37,855,918) (18,755,197)Taxes paid (116,971,848) (95,376,383)
(999,960,735) (1,020,500,474)
Cash flows from operating activities 877,119,778 1,267,637,551
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (328,368,836) (291,465,668)Purchase of intangible assets (250,000) -Purchase of investment property (13,240,000) -Long term investment in associates (16,279,500) (14,191,900)Long term investment in subsidiary (113,714) (33,400,286)Long term investment in others (4,624,120) -other financial assets (530,987,707) (71,030,758)Proceeds from disposal of property, plant and equipment 28,863,450 18,899,931Proceeds from sale of long term investment 18,755,570 22,428,393Proceeds from sale of other financial assets 270,349,127 100,000,341Proceeds from derivative financial instrument 4,126,986 (32,830,740)Dividend received from associates 118,029,052 3,076,595Dividend received from others 430,669 108,919,069Rental income 13,882,970 10,853,208Interest received 148,852 80,726Interest received 148,852 80,726
Cash (used in) investing activities (439,277,201) (178,661,089)
CASH FLOWS FROM FINANCING ACTIVITIES
Short term borrowings (260,151,951) (1,195,181,690)Proceeds from long term finances 115,155,000 400,000,000Repayment of term finance (228,566,448) (261,124,469)Equity dividend paid (30,069,159) (15,093,891)
(403,632,558) (1,071,400,050)
Net increase in cash and cash equivalents 34,210,019 17,576,412
Net foreign exchange differences (1,329,859) 954,890
Cash and cash equivalent at the beginning of the year 82,946,240 64,414,938
Cash and cash equivalent at the end of the year 36 115,826,401 82,946,240
The annexed notes form an integral part of these financial statements.
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED JUNE 30, 2010
Capital
R u p e e s
Balance as at June 30, 2008 200,831,400 156,202,200 65,000,000 330,000,000 3,030,593,555 3,581,795,755 1,787,387,519 - 7,476,935 1,794,864,454 5,577,491,609
Total comprehensive income for the year ended June
30, 2009
Profit for the year - 2009 - - - - 179,841,760 179,841,760 - - - - 179,841,760
Other comprehensive income for the year - 2009 - - - - - - (1,248,273,498) 2,544,108 (5,957,855) (1,251,687,245) (1,251,687,245)
Transaction with owners
Final dividend for the year ended June 30, 2008 - - - - (45,789,592) (45,789,592) - - - - (45,789,592)
Balance as at June 30, 2009 200,831,400 156,202,200 65,000,000 330,000,000 3,164,645,723 3,715,847,923 539,114,021 2,544,108 1,519,080 543,177,209 4,459,856,532
Balance as at July 01, 2009 200,831,400 156,202,200 65,000,000 330,000,000 3,164,645,723 3,715,847,923 539,114,021 2,544,108 1,519,080 543,177,209 4,459,856,532
Total comprehensive income for the year ended June
30, 2010
Profit for the year - 2010 - - - - 1,015,544,117 1,015,544,117 - - - - 1,015,544,117
Other comprehensive income for the year - 2010 - - - - - - 549,342,369 (1,028,290) (1,519,080) 546,794,999 546,794,999
Transaction with owners
Final dividend for the year ended June 30, 2009 - - - - (30,124,710) (30,124,710) - - - - (30,124,710)
Balance as at June 30, 2010 200,831,400 156,202,200 65,000,000 330,000,000 4,150,065,130 4,701,267,330 1,088,456,390 1,515,818 - 1,089,972,208 5,992,070,938
TOTAL EQUITYOn derivative
financial
instruments
Unappropriated
profit
On available for
sale investments
Revenue Unrealized gain / (loss)
On forward
foreign currency
contracts
SUB TOTALSUB TOTAL
The annexed notes form an integral part of these financial statements.
Other components of equity
Share CapitalShare
premium
General
reserves
Fixed assets
replacement
Reserves
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
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Sapphire Textile Mills Limited
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
1. LEGAL STATUS AND NATURE OF BUSINESS
Sapphire Textile Mills Limited (the Company) was incorporated in Pakistan on March 11, 1969 as a public limited under the Companies Act, 1913 (Now the Companies Ordinance, 1984). The shares of the Company are listed on Karachi Stock Exchange. The registered office of the Company is situated at 212, Cotton Exchange Building, I.I. Chundrigar Road, Karachi and its mills are located at Kotri, Nooriabad, Chunian, Feroze Watwan, Bhai Pheru and Bhopattain Lahore. The Company is principally engaged in manufacturing and sale of yarn, fabric, home textile products and energy sales.
2. BASIS OF PREPARATION
2.1 Statement of compliance
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 (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
2.2 Basis of preparation
2.2.1 These financial statements have been prepared under the historical cost convention, except for remeasurement of certain financial assets and financial liabilities at fair value through profit and loss and derivative hedging instruments at fair value.
2.2.2 These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance), directives issued by the Securities and Exchange Commission of Pakistan (SECP) and approved financial reporting standards as applicable in Pakistan. Approved financial reporting standards comprise of such international Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance or directive issued by the SECP differ with the requirements of these standards, the requirement of the Ordinance and of the said directives have been followed.
2.2.3 The preparation of financial statements in conformity with the above requirements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed.
2.3 Functional and presentation currency
These financial statements are presented in Pakistan Rupees which is also the company's functional currency. All financial information presented in Pakistan Rupees has been rounded to the nearest Rupee.
2.4 Use Of Estimates And Judgments
The preparation of financial statements in conformity with approved accounting standards requires management to make estimates, assumptions and use judgments that affect the application of policies and the reported amounts of assets, liabilities, income and expenses.
Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including revised expectations of future events. Revisions to accounting estimates are recognized prospectively commencing from the period of revision.
Judgments and estimates made by management that may brave a significant risk of material adjustments to the financial statements in subsequent years are as follows:
Residual values and useful lives of property, plant and equipment.
Provision for slow moving and obsolete stores and spares and stock-in trade.
Estimates of liability in respect of employee retirement gratuity and compensated absences.
Taxation.
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Fair value of investment classified as ‘available for sale’.
2.5 Standards, interpretations and amendments to published approved accounting standards
2.5.1 Amendments to published standards effective in the current year:
The following standards, amendments and interpretations became effective during the current year.
Revised IAS 1 – Presentation of financial statements (effective from January 01, 2009) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income.
Revised IAS 23 – Borrowing costs (effective from January 01, 2009) removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
Amended IAS 27 – Consolidated and Separate Financial Statements (effective January 01, 2009) requires accounting for changes in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in the profit or loss.
IAS 27 ‘Consolidated and separate financial statements (effective from January 01, 2009). The amendment removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor.
Amendments to IAS 32- Financial instruments: Presentation and IAS 1 Presentation of Financial Statements (effective from January 01, 2009) – Puttable Financial Instruments and Obligations arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met.
Amendment to IAS 38- Intangible assets the amendment is part of the IASB's annual improvements project published in April 2009 and the Company will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible assets acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic life.
Amendment to IAS 39- Financial Instruments : Recognition and measurement - Eligible hedged items (effective from January 01, 2009) clarifies the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship.
Amendments to IAS 39 and IFRIC 9 - Embedded derivatives (effective from January 01, 2009). Amendments require entities to assess whether they need to separate an embedded derivative from a hybrid (combined) financial instruments when financial assets are reclassified out of the fair value.
Amendment to IFRS -2 Share base payment-Vesting conditions and cancellations (effective from January 01, 2009) clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations.
Revised IFRS 3 Business Combinations (effective from July 01, 2009) Broadens among other things the definition of business resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair value, transaction costs other than share and debt issue costs to be expensed, any pre-existing interest an acquire to be measured at fair value, with the related gain or loss recognized in profit or loss and any non-controlling (minority interest to be measured at either fair value or at its proportionate interest) in the identifiable assets and liabilities of an acquire, on a transaction by transaction basis.
IFRS 4 Insurance contracts (effective from January 01, 2009). The IFRS makes limited improvements to accounting for insurance contracts until the board completes the second phase of its project on insurance
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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contracts. The standard also requires that an entity issuing insurance contracts (an insurer) to disclose information about those contracts.
IFRS 5 Measurement of non-current assets (of disposal groups) classified as held-for-sale. The amendment is part of the IASB's annual improvements project published in April 2009. the amendment provides clarification that IFRS 5 specifies the disclosures required in the respect of non-current assets (or disposals group) classified as held for sale or discontinued operations. it also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.
IFRS 7- Financial Instruments Disclosures (amendment) - effective January 01, 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosures of the fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on profit for the year.
IFRS 8- Operating segment (effective from January 01, 2009) replaces IAS 14 and requires an entity to determine and present operating segments based on the information that is provided internally to the Chief Operating Decision maker who is responsible for allocating recourses and assessing performance of the operating segment.
IFRIC 15- Agreement for the Construction of Real Estate (effective from October 01, 2009) clarifies the recognition of revenue by real estate developers for sale of units, such as apartments or houses, 'off-plan', that is , before construction is complete.
IFRIC 17-Distribution of non-cash assets to owner (effective from July 01, 2009) states that when a company distributes non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent changes in the fair value before the liability is discharged, this is recognize in equity. When the non cash assets is distributed, the difference between the carrying amount and fair value is recognized in the income statement.
IFRIC 18- Transfers of the assets from customer (to be applied prospectively to transfer of assets from customers received on or after 1st July 2009). This interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant, and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).
2.6 New / revised accounting standards, amendments to published accounting standards and interpretations that are not yet effective
2.6.1 The following standards, amendments and interpretations of approved accounting standards are only effective for accounting periods beginning from the dates specified below. These standards 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 increased disclosures in certain cases:
Amendment to IFRS 2 - Share-based Payment - Group Cash-settled Share-based Payment Transactions (effective for annual periods beginning on or after January 01, 2010). Amendment provides guidance on the accounting for share based payment transactions among group entities.
Amendment to IAS 32 - Classification of Right Issues (effective for period beginning on or after February 01, 2010). Under the amendments to IAS 32 rights, options and warrants - otherwise meeting the definition of equity instruments in IAS 32.11 - issued to acquire a fixed number of an entity's own non-derivative equity instruments for a fixed amount in any currency are classified as equity instruments, provided the offer is made pro-rata to all existing owners of the same class of the entity's own non-derivative equity instruments.
IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 01, 2010). IFRIC 19 clarifies the accounting when an entity extinguish the liability by issuing its own equity instruments to the creditor.
Revised IAS 24 - Related Party Disclosures (effective for annual periods beginning on or after January 01, 2011). The amendments to IAS 24 simplify the disclosure requirement for entities that are controlled, jointly controlled or significantly influenced by a government (referred to as government - related entities) and clarify the definition of a related party.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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Amendments to IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after January 01, 2011). IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction has been amended to remedy an unintended consequence of IFRIC 14 where entities are in some circumstances not permitted to recognize prepayments of minimum funding contributions, as an asset.
The International Accounting Standards Board made certain amendments to existing standards as part of its second and third annual improvement project. The effective dates for these amendments vary by standards.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Property, plant and equipment
The significant accounting policies adopted in the preparation of theses financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
3.1.1 Owned assets
Property, plant and equipment are stated at cost less accumulated depreciation except freehold land and leasehold, which are stated at cost less impairment losses, if any. Cost comprises acquisition and other directly attributable costs.
Depreciation is provided on a reducing balance method and charged to profit and loss account to write off the depreciable amount of each asset over its estimated useful life at the rates specified in note 4. Depreciation on addition in property, plant and equipment is charged from the month of addition while no depreciation is charged in the month of disposal.
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized, if any. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit and loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within "other income" in profit or loss.
The Company reviews the useful life and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding effect on depreciation charge.
3.1.2 Leased assets
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership, are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Outstanding obligations under the lease less finance cost allocated to future periods are shown as a liability.
Finance cost under lease agreements are allocated to the periods during the lease term so as to produce a constant periodic rate of finance cost on the remaining balance of principal liability for each period.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.
3.2 Capital work in progress
Capital work in progress is stated at cost less any identified impairment loss and represents expenditure incurred on fixed assets in the course of construction and installation. Transfers are made to relevant fixed assets category as and when assets are available for intended use.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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3.3 Intangible assets
Costs associated with maintaining computer software programmes are recognized as an expense when incurred. However, costs that are directly attributable to identifiable software and have probable economic benefits exceeding the cost beyond one year, are recognized as an intangible asset. Direct costs include the purchase cost of software and related overhead cost.
Expenditure which enhances or extends the performance of computer software beyond its original specification and useful life recognized as a capital improvement and added to the original cost of the software.
Computer software cost treated as intangible assets are amortized from the date the software is put to use on a straight-line basis over a period of 5 years.
3.4 Investment property
Investment property are stated at cost less accumulated depreciation and impairment loss, if any.
Depreciation is charged to income applying the reducing balance method at the rates specified in the respective note and after taking into account residual value.
Depreciation is charged on addition during the year from the month in which the asset is acquired or capitalized and in respect of disposals during the year up to the month in which the asset is disposed off. The residual values and useful lives are reviewed and adjusted at each reporting date, if material.
The carrying value of investment property is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written down to its recoverable amount.
Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized.
Gain or loss on disposal is taken to the profit and loss account.
3.5 Investments
Investments intended to be held for less than twelve months from the reporting date or to be sold to raise operating capital, are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.
3.5.1 Investment in subsidiary companies
Investments in subsidiaries are initially recognized at cost. At subsequent reporting dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of investments are adjusted accordingly. Impairment losses are recognized as expense. Where impairment losses subsequently reverses, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is recognized in the profit and loss account.
3.5.2 Investment in associated companies - equity method
Entities in which the Company has significant influence but not control and which are neither its subsidiaries nor joint ventures are associates and are accounted for by using the equity method of accounting.
These investments are initially recognized at cost, thereafter the carrying amount is increased or decreased to recognize the Company's share of profit or loss of associates. Share of post acquisition profit and loss of associates is accounted for in the Company's profit and loss account. Distribution received from invested, reduces the carrying amount of investment. The Company's share of changes in the associate's equity which have not been recognized in the associates' profit and loss account, are recognized directly in the equity of the Company.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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3.5.3 Available-for-sale investments
Other investments not covered in any of the above categories including investments in associates in which the Company has no significant influence are classified as being available-for-sale and are initially recognized at fair value plus attributable transaction costs. Subsequent to initial recognition these are measured at fair value, with any resultant gain or loss being recognized directly in equity. Gains or losses on available -for-sale investments are recognized directly in equity until the investments are sold or disposed off, or until the investments are determined to be impaired, at that time cumulative gain or loss previously reported in the equity is included in current year's profit and loss account.
Fair value of listed securities are the quoted prices on stock exchange on the date it is valued. Unquoted securities are valued at cost.
The Company follows trade date accounting for regular way of purchase and sales of securities, except for sale and purchase of securities in future market, which are accounted for at settlement date.
3.5.4 Held-for-trading investments - at fair value through profit or loss
Investments which are acquired principally for the purpose of selling in the near term or the investments that are part of a portfolio of financial instruments exhibiting short term profit taking, are classified as investments at fair value through profit or loss and designated as such upon initial recognition. These are stated at fair values with any resulting gains or losses recognized directly in the profit and loss account. The fair value of such investments representing listed equity securities are determined on the basis of prevailing market prices.
3.5.5 Held-to-maturity investment
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity.
Investments classified as held to maturity are recognized initially at fair value, plus attributable transaction cost. Subsequent to initial recognition, these are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss account over the period of the investments on an effective yield method.
3.6 Derivative financial instruments
Derivative instruments held by the Company generally comprise of cross currency interest rate swap and foreign currency forward contracts. Derivatives are initially recorded at fair value on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. Derivatives with positive impact at balance sheet date are included in 'other receivable' and with negative impacts in 'trade and other payables' in the balance sheet. The resultant gains and losses are included in the income. No derivative is designated as hedging instrument by the company.
Derivatives financial instruments entered into by the Company do not meet the hedging criteria as defined by IAS 39, 'Recognition and Measurement of Financial Instruments', consequently hedge accounting is not used by the Company.
3.7 Loans, advances, deposits and other receivables
These are stated at cost. Provision is made for the amounts considered doubtful. Amounts considered irrecoverable are written off to profit and loss account.
3.8 Stores, spares and loose tools
Stores and spares are valued at lower of weighted average cost and net realizable value, less provision for impairment if any. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon.
Provision for obsolete and slow moving stores, spares and loose tools is determined based on management estimate regarding their future usability.
Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs necessary to be incurred to make the sale.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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Spares parts of capital nature which can be used only in connection with an item of property, plant and equipment are classified as tangible fixed assets under 'plant and machinery' category and are depreciated over a time period not exceeding the useful life of the related assets.
3.9 Stock-in-trade
Raw materials are valued at average cost. Finished goods are valued at lower of average manufacturing cost and net realizable value. Work-in-progress is valued at average manufacturing cost. Waste products are valued at net realizable value. Goods-in-transit are stated at cost, plus direct expenses paid thereon.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Items in transit are valued at cost accumulated to the reporting date.
3.10 Trade debts
Trade debts are initially recognized at fair value and subsequently measured at cost less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the trade debts. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy of financial reorganization, and default or delinquency in making payments are considered indicators that the trade debt is doubtful and the provision is recognized in the profit and loss account. When a trade debt in uncollectible, it is written off against the provision.
3.11 Bank borrowings
Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortized cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in current liabilities to the extent of the amount remaining unpaid.
3.12 Employees' retirement benefits
3.12.1 Employee Benefits
Compensated absences
The company accounts for all accumulated compensated absences in the period in which absences accrue.
Post retirement Benefits
Defined benefits plans
The company operates an unfunded gratuity scheme for its permanent employees as per terms of employment who have completed minimum qualifying period of service as defined under the scheme.
The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses which exceed 10 percent of the greater of the present value of the company's obligation are amortized over the expected average remaining working lives of the eligible employees. Past service cost is recognized immediately to the extent that the benefits are already vested. For non-vested benefits past service cost is amortized on a straight line basis over the average period until the amended benefits become vested.
Amounts recognized in the statement of financial position represent the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost.
3.12.2 Defined Contribution Plan
There is an approved contributory provident fund for management staff for which contributions are charged to income for the year.
The Company and the employees make equal monthly contributions to the fund at the rate of 8.33% of basic salary, in the case of management staff, and 8.33% of basic salary and cost of living allowance, in case of non-management staff. The assets of the fund are held separately under the control of trustees.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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3.13 Trade and other payables
Liabilities for trade and other amounts payable are measured at cost which is the fair value of the consideration to be paid in future for goods and services received.
3.14 Taxation
Current year
The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credit, rebates and exemption available, if any. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.
Deferred tax
Deferred tax is provided using the balance sheet liability method in 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 regards, 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 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 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 each reporting date.
3.15 Dividend
Dividend distribution by the company's shareholders is recognized as liability in the period in which the dividends are approved.
3.16 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 reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
3.17 Revenue recognition
3.17.1 Revenue from sale of goods is recognized when goods are dispatched to customers and invoices raised.
3.17.2 Return on bank balances is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return.
3.17.3 Dividend income and entitlement of bonus shares are recognized when right to receive such dividend and bonus shares is established.
3.18 Government grant
These represent transfer of resources from government, government agencies and similar bodies, in return for the past or future compliances with certain conditions relating to the operating activities of the entity.
The grants are disclosed as a deduction from the related expense.
3.19 Borrowing cost
Borrowing costs are recognized as an expense in the period in which these are incurred except to the extent of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs are capitalized as part of the cost of that asset up to the date of its’ commencing.
3.20 Foreign currency transactions and translation
Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date. Foreign exchange gains and losses on translation are recognized in the profit and loss account. All non-monetary items are translated into
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
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Sapphire Textile Mills Limited
rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined.
3.21 Cash and cash equivalents
Cash and cash equivalents comprise of cash at banks, cash in hand and short term deposits. For the purposes of cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above, net of temporary overdrawn bank balances.
3.22 Impairment
The carrying amount of the company’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such indications exist, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment loss is recognized as expense in the profit and loss account.
3.23 Financial instruments
Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the instrument and de-recognized when the company loses control of the contractual rights that comprise the financial assets and when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on derecognizing of financial assets and financial liabilities is included in the profit and loss account for the year. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value, amortized cost or cost, as the case may be.
3.24 Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to setoff the recognized amount and the company intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously.
3.25 Related party transactions
All transactions with related parties are carried out by the Company at arms' length price using the method prescribed under the Companies Ordinance 1984.
Nature of the related party relationship as well as information about the transactions and outstanding balances are disclosed in the relevant notes to the financial statements.
3.26 Segment reporting
Segment reporting is based on the operating (business) segment of the Company. An operating segment is a component of the Company that engages is a business activities from which it may earn revenues and incur expenses, including revenues and expenses that relates to transactions with any of the Company's other component. An operating segment's operating results are reviewed by the CEO to make decision about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Segment results that are reported to the CEO includes items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprises mainly corporate assets, income tax assets, liabilities and related income and expenditure. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment.
The business segments are engaged in providing products and services which are subject to risks and rewards which differ from the risk and reward of other segment, Segment reported are Spinning, Weaving, Home textile products and Power generation, which also reflects the management structure of Company.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
2010
Note Rupees4 Property, plant and equipment
4.1 The following a is statement of property, plant and equipment:
Operating property, plant and equipment 4.2 & 4.3 3,679,969,935
Capital work-in-progress 4.4 194,141,158
3,874,111,094
2009
Rupees
3,777,650,771
168,831,043
3,946,481,814
26
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
4.2 The following is a statement of operating property, plant and equipment:
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
Free
- ho
ldLe
ase
- hol
dFa
ctor
y bu
ildin
g
At J
uly
01, 2
009
Cos
t11
6,67
3,68
912
,776
,399
789,
373,
356
Acc
umul
ated
dep
reci
atio
n-
-(3
31,2
66,1
47)
Net
boo
k va
lue
116,
673,
689
12,7
76,3
9945
8,10
7,20
9
Dur
ing
the
year
Add
ition
s-
95,7
2435
,955
,322
Dis
posa
ls:
Cos
t10
,296
,000
--
Dep
reci
atio
n-
--
10,2
96,0
00-
-
Dep
reca
tion
char
ged
for t
he y
ear
--
(46,
948,
433)
Clo
sing
net
boo
k va
lue
- 201
010
6,37
7,68
912
,872
,123
447,
114,
098
At J
une
30, 2
010
Cos
t10
6,37
7,68
912
,872
,123
825,
328,
678
Acc
umul
ated
dep
reci
atio
n-
-(3
78,2
14,5
80)
Net
boo
k va
lue
- 201
010
6,37
7,68
912
,872
,123
447,
114,
098
Dep
reci
atio
n ra
te %
per
ann
um-
-10
%
Free
- ho
ldLe
ase
- hol
dFa
ctor
y bu
ildin
g
At J
uly
01, 2
008
Cos
t11
4,19
2,68
912
,498
,451
742,
298,
317
Acc
umul
ated
dep
reci
atio
n-
-(2
82,6
46,9
58)
Net
boo
k va
lue
114,
192,
689
12,4
98,4
5145
9,65
1,35
9
Dur
ing
the
year
Add
ition
s2,
481,
000
277,
948
47,0
75,0
39
Dis
posa
ls:
Cos
t-
--
Dep
reci
atio
n-
--
--
-
--
(48,
619,
189)
Land
On
free
- hol
d
On
free
- hol
d
Dep
reca
tion
char
ged
for t
he y
ear
Land
Clo
sing
net
boo
k va
lue
- 200
911
6,67
3,68
912
,776
,399
458,
107,
209
At J
une
30, 2
009
Cos
t11
6,67
3,68
912
,776
,399
789,
373,
356
Acc
umul
ated
dep
reci
atio
n-
-(3
31,2
66,1
47)
Net
boo
k va
lue
- 200
911
6,67
3,68
912
,776
,399
458,
107,
209
--
10%
Labo
ur, s
taff
colo
ny a
nd
othe
rsFa
ctor
y bu
ildin
gLa
bour
, sta
ff co
lony
and
ot
hers
Leas
ed b
uild
ing
impr
ovem
ents
209,
297,
651
245,
378,
479
58,6
20,0
8732
,495
,308
5,03
2,40
3,49
991
,804
,677
(60,
925,
961)
(142
,775
,517
)(3
2,50
2,90
1)(1
3,11
2,63
5)(2
,393
,676
,582
)(3
0,20
0,72
1)14
8,37
1,69
010
2,60
2,96
226
,117
,186
19,3
82,6
732,
638,
726,
917
61,6
03,9
56
12,6
19,2
31-
4,55
7,70
328
8,35
217
9,98
8,81
11,
266,
757
--
--
7,88
9,95
2-
--
--
(6,0
25,3
70)
--
--
-1,
864,
582
-
(7,6
36,8
43)
(10,
260,
296)
(1,4
57,7
83)
(3,9
14,9
81)
(269
,900
,341
)(6
,218
,430
)
153,
354,
078
92,3
42,6
6629
,217
,106
15,7
56,0
442,
546,
950,
805
56,6
52,2
83
221,
916,
882
245,
378,
479
63,1
77,7
9032
,783
,660
5,20
4,50
2,35
893
,071
,434
(68,
562,
804)
(153
,035
,813
)(3
3,96
0,68
4)(1
7,02
7,61
6)(2
,657
,551
,553
)(3
6,41
9,15
1)15
3,35
4,07
892
,342
,666
29,2
17,1
0615
,756
,044
2,54
6,95
0,80
556
,652
,283
5%10
%5%
20%
10%
10%
Labo
ur, s
taff
colo
ny a
nd
othe
rsFa
ctor
y bu
ildin
gLa
bour
, sta
ff co
lony
and
ot
hers
Leas
ed b
uild
ing
impr
ovem
ents
187,
089,
794
245,
378,
479
58,6
20,0
8727
,051
,221
4,97
9,54
9,52
763
,081
,968
(53,
427,
333)
(131
,375
,188
)(3
1,12
8,31
2)(9
,058
,559
)(2
,143
,437
,306
)(2
4,60
7,79
0)13
3,66
2,46
111
4,00
3,29
127
,491
,775
17,9
92,6
622,
836,
112,
221
38,4
74,1
78
22,2
07,8
57-
-5,
444,
087
101,
289,
854
28,7
22,7
09
--
--
48,4
35,8
82-
--
--
(38,
030,
954)
--
--
-10
,404
,928
-
(7,4
98,6
28)
(11,
400,
329)
(1,3
74,5
89)
(4,0
54,0
76)
(288
,270
,230
)(5
,592
,931
)
Rup
ees
2009
2010
On
free
- hol
dO
n le
ase
- hol
d
Pla
nt &
m
achi
nery
On
free
- hol
dO
n le
ase
- hol
dP
lant
&
mac
hine
ryE
lect
ric
inst
alla
tions
Ele
ctric
in
stal
latio
ns
Rup
ees
148,
371,
690
102,
602,
962
26,1
17,1
8619
,382
,673
2,63
8,72
6,91
761
,603
,956
209,
297,
651
245,
378,
479
58,6
20,0
8732
,495
,308
5,03
2,40
3,49
991
,804
,677
(60,
925,
961)
(142
,775
,517
)(3
2,50
2,90
1)(1
3,11
2,63
5)(2
,393
,676
,582
)(3
0,20
0,72
1)14
8,37
1,69
010
2,60
2,96
226
,117
,186
19,3
82,6
732,
638,
726,
917
61,6
03,9
56
5%10
%5%
20%
10%
10%
1,57
1,56
510
,130
,869
9,49
5,53
134
,659
,517
30,7
11,0
8721
,055
,031
127,
095,
030
(206
,057
)(3
,544
,016
)(4
,528
,047
)(1
7,86
2,02
6)(1
8,49
4,64
9)(8
,711
,339
)(5
8,23
0,81
3)1,
365,
508
6,58
6,85
34,
967,
484
16,7
97,4
9112
,216
,438
12,3
43,6
9268
,864
,217
155,
400
20,0
14,0
465,
089,
133
405,
684
1,96
5,95
319
1,60
040
,465
,003
--
--
--
24,0
66,8
51-
--
--
-(1
4,62
0,50
5)-
--
--
-9,
446,
346
(150
,796
)(2
,127
,161
)(2
,158
,294
)(1
,710
,326
)(1
,320
,045
)(1
,244
,583
)(1
7,06
9,67
5)
1,37
0,11
224
,473
,738
7,89
8,32
315
,492
,849
12,8
62,3
4611
,290
,709
82,8
13,1
99
1,72
6,96
530
,144
,915
14,5
84,6
6435
,065
,201
32,6
77,0
4021
,246
,631
143,
493,
182
(356
,853
)(5
,671
,177
)(6
,686
,341
)(1
9,57
2,35
2)(1
9,81
4,69
4)(9
,955
,922
)(6
0,67
9,98
3)1,
370,
112
24,4
73,7
387,
898,
323
15,4
92,8
4912
,862
,346
11,2
90,7
0982
,813
,199
10%
10%
30%
10%
10%
10%
20%
877,
365
5,70
6,18
37,
295,
428
32,1
89,2
7829
,838
,674
14,2
67,3
1811
3,31
3,70
6(1
13,2
12)
(3,1
00,6
35)
(2,8
54,8
23)
(16,
152,
267)
(17,
199,
073)
(7,6
34,0
03)
(52,
507,
224)
764,
153
2,60
5,54
84,
440,
605
16,0
37,0
1112
,639
,601
6,63
3,31
560
,806
,482
736,
200
4,42
4,68
62,
277,
060
2,47
0,23
987
2,41
36,
787,
713
26,6
55,6
24
42,0
00-
76,9
57-
--
12,8
74,3
00(5
,104
)-
(43,
760)
--
-(8
,948
,182
)36
,896
-33
,197
--
-3,
926,
118
(97,
949)
(443
,381
)(1
,716
,984
)(1
,709
,759
)(1
,295
,576
)(1
,077
,336
)(1
4,67
1,77
1)
Offi
ce
equi
pmen
tsFu
rnitu
re &
fix
ture
sVe
hicl
es
Fire
figh
ting
equi
pmen
t
Mill
s eq
uipm
ents
Fire
figh
ting
equi
pmen
tE
lect
ric
equi
pmen
tsC
ompu
ters
Ele
ctric
eq
uipm
ents
Com
pute
rsO
ffice
eq
uipm
ents
Mill
s eq
uipm
ents
Furn
iture
&
fixtu
res
Vehi
cles
1,36
5,50
86,
586,
853
4,96
7,48
416
,797
,491
12,2
16,4
3812
,343
,692
68,8
64,2
17
1,57
1,56
510
,130
,869
9,49
5,53
134
,659
,517
30,7
11,0
8721
,055
,031
127,
095,
030
(206
,057
)(3
,544
,016
)(4
,528
,047
)(1
7,86
2,02
6)(1
8,49
4,64
9)(8
,711
,339
)(5
8,23
0,81
3)1,
365,
508
6,58
6,85
34,
967,
484
16,7
97,4
9112
,216
,438
12,3
43,6
9268
,864
,217
10%
10%
30%
10%
10%
10%
20%
Exp
ired
leas
e
Pla
nt &
m
achi
nery
365,
987,
671
7,18
9,52
9,44
6(2
95,8
41,2
64)
(3,4
11,8
78,6
75)
70,1
46,4
073,
777,
650,
771
-30
3,05
8,71
9
-42
,252
,803
-(2
0,64
5,87
5)-
21,6
06,9
28
(7,0
14,6
40)
(379
,132
,627
)
63,1
31,7
673,
679,
969,
935
365,
987,
671
7,45
0,33
5,36
2(3
02,8
55,9
04)
(3,7
70,3
65,4
27)
63,1
31,7
673,
679,
969,
935
10%
Exp
ired
leas
e
Pla
nt &
m
achi
nery
365,
987,
671
6,99
9,23
6,15
6(2
87,6
36,3
10)
(3,0
62,8
78,9
93)
78,3
51,3
613,
936,
357,
163
-25
1,72
2,42
9
-61
,429
,139
-(4
7,02
8,00
0)-
14,4
01,1
39
(8,2
04,9
54)
(396
,027
,682
)
Tota
l
Tota
l
70,1
46,4
073,
777,
650,
771
365,
987,
671
7,18
9,52
9,44
6(2
95,8
41,2
64)
(3,4
11,8
78,6
75)
70,1
46,4
073,
777,
650,
771
10%
Dep
reci
atio
n ra
te %
per
ann
um
27
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
4.3 The depreciation charge for the year has been allocated as follows:
Cost of sales 27 368,065,428 387,760,986Administrative expenses 29 2,949,906 3,493,218Income from power generation 32.2 8,117,293 4,773,479
379,132,627 396,027,683
4.4 The following is a statement of capital work-in-progress:
Civil works and Buildings 179,093,943 156,608,683Plant and machinery 2,595,513 9,056,349Electric installations 12,192,635 3,166,011Mill equipment 259,067 -
194,141,158 168,831,043
4.5 Particulars of operating property, plant and equipment disposed off during the year are as follows (through negotiation):
Land
Free Hold Land 10,296,000 - 10,296,000 12,100,000 1,804,000 M/s. Sapphire Finishing Mills Ltd, Karachi
10,296,000 - 10,296,000 12,100,000 1,804,000
Plant and Machinery
Auto Cone Murata 1,856,525 1,576,570 279,954 525,000 245,046 Mr. Muhammad Ilyas, HyderabadSketcher Trutchler 2,212,955 2,199,928 13,027 250,000 236,973 M/s. Famous Textile Mills Limited, KotriCard C-40 Marzoli 3,450,000 2,181,816 1,268,184 1,590,000 321,816 Mr. Muhammad Khalid, FaisalabadBale Breaker Trutchlar 370,472 67,056 303,417 300,000 (3,417)
7,889,952 6,025,370 1,864,582 2,665,000 800,418Vehicles
BMW 4,800,000 1,344,000 3,456,000 3,750,000 294,000
Cuore 399,000 287,867 111,133 200,000 88,867
Cuore 399,000 260,084 138,916 300,000 161,084
Honda Citi 830,500 541,353 289,147 400,000 110,853
Honda Citi 830,500 555,810 274,690 400,000 125,310
Honda Citi 830,500 552,692 277,808 325,000 47,192
Honda Citi 1,142,500 633,097 509,403 734,000 224,597
Honda Civic 1,002,000 578,755 423,245 750,000 326,755
Honda Civic 1,148,000 680,718 467,282 1,033,200 565,918
Honda Civic 810,160 769,937 40,223 475,000 434,777
Honda Civic 1,107,500 786,184 321,316 700,000 378,684
Honda Civic 1,083,000 786,382 296,618 300,000 3,382
Honda Civic 1,103,000 795,784 307,216 500,000 192,784
Suzuki Baleno 739,000 611,662 127,338 275,000 147,662
Suzuki Cultus 560,000 374,783 185,217 250,000 64,783
Suzuki Cultus 600,000 328,128 271,872 480,000 208,128
Suzuki Cultus 604,000 471,658 132,342 250,000 117,658
Suzuki Cultus 595,000 366,520 228,480 490,000 261,520
Suzuki Cultus 560,000 409,224 150,776 250,000 99,224
Suzuki Khyber 380,311 351,386 28,925 150,000 121,075
Suzuki Mehran 320,000 212,305 107,695 150,000 42,305
Suzuki Mehran 302,000 240,317 61,683 150,000 88,317
Toyota Corolla 849,000 624,353 224,647 400,000 175,353
Toyota Corolla 843,880 624,505 219,375 400,000 180,625
Toyota Corolla 1,039,000 542,053 496,947 500,000 3,053
Toyota Corolla 1,189,000 890,948 298,052 500,000 201,948
24,066,851 14,620,505 9,446,346 14,112,200 4,665,854
Total 42,252,803 20,645,875 21,606,928 28,877,200 7,270,272
Sale Proceeds Profit / (loss)CostAccumulated
Depreciation Net Book Value
Rupees
M/s. AL-Ahmed Textile Mill Pvt Ltd., Karachi
M/s. Adamjee Insurance Co. Ltd., Karachi
Mr. Muhammad Arif, Multan
Mr. Usman Saeed Khan, Lahore
Mr. Nazkat Ali, Tuba Take Singh
M/s. Adamjee Insurance Co. Ltd., Karachi
Mr. Muhammad Tariq Mehmood, Lahore
Mr. Mustafa Nawaz, Dera Ismail Khan
Mr. Muhammad Zahid Afzal, Lahore
Mr. Syed Nadeem Hadier Bukhari, Sahiwal
Particulars of Buyers
Mr. Naeem Hayder, Lahore
Mr. Naeem Haider, Lahore
Mr. Muhammad Umar, Lahore
Mr. Salman Masood, Lahore
Mr. Abdul Aziz, Karachi
Mr. Zia ul Qadir, Karachi
Mr. Nabeel Riaz, Lahore
Mr. Hassan Amir Mirza, Lahore
Mr. Abid Husain, Karachi
Mr. Ghulam M. Qureshi, Hyderabad
Mr. Ajmal Atiqus Siddiqui, Peshawar
Miss. Saima Raza, Faisalabad
Mr. Irshad Hussain, Lahore
M/s. Robert Cotton Ass. Ltd., Karachi
Mr. Haroon Mukhtar, Lahore
Miss. Khadija, Karachi
Mr. Zulfiqar Hussain Zulfi, Faisalabad
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
28
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
5 Investment property
Leasehold Freehold Leasehold land Freehold land
Net carrying value as at July 01, 2009
Opening net book value (NBV) 121,160,317 - 17,549,982 - 138,710,299
Additions - 6,140,000 - 7,100,000 13,240,000
Depreciation charged - - (1,754,998) (414,167) (2,169,165)
Balance as at June 30, 2010 (NBV) 121,160,317 6,140,000 15,794,984 6,685,833 149,781,134
Gross carrying value as at June 30, 2010
Cost 121,160,317 6,140,000 19,999,980 7,100,000 154,400,297
Accumulated depreciation - - (4,204,996) (414,167) (4,619,163)
Net book value - 2010 121,160,317 6,140,000 15,794,984 6,685,833 149,781,134
Net carrying value as at July 01, 2008
Opening net book value (NBV) 121,160,317 - 19,499,980 - 140,660,297
Additions - - - - -
Depreciation charged - - (1,949,998) - (1,949,998)
Balance as at June 30, 2009 (NBV) 121,160,317 - 17,549,982 - 138,710,299
Depreciation rate % per annum - - 10% 10%
Land Building on
Total
5.1 Cost of leasehold land and building on leasehold land represent 50% cost of land and building purchased jointly with an associated company. The property is registered in joint names. Agreement for joint venture made.
