Dg khan

Audit Report
of
D.G. Khan Cement Company Limited

B.S. (Business Administration)
6th Semester, Section “B”

Submitted by:
MUHAMMAD SADIQ
Roll No. 06
Seat No. 901148

Submitted to:
SIR FASEEH KHAN

Date: 12th December, 2011

Department of Business Administration
Federal Urdu University of Arts, Science & Technology


CORPORATE PROFILE

Board of Directors Mrs. Naz Mansha Chairperson
Mian Raza Mansha Chief Executive
Mr. Khalid Qadeer Qureshi
Mr. Zaka-ud-Din
Mr. Muhammad Azam
Mr. Inayat Ullah Niazi Chief Financial Officer
Ms. Nabiha Shahnawaz Cheema

Audit Committee Mr. Khalid Qadeer Qureshi Member/Chairman
Mr. Muhammad Azam Member
Ms. Nabiha Shahnawaz Cheema Member

Company Secretary Mr. Khalid Mahmood Chohan

Bankers Allied Bank Limited Habib Metropolitan Bank Limited
Askari Bank Limited MCB Bank Limited
Bank Alfalah Limited NIB Bank
Bank Islami Pakistan Limited Meezan Bank Limited
Barclays Bank Plc National Bank of Pakistan
Citibank N.A. Royal Bank of Scotland
Deutsche Bank AG Samba Bank Limted
Dubai Islamic Bank Standard Chartered Bank (Pakistan)
Faysal Bank Limited Limited
First Women Bank Limited Silk Bank Limited
Habib Bank Limited The Bank of Punjab
HSBC United Bank Limited

External Auditors KPMG Taseer Hadi & Co, Chartered Accountants

Cost Auditors Avais Hyder Liaquat Nauman, Chartered Accountants

Legal Advisors Mr. Shahid Hamid, Bar-at-Law

Registered Office Nishat House, 53-A, Lawrence Road,
Lahore-Pakistan
Phone: 92-42-6367812-20 UAN: 111 11 33 33
Fax: 92-42-6367414
Email: info@dgcement.com
web site: www.dgcement.com

Factory 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan
Phone: 92-641-460025-7
Fax: 92-641-462392
Email: dgsite@dgcement.com

2. 12, K.M. Choa Saidan Shah Road,
Khairpur, Tehsil Kallar Kahar,
Distt. Chakwal-Pakistan
Phone: 92-543-650215-8
Fax: 92-543-650231

01 ANNUAL REPORT 2010


Mission Statement

To provide quality products to customers and explore new
markets to promote/expand sales of the Company through
good governance and foster a sound and dynamic team,
so as to achieve optimum prices of products of the Company
for sustainable and equitable growth and prosperity of the
Company.

Vision Statement

To transform the Company into a modern and dynamic
cement manufacturing company with qualified professionals
and fully equipped to play a meaningful role on sustainable
basis in the economy of Pakistan.



AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of D. G. Khan Cement Company Limited (“the Company”) as at 30 June 2010
and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes
in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the
information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and
present the above said statements in conformity with the approved accounting standards and the requirements of the Companies
Ordinance, 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 management, as well as,
evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our
opinion and, after due verification, we report that:

a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance,
1984;

b) in our opinion:

i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in
conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied except for change referred to in note 2.3
with which we concur ;
ii) the expenditure incurred during the year was for the purpose of the Company's business; and
iii) the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Company;

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet,
profit and loss account, statement of comprehensive income, cash flow statement 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 30 June 2010 and of the profit,
its comprehensive income, its cash flows and changes in equity for the year then ended; and

d) in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

Lahore KPMG Taseer Hadi & Co
September 17, 2010 Chartered Accountants
(Bilal Ali)



BALANCE SHEET

2010 2009
Note ----(Rupees in thousand)----

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorised capital
- 950,000,000 (2009: 950,000,000) ordinary shares of Rs 10 each 9,500,000 9,500,000
- 50,000,000 (2009: 50,000,000) preference shares of Rs 10 each 500,000 500,000

10,000,000 10,000,000

Issued, subscribed and paid up capital 3 3,650,993 3,042,494
Reserves 4 22,160,477 17,401,220
Accumulated profit 707,750 474,728

26,519,220 20,918,442

NON-CURRENT LIABILITIES

Long term finances 5 5,089,507 4,375,837
Long term deposits 6 81,138 73,765
Retirement and other benefits 7 104,029 78,622
Deferred taxation 8 1,465,960 1,441,576

6,740,634 5,969,800

CURRENT LIABILITIES

Trade and other payables 9 1,679,749 1,435,420
Accrued markup 10 346,425 531,772
Short term borrowing - secured 11 9,585,642 9,068,575
Current portion of non-current liabilities 12 2,139,283 4,763,942
Provision for taxation 35,090 35,090

13,786,189 15,834,799

CONTINGENCIES AND COMMITMENTS 13

47,046,043 42,723,041

The annexed notes from 1 to 41 form an integral part of these financial statements.