5.2 In the opinion of the Directors the market value as on June 30, 2010 is not materially different.
2010 2009
Note Rupees Rupees
5.3 The depreciation charge for the year has been allocated as follows:
Other operating expenses 31 2,169,165 1,949,998
6 Intangible assets
Net carrying value as at July 01, 2009
Net book value as July 01, 2009 7,405,379 1,035,155
Transfer from capital work-in-progress 250,000 7,577,213
Amortization (1,734,969) (1,206,989)
Net book value at June 30, 2010 5,920,410 7,405,379
Gross carrying value at June 30, 2010
Cost 11,967,847 11,717,847
Accumulated amortization (6,047,437) (4,312,468)
Net book value - 2010 5,920,410 7,405,379
Amortization rate % per annum 20% 20%
Computer software
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
29
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees
6.2 Amortization charge for the year has been allocated as follows:
Other operating expenses 31 1,734,969 1,206,989
6.1 Computer software are being amortized over a useful life of 5 years.
7 Long term investments
Related parties - at cost:
In subsidiary - Unlisted 7.1 32,570,000 19,370,000 - Private 7.2 239,321 22,940,286 - Foreign 7.3 854,000 -
33,663,321 42,310,286
In associates - Listed 7.4 29,548,774 29,548,774 - Unlisted 7.5 434,807,880 437,820,400
464,356,654 467,369,174
In other companies - Available for sale
In other company 7.6 1,889,336,961 1,408,933,804
2,387,356,936 1,918,613,264
All investments have a face value of Rs. 10 per share unless stated otherwise.
7.1 Investments in subsidiary company - unlisted
Number of Shares Cost
2010 2009Rupees Rupees
1,687,000 1,687,000 16,870,000 16,870,000
Deposit for share application money 15,600,000 2,500,00032,470,000 19,370,000
10,000 - Sapphire Holding Limited 100,000 -
32,570,000 19,370,000
7.2 Investments in subsidiary company - private
Number of Shares Cost
2010 2009Rupees Rupees
900,000 100,000 Sapphire Renewable Solutions (Pvt) Limited 9,000,000 1,000,000
Deposit for share application money - 21,940,286
2009
Break up value on the basis of audited accounts for the year
ended June 30, 2010 Rs. 6.8 (June 30, 2009 Rs. 8.14) per
share.
Equity Interest Held 100% Break up value on the basis of audited accounts for the year
ended June 30, 2010 Rs. 3.99 (June 30, 2009 Rs. nil) per share.
Equity Interest Held 100%
Name of Company
2010
2010 2009
Name of Company
Equity Interest Held 100%
Sapphire Wind Power Company Limited
Break up value on the basis of audited accounts for the year
ended June 30, 2010 Rs. 0.27 (June 30, 2009 Rs. 42.18) per
share.
(8,760,679) -
239,321 22,940,286
Impairment loss on equity investments
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
30
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Rupees Rupees
200 - 854,000 -
854,000 -
Break up value on the basis of audited accounts for the year
ended June 30, 2010 Rs. (June 30, 2009 Rs. nil) per share.
Sapphire Home Inc. - USA
Equity Interest Held 100%
7.3 Investments in subsidiary company - foreign
Number of Shares Cost
Name of Company 2010 20092010 2009
7.4 Investments in associates - listed
Number of Shares Cost
2010 2009Rupees Rupees
2,942,243 2,615,311 Sapphire Fibres Limited 21,086,923 21,086,923
313,295 313,295 8,461,851 8,461,851
29,548,774 29,548,774
7.5 Investments in associates - unlisted
Number of Shares Fair value / Cost
2010 2009Rupees Rupees
5,699,000 5,699,000 Diamond Fabrics Limited 48,315,000 48,315,000
1,550,000 1,550,000 Sapphire Power Generation Limited 19,748,000 19,748,000
29,468,500 29,468,500 Sapphire Finishing Mills Limited 294,685,000 294,685,000
6,000,000 6,000,000 Sapphire Electric Company Limited 60,000,000 60,000,000
1,960 980 Beirholms Sapphire A/S Denmark 27,440,000 15,072,400
(15,380,120) -12,059,880 15,072,400
434,807,880 437,820,400
Break up value on the basis of audited accounts for the yearended April 30, 2010 DKK 439.5 (2009: DKK 541.5) equivalent toRs. 6,153 (2009: Rs. 7,770.53) per share.
Equity Interest Held 49% (2009: 49%)
2010 2009
Equity Interest Held 32.03 % (2009: 32.03%)
Equity Interest Held 16.54 % (2009: 16.54%)
Equity Interest Held 14.95% (2009: 14.94%)
Equity Interest Held 3.04% (2009: 3.04%)
Equity Interest Held 38.28% (2009: 38.28%)
Fair value of the ordinary shares as at June 30, 2010 amountedto Rs. 301.315 million (2009: 301.325 million).
Name of Company
2009
Break up value on the basis of un-audited accounts for the yearended June 30, 2010 Rs. 138.99 (June 30, 2009: Rs. 105.35audited) per share.
Name of Company
Fair value of the ordinary shares as at June 30, 2010 amountedto Rs. 6.206 million (2009: 6.206 million).
Break up value on the basis of un-audited accounts for the yearended 30 June, 2010 Rs. 62.79 (June 30, 2009: Rs. 59.07audited) per share.
1,960 shares of Danish Krone (DKK) 1000 per share
Impairment loss on equity investments
Break up value on the basis of un-audited accounts for the year
ended 30 June, 2010 Rs. 9.96 (June 30, 2009: 9.86) per share.
Reliance Cotton Spinning Mills Limited
2010
Equity Interest Held 1.67% (2009: 2.33%)
Break up value on the basis of un-audited accounts for the year
ended 30 June, 2010 Rs. 15.08 (June 30, 2009: Rs. 12.54
audited) per share.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
31
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
7.6 In other companies - Available for sale
Number of Shares Fair value / Cost
2010 2009Rupees Rupees
Quoted9,285,693
8,532,449 MCB Bank Limited (Note: 7.7) 730,579,344 737,109,135
1,072,609,381 585,676,433
1,803,188,725 1,322,785,568
Unquoted7,055,985 7,055,985 Novelty Enterprises (Pvt) Limited 86,148,236 86,148,236
1,889,336,961 1,408,933,804
Add: Adjustment arising from measurement to fair value
2009Name of Company
2010
7.7 During the year, this investment has been classified under non - current assets as the Management does not intends to dispose of this investment within 12 months from the reporting date.
2010 2009Note Rupees Rupees
8 Long term loans and advances
Loan to employees - unsecured (considered good)
Executives 21,935,184 18,320,567Other employees 16,873,376 16,450,125
38,808,560 34,770,692
Current portion of loans shown under current assets 10,842,792 14,422,648
27,965,768 20,348,044
8.3 Movement in loans to executives
Balance at the beginning of the Year 18,320,567 21,036,364Amount disbursed during the Year 6,330,414 -
24,650,981 21,036,364
Amount recovered during the Year 2,715,797 2,715,797
Balance at the end of the Year 21,935,184 18,320,567
9 Long term deposits
Security deposits
- WAPDA 7,330,096 4,270,096
- SNGPL 466,000 -
- PTCL 277,095 277,095
- Others 9.1 1,057,188 1,081,592
9,130,379 5,628,783
8.1 All the loans are granted to the employees, free of interest in accordance with their terms of employment.
8.2 Maximum amount due from executives during the year, calculated by reference to month-end balances, was Rs. 21,935,184 (2009: Rs. 18,320,567).
9.1 Include is an amount of Rs. 36,000 (2009: Rs. 36,000) deposit with Yousuf Agencies (Private) Limited an associated company.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
32
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
10.1 Stores, spares and loose tools
Stores 94,594,722 83,515,356
Spares - in hand 108,220,904 101,310,257Spares - in transit 21,596,098 13,613,365
129,817,002 114,923,622
Loose tools 744,141 760,223
225,155,865 199,199,201
10.2 Stock - in - trade
Raw material - in hand 1,729,916,003 1,500,686,230Raw material - in transit 48,759,608 189,393,716
1,778,675,611 1,690,079,946
Work in process 196,467,326 133,898,492
Finished goods 760,273,008 543,148,628Waste 24,247,063 27,511,255
784,520,071 570,659,883
2,759,663,008 2,394,638,321
11 Trade debts
Secured - considered good
Foreign debts - against export 652,254,153 273,267,179Provision for doubtful debts 11.4 (3,878,456) -
648,375,697 273,267,179Unsecured - considered good
Domestic debts 11.1 to 11.3 684,315,817 806,218,733For waste 12,621,684 9,890,469
Energy 20,856,794 16,562,003 Others 907,731 921,476
718,702,026 833,592,681
Provision for doubtful debts 11.4 (115,426,409) -
603,275,617 833,592,681
1,251,651,314 1,106,859,860
11.1 Domestic debts include amount of Rs. 41,583,400 (2009: Rs. nil) receivable against indirect export sales.
10 Inventories
Stores, spares and loose tools 10.1 225,155,865 199,199,201
Stock - in - trade 10.2 2,759,663,008 2,394,638,321
2,984,818,873 2,593,837,522
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
33
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
11.2 Domestic debts include the following amounts due from related parties:
Amer Cotton Mills (Private) Limited - 690,311Diamond Fabrics Limited 4,675,100 19,210,626Sapphire Fibres Limited - 6,000Sapphire Finishing Mills Limited - 6,677,508
4,675,100 26,584,445
11.4 Provision for doubtful debts
Balance at the beginning of the year - -Provision made during the year 119,304,865 -Amounts written off (against provision) - -
119,304,865 -
12 Loans and advances
Considered goodCurrent portion of long term loans - due from executives 3,667,804 3,373,996 - due from other employees 7,174,988 11,048,652
10,842,792 14,422,648Advances - unsecured - to suppliers 11,223,863 17,754,189 - to contractors - 148,380 - to others 1,702,413 1,322,000
12,926,276 19,224,569
23,769,068 33,647,217
13 Trade deposits and short term prepayments
Security deposits 810,209 750,209Prepayments 13.1 8,543,826 4,398,081
9,354,035 5,148,290
14 Other receivables
Dividend receivable - 1,957,846Claims receivable from an insurance company 10,343,531 1,305,868
11.3 The maximum aggregate amount of receivable due from related parties at the end of any month during the year was Rs. 70.966 million (2009: Rs. 87.158 million).
13.1 Included is an amount of Rs. 2,978,328 (2009: Rs. 120,000) prepaid rent with Yousuf Agencies (Private) Limited an associated company.
Receivable from related parties against shared expenses 14.1 7,317,821 5,084,393Export rebate receivable 15,078,206 14,707,123Unrealized gain on remeasurement of forward foreign currency contracts 1,515,818 2,544,108Unrealized gain on remeasurement of interest rate swap at fair value 14.2 - 1,519,080Receivable against sale of shares 8,935,891 -Receivable against subsidy on mark-up of long term loan 1,011,057 -Others 2,007,585 33,610
46,209,909 27,152,028
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
34
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
14.1 Other receivables include the following amounts due from related parties:
Neelum Textile Mills Limited - 856,738Reliance Cotton Spinning Mills Limited 162,331 990,604Sapphire Fibres Limited 7,155,490 3,237,051
7,317,821 5,084,393
14.2 This represents the fair value of one separate Cross Currency Interest Rate Swap agreement, the company has entered into with Royal Bank of Scotland (Formerly ABN Amro Bank N.V. Pakistan) at the notional amount of Rs. 770 million (equivalent USD 10.0 million). Under the terms of swap agreement, at each reset date, the company is entitled to receive 6 months KIBOR on notional amount and is required to pay 6 months LIBOR plus spread 0.63% on USD notional amount. In addition to this the company is required to pay exchange difference arising due to fluctuation in USD/PKR rates between reset and the settlement dates. This transaction has been remeasrued at fair value at the end of the year and resulted in gain of Rs. nil (2009: Rs. 1.519 million) which had been taken to equity as unrealized gain.
2010 2009Note Rupees Rupees
15 Other financial assets
Held-for-trading 15.1 - 15,350,632Available-for-sale 15.2 490,144,239 124,652,882
490,144,239 140,003,514
15.1 Held-for-trading
2010 2009 2010 2009
- 346,000 ABAMCO Composite Fund - - 1,076,060- 3,005,173 NIB Bank Limited - - 14,274,572
- - 15,350,632
15.2 Available-for-sale
2010 2009 2010 2009
3,712,986 110,000 Hub Power Company Limited 118,596,827 118,667,033 2,979,900810,247 736,588 Gulshan Spinning Mills Limited 17,441,370 5,582,595 3,682,940799,000 244,000 Engro Chemical Pakistan Limited 108,421,690 138,690,420 31,336,920591,151 319,723 Fauji Fertilizer Company Limited 55,740,826 60,929,934 27,799,915412,625 8,000 Pakistan Petroleum Limited 80,621,497 75,972,515 1,516,320385,858 14,500 Pakistan Oilfields Limited 85,382,922 83,306,742 2,115,55032,000 21,600 National Bank of Pakistan 2,064,426 2,051,200 1,447,84819,000 10,000 Pakistan State Oils Limited 6,027,580 4,943,800 2,136,500
- 457,000 Oil & Gas Development Co. Limited - - 35,938,480- 1,628,000 Pakistan Strategic Company Limited - - 5,584,040- 44,000 Crescent Steel & Allied Prd. Limited - - 790,680- 84,000 Lucky Cement Limited - - 4,916,520- 20,000 Pakistan Tobacco Company Limited - - 1,457,000- 40,000 United Bank Limited - - 1,531,600- 70,898 Arif Habib Investment Limited - - 1,418,669
474,297,138 490,144,239 124,652,882
2010 2009Note Rupees Rupees
16 Income tax and sales tax
Income tax 154,728,332 130,521,770Sales tax receivable 38,839,389 24,194,651Federal excise duty receivable 5,848,580 3,732,434
199,416,301 158,448,855
Number of shares/unitsName of Investee Company
Fair valueCost
Number of shares/unitsName of Investee Company Cost
Fair value
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
35
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
- deposit accounts 17.3 3,285 371,941 - margin account 17.3 3,350,340 3,350,340
117,988,235 80,412,075
Cash in hand 2,348,691 6,828,413
120,336,926 87,240,488
17 Cash and bank balances
With banks on: - currents accounts 99,543,108 75,023,995 - currents accounts - USD 17.1 1,874,978 1,482,764 - currents accounts - Euro 17.2 13,216,524 183,035
2010 2009Note Rupees Rupees
17.1 Cash at bank on USD account of US$ 21,955 (2009: US$ 18,283 ).
17.2 Cash at bank on EURO account of EURO 12,642 (2009: EURO 1,598 ).
17.3 Cash at bank on deposits account and cash at bank on margin account under lien of a banks / financial institutions against guarantee issued on behalf of the Company.
18 Issued, subscribed and paid-up capital
2010 2009 2010 2009
Rupees Rupees
6,206,740
6,206,740 62,067,400 62,067,400
13,876,400
13,876,400 138,764,000 138,764,000
20,083,140 20,083,140 200,831,400 200,831,400
Number of shares
Ordinary shares of Rs. 10 each alloted for consideration paid in cash
Ordinary shares of Rs. 10 each issued as bonus shares
18.1 The Company has only one class of shares which carry no right to fixed income.
18.2 The following shares were held by the related parties of the Company as at 30 June 2010:
Shares held Percentage Shares held Percentage
Amer Cotton Mills (Private) Limited 675,083 3.36 675,083 3.36Crystal Enterprises (Private) Limited - - 72,542 0.36Diamond Fabrics Limited 133,785 0.67 133,785 0.67Galaxy Agencies (Private) Limited 604,611 3.01 704,611 3.51Nadeem Enterprises (Private) Limited 586,242 2.92 586,242 2.92Neelum Textile Mills Limited 272,594 1.36 272,594 1.36Reliance Cotton Spinning Mills Limited 100,223 0.50 43,156 0.21Reliance Textiles Limited 5,367 0.03 38,667 0.19Sapphire Agencies (Private) Limited 2,138,539 10.65 1,963,258 9.78Sapphire Power Generation Limited 283,642 1.41 211,100 1.05Yousuf Agencies (Private) Limited 71,643 0.36 71,643 0.36
20092010
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
36
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
19 Long term finances
This represents secured long term finances from the following:Loans from banking companies - secured 19.1
Habib Bank Limited STM-5 19.1.1 12,000,000 24,000,000Habib Bank Limited STM-6 19.1.2 75,000,001 83,333,334Habib Bank Limited STM-1 19.1.3 18,750,000 31,250,000Habib Bank Limited STM-5 19.1.4 33,626,212 36,751,579Habib Bank Limited STM-1 19.1.5 50,000,000 -Habib Metropolitan Bank Limited STM-6 19.1.6 12,750,000 14,875,000Habib Metropolitan Bank Limited STM-6 19.1.7 12,750,000 14,875,000MCB Bank Limited STM-5 19.1.8 35,155,000 -Meezan Bank Limited STM-6 19.1.9 400,000,000 400,000,000National Bank of Pakistan STM-5 19.1.10 - 109,869,054National Bank of Pakistan STM-5 19.1.11 25,417,873 50,835,745National Bank of Pakistan STM-5 19.1.12 6,307,113 7,883,891National Bank of Pakistan STM-5 19.1.13 32,988,086 49,482,130Samba Bank Limited STM-4 19.1.14 30,000,000 -United Bank Limited STM-6 19.1.15 28,125,000 46,875,000United Bank Limited STM-6 19.1.16 25,000,000 31,250,000United Bank Limited STM-5 19.1.17 20,000,000 30,000,000
817,869,285 931,280,733
Less: Current portion shown under current liabilities (273,423,918) (228,566,450)
544,445,367 702,714,283
19.1 Terms and conditions of these financings are given below:
19.1.1 HBL - Non-LTF 4 quarterly May, 2011
19.1.2 HBL - LTF-EOP 7% 16 quarterly Aug., 2014
3 Months KIBORplus 75 bps
Date of final repayment
No. of installments outstanding
Mark-up rate p.a (%)
SecurityLenders
The loan is secured against 1st specific charge of Rs. 34
million over two imported generators installed at Unit No.5
factory premises situated at Feroze Watwan.
The term loan is secured against hypothecation of plant andmachinery at unit no. 6 of the Company.
19.1.3 HBL - Non-LTF 6 quarterly Nov., 2011
19.1.4 HBL - LTF-EOP 7% 11 quarterly Dec., 2015
19.1.5 HBL - Non-LTF 16 quarterly Feb., 2015
19.1.6 HMBL - LTF-EOP 7% 6 quarterly Aug., 2012
3 Months KIBORplus 125 bps
The loan is secured against first specific hypothecationcharge on plant and machinery of Rs. 53.2 million of UnitNo. 5 of the Company.
3 Months KIBORplus 125 bps
The loan is secured by first hypothecation charge overimported plant and machinery of the Company to the extent of Rs. 256 million.
The loan is secured against exclusive charge on specificplant and machinery of Rs. 23 million of Unit No. 6 of theCompany.
The loan is secured against 1st Specific and exclusivehypothecation charge of Rs. 67 million over imported plantand machinery of Unit No.1 of the Company.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
37
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Date of final repayment
No. of installments outstanding
Mark-up rate p.a (%)
SecurityLenders
19.1.12 NBP - LTF-EOP 7% 8 quarterly June, 2012
19.1.13 NBP - LTF-EOP 7% 8 quarterly Feb., 2011
19.1.14 SAMBA - Non-LTF 16 quarterly July., 2015
19.1.15 NBP - LTF-EOP 7% 8 quarterly May, 2012
19.1.16 NBP - LTF-EOP 7% 8 quarterly May, 2012
19.1.17 UBL - Non-LTF 8 quarterly May, 2012
The term loan is secured against hypothecation of plant andmachinery at Unit No. 6 of the Company.
The loan is secured by first hypothecation charge overimported plant and machinery of the Company to the extent of Rs. 256 million.
The loan is secured against first specific hypothecationcharge on plant and machinery of Rs. 53.33 million of UnitNo. 5 of the Company.
The term loan is secured against exclusive hypothecationcharge over plant and machinery at Unit No. 4 of theCompany.
It is secured by way of first pari passu hypothecation chargeof Rs. 200 million over fixed assets of Unit No. 6 (present andfuture plant and machinery) of the company. The registeredcharge should be sufficient to cover the entire facility with amargin of 25%.
3 Months KIBORplus 1.5%
The loan is secured against first specific hypothecationcharge on plant and machinery of Rs. 53.33 million of UnitNo. 5 of the Company.
3 Months KIBORplus 125 bps
19.1.10 NBP - Non-LTF Paid during the year
assets toCompany.
The term loan is secured against hypothecation of plant andmachinery installed or to be installed at Unit No. 5 of theCompany.
19.1.11 NBP - Non-LTF 4 quarterly Jan., 20113 Months KIBORplus 125 bps
The term loan is secured against hypothecation of plant andmachinery at Unit No. 5 of the Company.
19.1.7 HMBL - LTF-EOP 7% 6 quarterly Aug., 2013
19.1.8 MCB - Non-LTF 9.70% 16 quarterly Jan., 2015
19.1.9 MBL - Non-LTF 16 quarterly June., 20143 Months KIBORplus 125 bps
The loan is secured against first pari passu charge over fixedof amounting Rs. 534 million of Unit No. 6 of the
The loan is secured against exclusive charge on specificplant and machinery of Rs. 23 million of Unit No. 6 of theCompany.
The loan is secured against 1st registered hypothecationcharge for Rs. 54 million over present & future plant &machinery of Unit No. 1 of the Company.
2010 2009Note Rupees Rupees
20 Deferred liabilities
Deferred taxation 20.1 & 20.2 263,751,480 347,605,847Staff retirement benefits - gratuity 20.3 & 20.10 96,702,447 87,194,286
360,453,927 434,800,133
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
38
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
20.1 Deferred taxation
Deferred tax credits / (debits) arising in respect of:
Taxable temporary differences (deferred tax liabilities)Accelerated tax depreciation allowances 305,417,263 372,312,434
Deductible temporary differences (deferred tax assets)Staff retirement benefits - gratuity (14,471,748) (15,378,020)Provision for doubtful debts (17,854,253) -Provision for repair and maintenances (Generator overhauling) (9,339,782) -Unused tax credits - unabsorbed depreciation - (9,328,567)
(41,665,783) (24,706,587)
263,751,480 347,605,847
20.2 In view of applicability of presumptive tax regime on major portion of taxable income, deferred tax liability has been worked out after taking effect of income covered under presumptive tax regime.
2010 2009Note Rupees Rupees
20.3 Movement in the net liability recognized in the statement of financial position
Opening net liability 87,194,286 66,081,991
Expense for the year 47,364,079 39,867,492
134,558,365 105,949,483
Benefits paid during the year (37,855,918) (18,755,197)
Closing net liability 96,702,447 87,194,286
20.4 Expense recognized in the income statement
Current service cost 35,877,257 31,163,816Interest cost 11,486,822 8,703,676
47,364,079 39,867,492
20.5 Movement in the present value of defined benefit obligation
Present value of defined benefit obligation 95,723,513 72,530,632Current service cost 35,877,257 31,163,816Interest cost 11,486,822 8,703,676Actuarial loss / (gain) (6,390,954) 2,262,586Benefits due but not paid (182,000) (182,000)Benefits paid (37,673,918) (18,755,197)
98,840,720 95,723,513
20.6 Historical information
2010 2009 2008 2007 2006
98,840,720 95,723,513 72,530,632 73,099,939 59,273,935
6,390,954 (2,262,586) (1,405,429) 548,649 2,074,877Experience adjustments on plan liabilities
Present value of defined benefit obligation
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
39
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
20.7 Reconciliation
Present value of defined benefit obligation 98,840,720 95,723,513Unrecognized actuarial loss (2,138,273) (8,529,227)
96,702,447 87,194,286
20.8 General description
The scheme provides for terminal benefits for all of its permanent employees who attain the minimum qualifying period. Annual charges is made using the actuarial technique of Projected Unit Credit Method.
20.9 Principal actuarial assumption
Following are a few important actuarial assumption used in the valuation.
% %Discount rate 12% 12%Expected rate of increase in salary 11% 11%
20.10 Expected gratuity expense for the year ending June 30, 2011 works out to Rs. 48,628,104.
21 Trade and other payables
Trade creditors 21.1 136,437,054 84,997,682Accrued liabilities 21.2 357,336,279 233,372,001Advances from customers 29,758,681 2,687,514Custom duty payable 3,262,068 3,262,068Withholding tax payable 58,165 247,026Workers' profit participation fund 21.3 58,088,787 16,769,052Workers' welfare fund 22,767,627 5,593,136Sindh development and maintenance infrastructure fee 21.4 59,715,344 48,570,474Unclaimed dividend 415,665 360,114Others 4,040,189 2,868,229
671,879,859 398,727,296
21.1 These balances include the following amounts due to related parties:
Amer Cotton Mills (Private) Limited 3,530 336,000Diamond Fabrics Limited 1,079,285 61,800Sapphire Fibres Limited 12,389,902 -Sapphire Finishing Mills Limited 4,500 94,523Reliance Cotton Spinning Mills Limited 711,200 -
14,188,417 492,323
21.2 These balances include the following amounts due to related parties:
Beirholms Sapphire A/S Denmark 1,006,902 -Sapphire Power Generation Limited 18,392,690 3,923,643Sapphire Fibres Limited 2,576,769 -Sapphire Finishing Mills Limited 15,917 -
21,992,278 3,923,643
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
40
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
21.3 Workers' profit participation fund
Balance at the beginning of the year 16,769,052 -
Allocation for the year 58,088,787 16,769,052Interest on fund utilized in the Company's business 1,618,788 -
59,707,575 16,769,052
76,476,627 16,769,052
Less: Payments during the year (18,387,840) -
Balance at the end of the year 58,088,787 16,769,052
21.4 The Company has filed a suit against levy of Infrastructure fee, decision of the Honorable Sindh High Court dated 17 September 2008 in which the imposition of levy of infrasture cess before 28 December 2006 has been declared as void and invalid. However, the Excise and Taxation Department has filed an appeal before the Honorable Supreme Court of Pakistan against the order of the Honorable Sindh High Court.
2010 2009Note Rupees Rupees
22 Accrued interest / mark-up
Accrued interest / mark-up on secured: - long term finances 8,427,873 12,731,228 - short term borrowings 66,295,648 143,114,330
74,723,521 155,845,558
23 Short term borrowings
Short term loan 23.1 2,680,000,000 1,176,975,174Running finance under mark-up arrangements 23.1 793,684,105 2,550,891,011
3,473,684,105 3,727,866,185
Book overdraft 23.2 4,510,525 4,294,248
3,478,194,630 3,732,160,433
23.1 Aggregate facilities amounting to Rs. 9,005 million (2009: Rs. 8,260 million) were available to the Company from banking companies. These are secured against hypothecation charge on stock in trade, book debts, plant & machinery and export bills under collection. These carry mark up ranging from 7.5% to 15.79% (2009: 7.5% to 17%) p.a. payable quarterly. These facilities are renewable on expiry dates. It includes Rs. nil million (2009: 231 million) on account of foreign currency loan translated into local currency at exchange rate prevailing on the reporting date and are payable in foreign currencies.
23.2 This represents cheques issued by the Company in excess of balance at banks which remained unpresented till June 30, 2010.
24 Provision for taxation
Balance at the beginning of the year 76,854,672 60,813,750Provision made for current year - net 183,923,956 77,183,599
260,778,628 137,997,349
Less: Adjusted advance tax during the year against complete assessments (76,004,402) (61,142,677)
184,774,226 76,854,672
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
41
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
25 Contingencies and commitments
25.1 Contingencies
Guarantees issued by banks on behalf of the Company 233,418,200 140,282,950
25.2 Commitments
Confirmed letter of credit in respect of:
- plant and machinery 218,708,217 - - raw material 73,902,246 214,984,840 - stores and spares 15,236,712 19,620,387
307,847,175 234,605,227
25.3 The Subsidiary company Sapphire Renewable Solutions (Private) Limited has filed on 3rd September 2010 an application with SECP for striking off the Name of the Company U/S. 439 of the Companies Ordinances, 1984, due to continued losses.
26 Sales and services
2010 2009 2010 2009 2010
Gross sale of goods
Yarn 26.1 7,363,138,061 3,992,735,744 2,665,584,061 3,816,503,151 10,028,722,122
Fabric 26.2 1,793,830,899 1,259,080,448 988,070,624 1,032,422,462 2,781,901,523
Home textile products 26.3 1,111,284,403 1,155,212,202 3,458,120 3,414,292 1,114,742,523
Raw material 79,445,848 90,556,386 121,793,455 230,458,823 201,239,303
Waste 26.4 69,864,996 23,324,239 155,978,826 104,291,712 225,843,822
Services 4,950,738 3,183,257 - - 4,950,738
10,422,514,945 6,524,092,276 3,934,885,086 5,187,090,440 14,357,400,031
Export rebate 22,167,069
Duty drawback 26.6 7,910,142
Processing income 40,604,183
14,428,081,425
26.1 Export sales - Yarn
Direct export 5,609,639,738
In-direct export 1,753,498,323
7,363,138,061
26.2 Export sales - Fabric
Direct export 1,285,688,732
In-direct export 508,142,167
1,793,830,899
26.3 Export sales - Home textile products
Direct export 1,103,843,932
In-direct export 7,440,471
1,111,284,403
Rupees
Note
Export Sales Local Sales Total
2009
7,809,238,895
2,291,502,910
1,158,626,494
321,015,209
127,615,951
3,183,257
11,711,182,716
17,270,636
-
15,794,756
11,744,248,108
3,846,383,006
146,352,738
3,992,735,744
1,259,080,448
-
1,259,080,448
1,155,212,202
-
1,155,212,202
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
2010 2009Note Rupees Rupees
42
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
26.4 Waste sales includes comber noil sales Rs. 86,788,332 (2009: Rs. 27,941,760).
26.5 Exchange gain/loss due to currency rate fluctuations relating to export sales amounting to Rupees 17.189 million gain (2009: Rupees 36.298 million loss) has been included in export sales.
26.6 The duty drawback has been given by Ministry of Textile Industries from government of Pakistan vide S.R.O 3(1)TID/09-P-I Dated 1st September 2009 in order to encourage the exporters.
2010 2009Note Rupees Rupees
27 Cost of sales and services
Raw material consumed 27.1 8,423,946,165 6,911,494,291 Packing material consumed 211,788,404 202,366,547 Stores and spares consumed 412,660,562 321,351,948 Salaries, wages and benefits 27.2 & 27.3 823,860,959 750,222,421 Fuel, power and water 808,691,268 700,596,297 Other manufacturing expenses 27.4 351,249,741 324,750,062 Repairs and maintenance 94,817,581 28,545,828 Vehicle running expenses 15,633,880 14,198,687 Traveling and conveyance 13,844,869 14,643,684 Insurance expenses 39,039,093 32,971,272 Rent, rates and taxes 3,229,909 2,450,982 Fees and subscription 907,933 1,873,499 Communication expenses 3,982,474 5,253,082 Printing and stationery 1,465,367 2,239,688 Legal and professional charges 439,676 209,355 Other expenses 3,815,240 3,283,061 Depreciation expenses 4.3 368,065,428 387,760,986
11,577,438,549 9,704,211,690
Work in process Opening stock 133,898,492 127,781,058 Closing stock (196,467,326) (133,898,492)
(62,568,834) (6,117,434)
Cost of goods manufactured 11,514,869,715 9,698,094,257
Finished goods Opening balance 570,659,883 597,025,470
Finished goods purchased: Cotton 140,392,974 254,399,502 Yarn 155,462,577 34,015,175 Fabrics 95,167,861 -
391,023,412 288,414,677
Closing stock (784,520,071) (570,659,883)
11,692,032,939 10,012,874,520
27.1 Raw material consumed
Opening balance 1,500,686,230 2,380,432,823 Purchases 8,653,175,938 6,031,747,698
10,153,862,168 8,412,180,521
Closing stock (1,729,916,003) (1,500,686,230)
8,423,946,165 6,911,494,291
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
43
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
27.2 Salaries, wages and benefits include Rs. 47,364,079 (2009: Rs. 39,867,492) in respect of post employment benefits (gratuity).
27.3 Salaries and benefits include Rs. 2,928,219 (2009: Rs. 1,955,862) in respect of provident fund contribution.
27.4 Other manufacturing expenses
Cotton dyeing, bleaching and bale pressing charges 148,252,454 106,145,881 Yarn dyeing and bleaching charges 14,074,476 22,274,710 Fabric dyeing, bleaching, knitted and processing charges 149,309,011 153,817,148 Yarn doubling charges 4,810,028 9,837,378 Stitching and other charges 34,803,772 32,674,945
351,249,741 324,750,062
2010 2009Note Rupees Rupees
28 Selling and distribution expenses
On export sales Export development surcharges 17,897,664 16,196,168 Regulatory duty on export 3,223,309 - Insurance 1,608,056 4,030,136 Commission 194,812,452 152,884,614
Ocean freight and forwarding 250,640,175 224,342,672468,181,656 397,453,590
On local sales Inland freight and handling 42,815,800 35,984,471 Commission 64,874,761 55,046,656
107,690,561 91,031,127
Other distribution cost Salaries and benefits 28.1 42,065,253 32,781,533 Rent and utilities 1,902,383 1,269,499 Communication 9,689,952 8,427,355 Traveling, conveyance and entertainment 29,319,445 22,712,552 Repairs and maintenance 221,973 1,524,006 Fees and subscription 610,797 1,144,985 Samples and advertising 10,367,333 12,585,597 Printing and stationery 1,570,448 2,349,796 Others 1,214,836 2,322,932
96,962,420 85,118,255
Grant received from TDAP (4,301,850) -
668,532,787 573,602,972
28.1 Salaries and benefits include Rs. 1,247,554 (2009: Rs. 1,127,917) in respect of provident fund contribution.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
44
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
29 Administrative expenses
Directors' remuneration 8,775,000 7,200,000 Directors' meeting fee - 5,000 Salaries and benefits 29.1 71,641,779 54,114,083 Rent, rates and utilities 6,104,712 5,018,444 Communication 8,130,687 6,096,367 Printing and stationery 1,323,034 2,264,323 Traveling, conveyance and entertainment 12,965,130 13,853,678 Motor vehicle expenses 7,989,544 7,042,466 Repairs and maintenance 6,253,721 5,255,583 Insurance Expense 1,077,083 219,660 Legal and professional charges 3,500,405 5,082,074 Fees and subscription 1,918,245 3,178,450 Computer expenses 2,343,514 4,771,651 Advertisement 73,200 122,100 Others 320,020 1,186,690 Depreciation 4.3 2,949,906 3,493,218
135,365,980 118,903,787
29.1 Salaries and benefits include Rs. 2,401,282 (2009: Rs. 2,031,559) in respect of provident fund contribution.
29.2 Research and development support
Support on account of research and development 9,089,358 6,888,861
Less: Utilization
Product development 1,312,690 2,215,563Professional consultancy 15,248 -Market research 2,949,984 4,039,520Participation in exhibitions 4,811,436 633,778
9,089,358 6,888,861
- -
30 Finance cost
Interest / mark-up on - short term finances 550,008,787 668,948,697 - long term loans 93,893,252 56,502,120 - Workers' profit participation 21.3 1,618,788 -Bank charges, commission and others charges 107,221,933 112,812,450Realized (gain)/loss on remeasurement of derivative financial instruments - net 30.1 (4,126,986) 9,542,037
748,615,774 847,805,304
30.1 This represents the fair value of two separate Cross Currency Interest Rate Swap agreements and gain on reset date of agreements, the company has entered into with Royal Bank of Scotland (Formerly ABN Amro Bank N.V Pakistan) and Standard Chartered Bank ( Pakistan ) Limited at the aggregate notional amount of Rs. 428.6 million (equivalent to USD 7.0 million). Under the terms of swap agreements, at each reset date, the company is entitled to receive 6 months KIBOR on notional amounts and is required to pay 6 months LIBOR plus spread ranging from 0.75% to 0.85% on USD notional amount. In addition to this the company is required to pay exchange difference arising due to fluctuation in USD/PKR rates between reset and the settlement dates.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
45
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
30.1.1 During the year total gain realized Rs. 4.127 million (2009: Rs. 5.958 million) at the reset date. These transactions have been remeasrued to fair value at the end of the year resulted in a loss of Rs. nil (2009: Rs. 15.499 million). The resulted loss of Rs. nil (2009: Rs. 9.542 million) has been charged to finance cost after net off gain realized during the year of Rs. 4.127 million (2009: Rs. 5.958 million).
2010 2009Note Rupees Rupees
31 Other operating expenses
Workers' profit participation fund 21.3 58,088,787 16,769,052Workers' welfare fund 22,767,627 5,593,136Auditors' remuneration 31.1 2,287,444 1,490,795Donations 31.2 21,069,258 2,637,556Depreciation on investment property 5.3 2,169,165 1,949,998Amortization of intangible asset 6.2 1,734,969 1,206,989Loss on sale of investments - 23,132,735Loss due to remeasurement of held for trading investments - 15,822,463Provision for doubtful debts 119,304,865Impairment loss on associated company 15,380,120 -Impairment loss on subsidiary company 8,760,679 -Exchange loss on - foreign currency account 1,329,859 1,625,179 - short term foreign currency loan 5,969,871 - - monetary assets 3,911,900 -
262,774,544 70,227,903
31.1 Auditors' remuneration
Audit fee 1,000,000 896,200Half yearly review fee 302,500 275,000Code of corporate governance review fee 78,045 78,045Other certification / services 895,349 230,000Out of pocket expenses 11,550 11,550
2,287,444 1,490,795
2010 2009Note Rupees Rupees
31.2 Donations include the following in which a director is interested:
Name of director Interest in donee Name and address of donee
Mr. Mohammad Abdullah Director Abdullah Foundation 19,000,000 600,000
Mr. Yousuf Abdullah Director 312, Cotton Exchange Building,Mr. Shahid Abdullah Director I.I. Chundrigar Road, Karachi.Mr. Nadeem Abdullah DirectorMr. Amer Abdullah DirectorMr. Mohammad Yamin Director
Mr. Mohammad Abdullah Trustee Jamal-ud-din Fatima Charitable Trust 800,000 650,000
Mr. Shahid Abdullah Trustee 149, Cotton Exchange Building,Mr. Nadeem Abdullah Trustee I.I. Chundrigar Road, Karachi.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
-
46
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
32 Other operating income
Income from financial assets / liabilitiesDividend income - from other companies 116,023,354 100,498,478 - from associates companies 32.1 478,521 10,625,846Gain on sale of investments 33,978,504 -Gain due to remeasurement of held for trading investments 715,877 -Profit on saving and deposit accounts 148,852 70,562Rental income 13,824,279 10,154,210Income from power generation 32.2 10,310,796 5,717,658Scrape sales 12,117,599 11,461,320Exchange gain on - short term foreign currency loan - 954,890 - monetary assets - 880,500
Income from non-financial assetsGain on sale property, plant and equipment - net 7,256,523 4,498,792Written back provision - for excise duty on loan and leases - 4,811,742 - for excise duty on electricity - 3,393,355 - for unclaimed TFC's - 162,678
194,854,305 153,230,031
32.1 Dividend income from associated companies
Reliance Cotton Spinning Mills Limited 478,521 995,000Sapphire Fibres Limited - 9,630,846
478,521 10,625,846
32.2 Income from power generation
Sales 191,573,187 86,639,330
Cost of electricity product:
Salaries, wages and benefits 11,116,830 5,000,102 Stores and spares consumed 11,563,536 3,399,201 Fuel, power and water 141,277,067 62,564,583 Insurance expenses 1,680,323 90,953 Rent, rates and taxes 162,635 - Repairs and maintenance 6,712,785 4,785,196 Vehicle running expenses 307,625 108,897 Traveling and conveyance 147,786 55,829 Communication expenses 87,631 50,041 Fees and subscription - 2,000 Depreciation expenses 4.3 8,117,293 4,773,479 Finance cost 29,881 - Other expenses 58,999 91,391
181,262,391 80,921,672
10,310,796 5,717,658
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
47
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
33 Taxation
Current - for the year 184,774,226 77,278,127 - for prior years' (850,270) (94,528)
183,923,956 77,183,599
Deferred (83,854,367) 17,038,294
100,069,589 94,221,893
33.1 Reconciliation between the average effective tax rate and the applicable tax rate.
2010 2009
Applicable tax rate 35.00 35.00
8.00 10.56
(24.40) (19.52)Effect of income exempt for tax purpose (2.03) 2.15Effect of adjustment in respect of deferred taxation (7.52) 6.22Effect of change in prior years' tax (0.08) (0.03)
8.97 34.38
2010 2009
34 Earnings per shares
Profit after taxation 1,015,544,117 179,841,760
Weighted average number of ordinary shares 20,083,140 20,083,140
Earnings per share - basic and diluted 50.57 8.95
34.1 There is no dilutive effect on basic earnings per share.
Effect of difference in tax rates under normal tax regime and presumptive tax regime
Percentage
Tax effect of expenses that are admissible / inadmissible in determining taxable profit
Number of shares
(Rupees)
(Rupees)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
48
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
35 Cash generated from operations
Profit before taxation 1,115,613,706 274,063,653
Adjustments for non-cash charges and other items:
Depreciation 379,132,627 396,027,683Depreciation on investment property 2,169,165 1,949,998(Gain)/Loss on sale of other financial assets (33,978,504) 65,638,385(Gain)/Loss on sale of long term investments - (42,505,650)Amortization of intangible assets 1,734,969 1,206,989(Gain)/Loss on sale of property, plant and equipment (7,256,523) (4,498,792)Dividend income - others (116,023,354) (100,498,478)Dividend income - associates (478,521) (10,625,846)Provision for gratuity 47,364,079 39,867,492Provision for doubtful debts 119,304,865 -Exchange differences 11,211,630 (210,211)Fair value adjustment made in value of investment (715,877) 15,822,463
(4,126,986) 9,542,037Financial expenses 752,891,612 838,263,267Profit on deposit and held to maturity investments (148,852) (70,562)Impairment loss on associates company 15,380,120 -Impairment loss on subsidiary company 8,760,679 -Written back provision for excise duty on loan and leases - (4,811,742)Written back provision for excise duty on electricity - (3,393,355)Written back unclaimed TFC's - (162,678)Rental income (13,824,279) (10,154,210)
Operating cash flow before changes in working capital 2,277,010,556 1,465,450,443
Changes in working capital
(Increase) / Decrease in current assets
Inventories (390,981,351) 684,815,369Trade debts (264,096,319) 22,774,357Loans and advances 9,878,149 28,155,814Trade deposits and short term prepayments (4,205,745) 2,025,164Other receivables (23,563,097) 11,638,532
(672,968,363) 749,409,236
Increase / (decrease) in current liabilities
Trade and other payables 273,038,320 73,278,346
1,877,080,513 2,288,138,025
Realized (gain)/loss on remeasurement of derivative financial instrument
36 Cash and cash equivalents
Cash and bank balances 120,336,926 87,240,488Temporary overdrawn balances (4,510,525) (4,294,248)
115,826,401 82,946,240
37 Related party disclosures
37.1 Disclosure of transactions between the Company and related parties.
The related parties comprise associated companies (due to common directorship), wholly owned subsidiary, directors and key management personnel. Amounts due to/from related parties are shown in the relevant notes to the financial statements. The Company in the normal course of business carries out transactions with various related parties. Significant balances and transactions with related parties are as follows.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
49
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Nature of transaction Relationship with the Note Rupees Rupees
Company
Sales, services provided and reimbursement of expensesAmer Cotton Mills (Private) Limited Related party 870,615 690,311Beirholms Sapphire A/S Denmark Associate 4,928,917 2,881,786Diamond Fabrics Limited Associate 161,008,628 344,036,582Neelum Textile Mills Limited Related party 558,748 873,468Reliance Cotton Spinning Mills Limited Associate 4,092,723 2,490,395Sapphire Fibres Limited Associate 13,502,686 41,437,764Sapphire Finishing Mills Limited Associate 128,671,548 95,539,722
313,633,865 487,950,028
Purchases, services received and reimbursement of expensesAmer Cotton Mills (Private) Limited Related party 3,540,275 18,812,045Diamond Fabrics Limited Associate 8,136,700 13,396,918Neelum Textile Mills Limited Related party 558,749 430,857Reliance Cotton Spinning Mills Limited Associate 7,981,670 24,483,340Sapphire Fibres Limited Associate 89,472,104 57,082,520Sapphire Finishing Mills Limited Associate 13,197,354 5,947,830Sapphire Renewable Solutions (Pvt) Limited Subsidiary 4,488,936 7,408,761Sapphire Power Generation Limited Associate 169,033,632 92,705,736
296,409,419 220,268,007
Rent and other expensesYousuf Agencies (Private) Limited Related party 1,860,000 1,200,000
Sale of property, plant and equipmentSapphire Finishing Mills Limited Associate 12,100,000 -
DonationsAbdullah Foundation Related party 19,000,000 600,000Jamal-ud-din Fatima Charitable Trust Related party 800,000 650,000
19,800,000 1,250,000
Dividend paidAmer Cotton Mills (Private) Limited Related party 1,012,625 1,539,189Crystal Enterprises (Private) Limited Related party 108,813 165,396Diamond Fabrics Limited Associate 200,678 305,030Galaxy Agencies (Private) Limited Related party 1,056,917 1,606,513Nadeem Enterprises (Private) Limited Related party 879,363 1,336,632Neelum Textile Mills Limited Related party 408,891 621,515Reliance Cotton Spinning Mills Limited Associate 77,010 -Reliance Textiles Limited Related party 58,001 88,161Sapphire Agencies (Private) Limited Related party 2,944,887 4,471,669Sapphire Power Generation Limited Associate 316,650 481,308Yousuf Agencies (Private) Limited Related party 107,465 163,346
7,171,300 10,778,759
Dividend receivedReliance Cotton Spinning Mills Limited Associate 478,521 995,000Sapphire Fibres Limited Associate - 9,630,846
478,521 10,625,846
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
50
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Note 2010 200938 Plant capacity and actual production
Spinning units
Total number of spindles installed 120,312 120,232Average number of spindles worked 118,615 119,584Total number of rotors installed 3,120 3,120Average number of rotors worked 3,069 3,062Number of shifts worked per day 3 3Total days worked 360 360Installed capacity after conversion into 20/s lbs 84,627,839 82,877,920Actual production after conversion into 20/s lbs 92,266,592 92,695,300
Weaving unit
Total number of looms installed 220 220Average number of looms worked 206 206Number of shifts worked per day 3 3Total days worked 360 360
51,238,110 51,238,110
72,684,441 73,871,639
Home Textile Product unit
Installed capacity at 50 picks per inch of fabric square meters
Actual production converted at 50 picks per inch of fabric square meters
The capacity of this unit is indeterminable due to multi product involving varying processes of
manufacturing and run length of order lots.
2010 2009Note Rupees Rupees
39 REMUNERATION OF CHIEF EXECUTIVE, DIRECTOR AND EXECUTIVES
Chief Executive
Remuneration 3,450,000 2,400,000Rent and utilities 1,725,000 1,200,000
5,175,000 3,600,000
Number of person 1 1
Director
Remuneration 2,400,000 2,400,000Rent and utilities 1,200,000 1,200,000
3,600,000 3,600,000
Number of person 1 1
Executives
Managerial remuneration 42,945,227 40,001,495House rent 19,320,500 13,242,357Cost of living allowance 36,625 39,000Bonus 6,146,570 6,372,604Medical 937,374 1,123,538Utilities 2,445,438 1,863,887Leave encashment and other benefits 8,932,178 10,514,331
80,763,912 73,157,212
Number of persons 46 56
46 56Number of executives provided with the Company maintained cars
The Chief Executive and one Director were also provided with cars maintained by the Company and telephones at residence.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
51
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
40 FINANCIAL INSTRUMENTS
The Company has exposures to the following risks from its use of financial instruments:
40.1 - Credit risk
40.2 - Liquidity risk
40.3 - Market risk
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board is also responsible for developing and monitoring the Company's risk management policies.
40.1 Credit risk
40.1.1 Exposure to credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the trade debts, loans and advances, trade deposits and short term prepayments, other receivables, other financial assets and cash and bank balances. Out of total financial assets of Rs. 3,824.663 million (June 30, 2009 : Rs. 2,803.944 million), financial assets which are subject to credit risk aggregate to Rs. 3,706.675 million (June 30, 2009 : Rs. 2,723.532 million). The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows.
2010 2009
Rupees Rupees
Long term investments 1,889,336,961 1,408,933,804
Long term loans and advances 38,808,560 34,770,692
Long term deposits 9,130,379 5,628,783
Trade debts 1,251,651,314 1,106,859,860
Loans and advances 12,926,276 19,224,569
Trade deposits and short term prepayments 810,209 750,209
Other receivables 13,866,934 7,360,512
Other financial assets 490,144,239 140,003,514
Cash and bank balances 117,988,235 80,412,075
3,824,663,107 2,803,944,018
40.1.2
2010 2009
Rupees Rupees
Domestic 603,275,617 833,592,681
Export 648,375,697 273,267,179
1,251,651,314 1,106,859,860
The majority of export debts of the Company are situated in Asia, Europe, Australia and North America.
The maximum exposure to credit risk for trade debts at the reporting date by geographical region is as follows.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
52
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Waste 20,940,274 11,977,533
Processing services 59,126 -
Others 1,592,418 921,477
1,251,651,314 1,106,859,860
40.1.3
2010 2009Rupees Rupees
Yarn 816,309,819 771,922,216
Fabric 203,874,778 247,013,873
Home textile product 104,321,754 58,462,758
The maximum exposure to credit risk for debts at the reporting date by type of product is as follows:
Energy 20,856,794 16,562,003
Raw material 83,696,351 -
40.1.4 The aging of trade debts at the reporting date as follows:
Not past due 1,082,117,714 602,251,436
Past due 0 - 30 days 117,982,721 168,556,087
Past due 31 - 60 days 22,132,657 79,368,706
Past due 61 - 90 days 3,662,973 31,545,131
Past due 91 - 1 year 14,568,972 98,324,552
More than one year 11,186,277 126,813,948
1,251,651,314 1,106,859,860
Credit quality of counter parties is assessed based on historical default rates. All receivables past due are considered good. The management believes that allowance for impairment of receivables past due is not necessary, as these comprise amounts due from old customers, which have been re-negotiated from time to time and are also considered good.
40.2 Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credits facilities. The Company's treasury department maintains flexibility in funding by maintaining availability under committed credits lines.