Chief Executive



AS AT JUNE 30, 2010

2010 2009
Note ----(Rupees in thousand)-----
ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 14 25,307,302 24,345,793
Capital work in progress 15 465,650 1,750,208
Investments 16 4,696,922 3,172,508
Long term loans, advances and deposits 17 158,677 166,940

30,628,551 29,435,449

CURRENT ASSETS

Stores, spares and loose tools 18 3,017,742 2,935,880
Stock-in-trade 19 1,036,876 899,836
Trade debts 20 303,949 513,966
Investments 21 10,740,972 7,785,968
Advances, deposits, prepayments
and other receivables 22 1,087,161 908,100
Cash and bank balances 23 230,792 243,842

16,417,492 13,287,592

47,046,043 42,723,041

Director



PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2010

2010 2009

Sales - net 24 16,275,354 18,038,209

Cost of sales 25 (13,569,994) (12,358,479)

Gross profit 2,705,360 5,679,730

Administrative expenses 26 (172,436) (141,852)

Selling and distribution expenses 27 (994,418) (1,871,517)

Other operating expenses 28 (189,015) (795,854)

Other operating income 29 911,672 770,137

Impairment on investment - (257,386)

Profit from operations 2,261,163 3,383,258

Finance cost 30 (1,902,760) (2,606,358)

Profit before tax 358,403 776,900

Taxation 31 (125,381) (251,319)

Profit for the year 233,022 525,581

Earnings per share - basic and diluted 32 0.72 1.63


Chief Executive Director



STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2010
2010 2009
-----(Rupees in thousand)----

Profit after taxation 233,022 525,581

Other comprehensive income :

Available for sale financial assets
- Change in fair value 4,209,530 (10,958,946)
- Realized gain through profit and loss account (58,772) -
- Impairment loss through profit and loss account - 257,386

Other comprehensive income / (loss) for the year - net of taxes 4,150,758 (10,701,560)

Total comprehensive income / (loss) for the year 4,383,780 (10,175,979)





CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2010

2010 2009
Note -----(Rupees in thousand)----

Cash flows from operating activities

Cash generated from operations 33 3,194,599 3,829,987
Finance cost paid (2,088,107) (2,439,250)
Retirement and other benefits paid (11,368) (6,934)
Taxes paid (260,492) (235,684)
Net increase/ (decrease) in long term deposits 7,373 (125)

Net cash generated from operating activities 842,005 1,147,994

Cash flows from investing activities

Capital expenditure including purchase
of property, plant and equipment (1,079,494) (1,995,630)
Proceeds from sale of property, plant and equipment 16,785 4,076
Investments - net (249,445) (38,878)
Net decrease in long term loans,
advances and deposits 8,489 356,106
Dividend received 766,398 707,242
Interest received 2,555 42,205

Net cash used in investing activities (534,712) (924,879)

Cash flows from financing activities

Proceeds from issuance of share capital 1,216,998 1,014,164
Proceeds from long term finances 3,050,000 300,000
Repayment of long term finances (5,104,383) (2,989,690)
Repayment of liabilities against assets subject to finance lease - (1,141)
Dividend paid (25) (533)

Net cash used in financing activities (837,410) (1,677,200)

Net decrease in cash and cash equivalents (530,117) (1,454,085)

Cash and cash equivalents at the beginning of year (8,824,733) (7,370,648)

Cash and cash equivalents at the end of year 34 (9,354,850) (8,824,733)





STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2010

CAPITAL RESERVE REVENUE RESERVE
Capital
Fair redemption
Share Share value reserve General Accumulated
capital premium reserve fund reserve (loss) /profit Total
( Ru p e e s i n t h o u s a n d )

Balance as at 30 June 2008 2,535,412 2,711,384 19,458,977 353,510 5,071,827 (50,853) 30,080,257

Capital transactions with owner
- Right issue 507,082 507,082 - - - - 1,014,164

Total comprehensive income
for the year
- Profit for the year - - - - - 525,581 525,581
- Other comprehensive loss
for the year - - (10,701,560) - - - (10,701,560)

Balance as at 30 June 2009 3,042,494 3,218,466 8,757,417 353,510 5,071,827 474,728 20,918,442

Capital transactions with owner
- Right issue 608,499 608,499 - - - - 1,216,998

Total comprehensive income
for the year
- Profit for the year - - - - - 233,022 233,022
- Other comprehensive
income for the year - - 4,150,758 - - - 4,150,758

Balance as at 30 June 2010 3,650,993 3,826,965 12,908,175 353,510 5,071,827 707,750 26,519,220





NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010

1 Legal status and nature of business

D. G. Khan Cement Company Limited ("the Company") is a public limited company incorporated in Pakistan and is listed
on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in production and sale of Clinker, Ordinary
Portland and Sulphate Resistant Cement. The registered office of the Company is situated at 53-A Lawrence Road,
Lahore.