Financial liabilities in accordance with their contractual maturities are presented below:
Long term finances 817,869,285 991,030,141 360,728,142 630,301,999 -
Trade and other payables 526,237,867 526,237,867 526,237,867 - -
Accrued interest / mark-up 74,723,521 74,723,521 74,723,521 - -
Short term borrowings 3,473,684,105 3,675,939,362 3,675,939,362 - -
4,892,514,778 5,267,930,891 4,637,628,892 630,301,999 -
Long term finances 931,280,733 1,224,083,801 352,882,181 859,473,177 11,728,443
Trade and other payables 320,708,874 320,708,874 320,708,874 - -
Accrued interest / mark-up 155,845,558 155,845,558 155,845,558 - -
Short term borrowings 3,727,866,185 3,956,197,989 3,956,197,989 - -
5,135,701,350 5,656,836,222 4,785,634,602 859,473,177 11,728,443
2 0 0 9
Carrying
amount
Contractual
cash flow
Between 1 to 5
years
5 years and
above
Rupees
Up to 1 yearBetween 1 to 5
years
Contractual
cash flow
5 years and
above
Carrying
amount
2 0 1 0
Rupees
Up to 1 year
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
53
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
40.2.1 The contractual cash flow relating to the above financial liabilities have been determined on the basis of mark-up / interest rates effective at the respective year-end. The rates of mark-up / interest have been disclosed in the respective notes to these financial statements.
40.3 Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holding of financial instruments.
40.3.1 Currency risk
The Company is exposed to currency risk on import of raw materials, stores & spares parts and export of goods mainly denominated in US Dollar and Euro. The Company's exposure to foreign currency risk for US Dollar and Euro is as follows:
Rupees US $ EURO JPY
Short term borrowings (Foreign currency loan) - - - -
Accrued mark-up on (Foreign currency loan) - - - -
- - - -
Trade debts (648,375,678) (6,813,736) (637,234) -
Bank balances (15,091,502) (47,234) (12,642) -
Gross statement of financial position exposure (663,467,180) (6,860,970) (649,876) -
Outstanding letters of credit 307,847,175 1,119,001 540,585 159,206,822
Forward exchange contracts 155,738,444 - 1,489,180 -
Net Exposures (199,881,561) (5,741,969) 1,379,889 159,206,822
Rupees US $ EURO JPY
Short term borrowings (Foreign currency loan) 231,323,174 2,845,303 - -
Accrued mark-up on (Foreign currency loan) 777,771 9,567 - -
232,100,945 2,854,870 - -
Trade debts (273,267,179) (3,615,259) (174,003) -
Bank balances (1,665,798) (18,283) (1,598) -
Gross statement of financial position exposure (42,832,033) (778,672) (175,601) -
Outstanding letters of credit 234,605,227 2,800,097 35,222 38,706
Forward exchange contracts 373,370,208 4,603,825 - -
Net Exposures 565,143,402 6,625,250 (140,379) 38,706
The following significant exchange rates have been applied:
2010 2009
US $ to Rupees 85.40 / 85.60 81.10 / 81.30
Euro to Rupees 104.33 / 104.58 114.354 / 114.82
Reporting date rate
2 0 0 9
2 0 1 0
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
54
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
40.3.2 Sensitivity analysis
A 10 percent strengthening of the Rupees against US Dollar at June 30, would have increase / (decrease) equity and profit and loss account by the amounts shown below. This analysis assumes that all other variables, in particulars interest rates, remain constant. The analysis is performed on the basis for 2010.
Equity Profit & loss
As at June 30, 2010
Effect in US Dollar - Gain - 58,729,903
Effect in Euro - Gain - 6,796,403
As at June 30, 2009
Effect in US Dollar - Gain - 6,330,602
Effect in Euro - Gain - 2,016,254
performed on the basis for 2010.
Rupees
10 percent weakening of the Rupees against the above currency at 30 June would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variable
2010 2009 2010 2009
Variable rate instruments
Financial liabilities
Long term finances 7.00% to 15.50% 7.00% to 15.50% 817,869,285 931,280,733
Short term borrowings 7.5% 15.79% 7.5% to 17.00% 3,473,684,105 3,727,866,185
Effective rate Carrying Amount
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
55
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Rupees Rupees
Total borrowings 4,291,553,390 4,659,146,918
Less: Cash and bank balances 120,336,926 87,240,488
Net debt 4,171,216,464 4,571,906,430
Total equity 5,992,070,939 4,459,856,532
Total capital 10,163,287,403 9,031,762,962
Gearing ratio 41 51
Percentage
41 Non adjusting event after balance sheet date
The board of directors in its meeting held on October 06, 2010 proposed a cash dividend of Rs. 100,415,700 (2009: Rs. 30,124,710) at the rate of Rs. 5 (2009: Rs. 1.5) per ordinary share of Rs. 10 each. Proposed dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in these financial statements. This will be accounted for subsequently in the year of payment.
42 Corresponding Figures
Comparative information has been rearranged and reclassified, wherever necessary, for better presentation and comparison. Minor reclassifications were made in balance sheet for better presentation and understanding. Significant reclassification includes the following.
15 1,322,785,568
27 21,811,459
21 2,687,514
27 202,366,547
Trade creditors Advances from customers Advances from customers
Stores and spares consumed Packing material consumed Packing material consumed
Long term investments MCB Bank Limited - investment
Stores and spares consumed Fuel, power and water Diesel expenses for power generation
Other financial assets
Reclassification
reclassifications were made in balance sheet for better presentation and understanding. Significant reclassification includes the following.
Nature RupeesNote From To
43 GENERAL
The figures have been rounded off to the nearest Rupees.
44 DATE OF AUTHORIZATION FOR ISSUE
These financial statements were authorized for issue by the Board of Directors of the Company on 06th October, 2010
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2010
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
56
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
PATTERN OF SHAREHOLDING
AS AT 30TH JUNE, 2010
NUMBER TOTAL
OF SHARE FROM TO SHARES
HOLDERS HELD
340 1 100 6,961
49 101 500 13,585
36 501 1,000 26,189
41 1,001 5,000 88,099
15 5,001 10,000 108,438
2 10,001 15,000 27,291
2 15,001 20,000 31,251
3 20,001 25,000 62,591
2 35,001 40,000 75,283
1 45,001 50,000 46,636
1 60,001 65,000 62,167
1 65,001 70,000 65,920
2 70,001 75,000 144,185
1 75,001 80,000 77,281
1 100,001 105,000 103,086
2 115,001 120,000 232,102
1 130,001 135,000 133,785
1 135,001 140,000 138,162
1 170,001 175,000 170,374
1 175,001 180,000 178,900
1 210,001 215,000 211,100
1 245,001 250,000 248,400
1 265,001 270,000 268,050
1 270,001 275,000 272,594
1 295,001 300,000 298,893
2 375,001 380,000 756,039
1 475,001 480,000 475,183
1 560,001 565,000 564,522
1 585,001 590,000 586,242
1 595,001 600,000 600,000
1 600,001 605,000 604,611
1 605,001 610,000 609,063
1 635,001 640,000 635,506
1 840,001 845,000 843,123
1 920,001 925,000 924,088
1 1,870,001 1,875,000 1,873,289
1 2,060,001 2,065,000 2,061,258
1 2,075,001 2,080,000 2,077,128
1 2,105,001 2,110,000 2,106,659
1 2,275,001 2,280,000 2,275,106
524 Total : - 20,083,140
57
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
PATTERN OF SHAREHOLDING
AS AT 30TH JUNE, 2010
CATEGORY OF SHAREHOLDERS SHARES HELD PERCENTAGE
Director, CEO, spouses and Minor Children 12,027,824 59.89
Associated Companies, undertakings, related parties 4,871,729 24.26
NIT & ICP 929,970 4.63
Banks & Modaraba 262,083 1.30
General Public (Local) 1,977,905 9.85
Public Sector Companies 13,629 0.07
20,083,140 100.00
58
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
A) ASSOCIATED COMPANIES, UNDERTAKINGS AND RELATED PARTIES
Sapphire Agencies (Private) Limited. 2061258
Nadeem Enterprises (Private) Limited 586242
Galaxy Agencies (Private) Limited 604611
Neelum Textile Mills Limited. 272594
Yousuf Agencies (Private) Limited 71643
Amer Cotton Mills (Private) Limited 475183
Reliance Textiles Limited 5367
Reliance Cotton Spinning Mills Limited 38056
Sapphire Power Generation Limited 72542
Amer Cotton Mills (Private) Limited 21000
Sapphire Agencies (Private) Limited. 77281
Amer Cotton Mills (Private) Limited 178900
Sapphire Power Generation Limited 211100
Diamond Fabrics Limited 133785
Reliance Cotton Spinning Mills Limited 62167
B) NIT & ICP
National Bank of Pakistan Trustee Department 924088
National Investment Trust Limited 5882
C) DIRECTORS, CHIEF EXECUTIVE OFFICER, THEIR SPOUSES
AND MINOR CHILDREN
DIRECTORS & THEIR SPOUSES
Mrs. Shamshad Begum 609063
Mr. Mohammad Younus 20738
Mr. Mohammad Abdullah. 600000
Mr. Amer Abdullah. 2077128
Mr. Shahid Abdullah. 378057
Mr. Yousuf Abdullah. 2106659
Mrs. Shireen Shahid. 2275106
Mrs. Ambareen Amer 635506
Mr. Mohammad Yamin. 1350
Mrs. Usma Yousuf 564522
Mr. Shahid Abdullah. 15000
Mrs. Shamshad Begum 9700
Mr. Yousuf Abdullah. 1883
Mrs. Ambareen Amer 1000
PATTERN OF SHAREHOLDING
AS AT 30TH JUNE, 2010
59
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
CHIEF EXECUTIVE OFFICER & HIS SPOUSE
Mr. Nadeem Abdullah. 1873289
Mrs. Noshaba Nadeem. 843123
Mr. Nadeem Abdullah. 15400
Mrs. Noshaba Nadeem. 300
D) BANKS, DEVELOPMENT FINANCIAL INSTITUTIONS, NON
BANKING FINANCIAL INSTITUTIONS, INSURANCE
COMPANIES, MODARABAS & MUTUAL FUNDS
BANKS
National Bank of Pakistan 138162
National Bank of Pakistan 115031
MODARABAS
Guardian Leasing Modaraba 1890
Guardian Leasing Modaraba 7000
E) SHAREHOLDERS HOLDING 10% OR MORE
Mr. Amer Abdullah. 2077128
Mrs. Shireen Shahid 2275106
Mr. Yousuf Abdullah 2108542
Sapphire Agencies (Private) Limited. 2138539
F) TRADING IN THE SHARES OF COMPANY DURING THE YEAR
BY THE DIRECTORS, CHIEF EXECUTIVE OFFICER, CHIEF
FINANCIAL OFFICER, COMPANY SECRETARY AND THEIR
SPOUSES AND MINOR CHILDREN.
NIL
PATTERN OF SHAREHOLDING
AS AT 30TH JUNE, 2010
60
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
I/WE
Of
a member(s) of SAPPHIRE TEXTILE MILLS LIMITED and a holder of
ordinary shares, do hereby appoint
of
or failing him
of
a member of SAPPHIRE TEXTILE MILLS LIMITED, vide Registered Folio No.
as my/ our proxy to act on my/ our behalf at the 42nd Annual General Meeting of the company to be held on Thursday, 28th October, 2010 at 11:45 a.m. at 212, Cotton Exchange Building, I.I. Chundriger Road, Karachi and or at any adjournment thereof.
Signed this_______________________day of October, 2010
Signature__________________________________________
(Signature should agree with the specimen signature registered with the Company)
NOTICE
1. No proxy shall be valid unless it is duly stamped with a revenue stamp worth Rs. 5/-
2. In the case of Bank or Company, the proxy form must be executed under its common seal and signed by its authorized person.
3. Power of attorney and other authority (if any) under which this proxy form is signed then a notarially certified copy of that power of attorney must be deposited along with this proxy form.
4. This form of proxy duly completed must be deposited at the Registered Office of Company atleast 48 hours before the time of holding the meeting.
5. In case of CDC account holder :
i). The proxy from shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.
ii). Attested copies of CNIC or passport of the beneficial owners and the proxy shall be furnished with the proxy form.
iii). The proxy shall produce his original CNIC or original passport at the time of meeting.
FORM OF PROXY
Affix Five Rupee Revenue
Stamp
61
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
DIRECTORS REPORT 70
AUDITOR’S REPORT 71
BALANCE SHEET 72
PROFIT & LOSS ACCOUNT 73
CASH FLOW STATEMENT 74
STATEMENT OF CHANGES IN EQUITY 75
NOTES TO THE FINANCIAL STATEMENTS 76
FORM OF PROXY
CONSOLIDATED ACCOUNT
Sapphire Textile Mills Limited
and its subsidiaries
CO
NT
EN
TS
62
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
DIRECTOR’S REPORT
to the Shareho lders
The Directors of Holding Company of Sapphire Wind Power Company Limited, Sapphire Renewable Solutions (Private) Limited, Sapphire Holding Company and Sapphire Home Inc are please to place before you the Directors’ report with the Audited Consolidated Financial Accounts and Auditors’ report thereon for the year ended 30th June, 2010.
Sapphire Wind Power Company Limited: : The Company is under implementation stage, 1372 acres of land has been allocated, for setting-up of 50 MW Wind Energy project. The Mast (Wind Turbine Power Performance Testing instrument) has been installed at the project, sub-lease document has been signed with the Alternative Energy Development Board. Further the technical feasibility has been approved by AEDB and bankable documents will be submitted to financial Institution shortly.
Sapphire Renewable Solutions (Private) Limited: The management of the company is planning to close the business of the company. Therefore, Mr.Nadeem Abdullah Director of company has filed the application under Companies Easy Exit Scheme on 3rd September, 2010.
Sapphire Holding Company: The Company is an unlisted public limited company incorporated in Pakistan on April 21st, 2010 under The Companies Ordinance, 1984 as wholly owned subsidiary of Sapphire Textile Mills Limited. The principal object of forming this company is de-merger of Sapphire Textile Mills Limited by transferring the Investments in M/s.Sapphire Fibres Limited, M/s.Diamond Fabrics Limited and M/s.Sapphire Finishing Mills Limited to Sapphire Holding Company.
Sapphire Home Inc.: The Company is incorporated in United State of America. The Company is wholly owned subsidiary of Sapphire Textile Mills Limited. The company is principally engaged in marketing services in United State of America.
On behalf of the Board
NADEEM ABDULLAH CHIEF EXECUTIVE
KarachiDated : 06th October, 2010
63
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
AUDITOR’S REPORT
to the Members
We have examined the annexed consolidated financial statements comprising consolidated statement of financial position of Sapphire Textile Mills Limited (the holding company) and its subsidiary companies Sapphire Wind Power Company Limited, Sapphire Holding Limited, Sapphire Home Inc. and Sapphire Renewable Solutions (Private) Limited as at June 30, 2010 and the related consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of cash flow, and the consolidated statement of changes in equity together with the notes forming part thereof, for the year ended June 30, 2010. We have also expressed a separate opinion on the financial statements of Sapphire Textile Mills Limited and Sapphire Holding Limited and Sapphire Renewable Solutions (Private) Limited. The financial statements of Sapphire Wind Power Company Limited and Sapphire Home Inc. have been audited by another firm of Chartered Accountants and whose report has been furnished to us. Our opinion in so far as it relates to the amounts included in respect of the subsidiary companies, is based solely on the report of such other auditor. These financial statements are the responsibility of the holding company’s management. Our responsibility is to express an opinion on these financial statements based on our examination.
Our examination was made in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures, as we considered necessary in the circumstances.
In our opinion the consolidated financial statements examined by us present fairly the financial position of Sapphire Textile Mills Limited and its subsidiary companies as at June 30, 2010 and the results of their operations for the year ended June 30, 2010.
Karachi. MUSHTAQ & COMPANYDate: ___________ Chartered Accountants
Engagement Partner: Shahabuddin A. Siddiqui
64
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
AS AT JUNE 30, 2010
2010 2009
Note Rupees RupeesNON CURRENT ASSETS
Property, plant and equipment 4 3,893,494,968 3,956,160,288
Investment property 5 149,781,134 138,710,299
Intangible assets 6 5,920,410 7,405,379
Long term investments 7 4,759,653,096 3,699,958,655
Long term loans and advances 8 27,965,768 20,371,219
Long term deposits 9 9,130,379 5,628,783
8,845,945,755 7,828,234,623
CURRENT ASSETS
Inventories 10 2,984,818,873 2,603,525,593
Trade debts 11 1,251,651,314 1,112,466,515
Loans and advances 12 31,501,517 41,440,757
Trade deposits and short term prepayments 13 9,354,035 5,174,290
Other receivables 14 46,209,909 27,152,028
Other financial assets 15 490,144,239 140,003,514
Income tax and sales tax 16 199,416,301 158,499,644
Cash and bank balances 17 121,649,167 89,246,492
5,134,745,355 4,177,508,833
TOTAL ASSETS 13,980,691,110 12,005,743,456
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Authorized capital 35,000,000 ordinary shares of Rs. 10 each 350,000,000 350,000,000
Issued, subscribed and paid-up capital 18 200,831,400 200,831,400
Reserves 8,075,212,577 5,982,176,064
8,276,043,977 6,183,007,464
NON CURRENT LIABILITIES
Long term finances 19 544,445,367 702,714,283
Deferred liabilities 20 476,883,980 526,938,409
1,021,329,347 1,229,652,692
CURRENT LIABILITIES
Trade and other payables 21 672,154,661 399,656,187
Accrued interest / mark-up 22 74,723,521 155,845,558
Short term borrowings 23 3,478,194,630 3,732,160,433
Current portion of long term finance 19 273,423,918 228,566,450
Provision for taxation 24 184,821,056 76,854,672
4,683,317,786 4,593,083,300
Contingencies and Commitments 25
13,980,691,110 12,005,743,456
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
65
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009
Note Rupees Rupees
Sales and services 26 14,638,890,520 11,851,420,839Cost of sales and services 27 (11,879,502,107) (10,099,834,125)
Gross profit 2,759,388,413 1,751,586,714
Selling and distribution expenses 28 (669,148,454) (577,605,424)Administrative expenses 29 (137,702,067) (125,257,740)
(806,850,521) (702,863,164)
1,952,537,892 1,048,723,550
Finance cost 30 (748,654,790) (847,821,299)Other operating expenses 31 (257,806,392) (70,472,903)
(1,006,461,182) (918,294,202)
Profit from operations 946,076,710 130,429,348
Other operating income 32 172,122,394 125,442,621
Profit before taxation 1,118,199,104 255,871,969
Share of profit of associated companies 454,883,045 316,229,716
Taxation 33 (124,615,205) (63,265,625)
Profit after taxation 1,448,466,944 508,836,060
Earnings per share - basic and diluted 34 72.12 25.34
The annexed notes form an integral part of these financial statements.
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
66
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009
Rupees Rupees
Profit for the year after taxation 1,448,466,944 508,836,060
Other comprehensive income:
Unrealized gain / (loss) on remeasurement of 549,342,369 (1,248,273,498)available for sale investments
Unrealized gain / (loss) on remeasurement of 112,379,721 (283,569,530)available for sale investments - associates
Unrealized gain / (loss) on remeasurement of (1,028,290) 2,544,108forward foreign currency contracts
Unrealized gain / (loss) on remeasurement of 435,580 -forward foreign currency contracts - associates
Unrealized (loss) on remeasurement of (1,519,080) (5,957,855)derivative financial instruments
Shares of decrease in reserves of associated companies under 15,083,979 (130,204,048)equity method
Other comprehensive income for the year 674,694,279 (1,665,460,823)
Total comprehensive income/(loss) for the year 2,123,161,223 (1,156,624,763)
The annexed notes form an integral part of these financial statements.
67
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009Note Rupees Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 35 1,886,423,064 2,265,865,219
Long term loans and deposits (11,096,145) (7,337,930)Interest paid (834,052,665) (899,018,007)Gratuity paid (37,855,918) (18,755,197)Taxes paid (117,128,069) (95,593,669)
(1,000,132,797) (1,020,704,803)
Cash flows from operating activities 886,290,267 1,245,160,416
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (339,218,526) (301,239,494)Purchase of intangible assets (250,000) -Purchase of investment property (13,240,000) -Long term investment in associates (15,800,979) (14,191,900)Long term investment in others (4,624,120) -other financial assets (530,987,707) (71,030,758)Proceeds from disposal of property, plant and equipment 29,735,177 18,961,312Proceeds from sale of long term investment 18,755,570 22,428,393Proceeds from sale of other financial assets 270,349,125 100,000,341Proceeds from derivative financial instrument 4,126,986 (32,830,740)Dividend received from others 117,981,200 108,919,069Rental income 13,882,970 10,853,208Interest received 148,852 80,726
Cash (used in) investing activities (449,141,452) (158,049,842)
CASH FLOWS FROM FINANCING ACTIVITIES
Short term borrowings (260,151,951) (1,192,105,077)Proceeds from long term finances 115,155,000 400,000,000Repayment of term finance (228,566,448) (261,124,473)Equity dividend paid (30,069,159) (15,093,891)
(403,632,558) (1,068,323,441)
Net increase in cash and cash equivalents 33,516,257 18,787,133
Net foreign exchange differences (1,329,859) 954,890
Cash and cash equivalent at the beginning of the year 84,952,244 65,210,221
Cash and cash equivalent at the end of the year 36 117,138,642 84,952,244
The annexed notes form an integral part of these financial statements.
68
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED JUNE 30, 2010
Capital
R u p e e s
Balance as at June 30, 2008 200,831,400 156,202,200 65,000,000 330,000,000 4,049,648,197 4,600,850,397 2,576,576,494 (313,407) 7,476,935 2,583,740,022 7,385,421,819
Total comprehensive income for the year ended June
30, 2009
Profit for the year - 2009 - - - - 508,836,060 508,836,060 - - - - 508,836,060
Other comprehensive income for the year - 2009 - - - - - - (1,248,273,498) 2,544,108 (5,957,855) (1,251,687,245) (1,251,687,245)
- - - - (130,204,048) (130,204,048) (283,569,530) - - (283,569,530) (413,773,578)
Transaction with owners
Final dividend for the year ended June 30, 2008 - - - - (45,789,592) (45,789,592) - - - - (45,789,592)
Balance as at June 30, 2009 200,831,400 156,202,200 65,000,000 330,000,000 4,382,490,617 4,933,692,817 1,044,733,466 2,230,701 1,519,080 1,048,483,247 6,183,007,464
Balance as at July 01, 2009 200,831,400 156,202,200 65,000,000 330,000,000 4,382,490,617 4,933,692,817 1,044,733,466 2,230,701 1,519,080 1,048,483,247 6,183,007,464
Total comprehensive income for the year ended June
30, 2010
Profit for the year - 2010 - - - - 1,448,466,944 1,448,466,944 - - - - 1,448,466,944
Other comprehensive income for the year - 2010 - - - - - - 549,342,369 (1,028,290) (1,519,080) 546,794,999 546,794,999
- - - - 15,083,979 15,083,979 112,379,721 435,580 - 112,815,301 127,899,280
Transaction with owners
Final dividend for the year ended June 30, 2009 - - - - (30,124,710) (30,124,710) - - - - (30,124,710)
Balance as at June 30, 2010 200,831,400 156,202,200 65,000,000 330,000,000 5,815,916,830 6,367,119,030 1,706,455,556 1,637,991 - 1,708,093,547 8,276,043,977
Other comprehensive income for the year - 2010 (associates)
The annexed notes form an integral part of these financial statements.
Unrealized gain / (loss)
On forward
foreign currency
contracts
SUB TOTALSUB TOTAL
Other components of equity
Share CapitalShare
premium
General
reserves
Fixed assets
replacement
Reserves
Other comprehensive income for the year - 2009 (associates)
TOTAL EQUITYOn derivative
financial
instruments
Unappropriated
profit
On available for
sale
investments
Revenue
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1. LEGAL STATUS AND NATURE OF BUSINESS
Sapphire Textile Mills Limited (the Company) was incorporated in Pakistan on March 11, 1969 as a public limited under the Companies Act, 1913 (Now the Companies Ordinance, 1984). The shares of the Company are listed on Karachi Stock Exchange. The registered office of the Company is situated at 212, Cotton Exchange Building, I.I. Chundrigar Road, Karachi and its mills are located at Kotri, Nooriabad, Chunian, Feroze Watwan, Bhai Pheru and Bhopattain Lahore. The Company is principally engaged in manufacturing and sale of yarn, fabric, home textile products and energy sales.
Sapphire Wind Power Company Limited - (the subsidiary company)
The Company was incorporated as a public limited on December 27, 2006. The main object of the company is power generation through wind mills and sale of power. The company has not yet set up any project. The registered office of the company is located at 212, Cotton Exchange Building, Karachi.
Sapphire Renewable Solutions (Private) Limited - (the subsidiary company)
The Company was incorporated as a private limited on June 05, 2008. The company is principally engaged in assembling, manufacturing and sale of alternative energy products. The registered office of the company is located at 7 A/K, Main Boulevard, Gulberg II, Lahore.
Sapphire Holding Limited - (the subsidiary company)
The Company was incorporated as a unlisted public limited on April 21, 2010. The company is principally engaged to carry on the business of holding company and for that purpose to invest in, acquire, subscribe for, hold shares, underwrite bonds, stock, securities, debentures, debenture stock issued or guaranteed by any company constituted and carrying on business in Pakistan or elsewhere and other business as per Memorandum of Association. The registered office of the company is located at 212, Cotton Exchange Building, Karachi.
Sapphire Home Inc. - U.S.A - (the subsidiary company)
The company is incorporated in USA. The company is principally engaged in marketing services in United Sate of America. The registered office of the company is located at 1430, Broadway, Suite 1805, New York, NY 10018.
2. BASIS OF PREPARATION
2.1 Statement of compliance
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 (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
2.2 Basis of preparation
2.2.1 These financial statements have been prepared under the historical cost convention, except for remeasurement of certain financial assets and financial liabilities at fair value through profit and loss and derivative hedging instruments at fair value.
2.2.2 These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance), directives issued by the Securities and Exchange Commission of Pakistan (SECP) and approved financial reporting standards as applicable in Pakistan. Approved financial reporting standards comprise of such international Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the provisions of the Ordinance. Wherever, the requirements of the Ordinance or directive issued by the SECP differ with the requirements of these standards, the requirement of the Ordinance and of the said directives have been followed.
2.2.3 The preparation of financial statements in conformity with the above requirements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed.
2.3 Functional and presentation currency
These financial statements are presented in Pakistan Rupees which is also the company's functional currency. All financial information presented in Pakistan Rupees has been rounded to the nearest Rupee.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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2.4 Use Of Estimates And Judgments
The preparation of financial statements in conformity with approved accounting standards requires management to make estimates, assumptions and use judgments that affect the application of policies and the reported amounts of assets, liabilities, income and expenses.
Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including revised expectations of future events. Revisions to accounting estimates are recognized prospectively commencing from the period of revision.
Judgments and estimates made by management that may brave a significant risk of material adjustments to the financial statements in subsequent years are as follows:
Residual values and useful lives of property, plant and equipment.
Provision for slow moving and obsolete stores and spares and stock-in trade.
Estimates of liability in respect of employee retirement gratuity and compensated absences.
Taxation.
Fair value of investment classified as ‘available for sale’.
2.5 Standards, interpretations and amendments to published approved accounting standards
2.5.1 Amendments to published standards effective in the current year:
The following standards, amendments and interpretations became effective during the current year.
Revised IAS 1 – Presentation of financial statements (effective from January 01, 2009) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income.
Revised IAS 23 – Borrowing costs (effective from January 01, 2009) removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
Amended IAS 27 – Consolidated and Separate Financial Statements (effective January 01, 2009) requires accounting for changes in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in the profit or loss.
IAS 27 ‘Consolidated and separate financial statements (effective from January 01, 2009). The amendment removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor.
Amendments to IAS 32- Financial instruments: Presentation and IAS 1 Presentation of Financial Statements (effective from January 01, 2009) – Puttable Financial Instruments and Obligations arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met.
Amendment to IAS 38- Intangible assets the amendment is part of the IASB's annual improvements project published in April 2009 and the Company will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible assets acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic life.
Amendment to IAS 39- Financial Instruments : Recognition and measurement - Eligible hedged items ( effective from January 01, 2009) clarifies the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship.
Amendments to IAS 39 and IFRIC 9 - Embedded derivatives (effective from January 01, 2009). Amendments require entities to assess whether they need to separate an embedded derivative from a hybrid (combined) financial instruments when financial assets are reclassified out of the fair value.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
Amendment to IFRS -2 Share base payment-Vesting conditions and cancellations (effective from January 01, 2009) clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations.
Revised IFRS 3 Business Combinations (effective from July 01, 2009) Broadens among other things the definition of business resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair value, transaction costs other than share and debt issue costs to be expensed, any pre-existing interest an acquire to be measured at fair value, with the related gain or loss recognized in profit or loss and any non-controlling (minority interest to be measured at either fair value or at its proportionate interest) in the identifiable assets and liabilities of an acquire, on a transaction by transaction basis.
IFRS 4 Insurance contracts (effective from January 01, 2009). The IFRS makes limited improvements to accounting for insurance contracts until the board completes the second phase of its project on insurance contracts. The standard also requires that an entity issuing insurance contracts (an insurer) to disclose information about those contracts.
IFRS 5 Measurement of non-current assets (of disposal groups) classified as held-for-sale. The amendment is part of the IASB's annual improvements project published in April 2009. the amendment provides clarification that IFRS 5 specifies the disclosures required in the respect of non-current assets (or disposals group) classified as held for sale or discontinued operations. it also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.
IFRS 7- Financial Instruments Disclosures (amendment) - effective January 01, 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosures of the fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on profit for the year.
IFRS 8- Operating segment (effective from January 01, 2009) replaces IAS 14 and requires an entity to determine and present operating segments based on the information that is provided internally to the Chief Operating Decision maker who is responsible for allocating recourses and assessing performance of the operating segment.
IFRIC 15- Agreement for the Construction of Real Estate (effective from October 01, 2009) clarifies the recognition of revenue by real estate developers for sale of units, such as apartments or houses, 'off-plan', that is , before construction is complete.
IFRIC 17-Distribution of non-cash assets to owner (effective from July 01, 2009) states that when a company distributes non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent changes in the fair value before the liability is discharged, this is recognize in equity. When the non cash assets is distributed, the difference between the carrying amount and fair value is recognized in the income statement.
IFRIC 18- Transfers of the assets from customer (to be applied prospectively to transfer of assets from customers received on or after 1st July 2009). This interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant, and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).
2.6 New / revised accounting standards, amendments to published accounting standards and interpretations that are not yet effective
2.6.1 The following standards, amendments and interpretations of approved accounting standards are only effective for accounting periods beginning from the dates specified below. These standards 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 increased disclosures in certain cases:
Amendment to IFRS 2 - Share-based Payment - Group Cash-settled Share-based Payment Transactions (effective for annual periods beginning on or after January 01, 2010). Amendment provides guidance on the accounting for share based payment transactions among group entities.
Amendment to IAS 32 - Classification of Right Issues (effective for period beginning on or after February 01, 2010). Under the amendments to IAS 32 rights, options and warrants - otherwise meeting the definition of equity instruments in IAS 32.11 - issued to acquire a fixed number of an entity's own non-derivative equity instruments for a fixed amount in any currency are classified as equity instruments, provided the offer is made pro-rata to all existing owners of the same class of the entity's own non-derivative equity instruments.
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 01, 2010). IFRIC 19 clarifies the accounting when an entity extinguish the liability by issuing its own equity instruments to the creditor.
Revised IAS 24 - Related Party Disclosures (effective for annual periods beginning on or after January 01, 2011). The amendments to IAS 24 simplify the disclosure requirement for entities that are controlled, jointly controlled or significantly influenced by a government (referred to as government - related entities) and clarify the definition of a related party.
Amendments to IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after January 01, 2011). IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction has been amended to remedy an unintended consequence of IFRIC 14 where entities are in some circumstances not permitted to recognize prepayments of minimum funding contributions, as an asset.
The International Accounting Standards Board made certain amendments to existing standards as part of its second and third annual improvement project. The effective dates for these amendments vary by standards.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Property, plant and equipment
The significant accounting policies adopted in the preparation of theses financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
3.1.1 Owned assets
Property, plant and equipment are stated at cost less accumulated depreciation except freehold land and leasehold, which are stated at cost less impairment losses, if any. Cost comprises acquisition and other directly attributable costs.
Depreciation is provided on a reducing balance method and charged to profit and loss account to write off the depreciable amount of each asset over its estimated useful life at the rates specified in note 4. Depreciation on addition in property, plant and equipment is charged from the month of addition while no depreciation is charged in the month of disposal.
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized, if any. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit and loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within "other income" in profit or loss.
The Company reviews the useful life and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding effect on depreciation charge.
3.1.2 Leased assets
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership, are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Outstanding obligations under the lease less finance cost allocated to future periods are shown as a liability.
Finance cost under lease agreements are allocated to the periods during the lease term so as to produce a constant periodic rate of finance cost on the remaining balance of principal liability for each period.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.
3.2 Capital work in progress
Capital work in progress is stated at cost less any identified impairment loss and represents expenditure incurred on fixed assets in the course of construction and installation. Transfers are made to relevant fixed assets category as and when assets are available for intended use.
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3.3 Intangible assets
Costs associated with maintaining computer software programmes are recognized as an expense when incurred. However, costs that are directly attributable to identifiable software and have probable economic benefits exceeding the cost beyond one year, are recognized as an intangible asset. Direct costs include the purchase cost of software and related overhead cost.
Expenditure which enhances or extends the performance of computer software beyond its original specification and useful life recognized as a capital improvement and added to the original cost of the software.
Computer software cost treated as intangible assets are amortized from the date the software is put to use on a straight-line basis over a period of 5 years.
3.4 Investment property
Investment property are stated at cost less accumulated depreciation and impairment loss, if any.
Depreciation is charged to income applying the reducing balance method at the rates specified in the respective note and after taking into account residual value.
Depreciation is charged on addition during the year from the month in which the asset is acquired or capitalized and in respect of disposals during the year up to the month in which the asset is disposed off. The residual values and useful lives are reviewed and adjusted at each reporting date, if material.
The carrying value of investment property is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written down to its recoverable amount.
Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized.
Gain or loss on disposal is taken to the profit and loss account.
3.5 Investments
Investments intended to be held for less than twelve months from the reporting date or to be sold to raise operating capital, are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.
3.5.1 Investment in subsidiary companies
Investments in subsidiaries are initially recognized at cost. At subsequent reporting dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of investments are adjusted accordingly. Impairment losses are recognized as expense. Where impairment losses subsequently reverse, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is recognized in the profit and loss account.
3.5.2 Investment in associated companies - equity method
Entities in which the Company has significant influence but not control and which are neither its subsidiaries nor joint ventures are associates and are accounted for by using the equity method of accounting.
These investments are initially recognized at cost, thereafter the carrying amount is increased or decreased to recognize the Company's share of profit or loss of associates. Share of post acquisition profit and loss of associates is accounted for in the Company's profit and loss account. Distribution received from invested, reduces the carrying amount of investment. The Company's share of changes in the associate's equity which have not been recognized in the associates' profit and loss account, are recognized directly in the equity of the Company.
3.5.3 Available-for-sale investments
Other investments not covered in any of the above categories including investments in associates in which the Company has no significant influence are classified as being available-for-sale and are initially recognized at fair value plus attributable transaction costs. Subsequent to initial recognition these are
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
measured at fair value, with any resultant gain or loss being recognized directly in equity. Gains or losses on available -for-sale investments are recognized directly in equity until the investments are sold or disposed off, or until the investments are determined to be impaired, at that time cumulative gain or loss previously reported in the equity is included in current year's profit and loss account.
Fair value of listed securities are the quoted prices on stock exchange on the date it is valued. Unquoted securities are valued at cost.
The Company follows trade date accounting for regular way of purchase and sales of securities, except for sale and purchase of securities in future market, which are accounted for at settlement date.
3.5.4 Held-for-trading investments - at fair value through profit or loss
Investments which are acquired principally for the purpose of selling in the near term or the investments that are part of a portfolio of financial instruments exhibiting short term profit taking, are classified as investments at fair value through profit or loss and designated as such upon initial recognition. These are stated at fair values with any resulting gains or losses recognized directly in the profit and loss account. The fair value of such investments representing listed equity securities are determined on the basis of prevailing market prices.
3.5.5 Held-to-maturity investment
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity.
Investments classified as held to maturity are recognized initially at fair value, plus attributable transaction cost. Subsequent to initial recognition, these are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss account over the period of the investments on an effective yield method.
3.6 Derivative financial instruments
Derivative instruments held by the Company generally comprise of cross currency interest rate swap and foreign currency forward contracts. Derivatives are initially recorded at fair value on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. Derivatives with positive impact at balance sheet date are included in 'other receivable' and with negative impacts in 'trade and other payables' in the balance sheet. The resultant gains and losses are included in the income. No derivative is designated as hedging instrument by the company.
Derivatives financial instruments entered into by the Company do not meet the hedging criteria as defined by IAS 39, 'Recognition and Measurement of Financial Instruments', consequently hedge accounting is not used by the Company.
3.7 Loans, advances, deposits and other receivables
These are stated at cost. Provision is made for the amounts considered doubtful. Amounts considered irrecoverable are written off to profit and loss account.
3.8 Stores, spares and loose tools
Stores and spares are valued at lower of weighted average cost and net realizable value, less provision for impairment if any. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon.
Provision for obsolete and slow moving stores, spares and loose tools is determined based on management estimate regarding their future usability.
Net realizable value signifies the estimated selling price in the ordinary course of business less the estimated costs necessary to be incurred to make the sale.
Spares parts of capital nature which can be used only in connection with an item of property, plant and equipment are classified as tangible fixed assets under 'plant and machinery' category and are depreciated over a time period not exceeding the useful life of the related assets.
3.9 Stock-in-trade
Raw materials are valued at average cost. Finished goods are valued at lower of average manufacturing cost and net realizable value. Work-in-progress is valued at average manufacturing cost. Waste products are valued at net realizable value. Goods-in-transit are stated at cost, plus direct expenses paid thereon.
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Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Items in transit are valued at cost accumulated to the reporting date.
3.10 Trade debts
Trade debts are initially recognized at fair value and subsequently measured at cost less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the trade debts. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy of financial reorganization, and default or delinquency in making payments are considered indicators that the trade debt is doubtful and the provision is recognized in the profit and loss account. When a trade debt in uncollectible, it is written off against the provision.
3.11 Bank borrowings
Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortized cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in current liabilities to the extent of the amount remaining unpaid.
3.12 Employees' retirement benefits
3.12.1 Employee Benefits
Compensated absences
The company accounts for all accumulated compensated absences in the period in which absences accrue.
Post retirement Benefits
Defined benefits plans
The company operates an unfunded gratuity scheme for its permanent employees as per terms of employment who have completed minimum qualifying period of service as defined under the scheme.
The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses which exceed 10 percent of the greater of the present value of the company's obligation are amortized over the expected average remaining working lives of the eligible employees. Past service cost is recognized immediately to the extent that the benefits are already vested. For non-vested benefits past service cost is amortized on a straight line basis over the average period until the amended benefits become vested.
Amounts recognized in the statement of financial position represent the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost.
3.12.2 Defined Contribution Plan
There is an approved contributory provident fund for management staff for which contributions are charged to income for the year.
The Company and the employees make equal monthly contributions to the fund at the rate of 8.33% of basic salary, in the case of management staff, and 8.33% of basic salary and cost of living allowance, in case of non-management staff. The assets of the fund are held separately under the control of trustees.
3.13 Trade and other payables
Liabilities for trade and other amounts payable are measured at cost which is the fair value of the consideration to be paid in future for goods and services received.
3.14 Taxation
Current year
The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credit, rebates and exemption available, if any. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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Deferred tax
Deferred tax is provided using the balance sheet liability method in 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 regards, 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 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 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 each reporting date.
3.15 Dividend
Dividend distribution by the company's shareholders is recognized as liability in the period in which the dividends are approved.
3.16 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 reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
3.17 Revenue recognition
3.17.1 Revenue from sale of goods is recognized when goods are dispatched to customers and invoices raised.
3.17.2 Return on bank balances is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return.
3.17.3 Dividend income and entitlement of bonus shares are recognized when right to receive such dividend and bonus shares is established.
3.18 Government grant
These represent transfer of resources from government, government agencies and similar bodies, in return for the past or future compliances with certain conditions relating to the operating activities of the entity.
The grants are disclosed as a deduction from the related expense.
3.19 Borrowing cost
Borrowing costs are recognized as an expense in the period in which these are incurred except to the extent of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs are capitalized as part of the cost of that asset up to the date of its’ commencing.
3.20 Foreign currency transactions and translation
Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date. Foreign exchange gains and losses on translation are recognized in the profit and loss account. All non-monetary items are translated into rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined.
3.21 Cash and cash equivalents
Cash and cash equivalents comprise of cash at banks, cash in hand and short term deposits. For the purposes of cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above, net of temporary overdrawn bank balances.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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3.22 Impairment
The carrying amount of the company’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such indications exist, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment loss is recognized as expense in the profit and loss account.
3.23 Financial instruments
Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the instrument and de-recognized when the company loses control of the contractual rights that comprise the financial assets and when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on derecognizing of financial assets and financial liabilities is included in the profit and loss account for the year. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value, amortized cost or cost, as the case may be.
3.24 Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to setoff the recognized amount and the company intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously.
3.25 Related party transactions
All transactions with related parties are carried out by the Company at arms' length price using the method prescribed under the Companies Ordinance 1984.
Nature of the related party relationship as well as information about the transactions and outstanding balances are disclosed in the relevant notes to the financial statements.
3.26 Segment reporting
Segment reporting is based on the operating (business) segment of the Company. An operating segment is a component of the Company that engages is a business activities from which it may earn revenues and incur expenses, including revenues and expenses that relates to transactions with any of the Company's other component. An operating segment's operating results are reviewed by the CEO to make decision about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Segment results that are reported to the CEO includes items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprises mainly corporate assets, income tax assets, liabilities and related income and expenditure. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment
The business segments are engaged in providing products and services which are subject to risks and rewards which differ from the risk and reward of other segment, Segment reported are Spinning, Weaving, Home textile products and Power generation, which also reflects the management structure of Company.
2009
Rupees
3,778,948,542
177,211,746
3,956,160,288
2010
Note Rupees
4 Property, plant and equipment
4.1 The following a is statement of property, plant and equipment:
Operating property, plant and equipment 4.2 & 4.3 3,680,123,414
Capital work-in-progress 4.4 213,371,554
3,893,494,968
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
78
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Exp
ired
leas
e
Free
- ho
ldLe
ase
- hol
dFa
ctor
y
build
ing
Labo
ur, s
taff
colo
ny a
nd
othe
rs
Fact
ory
build
ing
Labo
ur, s
taff
colo
ny a
nd
othe
rs
Leas
ed b
uild
ing
impr
ovem
ents
Pla
nt &
mac
hine
ry
At J
uly
01, 2
009
Cos
t11
6,67
3,68
912
,776
,399
789,
373,
356
209,
297,
651
245,
378,
479
58,6
20,0
8732
,822
,978
5,03
2,32
7,89
991
,804
,677
1,57
1,56
510
,513
,927
9,79
3,44
834
,901
,327
30,7
11,0
8721
,324
,810
127,
095,
030
365,
987,
671
Acc
umul
ated
dep
reci
atio
n-
-(3
31,2
66,1
47)
(60,
925,
961)
(142
,775
,517
)(3
2,50
2,90
1)(1
3,13
4,48
0)(2
,393
,680
,975
)(3
0,20
0,72
1)(2
06,0
57)
(3,5
70,0
66)
(4,5
87,1
32)
(17,
880,
745)
(18,
494,
649)
(8,7
28,1
09)
(58,
230,
813)
(295
,841
,264
)
Net
boo
k va
lue
116,
673,
689
12,7
76,3
9945
8,10
7,20
914
8,37
1,69
010
2,60
2,96
226
,117
,186
19,6
88,4
982,
638,
646,
923
61,6
03,9
561,
365,
508
6,94
3,86
15,
206,
316
17,0
20,5
8212
,216
,438
12,5
96,7
0168
,864
,217
70,1
46,4
07
Dur
ing
the
year
Add
ition
s-
95,7
2435
,955
,322
12,6
19,2
31-
4,55
7,70
228
8,35
217
9,98
8,81
11,
266,
757
155,
400
20,0
14,0
465,
089,
133
405,
684
1,96
5,95
319
1,60
040
,465
,003
-
Dis
posa
ls/ w
ritte
n of
f:
Cos
t10
,296
,000
--
--
-32
7,67
07,
918,
702
--
383,
058
297,
917
33,0
60-
147,
500
24,0
66,8
51-
Dep
reci
atio
n-
--
--
-(8
3,01
0)(6
,036
,026
)-
-(9
7,45
2)(1
30,7
35)
(5,5
38)
-(1
8,83
8)(1
4,62
0,50
5)-
10,2
96,0
00-
--
--
244,
660
1,88
2,67
6-
-28
5,60
616
7,18
227
,522
-12
8,66
29,
446,
346
-
Dep
reca
tion
char
ged
for t
he y
ear
--
(46,
948,
433)
(7,6
36,8
43)
(10,
260,
296)
(1,4
57,7
83)
(3,9
76,1
46)
(269
,904
,864
)(6
,218
,430
)(1
50,7
96)
(2,1
98,5
63)
(2,2
29,9
44)
(1,7
43,3
48)
(1,3
20,0
45)
(1,2
58,8
79)
(17,
086,
182)
(7,0
14,6
40)
Clo
sing
net
boo
k va
lue
- 201
010
6,37
7,68
912
,872
,123
447,
114,
099
153,
354,
078
92,3
42,6
6629
,217
,106
15,7
56,0
442,
546,
848,
195
56,6
52,2
831,
370,
112
24,4
73,7
387,
898,
323
15,6
55,3
9612
,862
,346
11,4
00,7
5982
,796
,692
63,1
31,7
67
At J
une
30, 2
010
Cos
t10
6,37
7,68
912
,872
,123
825,
328,
679
221,
916,
882
245,
378,
479
63,1
77,7
8932
,866
,670
5,20
4,39
8,00
893
,071
,434
1,72
6,96
530
,242
,367
14,5
84,6
6335
,279
,489
32,6
77,0
4021
,387
,748
143,
493,
182
365,
987,
671
Acc
umul
ated
dep
reci
atio
n-
-(3
78,2
14,5
80)
(68,
562,
804)
(153
,035
,813
)(3
3,96
0,68
4)(1
7,11
0,62
6)(2
,657
,549
,813
)(3
6,41
9,15
1)(3
56,8
52)
(5,7
68,6
29)
(6,6
86,3
40)
(19,
624,
093)
(19,
814,
694)
(9,9
86,9
89)
(60,
696,
490)
(302
,855
,904
)N
et b
ook
valu
e - 2
010
106,
377,
689
12,8
72,1
2344
7,11
4,09
915
3,35
4,07
892
,342
,666
29,2
17,1
0615
,756
,044
2,54
6,84
8,19
556
,652
,283
1,37
0,11
224
,473
,738
7,89
8,32
315
,655
,396
12,8
62,3
4611
,400
,759
82,7
96,6
9263
,131
,767
Dep
reci
atio
n ra
te %
per
ann
um-
-10
%5%
10%
5%20
%10
%10
%10
%10
%30
%10
%10
%10
%20
%10
%
Exp
ired
leas
e
Free
- ho
ldLe
ase
- hol
dFa
ctor
y
build
ing
Labo
ur, s
taff
colo
ny a
nd
othe
rs
Fact
ory
build
ing
Labo
ur, s
taff
colo
ny a
nd
othe
rs
Leas
ed b
uild
ing
impr
ovem
ents
Pla
nt &
mac
hine
ry
At J
uly
01, 2
008
Cos
t11
4,19
2,68
912
,498
,451
742,
298,
317
187,
089,
794
245,
378,
479
58,6
20,0
8727
,051
,221
4,97
9,54
9,52
763
,081
,968
877,
365
5,72
8,96
37,
295,
428
32,2
93,6
2829
,838
,674
14,2
67,3
1711
3,31
3,70
636
5,98
7,67
1
Acc
umul
ated
dep
reci
atio
n-
-(2
82,6
46,9
57)
(53,
427,
333)
(131
,375
,188
)(3
1,12
8,31
2)(9
,058
,559
)(2
,143
,437
,305
)(2
4,60
7,79
0)(1
13,2
12)
(3,1
01,0
07)
(2,8
54,8
23)
(16,
154,
006)
(17,
199,
073)
(7,6
34,0
03)
(52,
507,
224)
(287
,636
,310
)
Net
boo
k va
lue
114,
192,
689
12,4
98,4
5145
9,65
1,36
013
3,66
2,46
111
4,00
3,29
127
,491
,775
17,9
92,6
622,
836,
112,
221
38,4
74,1
7876
4,15
32,
627,
956
4,44
0,60
516
,139
,622
12,6
39,6
016,
633,
314
60,8
06,4
8278
,351
,361
Dur
ing
the
year
Add
ition
s2,
481,
000
277,
948
47,0
75,0
3922
,207
,857
--
5,77
1,75
710
1,28
9,85
428
,722
,709
736,
200
4,78
4,96
42,
574,
977
2,60
7,69
987
2,41
37,
057,
493
26,6
55,6
24-
Dis
posa
ls:
Cos
t-
--
--
--
48,5
11,4
82-
42,0
00-
76,9
57-
--
12,8
74,3
00-
Dep
reci
atio
n-
--
--
--
(38,
045,
843)
-(5
,104
)-
(43,
760)
--
-(8
,948
,182
)-
--
--
--
-10
,465
,639
-36
,896
-33
,197
--
-3,
926,
118
-
--
(48,
619,
190)
(7,4
98,6
28)
(11,
400,
329)
(1,3
74,5
89)
(4,0
75,9
21)
(288
,289
,513
)(5
,592
,931
)(9
7,94
9)(4
69,0
59)
(1,7
76,0
69)
(1,7
26,7
39)
(1,2
95,5
76)
(1,0
94,1
06)
(14,
671,
771)
(8,2
04,9
54)
Clo
sing
net
boo
k va
lue
- 200
911
6,67
3,68
912
,776
,399
458,
107,
209
148,
371,
690
102,
602,
962
26,1
17,1
8619
,688
,498
2,63
8,64
6,92
361
,603
,956
1,36
5,50
86,
943,
861
5,20
6,31
617
,020
,582
12,2
16,4
3812
,596
,701
68,8
64,2
1770
,146
,407
At J
une
30, 2
009
Cos
t11
6,67
3,68
912
,776
,399
789,
373,
356
209,
297,
651
245,
378,
479
58,6
20,0
8732
,822
,978
5,03
2,32
7,89
991
,804
,677
1,57
1,56
510
,513
,927
9,79
3,44
834
,901
,327
30,7
11,0
8721
,324
,810
127,
095,
030
365,
987,
671
Acc
umul
ated
dep
reci
atio
n-
-(3
31,2
66,1
47)
(60,
925,
961)
(142
,775
,517
)(3
2,50
2,90
1)(1
3,13
4,48
0)(2
,393
,680
,975
)(3
0,20
0,72
1)(2
06,0
57)
(3,5
70,0
66)
(4,5
87,1
32)
(17,
880,
745)
(18,
494,
649)
(8,7
28,1
09)
(58,
230,
813)
(295
,841
,264
)N
et b
ook
valu
e - 2
009
116,
673,
689
12,7
76,3
9945
8,10
7,20
914
8,37
1,69
010
2,60
2,96
226
,117
,186
19,6
88,4
982,
638,
646,
923
61,6
03,9
561,
365,
508
6,94
3,86
15,
206,
316
17,0
20,5
8212
,216
,438
12,5
96,7
0168
,864
,217
70,1
46,4
07
--
10%
5%10
%5%
20%
10%
10%
10%
10%
30%
10%
10%
10%
20%
10%
Rup
ees
On
free
- hol
d
Com
pute
rs
Fire
figh
ting
equi
pmen
t
Land
Vehi
cles
On
free
- hol
dE
lect
ric
equi
pmen
ts
Ele
ctric
equi
pmen
ts
Ele
ctric
inst
alla
tions
On
leas
e - h
old
2009
Pla
nt &
mac
hine
ry
Dep
reca
tion
char
ged
for t
he y
ear
On
leas
e - h
old
Rup
ees
Mill
s
equi
pmen
ts
Furn
iture
&
fixtu
res
Pla
nt &
mac
hine
ry
Offi
ce
equi
pmen
ts
Ele
ctric
inst
alla
tions
Com
pute
rs
2010
Offi
ce
equi
pmen
ts
Mill
s
equi
pmen
ts
Furn
iture
&
fixtu
res
Vehi
cles
Fire
figh
ting
equi
pmen
t
Land
7,19
0,97
4,08
0
(3,4
12,0
25,5
38)
3,77
8,94
8,54
2
303,
058,
718
43,4
70,7
58
(20,
992,
104)
22,4
78,6
54
(379
,405
,192
)
3,68
0,12
3,41
4
7,45
0,76
6,87
8
(3,7
70,6
43,4
64)
3,68
0,12
3,41
4
6,99
9,36
3,28
5
(3,0
62,8
81,1
02)
3,93
6,48
2,18
3
253,
115,
534
61,5
04,7
39
(47,
042,
889)
14,4
61,8
50
(396
,187
,324
)
3,77
8,94
8,54
2
7,19
0,97
4,08
0
(3,4
12,0
25,5
38)
3,77
8,94
8,54
2
Tota
l
Tota
l4.2 The following is a statement of operating property, plant and equipment:
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
79
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees
4.3 The depreciation charge for the year has been allocated as follows:
Cost of sales 27 376,182,722 392,534,465
Selling and distribution expenses 28 226,094 132,913
Administrative expenses 29 2,996,376 3,519,946
379,405,192 396,187,324
4.4 The following is a statement of capital work-in-progress:
Civil works and Buildings 179,093,945 156,608,683
Plant and machinery 21,825,907 17,437,052
Electric installations 12,192,635 3,166,011
Mill equipment 259,067 -
213,371,554 177,211,746
4.5 Particulars of operating property, plant and equipment disposed off during the year are as follows (through negotiation):
Land
Free Hold Land 10,296,000 - 10,296,000 12,100,000 1,804,000 M/s. Sapphire Finishing Mills Ltd, Karachi
10,296,000 - 10,296,000 12,100,000 1,804,000
Plant and Machinery
Auto Cone Murata 1,856,525 1,576,570 279,954 525,000 245,046 Mr. Muhammad Ilyas, Hyderabad
Sketcher Trutchler 2,212,955 2,199,928 13,027 250,000 236,973 M/s. Famous Textile Mills Limited, Kotri
Card C-40 Marzoli 3,450,000 2,181,816 1,268,184 1,590,000 321,816 Mr. Muhammad Khalid, Faisalabad
Bale Breaker Trutchlar 370,472 67,056 303,417 300,000 (3,417)
7,889,952 6,025,370 1,864,582 2,665,000 800,418
Vehicles
BMW 4,800,000 1,344,000 3,456,000 3,750,000 294,000
Cuore 399,000 287,867 111,133 200,000 88,867
Cuore 399,000 260,084 138,916 300,000 161,084
Particulars of Buyers
Rupees
M/s. AL-Ahmed Textile Mill Pvt Ltd., Karachi
Mr. Usman Saeed Khan, Lahore
Mr. Nazkat Ali, Tuba Take Singh
M/s. Adamjee Insurance Co. Ltd., Karachi
Sale Proceeds Profit / (loss)CostAccumulated
Depreciation
Net Book
Value
Honda Citi 830,500 541,353 289,147 400,000 110,853
Honda Citi 830,500 555,810 274,690 400,000 125,310
Honda Citi 830,500 552,692 277,808 325,000 47,192
Honda Citi 1,142,500 633,097 509,403 734,000 224,597
Honda Civic 1,002,000 578,755 423,245 750,000 326,755
Honda Civic 1,148,000 680,718 467,282 1,033,200 565,918
Honda Civic 810,160 769,937 40,223 475,000 434,777
Honda Civic 1,107,500 786,184 321,316 700,000 378,684
Honda Civic 1,083,000 786,382 296,618 300,000 3,382
Honda Civic 1,103,000 795,784 307,216 500,000 192,784
Suzuki Baleno 739,000 611,662 127,338 275,000 147,662
Suzuki Cultus 560,000 374,783 185,217 250,000 64,783
Suzuki Cultus 600,000 328,128 271,872 480,000 208,128
Suzuki Cultus 604,000 471,658 132,342 250,000 117,658
Suzuki Cultus 595,000 366,520 228,480 490,000 261,520
Suzuki Cultus 560,000 409,224 150,776 250,000 99,224
Suzuki Khyber 380,311 351,386 28,925 150,000 121,075
Suzuki Mehran 320,000 212,305 107,695 150,000 42,305
Suzuki Mehran 302,000 240,317 61,683 150,000 88,317
Toyota Corolla 849,000 624,353 224,647 400,000 175,353
Toyota Corolla 843,880 624,505 219,375 400,000 180,625
Toyota Corolla 1,039,000 542,053 496,947 500,000 3,053
Toyota Corolla 1,189,000 890,947 298,053 500,000 201,947
24,066,851 14,620,504 9,446,347 14,112,200 4,665,853
Sub total 42,252,803 20,645,875 21,606,928 28,877,200 7,270,272
Various items 1,217,955 346,229 871,726 - (871,726) Written off
Grand total 43,470,758 20,992,104 22,478,654 28,877,200 6,398,546
Mr. Abid Husain, Karachi
Mr. Ghulam M. Qureshi, Hyderabad
Mr. Ajmal Atiqus Siddiqui, Peshawar
Miss. Saima Raza, Faisalabad
Mr. Irshad Hussain, Lahore
M/s. Robert Cotton Ass. Ltd., Karachi
Mr. Haroon Mukhtar, Lahore
Miss. Khadija, Karachi
Mr. Zulfiqar Hussain Zulfi, Faisalabad
Mr. Syed Nadeem Hadier Bukhari, Sahiwal
Mr. Naeem Hayder, Lahore
Mr. Naeem Haider, Lahore
Mr. Muhammad Umar, Lahore
Mr. Salman Masood, Lahore
Mr. Abdul Aziz, Karachi
Mr. Zia ul Qadir, Karachi
Mr. Nabeel Riaz, Lahore
Mr. Hassan Amir Mirza, Lahore
M/s. Adamjee Insurance Co. Ltd., Karachi
Mr. Muhammad Arif, Multan
Mr. Muhammad Tariq Mehmood, Lahore
Mr. Mustafa Nawaz, Dera Ismail Khan
Mr. Muhammad Zahid Afzal, Lahore
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
80
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
5 Investment property
Leasehold Freehold Leasehold land Freehold land
Net carrying value as at July 01, 2009
Opening net book value (NBV) 121,160,317 - 17,549,982 - 138,710,299
Additions - 6,140,000 - 7,100,000 13,240,000
Depreciation charged - - (1,754,998) (414,167) (2,169,165)
Balance as at June 30, 2010 (NBV) 121,160,317 6,140,000 15,794,984 6,685,833 149,781,134
Gross carrying value as at June 30, 2010
Cost 121,160,317 6,140,000 19,999,980 7,100,000 154,400,297
Accumulated depreciation - - (4,204,996) (414,167) (4,619,163)
Net book value - 2010 121,160,317 6,140,000 15,794,984 6,685,833 149,781,134
Net carrying value as at July 01, 2008
Opening net book value (NBV) 121,160,317 - 19,499,980 - 140,660,297
Additions - - - - -
Depreciation charged - - (1,949,998) - (1,949,998)
Balance as at June 30, 2009 (NBV) 121,160,317 - 17,549,982 - 138,710,299
Depreciation rate % per annum - - 10% 10%
Land Building on
Total
5.1 Cost of leasehold land and building on leasehold land represent 50% cost of land and building purchased jointly with an associated company. The property is registered in joint names. Agreement for joint venture made.
5.2 In the opinion of the Directors the market value as on June 30, 2010 is not materially different.
2010 2009
Note Rupees Rupees
5.3 The depreciation charge for the year has been allocated as follows:
Other operating expenses 31 2,169,165 1,949,998
6 Intangible assets
Net carrying value as at July 01, 2009
Net book value as July 01, 2009 7,405,379 1,035,155 Transfer from capital work-in-progress 250,000 7,577,213 Amortization (1,734,969) (1,206,989)
Net book value at June 30, 2010 5,920,410 7,405,379
Gross carrying value at June 30, 2010
Cost 11,967,847 11,717,847 Accumulated amortization (6,047,437) (4,312,468)
Net book value - 2010 5,920,410 7,405,379
Amortization rate % per annum 20% 20%
Computer software
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
81
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Rupees Rupees6.1 Computer software are being amortized over a useful life of 5 years.
6.2 Amortization charge for the year has been allocated as follows:
Other operating expenses 31 1,734,969 1,206,989
2010 2009
Note Rupees Rupees
7 Long term investments
Related parties
In associates - Listed 7.1 1,199,429,425 956,511,658
- Unlisted 7.2 1,670,886,710 1,334,513,193
2,870,316,135 2,291,024,851
In other companies - Available for sale
In other company 7.4 1,889,336,961 1,408,933,804
4,759,653,096 3,699,958,655
All investments have a face value of Rs. 10 per share unless stated otherwise.
7.1 Investments in associates - listed
Number of Shares Cost
2010 2009
Rupees Rupees
2,942,243 2,615,311 Sapphire Fibres Limited 21,086,923 21,086,923
1,154,435,043 927,332,740
- (9,630,846)
- (1,612,580)
1,175,521,966 937,176,237
313,295 313,295 8,461,851 8,461,851
15,924,129 13,356,719
- 7,549,251
(478,521) (995,000)
- (9,037,400)
23,907,459 19,335,421
1,199,429,425 956,511,658
2010 2009Name of Company
Fair value of the ordinary shares as at June 30, 2010 amounted to
Rs. 6.206 million (2009: 7.519 million).
Fair value of the ordinary shares as at June 30, 2010 amounted to
Rs. 301.315 million (2009: 222.302 million).
Equity Interest Held 14.95% (2009: 14.94%)
Equity Interest Held 3.04% (2009: 3.04%)
Specie dividend paid during the year
Share of post acquisition profit
Less: Dividend received during the year
Less: Share sold during the year
Share of post acquisition profit
Reliance Cotton Spinning Mills Limited
Less: Dividend received during the year
Less: Share sold during the year
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
82
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
7.2 Investments in associates - unlisted
Number of Shares Fair value / Cost
2010 2009
Rupees Rupees
5,699,000 5,699,000 Diamond Fabrics Limited 48,315,000 48,315,000
934,224,666 701,713,416
982,539,666 750,028,416
1,550,000 1,550,000 Sapphire Power Generation Limited 19,748,000 19,748,000
114,389,433 85,140,093
134,137,433 104,888,093
2010 2009
Break up value on the basis of un-audited accounts for the year
ended June 30, 2010 Rs. 138.99 (June 30, 2009: Rs. 105.35
audited) per share.
Name of Company
Equity Interest Held 38.28% (2009: 38.28%)
Share of post acquisition profit
Share of post acquisition profit
Equity Interest Held 16.54 % (2009: 16.54%)
Break up value on the basis of un-audited accounts for the year
ended 30 June, 2010 Rs. 62.79 (June 30, 2009: Rs. 59.07
audited) per share.
29,468,500
29,468,500
Sapphire Finishing Mills Limited 294,685,000 294,685,000
194,349,653 117,247,875
489,034,653 411,932,875
6,000,000
6,000,000
Sapphire Electric Company Limited 60,000,000 60,000,000
25,773 (497,896)
60,025,773 59,502,104
1,960 980 Beirholms Sapphire A/S Denmark 27,440,000 15,072,400
(6,910,695) (6,910,695)
(15,380,120)
5,149,185 8,161,705
1,670,886,710 1,334,513,193
Equity Interest Held 1.67% (2009: 2.33%)
Break up value on the basis of un-audited accounts for the year
ended 30 June, 2010 Rs. 15.08 (June 30, 2009: Rs. 12.54
audited) per share.
Impairment loss on equity investments
1,960 shares of Danish Krone (DKK) 1000 per share
Share of post acquisition profit
Equity Interest Held 32.03 % (2009: 32.03%)
Break up value on the basis of audited accounts for the year ended
April 30, 2010 DKK 439.5 (2009: DKK 541.5) equivalent to Rs.
6,153 (2009: Rs. 7,770.53) per share.
Equity Interest Held 49% (2009: 49%)
Break up value on the basis of un-audited accounts for the year
ended 30 June, 2010 Rs. 9.96 (June 30, 2009: 9.86) per share.
Share of post acquisition profit
Share of post acquisition profit
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
83
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Rupees Rupees
7.3 Valuation of associated undertakings on equity method basis
Cost 479,736,774 467,369,174
Post acquisition profit brought forward 1,823,795,116 1,934,926,114
Specie dividend paid during the year - 7,549,251
Specie of increase in reserves of associated Companies under equity method - (130,204,048)
Investments sold - (10,649,980)
2,303,531,890 2,268,990,511
Adjusted profit for the year before tax 454,883,045 316,229,716
Adjusted unrealized gain 112,379,721 (283,569,530)
Profit for the year after tax 567,262,766 32,660,186
2,870,794,656 2,301,650,697
Less: Dividend received during the year (478,521) (10,625,846)
2,870,316,135 2,291,024,851
7.4 In other companies - Available for sale
Number of Shares Fair value / Cost
2010 2009
Rupees Rupees
Quoted9,285,693 8,532,449 MCB Bank Limited (Note: 7.5) 730,579,344 737,109,135
1,072,609,381 585,676,433
1,803,188,725 1,322,785,568
Unquoted7,055,985 7,055,985 Novelty Enterprises (Pvt) Limited 86,148,236 86,148,236
1,889,336,961 1,408,933,804
Name of Company2010 2009
Add: Adjustment arising from measurement to fair value
2010 2009Note Rupees Rupees
8 Long term loans and advances
Loan to employees - unsecured (considered good)
Executives 21,935,184 18,320,567
Other employees 16,873,376 16,473,300
38,808,560 34,793,867
Current portion of loans shown under current assets 10,842,792 14,422,648
27,965,768 20,371,219
7.5 During the year, this investment has been classified under non - current assets as the Management does not intends to dispose of this investment within 12 months from the reporting date.
8.1 All the loans are granted to the employees, free of interest in accordance with their terms of employment.
8.2 Maximum amount due from executives during the year, calculated by reference to month-end balances, was Rs. 21,935,184 (2009: Rs. 18,320,567).
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
84
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009Note Rupees Rupees
8.3 Movement in loans to executives
Balance at the beginning of the Year 18,320,567 21,036,364Amount disbursed during the Year 6,330,414 -
24,650,981 21,036,364
Amount recovered during the Year 2,715,797 2,715,797
Balance at the end of the Year 21,935,184 18,320,567
9 Long term deposits
Security deposits
- WAPDA 7,330,096 4,270,096
- SNGPL 466,000 -
- PTCL 277,095 277,095
- Others 9.1 1,057,188 1,081,592
9,130,379 5,628,783
9.1 Include is an amount of Rs. 36,000 (2009: Rs. 36,000) deposit with Yousuf Agencies (Private) Limited an associated company.
2010 2009
Note Rupees Rupees
10 Inventories
Stores, spares and loose tools 10.1 225,155,865 199,288,887
Stock - in - trade 10.2 2,759,663,008 2,404,236,706
2,984,818,873 2,603,525,593
10.1 Stores, spares and loose tools
Stores 94,594,722 83,605,042
Spares - in hand 108,220,904 101,310,257
Spares - in transit 21,596,098 13,613,365
129,817,002 114,923,622
Loose tools 744,141 760,223
225,155,865 199,288,887
10.2 Stock - in - trade
Raw material - in hand 1,729,916,003 1,500,686,230
Raw material - in transit 48,759,608 189,393,716
1,778,675,611 1,690,079,946
Work in process 196,467,326 133,898,492
Finished goods 760,273,008 552,747,013Waste 24,247,063 27,511,255
784,520,071 580,258,268
2,759,663,008 2,404,236,706
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
85
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees
11 Trade debts
Secured - considered good
Foreign debts - against export 652,254,153 273,267,179
Provision for doubtful debts 11.4 (3,878,456) -
648,375,697 273,267,179
Unsecured - considered good
Domestic debts 11.1 to 11.3 686,854,977 811,825,388
For waste 12,621,684 9,890,469 Energy 20,856,794 16,562,003 Others 907,731 921,476
721,241,186 839,199,336
Provision for doubtful debts 11.4 (115,426,409) -
Written off (2,539,160) -
603,275,617 839,199,336
1,251,651,314 1,112,466,515
11.1 Domestic debts include amount of Rs. 41,583,400 (2009: Rs. nil) receivable against indirect export sales.
11.2 Domestic debts include the following amounts due from related parties:
Amer Cotton Mills (Private) Limited - 690,311
Diamond Fabrics Limited 4,675,100 19,210,626
Sapphire Fibres Limited - 6,000
Sapphire Finishing Mills Limited - 6,677,508
4,675,100 26,584,445
11.4 Provision for doubtful debts
Balance at the beginning of the year - -
Provision made during the year 119,304,865 -
Amounts written off (against provision) 2,539,160 -
121,844,025 -
12 Loans and advances
Considered good
Current portion of long term loans
- due from executives 3,667,804 3,373,996
- due from other employees 7,174,988 11,048,652
10,842,792 14,422,648
Advances - unsecured
- to suppliers 11,233,212 17,824,629
- to contractors - 148,380
- to purchase land 7,723,100 7,723,100
- to others 1,702,413 1,322,000
20,658,725 27,018,109
31,501,517 41,440,757
11.3 The maximum aggregate amount of receivable due from related parties at the end of any month during the year was Rs. 70.966 million (2009: Rs. 87.158 million).
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
86
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
13 Trade deposits and short term prepayments
Security deposits 810,209 776,209
Prepayments 13.1 8,626,459 4,398,081
9,436,668 5,174,290
Written off (82,633) -
9,354,035 5,174,290
13.1 Included is an amount of Rs. 2,978,328 (2009: Rs. 120,000) prepaid rent with Yousuf Agencies (Private) Limited an associated company.
2010 2009
Note Rupees Rupees
14 Other receivables
Dividend receivable -
1,957,846
Claims receivable from an insurance company 10,343,531
1,305,868
Receivable from related parties against shared expenses 14.1 7,317,821
5,084,393
Export rebate receivable 15,078,206
14,707,123
Unrealized gain on remeasurement of forward foreign currency contracts 1,515,818
2,544,108
Unrealized gain on remeasurement of interest rate swap at fair value 14.2 -
1,519,080
Receivable against sale of shares 8,935,891
-
Receivable against subsidy on mark-up of long term loan 1,011,057
-
Others 2,007,585
33,610
46,209,909
27,152,028
14.1 Other receivables include the following amounts due from related parties:
Neelum Textile Mills Limited -
856,738
Reliance Cotton Spinning Mills Limited 162,331
990,604
Sapphire Fibres Limited 7,155,490 3,237,051
7,317,821 5,084,393
15 Other financial assets
Held-for-trading 15.1 -
15,350,632
Available-for-sale 15.2 490,144,239 124,652,882
490,144,239 140,003,514
14.2 This represents the fair value of one separate Cross Currency Interest Rate Swap agreement, the company has entered into with Royal Bank of Scotland (Formerly ABN Amro Bank N.V. Pakistan) at the notional amount of Rs. 770 million (equivalent USD 10.0 million). Under the terms of swap agreement, at each reset date, the company is entitled to receive 6 months KIBOR on notional amount and is required to pay 6 months LIBOR plus spread 0.63% on USD notional amount. In addition to this the company is required to pay exchange difference arising due to fluctuation in USD/PKR rates between reset and the settlement dates. This transaction has been remeasrued at fair value at the end of the year and resulted in gain of Rs. nil (2009: Rs. 1.519 million) which had been taken to equity as unrealized gain.
15.1 Held-for-trading
2010 2009 2010 2009
- 346,000 ABAMCO Composite Fund - - 1,076,060
- 3,005,173
NIB Bank Limited -
-
14,274,572
- - 15,350,632
CostNumber of shares/units
Name of Investee CompanyFair value
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
87
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
15.2 Available-for-sale
2010 2009 2010 2009
3,712,986 110,000
Hub Power Company Limited 118,596,827
118,667,033
2,979,900 810,247 736,588
Gulshan Spinning Mills Limited 17,441,370
5,582,595
3,682,940
799,000 244,000
Engro Chemical Pakistan Limited 108,421,690
138,690,420
31,336,920
591,151 319,723 Fauji Fertilizer Company Limited 55,740,826 60,929,934 27,799,915 412,625 8,000 Pakistan Petroleum Limited 80,621,497 75,972,515 1,516,320 385,858 14,500 Pakistan Oilfields Limited 85,382,922 83,306,742 2,115,550
32,000 21,600 National Bank of Pakistan 2,064,426 2,051,200 1,447,848
19,000 10,000 Pakistan State Oils Limited 6,027,580 4,943,800 2,136,500
- 457,000 Oil & Gas Development Co. Limited - - 35,938,480
- 1,628,000
Pakistan Strategic Company Limited -
-
5,584,040
- 44,000
Crescent Steel & Allied Prd. Limited -
-
790,680
- 84,000
Lucky Cement Limited -
-
4,916,520
- 20,000
Pakistan Tobacco Company Limited -
-
1,457,000
- 40,000
United Bank Limited -
-
1,531,600
- 70,898
Arif Habib Investment Limited -
-
1,418,669
474,297,138
490,144,239
124,652,882
Number of shares/unitsName of Investee Company Cost
Fair value
2010 2009
Note Rupees Rupees
16 Income tax and sales tax
Income tax 154,728,332 130,572,558
Sales tax receivable 38,839,389 24,194,652
Federal excise duty receivable 5,848,580 3,732,434
199,416,301 158,499,644
17 Cash and bank balances
With banks on:
- currents accounts 100,079,635 77,029,999
- currents accounts - USD 17.1 2,650,692 1,482,763
- currents accounts - Euro 17.2 13,216,524 183,035
- deposit accounts 17.3 3,285 371,942
- margin account 17.3 3,350,340 3,350,340
119,300,476 82,418,079
Cash in hand 2,348,691 6,828,413
121,649,167 89,246,492
17.1 Cash at bank on USD account of US$ 30,038 (2009: US$ 18,283 ).
17.2 Cash at bank on EURO account of EURO 12,642 (2009: EURO 1,598 ).
17.3 Cash at bank on deposits account and cash at bank on margin account under lien of a banks / financial institutions against guarantee issued on behalf of the Company.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
88
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
18 Issued, subscribed and paid-up capital
2010 2009
2010 2009
Rupees Rupees
6,206,740 6,206,740 62,067,400 62,067,400
13,876,400 13,876,400 138,764,000 138,764,000
20,083,140 20,083,140 200,831,400 200,831,400
Number of shares
Ordinary shares of Rs. 10 each alloted for consideration paid in cash
Ordinary shares of Rs. 10 each issued as
bonus shares
18.1 The Company has only one class of shares which carry no right to fixed income.
18.2 The following shares were held by the related parties of the Company as at 30 June 2010:
Shares held Percentage
Amer Cotton Mills (Private) Limited 675,083 3.36
Crystal Enterprises (Private) Limited 72,542 0.36
Diamond Fabrics Limited 133,785 0.67
Galaxy Agencies (Private) Limited 704,611 3.51
Nadeem Enterprises (Private) Limited 586,242 2.92
Neelum Textile Mills Limited 272,594 1.36
Reliance Cotton Spinning Mills Limited 43,156 0.21
Reliance Textiles Limited 38,667 0.19
Sapphire Agencies (Private) Limited 1,963,258 9.78
Sapphire Power Generation Limited 211,100 1.05
Yousuf Agencies (Private) Limited
Shares held
675,083
-
133,785
604,611
586,242
272,594
100,223
5,367
2,138,539
283,642
71,643
Percentage
3.36
-
0.67
3.01
2.92
1.36
0.50
0.03
10.65
1.41
0.36 71,643 0.36
20092010
2010 2009
Note Rupees Rupees19 Long term finances
This represents secured long term finances from the following:
Loans from banking companies - secured 19.1
Habib Bank Limited STM-5 19.1.1 12,000,000 24,000,000
Habib Bank Limited STM-6 19.1.2 75,000,001 83,333,334
Habib Bank Limited STM-1 19.1.3 18,750,000 31,250,000
Habib Bank Limited STM-5 19.1.4 33,626,212 36,751,579
Habib Bank Limited STM-1 19.1.5 50,000,000 -
Habib Metropolitan Bank Limited STM-6 19.1.6 12,750,000 14,875,000
Habib Metropolitan Bank Limited STM-6 19.1.7 12,750,000 14,875,000
MCB Bank Limited STM-5 19.1.8 35,155,000 -
Meezan Bank Limited STM-6 19.1.9 400,000,000 400,000,000
National Bank of Pakistan STM-5 19.1.10 - 109,869,054
National Bank of Pakistan STM-5 19.1.11 25,417,873 50,835,745
National Bank of Pakistan STM-5 19.1.12 6,307,113 7,883,891
National Bank of Pakistan STM-5 19.1.13 32,988,086 49,482,130
Samba Bank Limited STM-4 19.1.14 30,000,000 -
United Bank Limited STM-6 19.1.15 28,125,000 46,875,000
United Bank Limited STM-6 19.1.16 25,000,000 31,250,000
United Bank Limited STM-5 19.1.17 20,000,000 30,000,000
817,869,285 931,280,733
Less: Current portion shown under current liabilities (273,423,918) (228,566,450)
544,445,367 702,714,283
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
89
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
19.1 Terms and conditions of these financings are given below:
19.1.1 HBL - Non-LTF 4 quarterly May, 2011
19.1.2 HBL - LTF-EOP 7% 16 quarterly Aug., 2014
19.1.3 HBL - Non-LTF 6 quarterly Nov., 2011
19.1.4 HBL - LTF-EOP 7% 11 quarterly Dec., 2015
19.1.5 HBL - Non-LTF 16 quarterly Feb., 2015
19.1.6 HMBL - LTF-EOP 7% 6 quarterly Aug., 2012
19.1.7 HMBL - LTF-EOP 7% 6 quarterly Aug., 2013
19.1.8 MCB - Non-LTF 9.70% 16 quarterly Jan., 2015
19.1.9 MBL - Non-LTF 16 quarterly June., 20143 Months KIBOR
plus 125 bps
The loan is secured against first pari passu charge over fixed
assets of amounting to Rs. 534 million of Unit No. 6 of the
Company.
The loan is secured against exclusive charge on specific plant
and machinery of Rs. 23 million of Unit No. 6 of the Company.
The loan is secured against first specific hypothecation charge
on plant and machinery of Rs. 53.2 million of Unit No. 5 of the
Company.
3 Months KIBOR
plus 75 bps
3 Months KIBOR
plus 125 bps
The loan is secured against 1st specific charge of Rs. 34
million over two imported generators installed at Unit No.5
factory premises situated at Feroze Watwan.
The loan is secured against 1st Specific and exclusive
hypothecation charge of Rs. 67 million over imported plant and
machinery of Unit No.1 of the Company.
The term loan is secured against hypothecation of plant and
machinery at unit no. 6 of the Company.
The loan is secured by first hypothecation charge over
imported plant and machinery of the Company to the extent of
Rs. 256 million.
The loan is secured against 1st registered hypothecation
charge for Rs. 54 million over present & future plant &
machinery of Unit No. 1 of the Company.
3 Months KIBOR
plus 125 bps
Lenders
The loan is secured against exclusive charge on specific plant
and machinery of Rs. 23 million of Unit No. 6 of the Company.
Mark-up rate p.a
(%)Security
Date of final
repayment
No. of
installments
outstanding
19.1.10 NBP - Non-LTF
19.1.11 NBP - Non-LTF 4 quarterly Jan., 2011
19.1.12 NBP - LTF-EOP 7% 8 quarterly June, 2012
19.1.13 NBP - LTF-EOP 7% 8 quarterly Feb., 2011
19.1.14 SAMBA - Non-LTF 16 quarterly July., 2015
19.1.15 NBP - LTF-EOP 7% 8 quarterly May, 2012
19.1.16 NBP - LTF-EOP 7% 8 quarterly May, 2012
19.1.17 UBL - Non-LTF 8 quarterly May, 2012
3 Months KIBOR
plus 125 bps
3 Months KIBOR
plus 125 bps
Paid during the year
The loan is secured against first specific hypothecation charge
on plant and machinery of Rs. 53.33 million of Unit No. 5 of
the Company.
3 Months KIBOR
plus 1.5%
The term loan is secured against hypothecation of plant and
machinery at Unit No. 5 of the Company.
The term loan is secured against hypothecation of plant and
machinery at Unit No. 6 of the Company.
The loan is secured by first hypothecation charge over
imported plant and machinery of the Company to the extent of
Rs. 256 million.
The loan is secured against first specific hypothecation charge
on plant and machinery of Rs. 53.33 million of Unit No. 5 of
the Company.
The term loan is secured against exclusive hypothecation
charge over plant and machinery at Unit No. 4 of the Company.
It is secured by way of first pari passu hypothecation charge of
Rs. 200 million over fixed assets of Unit No. 6 (present and
future plant and machinery) of the company. The registered
charge should be sufficient to cover the entire facility with a
margin of 25%.
The term loan is secured against hypothecation of plant and
machinery installed or to be installed at Unit No. 5 of the
Company.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
90
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees
20 Deferred liabilities
Deferred taxation 20.1 & 20.2 380,181,533 439,744,123
Staff retirement benefits - gratuity 20.3 & 20.10 96,702,447 87,194,286
476,883,980 526,938,409
20.1 Deferred taxation
Deferred tax credits / (debits) arising in respect of:
Taxable temporary differences (deferred tax liabilities)
Accelerated tax depreciation allowances 305,417,263 372,312,434
Deductible temporary differences (deferred tax assets)
Staff retirement benefits - gratuity (14,471,748) (15,378,020)
Provision for doubtful debts (17,854,253) -
Provision for repair and maintenances (Generator overhauling) (9,339,782) -
Unused tax credits - unabsorbed depreciation - (9,328,567)
Deferred tax in investments in associates 116,430,053 92,138,276
74,764,270 67,431,689
380,181,533 439,744,123
20.2 In view of applicability of presumptive tax regime on major portion of taxable income, deferred tax liability has been worked out after taking effect of income covered under presumptive tax regime.
20.3 Movement in the net liability recognized in the statement of financial position
Opening net liability 87,194,286 66,081,991
Expense for the year 47,364,079 39,867,492
134,558,365 105,949,483
Benefits paid during the year (37,855,918) (18,755,197)
Closing net liability 96,702,447 87,194,286
20.4 Expense recognized in the income statement
Current service cost 35,877,257 31,163,816
Interest cost 11,486,822 8,703,676
47,364,079 39,867,492
20.5 Movement in the present value of defined benefit obligation
Present value of defined benefit obligation 95,723,513 72,530,632Current service cost 35,877,257 31,163,816
Interest cost 11,486,822 8,703,676
Actuarial loss / (gain) (6,390,954) 2,262,586Benefits due but not paid (182,000) (182,000)
Benefits paid (37,673,918) (18,755,197)
98,840,720 95,723,513
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
91
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
20.6 Historical information
2010 2009 2008 2007 2006
98,840,720 95,723,513 72,530,632 73,099,939 59,273,935
6,390,954 (2,262,586) (1,405,429) 548,649 2,074,877
2010 2009Note Rupees Rupees
20.7 Reconciliation
Present value of defined benefit obligation 98,840,720 95,723,513Unrecognized actuarial loss (2,138,273) (8,529,227)
96,702,447 87,194,286
Experience adjustments on plan
liabilities
Present value of defined benefit
obligation
20.8 General description
The scheme provides for terminal benefits for all of its permanent employees who attain the minimum qualifying period. Annual charges is made using the actuarial technique of Projected Unit Credit Method.
2010 2009
Note Rupees Rupees
20.9 Principal actuarial assumption
Following are a few important actuarial assumption used in the valuation.
% %
Discount rate 12% 12%Expected rate of increase in salary 11% 11%
20.10 Expected gratuity expense for the year ending June 30, 2011 works out to Rs. 48,628,104.
21 Trade and other payables
Trade creditors 21.1 136,668,495 85,030,695Accrued liabilities 21.2 357,551,279 234,121,780
Advances from customers 29,762,047 2,687,514
Custom duty payable 3,262,068 3,262,068
Withholding tax payable 58,165 247,026
Workers' profit participation fund 21.3 58,088,787 16,769,052
Workers' welfare fund 22,767,627 5,593,136Sindh development and maintenance infrastructure fee 21.4 59,715,344 48,570,474
Unclaimed dividend 415,665 360,114Others 4,040,189 3,014,328
672,329,666 399,656,187
Written back provision (175,005) -
672,154,661 399,656,187
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
92
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Rupees Rupees
21.1 These balances include the following amounts due to related parties:
Amer Cotton Mills (Private) Limited 3,530 336,000
Diamond Fabrics Limited 1,079,285 61,800
Sapphire Fibres Limited 12,389,902 -
Sapphire Finishing Mills Limited 4,500 94,523
Reliance Cotton Spinning Mills Limited 711,200 -
14,188,417 492,323
21.2 These balances include the following amounts due to related parties:
Beirholms Sapphire A/S Denmark 1,006,902 -
Sapphire Power Generation Limited 18,392,690 3,923,643
Sapphire Fibres Limited 2,576,769 -
Sapphire Finishing Mills Limited 15,917 -
21,992,278 3,923,643
21.3 Workers' profit participation fund
Balance at the beginning of the year 16,769,052 -
Allocation for the year 58,088,787 16,769,052
Interest on fund utilized in the Company's business 1,618,788 -
59,707,575 16,769,052
76,476,627 16,769,052
Less: Payments during the year (18,387,840) -
Balance at the end of the year 58,088,787 16,769,052
21.4 The Company has filed a suit against levy of Infrastructure fee, decision of the Honorable Sindh High Court dated 17 September 2008 in which the imposition of levy of infrasture cess before 28 December 2006 has been declared as void and invalid. However, the Excise and Taxation Department has filed an appeal before the Honorable Supreme Court of Pakistan against the order of the Honorable Sindh High Court.
2010 2009
Note Rupees Rupees
22 Accrued interest / mark-up
Accrued interest / mark-up on secured:
- long term finances 8,427,873 12,731,228
- short term borrowings 66,295,648 143,114,330
74,723,521 155,845,558
23 Short term borrowings
Short term loan 23.1 2,680,000,000 1,176,975,174
Running finance under mark-up arrangements 23.1 793,684,105 2,550,891,011
3,473,684,105 3,727,866,185
Book overdraft 23.2 4,510,525 4,294,248
3,478,194,630 3,732,160,433
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
93
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
23.1 Aggregate facilities amounting to Rs. 9,005 million (2009: Rs. 8,260 million) were available to the Company from banking companies. These are secured against hypothecation charge on stock in trade, book debts, plant & machinery and export bills under collection. These carry mark up ranging from 7.5% to 15.79% (2009: 7.5% to 17%) p.a. payable quarterly. These facilities are renewable on expiry dates. It includes Rs. nil million (2009: 231 million) on account of foreign currency loan translated into local currency at exchange rate prevailing on the reporting date and are payable in foreign currencies.
23.2 This represents cheques issued by the Company in excess of balance at banks which remained unpresented till June 30, 2010.
2010 2009
Rupees Rupees
24 Provision for taxation
Balance at the beginning of the year 76,854,672 60,813,750
Provision made for current year - net 183,970,786 77,183,599
260,825,458 137,997,349
Less: Adjusted advance tax during the year against complete assessments (76,004,402) (61,142,677)
184,821,056 76,854,672
25 Contingencies and commitments
25.1 Contingencies
Guarantees issued by banks on behalf of the Company 235,558,200 142,315,450
25.2 Commitments
Confirmed letter of credit in respect of:
- plant and machinery 218,708,217 -
- raw material 73,902,246 214,984,840
- stores and spares 15,236,712 19,620,387
307,847,175 234,605,227
26 Sales and services
2010 2009 2010 2009 2010
Gross sale of goods
Yarn 26.1 7,363,138,061 3,992,735,744 2,665,584,061 3,816,503,151 10,028,722,122Fabric 26.2 1,793,830,899 1,259,080,448 988,070,624 1,032,422,462 2,781,901,523Home textile products 26.3 1,111,284,403 1,155,212,202 3,458,120 3,414,292 1,114,742,523Power generation - - 191,573,187 86,639,330 191,573,187Raw material 79,445,848 90,556,386 121,793,455 230,458,823 201,239,303Energy product - - 7,098,187 8,426,244 7,098,187Waste 26.4 69,864,996 23,324,239 155,978,826 104,291,712 225,843,822Scrap - - 12,137,722 11,461,320 12,137,722Services 4,950,738 3,183,257 - - 4,950,738
10,422,514,945 6,524,092,276 4,145,694,182 5,293,617,334 14,568,209,127
Export rebate 22,167,069Duty drawback 26.6 7,910,142Processing / commission income 40,604,183
14,638,890,520
Rupees
Note
Export Sales Local Sales
2009
7,809,238,8952,291,502,9101,158,626,494
86,639,330321,015,209
8,426,244127,615,951
11,461,3203,183,257
11,817,709,610
17,270,634-
16,440,595
11,851,420,839
Total
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
94
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
26.4 Waste sales includes comber noil sales Rs. 86,788,332 (2009: Rs. 27,941,760).
26.5 Exchange gain/loss due to currency rate fluctuations relating to export sales amounting to Rupees 17.189 million gain (2009: Rupees 36.298 million loss) has been included in export sales.
26.6 The duty drawback has been given by Ministry of Textile Industries from government of Pakistan vide S.R.O 3(1)TID/09-P-I Dated 1st September 2009 in order to encourage the exporters.
26.1 Export sales - Yarn
Direct export 5,609,639,738
In-direct export 1,753,498,323
7,363,138,061
26.2 Export sales - Fabric
Direct export 1,285,688,732
In-direct export 508,142,167
1,793,830,899
26.3 Export sales - Home textile products
Direct export 1,103,843,932In-direct export 7,440,471
1,111,284,403
3,846,383,006
146,352,738
3,992,735,744
1,259,080,448
-
1,259,080,448
1,155,212,202-
1,155,212,202
2010 2009
Rupees Rupees
2010 2009
Note Rupees Rupees
27 Cost of sales and services
Raw material consumed 27.1 8,434,387,740 6,924,107,731
Packing material consumed 211,788,404 202,366,546
Stores and spares consumed 27.2 419,951,732
317,496,837
Salaries, wages and benefits 27.3 & 27.4 835,020,263
755,733,838
Fuel, power and water 949,968,335
763,160,878
Other manufacturing expenses 27.5 351,249,741
324,750,062
Repairs and maintenance 101,530,367
33,331,021
Vehicle running expenses 15,941,505
14,307,584
Traveling and conveyance 13,992,655
14,867,006
Insurance expenses 40,744,389
33,062,225
Rent, rates and taxes 3,392,544
2,450,982
Fees and subscription 907,933
1,875,499
Communication expenses 4,070,105
5,303,123
Printing and stationery 1,465,367
2,239,688
Legal and professional charges 439,676
209,355
Other expenses 3,874,240
3,374,455
Depreciation expenses 4.3 376,182,722
392,534,464
11,764,907,717
9,791,171,296
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
95
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Yarn 155,462,577 34,015,175
Fabrics 95,167,861 -
391,023,412
288,414,677
Closing stock (784,520,071)
(570,659,883)
11,879,502,107
10,099,834,125
Work in process
Opening stock 133,898,492
127,781,058
Closing stock (196,467,326)
(133,898,492)
(62,568,834) (6,117,434)
Cost of goods manufactured 11,702,338,883
9,785,053,862
Finished goods
Opening balance 570,659,883
597,025,470
Finished goods purchased:
Cotton 140,392,974
254,399,502
2010 2009
Rupees Rupees
27.1 Raw material consumed
Opening balance 1,510,284,615 2,380,432,823
Purchases 8,654,019,128
6,053,959,523
10,164,303,743
8,434,392,346
Closing stock (1,729,916,003)
(1,510,284,615)
8,434,387,740
6,924,107,731
27.2 Stores and spares consumed
Opening balance 199,199,201
152,848,163
Purchases 446,017,403
363,847,875
645,216,604
516,696,038
Closing stock (225,155,865)
(199,199,201)
Written off (109,007)
-
419,951,732
317,496,837
27.3 Salaries, wages and benefits include Rs. 47,364,079 (2009: Rs. 39,867,492) in respect of post employment benefits (gratuity).
27.4 Salaries and benefits include Rs. 2,928,219 (2009: Rs. 1,955,862) in respect of provident fund contribution.
2010 2009
Note Rupees Rupees
27.5 Other manufacturing expenses
Cotton dyeing, bleaching and bale pressing charges 148,252,454 106,145,881
Yarn dyeing and bleaching charges 14,074,476 22,274,710
Fabric dyeing, bleaching, knitted and processing charges 149,309,011
153,817,148
Yarn doubling charges 4,810,028
9,837,378
Stitching and other charges 34,803,772
32,674,945
351,249,741
324,750,062
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
96
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Ocean freight and forwarding 250,640,175
224,342,671
468,181,656
397,453,590
On local sales
Inland freight and handling 42,819,954
36,117,486
Commission 65,009,663
55,046,656
107,829,617
91,164,142
Other distribution cost
Salaries and benefits 28.1 42,251,638
35,002,159
Rent and utilities 1,944,016
1,420,766
Communication 9,689,952
8,554,633
Traveling, conveyance and entertainment 29,319,445
23,285,291
Repairs and maintenance 221,973
1,671,328
Fees and subscription 610,797
1,199,983
Samples and advertising 10,367,332
12,585,597
Printing and stationery 1,570,448
2,505,069
Advertisement and sales promotion -
307,021
Depreciation expenses 4.3 226,094
132,913
Others 1,237,336
2,322,932
97,439,031
88,987,693
Grant received from TDAP (4,301,850)
-
669,148,454
577,605,424
28 Selling and distribution expenses
On export sales
Export development surcharges 17,897,664
16,196,168
Regulatory duty on export 3,223,309
-
Insurance 1,608,056
4,030,136
Commission 194,812,452
152,884,614
28.1 Salaries and benefits include Rs. 1,247,554 (2009: Rs. 1,127,917) in respect of provident fund contribution.
2010 2009
Note Rupees Rupees
29 Administrative expenses
Directors' remuneration 8,775,000
7,200,000
Directors' meeting fee -
5,000
Salaries and benefits 29.1 71,641,779
57,135,343
Rent, rates and utilities 6,104,712
5,018,444
Communication 8,130,687
6,212,149
Printing and stationery 1,323,034
2,300,506
Traveling, conveyance and entertainment 12,998,396
14,206,205
Motor vehicle expenses 7,989,544
7,042,466
Repairs and maintenance 6,253,721
5,255,583
Insurance Expense 1,077,083
219,660
Legal and professional charges 4,487,297
7,119,460
Fees and subscription 1,920,545
3,178,450
Computer expenses 2,343,514
4,771,651
Advertisement 73,200
122,100
Security expenses 1,211,200
685,250
Others 375,978
1,265,527
Depreciation 4.3 2,996,377
3,519,947
137,702,067
125,257,740
29.1 Salaries and benefits include Rs. 2,401,282 (2009: Rs. 2,031,559) in respect of provident fund contribution.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
97
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees29.2 Research and development support
Support on account of research and development 9,089,358 6,888,861
Less: Utilization
Product development 1,312,690 2,215,563
Professional consultancy 15,248 -
Market research 2,949,984 4,039,520
Participation in exhibitions 4,811,436 633,778
9,089,358 6,888,861
- -
30 Finance cost
Interest / mark-up on
- short term finances 550,013,754 668,948,697
- long term loans 93,893,252 56,502,120
- Workers' profit participation 21.3 1,618,788 -
Bank charges, commission and others charges 107,255,982 112,828,445
Realized (gain)/loss on remeasurement of derivative financial instruments - net 30.1 (4,126,986) 9,542,037
748,654,790 847,821,299
30.1 This represents the fair value of two separate Cross Currency Interest Rate Swap agreements and gain on reset date of agreements, the company has entered into with Royal Bank of Scotland (Formerly ABN Amro Bank N.V Pakistan) and Standard Chartered Bank ( Pakistan ) Limited at the aggregate notional amount of Rs. 428.6 million (equivalent to USD 7.0 million). Under the terms of swap agreements, at each reset date, the company is entitled to receive 6 months KIBOR on notional amounts and is required to pay 6 months LIBOR plus spread ranging from 0.75% to 0.85% on USD notional amount. In addition to this the company is required to pay exchange difference arising due to fluctuation in USD/PKR rates between reset and the settlement dates.
30.1.1 During the year total gain realized Rs. 4.127 million (2009: Rs. 5.958 million) at the reset date. These transactions have been remeasrued to fair value at the end of the year resulted in a loss of Rs. nil (2009: Rs. 15.499 million). The resulted loss of Rs. nil (2009: Rs. 9.542 million) has been charged to finance cost after net off gain realized during the year of Rs. 4.127 million (2009: Rs. 5.958 million).
31 Other operating expenses
Workers' profit participation fund 21.3 58,088,787 16,769,052
Workers' welfare fund 22,767,627 5,593,136
Auditors' remuneration 31.1 2,477,444 1,735,795
Donations 31.2 21,069,258 2,637,556
Depreciation on investment property 5.3 2,169,165 1,949,998
Amortization of intangible asset 6.2 1,734,969 1,206,989
Loss on sale of investments - 23,132,735
Loss due to remeasurement of held for trading investments - 15,822,463
Provision for doubtful debts 119,304,865 -
Impairment loss on associated company 15,380,120 -
Exchange loss on
- foreign currency account 1,329,859 1,625,179
- short term foreign currency loan 5,969,871 -
- monetary assets 3,911,900 -
Written off provision
- for property, plant and equipment 871,727 -
- for stores, spares and loose tools 109,007 -
- for trade debtors 2,539,160 -
- for trade deposits & short term prepayments 82,633 -
257,806,392 70,472,903
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
98
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
31.1 Auditors' remuneration
Audit fee 1,155,000 1,041,200
Half yearly review fee 302,500 275,000
Code of corporate governance review fee 78,045 78,045
Other certification / services 930,349 330,000
Out of pocket expenses 11,550 11,550
2,477,444 1,735,795
2010 2009
Rupees Rupees
31.2 Donations include the following in which a director is interested:
Name of director Interest in donee Name and address of donee
Mr. Mohammad Abdullah Director Abdullah Foundation 19,000,000 600,000
Mr. Yousuf Abdullah Director 312, Cotton Exchange Building,
Mr. Shahid Abdullah Director I.I. Chundrigar Road, Karachi.
Mr. Nadeem Abdullah Director
Mr. Amer Abdullah Director
Mr. Mohammad Yamin Director
Mr. Mohammad Abdullah Trustee Jamal-ud-din Fatima Charitable Trust 800,000 650,000
Mr. Shahid Abdullah Trustee 149, Cotton Exchange Building,
Mr. Nadeem Abdullah Trustee I.I. Chundrigar Road, Karachi.
32 Other operating income
Income from financial assets / liabilities
Dividend income
- from other companies 116,023,354 100,498,478
Gain on sale of investments 33,978,504 -
Gain due to remeasurement of held for trading investments 715,877 -
Profit on saving and deposit accounts 148,852 70,562
Rental income 13,824,279 10,154,210
Exchange gain on
- short term foreign currency loan - 954,890
- monetary assets - 880,500
Income from non-financial assets
Gain on sale property, plant and equipment - net 7,256,523 4,516,206
Written back provision
- for excise duty on loan and leases - 4,811,742
- for excise duty on electricity - 3,393,355
- for unclaimed TFC's - 162,678
- for creditors 21 171,639 -
- for advances from customers 21 3,366 -
172,122,394 125,442,621
33 Taxation
Current
- for the year 184,874,764 77,444,625
- for prior years' (696,969) (94,528)
184,177,795 77,350,097
Deferred (59,562,590) (14,084,472)
124,615,205 63,265,625
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
99
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
33.1 Reconciliation between the average effective tax rate and the applicable tax rate.
2010 2009
Applicable tax rate 35.00 35.00
8.00 10.56
(24.40) (19.52)
Effect of income exempt for tax purpose (2.03) 2.15
Effect of adjustment in respect of deferred taxation (7.52) 6.22
Effect of change in prior years' tax (0.08) (0.03)
8.97 34.38
Effect of difference in tax rates under normal tax regime and presumptive tax regime
Percentage
Tax effect of expenses that are admissible / inadmissible in determining taxable profit
2010 2009
34 Earnings per shares
Profit after taxation 1,448,466,944 508,836,060
Weighted average number of ordinary shares 20,083,140 20,083,140
Earnings per share - basic and diluted 72.12 25.34
34.1 There is no dilutive effect on basic earnings per share.
(Rupees)
Number of shares
(Rupees)
35 Cash generated from operations
Profit before taxation 1,118,199,104 255,871,969
Adjustments for non-cash charges and other items:
Depreciation 379,405,192 396,187,324
Depreciation on investment property 2,169,165 1,949,998
(Gain)/Loss on sale of investments (33,978,504) 23,132,735
Amortization of intangible assets 1,734,969 1,206,989
(Gain)/Loss on sale of property, plant and equipment (7,256,523) (4,499,461)
Dividend income - others (116,023,354) (100,498,478)
Provision for gratuity 47,364,079 39,867,492
Provision for doubtful debts 119,304,865 -
Exchange differences 11,211,630 (210,211)
Fair value adjustment made in value of investment (715,877) 15,822,463
(4,126,986) 9,542,037
Financial expenses 752,930,631 838,279,262
Profit on deposit and held to maturity investments (148,852) (70,562)
Impairment loss on associates company 15,380,120 -
Written back provision for excise duty on loan and leases - (4,811,742)
Written back provision for excise duty on electricity - (3,393,355)
Written back unclaimed TFC's - (162,678)
Rental income (13,824,279) (10,154,210)
Operating cash flow before changes in working capital 2,271,625,380 1,458,059,572
Realized (gain)/loss on remeasurement of derivative financial instrument
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
100
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
(657,586,546) 734,018,070
Increase / (decrease) in current liabilities
Trade and other payables 272,384,230 73,787,577
1,886,423,064 2,265,865,219
Changes in working capital
(Increase) / Decrease in current assets
Inventories (381,293,280) 675,127,298
Trade debts (258,489,664) 17,167,702
Loans and advances 9,939,240 28,085,374
Trade deposits and short term prepayments (4,179,745) 1,999,164
Other receivables (23,563,097) 11,638,532
36 Cash and cash equivalents
Cash and bank balances 121,649,167 89,246,492
Temporary overdrawn balances (4,510,525) (4,294,248)
117,138,642 84,952,244
2010 2009Note Rupees Rupees
38 Reconciliations of reportable segments sales, cost of sales, assets and liabilities
38.1 Sales
Total sales for reportable segment 37.1 15,222,576,121 12,531,329,655
Elimination of inter-segment 37.1 (583,685,601) (679,908,816)
Total sales 14,638,890,520 11,851,420,839
38.2 Cost of sales
Total cost of sales for reportable segment 39 12,463,187,707 10,779,742,942
Elimination of inter-segment 39.1 (579,196,664) (672,500,054)
Elimination of inter-segment 39.2 (4,488,937) (7,408,761)
Total cost of sales 11,879,502,106 10,099,834,127
38.3 Assets
Total assets for reportable segments 37.2 8,329,566,022 7,834,013,937
Investment property 5 149,781,134 138,710,299Intangible assets 6 5,920,410 7,405,379Long term investments 7 4,759,653,096 3,699,958,655Other receivables 14 46,209,909 27,152,028Other financial assets 15 490,144,239 140,003,514Income tax and sales tax 16 199,416,301 158,499,644Unallocated assets 37.3 5,651,125,089 4,171,729,519
13,980,691,111 12,005,743,456
38.4 Liabilities
Total liabilities for reportable segments 37.4 11,015,638,961 9,725,413,363
Custom duty payable 21 3,262,068 3,262,068Workers' profit participation fund 21 58,088,787 16,769,052Workers' welfare fund 21 22,767,627 5,593,136Sindh development and maintenance infrastructure fee 21 59,715,344 48,570,474Unclaimed dividend 21 415,665 360,114Provision for taxation 24 184,821,056 76,854,672
2,255,800,070 1,689,176,455Deferred taxation 20 380,181,533 439,744,123Unallocated liabilities 37.5 2,965,052,150 2,280,330,094
13,980,691,111 12,005,743,456
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
101
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
37.1
Ope
ratin
g re
sults
Com
pany
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
Rup
ees
7,36
3,13
8,06
13,
992,
735,
744
1,79
3,83
0,89
91,
259,
080,
448
1,11
1,28
4,40
31,
155,
212,
202
--
--
--
10,2
68,2
53,3
64
2,66
5,58
4,06
13,
816,
503,
151
988,
070,
624
1,03
2,42
2,46
23,
458,
120
3,41
4,29
219
1,57
3,18
786
,639
,330
7,09
8,18
78,
426,
244
--
3,85
5,78
4,17
9
79,4
45,8
4890
,556
,386
--
--
--
--
--
79,4
45,8
48
121,
793,
455
230,
458,
823
--
--
--
--
--
121,
793,
455
69,8
64,9
9623
,324
,239
--
--
--
--
--
69,8
64,9
96
135,
739,
048
85,0
92,5
6416
,278
,815
14,5
23,5
063,
960,
962
4,67
5,64
3-
--
--
-15
5,97
8,82
6
6,91
0,05
85,
277,
965
4,00
7,26
54,
664,
290
1,01
8,29
394
8,30
818
1,98
357
0,75
720
,123
--
-12
,137
,722
--
--
4,95
0,73
83,
183,
257
--
--
--
4,95
0,73
8
39,9
22,1
3715
,511
,642
183,
800
9,40
049
8,24
627
3,71
4-
--
645,
839
--
40,6
04,1
83
13,6
68,6
268,
158,
077
1,10
0,33
685
5,61
67,
398,
107
8,25
6,94
1-
--
--
-22
,167
,069
--
--
7,91
0,14
2-
--
--
--
7,91
0,14
2
10,4
96,0
66,2
908,
267,
618,
591
2,80
3,47
1,73
92,
311,
555,
722
1,14
0,47
9,01
11,
175,
964,
357
191,
755,
170
87,2
10,0
877,
118,
310
9,07
2,08
314
,638
,890
,520
198,
712,
879
273,
395,
123
380,
483,
785
399,
104,
932
--
--
4,48
8,93
77,
408,
761
--
583,
685,
601
10,6
94,7
79,1
698,
541,
013,
713
3,18
3,95
5,52
42,
710,
660,
653
1,14
0,47
9,01
11,
175,
964,
357
191,
755,
170
87,2
10,0
8711
,607
,247
16,4
80,8
44-
-15
,222
,576
,121
39(8
,346
,603
,933
)(7
,363
,970
,883
)(2
,832
,342
,364
)(2
,271
,043
,697
)(1
,092
,283
,307
)(1
,050
,359
,993
)(1
81,2
32,5
10)
(80,
921,
672)
(10,
725,
593)
(13,
446,
697)
--
(12,
463,
187,
707)
2,34
8,17
5,23
71,
177,
042,
830
351,
613,
160
439,
616,
956
48,1
95,7
0412
5,60
4,36
410
,522
,660
6,28
8,41
588
1,65
43,
034,
147
--
2,75
9,38
8,41
4
40(4
81,7
39,4
52)
(364
,039
,865
)(1
03,9
90,2
24)
(113
,726
,917
)(8
2,80
3,11
2)(9
5,83
6,19
0)-
-(6
15,6
66)
(4,0
02,4
52)
--
(669
,148
,454
)
41(1
08,3
29,7
14)
(94,
594,
617)
(20,
171,
382)
(16,
439,
504)
(6,8
64,8
83)
(7,8
69,6
64)
--
(24,
286)
(3,6
18,7
82)
(2,3
11,8
01)
(2,7
35,1
71)
(137
,702
,067
)
(590
,069
,166
)(4
58,6
34,4
82)
(124
,161
,606
)(1
30,1
66,4
21)
(89,
667,
996)
(103
,705
,854
)-
-(6
39,9
52)
(7,6
21,2
34)
(2,3
11,8
01)
(2,7
35,1
71)
(806
,850
,520
)
1,75
8,10
6,07
171
8,40
8,34
922
7,45
1,55
430
9,45
0,53
5(4
1,47
2,29
2)21
,898
,510
10,5
22,6
606,
288,
415
241,
702
(4,5
87,0
87)
(2,3
11,8
01)
(2,7
35,1
71)
1,95
2,53
7,89
4
5,81
6,62
9,22
85,
615,
781,
755
1,68
5,12
4,36
61,
629,
446,
257
470,
637,
898
414,
716,
691
328,
745,
962
139,
247,
314
386,
151
18,4
82,0
2228
,042
,417
16,3
39,8
988,
329,
566,
022
5,65
1,12
5,08
9
13,9
80,6
91,1
11
5,94
0,85
9,84
36,
053,
821,
360
1,45
6,91
2,86
41,
205,
915,
135
545,
702,
737
748,
160,
029
3,04
3,94
1,29
91,
682,
613,
469
339,
321
18,5
32,8
1027
,882
,897
16,3
70,5
5911
,015
,638
,961
2,96
5,05
2,15
0
13,9
80,6
91,1
11
Pr
oces
sing
/ co
mm
issi
on in
com
e
Sale
s
Ex
port
sale
s
Lo
cal s
ales
Ex
port
sale
s ra
w m
ater
ial
Lo
cal s
ales
raw
mat
eria
l
Ex
port
sale
s w
aste
Lo
cal s
ales
was
te
Sc
rap
sale
s
Se
rvic
es o
n ex
port
C
usto
m re
bate
D
uty
draw
back
Inte
r - s
egm
ent s
ales
Tota
l sal
es
Cos
t of s
ales
Gro
ss p
rofit
Sellin
g an
d di
strib
utio
n ex
pens
es
Adm
inis
trativ
e ex
pens
es
Ope
ratin
g R
esul
ts
37.2
Seg
men
t ass
ets
37.3
Una
lloca
ted
asse
ts
37.4
Segm
ent l
iabi
litie
s
37.5
Una
lloca
ted
liabi
litie
s
37.6
Dep
reci
atio
n 25
8,31
2,24
427
3,15
5,60
596
,814
,987
103,
282,
308
15,8
88,1
0514
,816
,291
8,11
7,29
34,
773,
479
226,
094
132,
913
46,4
7126
,728
379,
405,
193
Not
eSp
inni
ngW
eavi
ngEn
ergy
Pro
duct
Oth
ers
Rup
ees
Hom
e Te
xtile
Pow
er G
ener
atio
nC
ompa
ny
2009
Rup
ees
6,40
7,02
8,39
4
4,94
7,40
5,47
9
90,5
56,3
86
230,
458,
823
23,3
24,2
39
104,
291,
712
11,4
61,3
20
3,18
3,25
7
16,4
40,5
95
17,2
70,6
34 -
11,8
51,4
20,8
39
679,
908,
816
12,5
31,3
29,6
55
(10,
779,
742,
942)
1,75
1,58
6,71
3
(577
,605
,424
)
(125
,257
,738
)
(702
,863
,162
)
1,04
8,72
3,55
1
7,83
4,01
3,93
7
4,17
1,72
9,51
9
12,0
05,7
43,4
56
9,72
5,41
3,36
3
2,28
0,33
0,09
4
12,0
05,7
43,4
56
396,
187,
324
39C
ost o
f sal
es
R
aw m
ater
ial c
onsu
med
39.1
6,09
5,76
0,46
75,
215,
297,
489
2,16
7,84
9,82
01,
682,
246,
724
739,
532,
542
686,
450,
134
--
10,4
41,5
7512
,613
,440
--
9,01
3,58
4,40
4
Pa
ckin
g m
ater
ial c
onsu
med
158,
051,
668
149,
246,
499
10,0
99,4
138,
124,
936
43,6
37,3
2244
,995
,112
--
--
--
211,
788,
404
St
ores
and
spa
res
cons
umed
39.2
280,
875,
536
201,
612,
947
109,
426,
545
99,4
86,3
1322
,358
,482
20,2
52,6
8811
,563
,536
3,39
9,20
121
6,57
115
4,44
9-
-42
4,44
0,66
9
Sa
larie
s, w
ages
and
ben
efits
616,
777,
436
574,
869,
506
134,
474,
831
112,
947,
675
72,6
08,6
9262
,405
,240
11,1
16,8
305,
000,
102
42,4
7451
1,31
5-
-83
5,02
0,26
3
Fu
el, p
ower
and
wat
er62
4,75
0,55
454
5,60
8,12
817
5,02
5,95
714
8,96
0,28
98,
914,
757
6,02
7,87
814
1,27
7,06
762
,564
,583
--
--
949,
968,
335
O
ther
man
ufac
turin
g ex
pens
es39
.314
9,47
8,22
011
2,66
8,82
724
,858
,130
28,5
63,8
1417
6,91
3,39
118
3,51
7,42
1-
--
--
-35
1,24
9,74
1
R
epai
rs a
nd m
aint
enan
ce
67,4
12,6
8925
,374
,188
23,6
85,6
371,
329,
790
3,71
9,25
51,
841,
847
6,71
2,78
54,
785,
196
--
--
101,
530,
366
Ve
hicl
e ru
nnin
g ex
pens
es10
,280
,876
9,57
5,16
82,
231,
135
1,97
9,10
83,
121,
869
2,64
4,41
130
7,62
510
8,89
7-
--
-15
,941
,505
Tr
avel
ing
and
conv
eyan
ce8,
446,
013
8,74
4,01
92,
494,
744
2,89
9,26
42,
904,
112
3,00
0,40
114
7,78
655
,829
-16
7,49
3-
-13
,992
,655
In
sura
nce
expe
nses
31,6
86,4
5525
,359
,207
6,00
0,08
16,
388,
006
1,35
2,55
71,
224,
059
1,68
0,32
390
,953
24,9
73-
--
40,7
44,3
89
R
ent,
rate
s an
d ta
xes
1,67
0,45
21,
068,
370
--
1,55
9,45
71,
382,
612
162,
635
--
--
-3,
392,
544
Fe
es a
nd s
ubsc
riptio
n76
7,73
01,
767,
172
44,4
2310
6,32
795
,780
--
2,00
0-
--
-90
7,93
3
C
omm
unic
atio
n ex
pens
es1,
541,
233
1,91
5,85
058
5,50
061
6,44
01,
855,
741
2,72
0,79
287
,631
50,0
41-
--
-4,
070,
105
Pr
intin
g an
d st
atio
nery
556,
456
1,43
1,64
590
4,66
569
5,41
14,
246
112,
632
--
--
--
1,46
5,36
7
Le
gal a
nd p
rofe
ssio
nal c
harg
es31
2,37
063
,415
--
127,
306
145,
940
--
--
--
439,
676
O
ther
exp
ense
s3,
038,
010
2,02
3,40
7-
422,
570
777,
230
837,
088
58,9
9991
,391
--
--
3,87
4,23
9
D
epre
ciat
ion
expe
nses
256,
190,
793
270,
530,
387
96,0
66,1
2610
2,41
4,30
815
,808
,510
14,8
16,2
918,
117,
293
4,77
3,47
9-
--
-37
6,18
2,72
2
8,30
7,59
6,95
87,
147,
156,
224
2,75
3,74
7,00
72,
197,
180,
975
1,09
5,29
1,24
91,
032,
374,
545
181,
232,
510
80,9
21,6
7210
,725
,593
13,4
46,6
97-
-12
,348
,593
,317
7,59
6,60
7,78
6
202,
366,
546
324,
905,
598
755,
733,
838
763,
160,
878
324,
750,
062
33,3
31,0
21
14,3
07,5
84
14,8
67,0
06
33,0
62,2
25
2,45
0,98
2
1,87
5,49
9
5,30
3,12
3
2,23
9,68
8
209,
355
3,37
4,45
5
392,
534,
465
10,4
71,0
80,1
13
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
102
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Pu
rcha
ses:
Inte
r-seg
men
t 4,
488,
937
7,40
8,76
1-
--
--
--
--
-4,
488,
937
Oth
er30
6,16
9,73
222
8,69
2,69
110
7,06
0,74
910
8,29
2,72
720
,987
,495
23,2
19,1
2111
,563
,536
3,39
9,20
123
5,89
224
4,13
5-
-44
6,01
7,40
3
310,
658,
669
236,
101,
452
107,
060,
749
108,
292,
727
20,9
87,4
9523
,219
,121
11,5
63,5
363,
399,
201
235,
892
244,
135
--
450,
506,
340
C
losi
ng s
tock
(180
,561
,857
)(1
50,7
78,7
24)
(36,
465,
347)
(38,
831,
143)
(8,1
28,6
61)
(9,4
99,6
48)
--
-(8
9,68
6)-
-(2
25,1
55,8
65)
W
ritte
n of
f pro
visi
on
--
--
--
--
(109
,007
)-
--
(109
,007
)
280,
875,
536
201,
612,
947
109,
426,
545
99,4
86,3
1322
,358
,482
20,2
52,6
8811
,563
,536
3,39
9,20
121
6,57
115
4,44
9-
-42
4,44
0,66
9
39.2
Oth
er m
anuf
actu
ring
expe
nses
C
otto
n dy
eing
, ble
achi
ng a
nd b
ale
pres
sing
cha
rges
148,
252,
454
106,
145,
881
--
--
--
--
--
148,
252,
454
Ya
rn d
yein
g an
d bl
each
ing
char
ges
17,2
80-
14,0
57,1
9622
,274
,710
--
--
--
--
14,0
74,4
76
Fa
bric
dye
ing,
ble
achi
ng, k
nitte
d an
d pr
oces
sing
cha
rges
1,20
8,48
61,
247,
858
5,99
0,90
61,
726,
814
142,
109,
619
150,
842,
476
--
--
--
149,
309,
011
Ya
rn d
oubl
ing
char
ges
-5,
275,
088
4,81
0,02
84,
562,
290
--
--
--
--
4,81
0,02
8
St
itchi
ng a
nd o
ther
cha
rges
--
--
34,8
03,7
7232
,674
,945
--
--
--
34,8
03,7
72
149,
478,
220
112,
668,
827
24,8
58,1
3028
,563
,814
176,
913,
391
183,
517,
421
--
--
--
351,
249,
741
7,40
8,76
1
363,
847,
875
371,
256,
636
(199
,199
,201
)
-
324,
905,
598
106,
145,
881
22,2
74,7
10
153,
817,
148
9,83
7,37
8
32,6
74,9
45
324,
750,
062
Com
pany
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
Rup
ees
Wor
k in
pro
cess
O
peni
ng s
tock
97,2
59,6
1592
,950
,120
34,2
81,3
0523
,579
,626
2,35
7,57
211
,251
,312
--
--
--
133,
898,
492
C
losi
ng s
tock
(114
,563
,480
)(9
7,25
9,61
5)(7
8,85
3,16
8)(3
4,28
1,30
5)(3
,050
,678
)(2
,357
,572
)-
--
--
-(1
96,4
67,3
26)
(17,
303,
865)
(4,3
09,4
95)
(44,
571,
863)
(10,
701,
679)
(693
,105
)8,
893,
740
--
--
--
(62,
568,
834)
Cos
t of g
oods
man
ufac
ture
d8,
290,
293,
093
7,14
2,84
6,72
92,
709,
175,
144
2,18
6,47
9,29
61,
094,
598,
143
1,04
1,26
8,28
518
1,23
2,51
080
,921
,672
10,7
25,5
9313
,446
,697
--
12,2
86,0
24,4
83
Fini
shed
goo
ds
O
peni
ng b
alan
ce46
1,14
9,67
842
7,87
4,33
010
5,65
8,63
215
6,20
7,85
93,
851,
573
12,9
43,2
80-
--
--
-57
0,65
9,88
3
Fi
nish
ed g
oods
pur
chas
ed:
Cot
ton
140,
392,
974
254,
399,
502
--
--
--
--
--
140,
392,
974
Yarn
65
,413
,700
-90
,048
,877
34,0
15,1
75-
--
--
--
-15
5,46
2,57
7
Fabr
ics
--
95,1
67,8
61-
--
--
--
--
95,1
67,8
61
205,
806,
674
254,
399,
502
185,
216,
738
34,0
15,1
75-
--
--
--
-39
1,02
3,41
2
C
losi
ng s
tock
(610
,645
,512
)(4
61,1
49,6
78)
(167
,708
,150
)(1
05,6
58,6
32)
(6,1
66,4
09)
(3,8
51,5
73)
--
--
--
(784
,520
,071
)
8,34
6,60
3,93
37,
363,
970,
883
2,83
2,34
2,36
42,
271,
043,
697
1,09
2,28
3,30
71,
050,
359,
993
181,
232,
510
80,9
21,6
7210
,725
,593
13,4
46,6
97-
-12
,463
,187
,707
39.1
Raw
mat
eria
l con
sum
ed
O
peni
ng b
alan
ce1,
236,
415,
752
2,07
5,87
4,73
894
,150
,057
146,
229,
134
170,
120,
421
158,
328,
951
--
9,59
8,38
5-
--
1,51
0,28
4,61
5
Pu
rcha
ses:
Inte
r-seg
men
t -
-19
8,71
2,87
927
3,39
5,12
338
0,48
3,78
539
9,10
4,93
2-
--
--
-57
9,19
6,66
4
Oth
er5,
953,
173,
658
4,12
1,43
9,00
01,
950,
690,
688
1,32
2,75
7,34
935
8,28
8,18
129
9,13
6,67
2-
-84
3,19
022
,211
,825
--
8,26
2,99
5,71
6
5,95
3,17
3,65
84,
121,
439,
000
2,14
9,40
3,56
71,
596,
152,
472
738,
771,
966
698,
241,
604
--
843,
190
22,2
11,8
25-
-8,
842,
192,
380
C
losi
ng s
tock
(1,2
99,6
35,6
16)
(1,2
36,4
15,7
52)
(260
,920
,543
)(9
4,15
0,05
7)(1
69,3
59,8
45)
(170
,120
,421
)-
--
(9,5
98,3
85)
--
(1,7
29,9
16,0
03)
6,09
5,76
0,46
75,
215,
297,
489
2,16
7,84
9,82
01,
682,
246,
724
739,
532,
542
686,
450,
134
--
10,4
41,5
7512
,613
,440
--
9,01
3,58
4,40
4
39.2
Stor
es a
nd s
pare
s co
nsum
ed
O
peni
ng b
alan
ce15
0,77
8,72
411
6,29
0,21
938
,831
,143
30,0
24,7
299,
499,
648
6,53
3,21
5-
-89
,686
--
-19
9,19
9,20
1
Rup
ees
Not
eSp
inni
ngW
eavi
ngEn
ergy
Pro
duct
Oth
ers
Hom
e Te
xtile
Pow
er G
ener
atio
nC
ompa
ny
2009
Rup
ees
127,
781,
058
(133
,898
,492
)
(6,1
17,4
34)
10,4
64,9
62,6
79
597,
025,
470
254,
399,
502
34,0
15,1
75 -
288,
414,
677
(570
,659
,883
)
10,7
79,7
42,9
42
2,38
0,43
2,82
3
672,
500,
054
5,76
5,54
4,84
7
6,43
8,04
4,90
1
(1,5
10,2
84,6
15)
7,59
6,60
7,78
6
152,
848,
163
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
103
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
Com
pany
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
Rup
ees
40Se
lling
and
dis
trib
utio
n ex
pens
es
O
n ex
port
sal
es
Expo
rt de
velo
pmen
t sur
char
ges
12,6
12,5
0110
,392
,011
2,55
0,00
32,
700,
771
2,73
5,16
03,
103,
385
--
--
--
17,8
97,6
64
Reg
ulat
ory
duty
on
expo
rt3,
223,
309
--
--
--
--
--
-3,
223,
309
Insu
ranc
e73
7,10
41,
043,
465
473,
526
710,
899
397,
426
2,27
5,77
2-
--
--
-1,
608,
056
Com
mis
sion
153,
418,
754
98,3
75,7
1522
,979
,303
29,0
48,3
2718
,414
,395
25,4
60,5
72-
--
--
-19
4,81
2,45
2
O
cean
frei
ght a
nd fo
rwar
ding
169,
227,
887
128,
391,
001
41,4
99,3
1355
,503
,628
39,9
12,9
7540
,448
,043
--
--
--
250,
640,
175
339,
219,
555
238,
202,
192
67,5
02,1
4587
,963
,625
61,4
59,9
5671
,287
,772
--
468,
181,
656
O
n lo
cal s
ales
Inla
nd fr
eigh
t and
han
dlin
g
42,4
54,7
6135
,426
,091
361,
039
558,
380
--
--
4,15
413
3,01
5-
-42
,819
,954
Com
mis
sion
58,6
95,9
0351
,281
,668
6,17
8,85
83,
750,
410
-14
,578
--
134,
902
--
-65
,009
,663
101,
150,
664
86,7
07,7
596,
539,
897
4,30
8,79
0-
14,5
78-
-13
9,05
613
3,01
5-
-10
7,82
9,61
7
O
ther
dis
trib
utio
n co
sts
Sala
ries
and
bene
fits
17,7
52,1
5015
,166
,797
9,79
9,88
14,
613,
915
14,5
13,2
2213
,000
,821
--
186,
385
2,22
0,62
6-
-42
,251
,638
Ren
t and
util
ities
1,90
2,38
51,
269,
499
--
--
--
41,6
3115
1,26
7-
-1,
944,
016
Com
mun
icat
ion
3,67
9,96
54,
937,
029
2,90
7,95
31,
247,
085
3,10
2,03
42,
243,
241
--
-12
7,27
8-
-9,
689,
952
Trav
elin
g, c
onve
yanc
e an
d en
terta
inm
ent
9,30
8,92
97,
651,
302
12,6
93,9
306,
906,
726
7,31
6,58
68,
154,
525
--
-57
2,73
9-
-29
,319
,445
Rep
airs
and
mai
nten
ance
188,
613
1,46
1,48
615
,250
62,5
2018
,110
--
--
147,
322
--
221,
973
Fees
and
sub
scrip
tion
401,
668
45,8
4770
,437
38,7
3113
8,69
21,
060,
407
--
-54
,998
--
610,
797
Sam
ples
and
adv
ertis
ing
6,08
7,55
24,
649,
045
3,83
6,99
57,
936,
552
442,
785
--
--
--
-10
,367
,332
Prin
ting
and
stat
ione
ry97
4,07
81,
962,
146
482,
794
387,
650
113,
577
--
--
155,
273
--
1,57
0,44
8
Adve
rtise
men
t and
sal
es p
rom
otio
n-
--
--
--
--
307,
021
--
-
Gra
nt re
ceiv
ed fr
om T
ADP
--
--
(4,3
01,8
50)
--
--
--
-(4
,301
,850
)
Dep
reci
atio
n ex
pens
es-
--
--
--
-22
6,09
413
2,91
3-
-22
6,09
4
Oth
ers
1,07
3,89
41,
986,
763
140,
942
261,
323
-74
,847
--
22,5
00-
--
1,23
7,33
6
41,3
69,2
3339
,129
,914
29,9
48,1
8221
,454
,502
21,3
43,1
5624
,533
,840
--
476,
610
3,86
9,43
7-
-93
,137
,181
481,
739,
452
364,
039,
865
103,
990,
224
113,
726,
917
82,8
03,1
1295
,836
,190
--
615,
666
4,00
2,45
2-
-66
9,14
8,45
4
Com
pany
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
Rup
ees
41A
dmin
istr
ativ
e ex
pens
es
D
irect
ors'
rem
uner
atio
n8,
775,
000
7,20
0,00
0-
--
--
--
--
-8,
775,
000
D
irect
ors'
mee
ting
fee
--
--
-5,
000
--
--
--
-
Sa
larie
s an
d be
nefit
s57
,046
,729
43,7
75,9
2210
,473
,478
7,85
4,08
54,
121,
572
2,48
4,07
6-
--
3,02
1,26
0-
-71
,641
,779
R
ent,
rate
s an
d ut
ilitie
s2,
145,
376
2,54
0,18
73,
015,
856
1,76
3,73
294
3,47
971
4,52
6-
--
--
-6,
104,
712
C
omm
unic
atio
n6,
348,
040
4,76
5,20
91,
430,
727
1,05
2,27
935
1,92
027
8,87
8-
--
115,
782
--
8,13
0,68
7
Pr
intin
g an
d st
atio
nery
976,
834
1,93
3,64
630
9,69
928
0,01
736
,501
50,6
60-
--
36,1
83-
-1,
323,
034
Tr
avel
ing,
con
veya
nce
and
ente
rtain
men
t12
,221
,316
12,9
66,8
1643
1,57
053
3,72
031
2,24
435
3,14
1-
-2,
725
270,
192
30,5
4182
,335
12,9
98,3
96
M
otor
veh
icle
exp
ense
s6,
132,
219
5,20
7,23
71,
680,
096
1,57
4,16
517
7,22
926
1,06
4-
--
--
-7,
989,
544
R
epai
rs a
nd m
aint
enan
ce3,
972,
942
3,87
1,59
61,
551,
781
726,
325
728,
998
657,
662
--
--
--
6,25
3,72
1
In
sura
nce
Expe
nse
956,
063
219,
660
41,4
25-
79,5
95-
--
--
--
1,07
7,08
3
Le
gal a
nd p
rofe
ssio
nal c
harg
es3,
465,
405
1,86
5,12
735
,000
675,
086
-2,
541,
861
--
21,5
6117
5,36
596
5,33
11,
862,
021
4,48
7,29
7
Fe
es a
nd s
ubsc
riptio
n1,
878,
710
2,95
9,75
730
,785
23,0
498,
750
195,
644
--
--
2,30
0-
1,92
0,54
5
C
ompu
ter e
xpen
ses
2,17
5,15
04,
371,
163
143,
364
256,
665
25,0
0014
3,82
3-
--
--
-2,
343,
514
Ad
verti
sem
ent
73,2
0012
2,10
0-
--
--
--
--
-73
,200
Se
curit
y ex
pens
es-
--
--
--
--
-1,
211,
200
685,
250
1,21
1,20
0
O
ther
s41
,280
170,
980
278,
740
832,
381
-18
3,32
9-
--
-55
,958
78,8
3737
5,97
8
D
epre
ciat
ion
2,12
1,45
02,
625,
218
748,
861
868,
000
79,5
95-
--
--
46,4
7126
,728
2,99
6,37
7
108,
329,
714
94,5
94,6
1720
,171
,382
16,4
39,5
046,
864,
883
7,86
9,66
4-
-24
,286
3,61
8,78
22,
311,
801
2,73
5,17
113
7,70
2,06
7
Pow
er G
ener
atio
n
Pow
er G
ener
atio
n
Ener
gy P
rodu
ctO
ther
s
Rup
ees
Ener
gy P
rodu
ctO
ther
sN
ote
Spin
ning
Wea
ving
Hom
e Te
xtile
Not
eSp
inni
ngW
eavi
ngH
ome
Text
ile
Rup
ees
Com
pany
2009
Rup
ees
16,1
96,1
68 -
4,03
0,13
6
152,
884,
614
224,
342,
671
397,
453,
590
36,1
17,4
86
55,0
46,6
56
91,1
64,1
42
35,0
02,1
59
1,42
0,76
6
8,55
4,63
3
23,2
85,2
91
1,67
1,32
8
1,19
9,98
3
12,5
85,5
97
2,50
5,06
9
307,
021
-
132,
913
2,32
2,93
2
88,9
87,6
93
577,
605,
424
Com
pany
2009
Rup
ees
7,20
0,00
0
5,00
0
57,1
35,3
43
5,01
8,44
4
6,21
2,14
9
2,30
0,50
6
14,2
06,2
05
7,04
2,46
6
5,25
5,58
3
219,
660
7,11
9,46
0
3,17
8,45
0
4,77
1,65
1
122,
100
685,
250
1,26
5,52
7
3,51
9,94
6
125,
257,
740
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
104
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
42 Related party disclosures
42.1 Disclosure of transactions between the Company and related parties.
The related parties comprise associated companies (due to common directorship), wholly owned subsidiary, directors and key management personnel. Amounts due to/from related parties are shown in the relevant notes to the financial statements. The Company in the normal course of business carries out transactions with various related parties. Significant balances and transactions with related parties are as follows.
2010 2009
Nature of transaction Relationship with the Company
Rupees Rupees
Sales, services provided and
reimbursement of expenses
Amer Cotton Mills (Private) Limited Related party 870,615 690,311
Beirholms Sapphire A/S Denmark Associate 4,928,917 2,881,786
Diamond Fabrics Limited Associate 161,008,628 344,036,582
Neelum Textile Mills Limited Related party 558,748 873,468
Reliance Cotton Spinning Mills Limited Associate 4,092,723 2,490,395
Sapphire Fibres Limited Associate 13,502,686 41,437,764
Sapphire Finishing Mills Limited Associate 128,671,548 95,539,722
313,633,865 487,950,028
Purchases, services received and
reimbursement of expenses
Amer Cotton Mills (Private) Limited Related party 3,540,275 18,812,045
Diamond Fabrics Limited Associate 8,136,700 13,396,918
Neelum Textile Mills Limited Related party 558,749 430,857
Reliance Cotton Spinning Mills Limited Associate 7,981,670 24,483,340
Sapphire Fibres Limited Associate 89,472,104 57,082,520
Sapphire Finishing Mills Limited Associate 13,197,354 5,947,830
Sapphire Renewable Solutions (Pvt) Limited Subsidiary 4,488,936 7,408,761
Sapphire Power Generation Limited Associate 169,033,632 92,705,736
296,409,420 220,268,007
Abdullah Foundation Related party 19,000,000 600,000
Jamal-ud-din Fatima Charitable Trust Related party 800,000 650,000
19,800,000 1,250,000
Rent and other expensesYousuf Agencies (Private) Limited Related party 1,860,000 1,200,000
Sale of property, plant and equipmentSapphire Finishing Mills Limited Associate 12,100,000 -
Donations
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
105
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
7,171,298 10,778,758
Dividend received
Reliance Cotton Spinning Mills Limited Associate 478,521 995,000
Sapphire Fibres Limited Associate - 9,630,846
478,521 10,625,846
2010 2009
Nature of transaction Relationship with the Company
Rupees Rupees
Dividend paid
Amer Cotton Mills (Private) Limited Related party 1,012,625 1,539,189
Crystal Enterprises (Private) Limited Related party 108,813 165,396
Diamond Fabrics Limited Associate 200,678 305,030
Galaxy Agencies (Private) Limited Related party 1,056,917 1,606,513
Nadeem Enterprises (Private) Limited Related party 879,363 1,336,632
Neelum Textile Mills Limited Related party 408,891 621,515
Reliance Cotton Spinning Mills Limited Associate 77,010 -
Reliance Textiles Limited Related party 58,000 88,161
Sapphire Agencies (Private) Limited Related party 2,944,887 4,471,669
Sapphire Power Generation Limited Associate 316,650 481,308
Yousuf Agencies (Private) Limited Related party 107,465 163,346
Note 2010 200943 Plant capacity and actual production
Spinning units
Total number of spindles installed 120,312 120,232
Average number of spindles worked 118,615 119,584
Total number of rotors installed 3,120 3,120
Average number of rotors worked 3,069 3,062
Number of shifts worked per day 3 3
Total days worked 360 360
Installed capacity after conversion into 20/s lbs 84,627,839 82,877,920
Actual production after conversion into 20/s lbs 92,266,592 92,695,300
Weaving unit
Total number of looms installed 220 220
Average number of looms worked 206 206
Number of shifts worked per day 3 3
Total days worked 360 360
51,238,110 51,238,110
72,684,441 73,871,639
Home Textile Product unit
Installed capacity at 50 picks per inch of fabric square meters
Actual production converted at 50 picks per inch of fabric square meters
The capacity of this unit is indeterminable due to multi product involving varying processes of manufacturing and run length of order lots.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
106
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
2010 2009
Note Rupees Rupees
44 REMUNERATION OF CHIEF EXECUTIVE, DIRECTOR AND EXECUTIVES
Chief Executive
Remuneration 3,450,000
2,400,000
Rent and utilities 1,725,000
1,200,000
5,175,000
3,600,000
Number of person 1 1
Director
Remuneration 2,400,000
2,400,000
Rent and utilities 1,200,000
1,200,000
3,600,000
3,600,000
Number of person 1 1
Executives
Managerial remuneration 42,945,227
40,001,495
House rent 19,320,500
13,242,357
Cost of living allowance 36,625
39,000
Bonus 6,146,570
6,372,604
Medical 937,374
1,123,538
Utilities 2,445,438
1,863,887
Leave encashment and other benefits 8,932,178
10,514,331
80,763,912
73,157,212
Number of persons 46 56
46 56
The Chief Executive and one Director were also provided with cars maintained by the Company and telephones at residence.
Number of executives provided with the Company maintained cars
45 FINANCIAL INSTRUMENTS
The Company has exposures to the following risks from its use of financial instruments:
45.1 - Credit risk
45.2 - Liquidity risk
45.3 - Market risk
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board is also responsible for developing and monitoring the Company's risk management policies.
45.1 Credit risk
45.1.1 Exposure to credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the trade debts, loans and advances,
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
107
ANNUAL REPORT 2010
Sapphire Textile Mills Limited
trade deposits and short term prepayments, other receivables, other financial assets and cash and bank balances. Out of total financial assets of Rs. 6,704.024 million (June 30, 2009 : Rs. 5,110.424 million), financial assets which are subject to credit risk aggregate to Rs. 6,584.723 million (June 30, 2009 : Rs. 5,028.006 million). The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows.
2010 2009
Rupees Rupees
Long term investments 4,759,653,096 3,699,958,655 Long term loans and advances 38,808,560 34,793,867 Long term deposits 9,130,379 5,628,783 Trade debts 1,251,651,314 1,112,466,515 Loans and advances 20,658,725 27,018,109 Trade deposits and short term prepayments 810,209 776,209 Other receivables 13,866,934 7,360,512 Other financial assets 490,144,239 140,003,514 Cash and bank balances 119,300,476 82,418,079
6,704,023,932 5,110,424,243
2010 2009
Rupees Rupees
Domestic 603,275,617 839,199,336Export 648,375,697 273,267,179
1,251,651,314 1,112,466,515
The majority of export debts of the Company are situated in Asia, Europe, Australia and North America.
45.1.2 The maximum exposure to credit risk for trade debts at the reporting date by geographical region is as follows.
The majority of export debts of the Company are situated in Asia, Europe, Australia and North America.
45.1.3 The maximum exposure to credit risk for debts at the reporting date by type of product is as follows:
Credit quality of counter parties is assessed based on historical default rates. All receivables past due are considered good. The management believes that allowance for impairment of receivables past due is not necessary, as these comprise amounts due from old customers, which have been re-negotiated from time to time and are also considered good.
2010 2009
Rupees Rupees
Yarn 816,309,819 771,922,216Fabric 203,874,778 247,013,873Home textile product 104,321,754 58,462,758Energy 20,856,794 16,562,003Raw material 83,696,351 -Energy product - 5,606,655Waste 20,940,274 11,977,533Processing services 59,126 -Others 1,592,418 921,477
1,251,651,314 1,112,466,515
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2010 2009
Rupees Rupees
45.1.4 The aging of trade debts at the reporting date as follows:
Not past due 1,082,117,714 607,858,091Past due 0 - 30 days 117,982,721 168,556,087Past due 31 - 60 days 22,132,657 79,368,706Past due 61 - 90 days 3,662,973 31,545,131Past due 91 - 1 year 14,568,972 98,324,552More than one year 11,186,277 126,813,948
1,251,651,314 1,112,466,515
45.2 Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding trough an adequate amount of committed credits facilities. The Company's treasury department maintains flexibility in funding by maintaining availability under committed credits lines.
Financial liabilities in accordance with their contractual maturities are presented below:
Long term finances 817,869,285 991,030,141 360,728,142 630,301,999 - Trade and other payables 526,687,675 526,687,675 526,687,675 - - Accrued interest / mark-up 74,723,521 74,723,521 74,723,521 - - Short term borrowings 3,473,684,105 3,675,939,362 3,675,939,362 - -
4,892,964,586 5,268,380,699 4,638,078,700 630,301,999 -
Long term finances 931,280,733 1,224,083,801 352,882,181 859,473,177 11,728,443 Trade and other payables 321,637,765 321,637,765 321,637,765 - - Accrued interest / mark-up 155,845,558 155,845,558 155,845,558 - - Short term borrowings 3,727,866,185 3,956,197,989 3,956,197,989 - -
5,136,630,241 5,657,765,113 4,786,563,493 859,473,177 11,728,443
2 0 1 0
Rupees
Up to 1 year5 years and
above
Rupees
Up to 1 yearBetween 1 to 5
years
Contractual
cash flow
5 years and
above
Carrying
amount
2 0 0 9
Carrying
amount
Contractual
cash flow
Between 1 to 5
years
45.2.1 The contractual cash flow relating to the above financial liabilities have been determined on the basis of mark-up / interest rates effective at the respective year-end. The rates of mark-up / interest have been disclosed in the respective notes to these financial statements.
45.3 Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holding of financial instruments.
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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45.3.1 Currency risk
The Company is exposed to currency risk on import of raw materials, stores & spares parts and export of goods mainly denominated in US Dollar and Euro. The Company's exposure to foreign currency risk for US Dollar and Euro is as follows:
Rupees US $ EURO JPY
Short term borrowings (Foreign currency loan) - - - -Accrued mark-up on (Foreign currency loan) - - - -
- - - -
Trade debts (648,375,678) (6,813,736) (637,234) -Bank balances (15,867,216) (56,317) (12,642) -
Gross statement of financial position exposure (664,242,894) (6,870,053) (649,876) -
Outstanding letters of credit 307,847,176 1,119,001 540,585 159,206,822Forward exchange contracts 155,738,444 - 1,489,180 -
Net Exposures (200,657,273) (5,751,052) 1,379,889 159,206,822
Rupees US $ EURO JPY
Short term borrowings (Foreign currency loan) 231,323,174 2,845,303 - -Accrued mark-up on (Foreign currency loan) 777,771 9,567 - -
232,100,944 2,854,870 - -
Trade debts (273,267,179) (3,615,259) (174,003) -Bank balances (1,665,798) (18,283) (1,598) -
Gross statement of financial position exposure (42,832,033) (778,672) (175,601) -
Outstanding letters of credit 234,605,227 2,800,097 35,222 38,706Forward exchange contracts 373,370,208 4,603,825 - -
Net Exposures 565,143,402 6,625,250 (140,379) 38,706
The following significant exchange rates have been applied:
2010 2009
US $ to Rupees 85.40 / 85.60 81.10 / 81.30
Euro to Rupees 104.33 / 104.58 114.354 / 114.82
2 0 1 0
Reporting date rate
2 0 0 9
45.3.2 Sensitivity analysis
A 10 percent strengthening of the Rupees against US Dollar at June 30, would have increase / (decrease) equity and profit and loss account by the amounts shown below. This analysis assumes that all other variables, in particulars interest rates, remain constant. The analysis is performed on the basis for 2010.
Equity Profit & loss
As at June 30, 2010Effect in US Dollar - Gain - 58,807,653Effect in Euro - Gain - 6,796,403
As at June 30, 2009Effect in US Dollar - Gain - 6,330,602Effect in Euro - Gain - 2,016,254
Rupees
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10 percent weakening of the Rupees against the above currency at 30 June would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variable remain content.
45.3.3 Interest rate risk
At the reporting date, the profit, interest and mark-up rate profile of the Company's significant financial assets and liabilities is as follows:
2010 2009 2010 2009
Variable rate instruments
Financial liabilities
Long term finances 7.00% to 15.50% 7.00% to 15.50% 817,869,285
931,280,733
Short term borrowings 7.5% 15.79% 7.5% to 17.00% 3,473,684,105
3,727,866,185
Effective rate Carrying Amount
45.4 Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value through profit & loss. Therefore, a change in mark-up / interest rates at the reporting date would not affect profit & loss account.
45.5 Fair value of financial instruments
Carrying values of the financial assets and financial liabilities approximate their fair values. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
45.6 Capital risk management
The Company's prime objective when managing capital is to safeguard its ability to continue as a going concern in order to provide adequate returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Consistent with others in the industry, the company manages its capital risk monitoring its debts levels and liquid assets and keeping in view future investment requirements and expectations of the shareholders. Debt is calculated as total borrowings ('long term loans' and 'short term borrowings' as shown in the balance sheet). Total capital comprises shareholders' equity as shown in the balance sheet under 'share capital and reserves'.
2010 2009
Rupees Rupees
Total borrowings 4,291,553,390 4,659,146,918
Less: Cash and bank balances 121,649,167 89,246,492
Net debt 4,169,904,223
4,569,900,426
Total equity 8,276,043,977
6,183,007,464
Total capital 12,445,948,200
10,752,907,890
Gearing ratio 34 42
Percentage
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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Sapphire Textile Mills Limited
15 1,322,785,568
27 21,811,459
21 2,687,514
27 202,366,546
Nature RupeesNote From To
Reclassification
Long term investments MCB Bank Limited - investment
Stores and spares consumed Fuel, power and water Diesel expenses for power generation
Other financial assets
Trade creditors Advances from customers Advances from customers
Stores and spares consumed Packing material consumed Packing material consumed
46 Non adjusting event after balance sheet date
The board of directors in its meeting held on October 06, 2010 proposed a cash dividend of Rs. 100,415,700 (2009: Rs. 30,124,710) at the rate of Rs. 5 (2009: Rs. 1.5) per ordinary share of Rs. 10 each. Proposed dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in these financial statements. This will be accounted for subsequently in the year of payment.
47 Corresponding Figures
Comparative information has been rearranged and reclassified, wherever necessary, for better presentation and comparison. Minor reclassifications were made in balance sheet for better presentation and understanding. Significant reclassification includes the following.
48 GENERAL
The figures have been rounded off to the nearest Rupees.
49 DATE OF AUTHORIZATION FOR ISSUE
These financial statements were authorized for issue by the Board of Directors of the Company on______________ .
Karachi:Dated: 06th October, 2010
Chairman / DirectorMOHAMMAD ABDULLAH NADEEM ABDULLAH
Chief Executive
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTSFor the year ended June 30, 2010
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Sapphire Textile Mills Limited
I/WE
Of
a member(s) of SAPPHIRE TEXTILE MILLS LIMITED and a holder of
ordinary shares, do hereby appoint
of
or failing him
of
a member of SAPPHIRE TEXTILE MILLS LIMITED, vide Registered Folio No.
as my/ our proxy to act on my/ our behalf at the 42nd Annual General Meeting of the company to be held on Thursday, 28th October, 2010 at 11:45 a.m. at 212, Cotton Exchange Building, I.I. Chundriger Road, Karachi and or at any adjournment thereof.
Signed this_______________________day of October, 2010
Signature__________________________________________
(Signature should agree with the specimen signature registered with the Company)
NOTICE
1. No proxy shall be valid unless it is duly stamped with a revenue stamp worth Rs. 5/-
2. In the case of Bank or Company, the proxy form must be executed under its common seal and signed by its authorized person.
3. Power of attorney and other authority (if any) under which this proxy form is signed then a notarially certified copy of that power of attorney must be deposited along with this proxy form.
4. This form of proxy duly completed must be deposited at the Registered Office of Company atleast 48 hours before the time of holding the meeting.
5. In case of CDC account holder :
i). The proxy from shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.
ii). Attested copies of CNIC or passport of the beneficial owners and the proxy shall be furnished with the proxy form.
iii). The proxy shall produce his original CNIC or original passport at the time of meeting.
FORM OF PROXY
Affix Five Rupee Revenue
Stamp
113