2 Summary of significant accounting policies

The significant accounting policies adopted in preparation of financial statements are set out below.

2.1 Basis of preparation and 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 provisions of the Companies
Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued under the
Companies Ordinance, 1984 differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

2.2 Accounting convention

These financial statements have been prepared on the basis of historical cost convention, except for revaluation
of certain financial instruments at fair value and recognition of certain employee retirement benefits at present
value.

The preparation of financial statements in conformity with approved accounting standards requires management
to make judgments, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associated assumptions and judgments are based
on historical experience and various other factors that are believed to be reasonable under the circumstances,
the result of which form the basis of making the judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only that period, or in the
period of revision and future periods if the revision affects both current and future periods. The areas where
various assumptions and estimates are significant to Company's financial statements or where judgments were
exercised in application of accounting policies are:

- Provision for taxation note 2.5
- Retirement and other benefits note 2.6
- Residual values and useful lives
of depreciable assets note 2.8
- Interest rate and cross currency swaps note 2.18
- Provisions and contingencies note 2.20

2.3 Changes in accounting policy

Starting 01 July 2009, the Company has changed its accounting policy in the following area:

The Company has applied Revised IAS 1 : "Presentation of Financial Statements (2007)" which became effective
from financial year beginning on or after 01 January 2009. This standard required the Company to present in the
statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented
in statement of comprehensive income.



2.4 Borrowings

Interest bearing borrowings are recognized initially at fair value less 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 over the period of the borrowings on an effective interest rate basis.
Preference shares, which are mandatorily redeemable on a specific date at the option of the company, are
classified as liabilities. The dividend on these preference shares are recognised in the profit and loss account as
finance cost. Finance costs are accounted for on an accrual basis.

2.5 Taxation

Income tax expense comprises current and deferred tax. Income tax is recognized in the profit and loss account
except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current

Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing
law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected
to apply to the profit for the year if enacted after taking into account tax credits, rebates and exemptions, if any.
The charge for current tax also includes adjustments, where considered necessary, to provision for tax made
in previous years arising from assessments framed during the year for such years.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which the deductible temporary differences, unused tax
losses and tax credits can be utilised.

Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the
asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is charged or credited to the profit and loss account,
except in the case of items charged or credited to equity in which case it is included in the statement of changes
in equity.

2.6 Retirement and other benefits

The main features of the schemes operated by the Company for its employees are as follows:

Defined benefit plan

The Company operates an approved funded defined benefit gratuity plan for all employees having a service
period of more than five years for management staff and one year for workers. Provisions are made in the financial
statements to cover obligations on the basis of actuarial valuations carried out annually. The most recent valuation
was carried out as at 30 June 2010 using the "Projected Unit Credit Method".

The amount recognised in balance sheet represents the present value of the defined benefit obligation as on 30
June 2010 as adjusted for unrecognised actuarial gains and losses.

Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of
the greater of the present value of the Company obligations and the fair value of plan assets are amortised over
the expected average working lives of the participating employees.



Defined contribution plan

The Company operates a recognized provident fund for all its regular employees. Equal monthly contributions
are made to the fund both by the Company and the employees at the rate of 10% of the basic salary for officers
and 10% of basic salary plus cost of living allowance for workers. Obligation for contributions to defined
contribution plan is recognized as an expense in the profit and loss account as and when incurred.

Accumulating compensated absences

The Company provides for accumulating compensated absences, when the employees render service that
increase their entitlement to future compensated absences. Under the service rules employees are entitled to
2.5 days leave per month. Unutilized leaves can be accumulated upto 90 days in case of officers. Any balance in
excess of 90 days can be encashed upto 17 days a year only. Any further unutilised leaves lapse. In case of workers,
unutilized leaves may be accumulated without any limit, however accumulated leave balance above 50 days is
encashable upon demand of the worker. Unutilized leaves can be used at any time by all employees, subject to
the approval of the Company's management.

Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial
valuation and are charged to profit and loss account. The most recent valuation was carried out as at 30 June
2010 using the "Projected Unit Credit Method".

The amount recognised in the balance sheet represents the present value of the defined benefit obligations.
Actuarial gains and losses are charged to the profit and loss account immediately in the period when these occur.

2.7 Trade and other payables

Financial liabilities are initially recognized at fair value plus directly attributable cost, if any, and subsequently at
amortized cost using effective interest rate method.

Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for
goods and services.

2.8 Property, plant and equipment

Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any
identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation
to certain property, plant and equipment signifies historical cost, gains and losses transferred from equity on
qualifying cash flow hedges as referred to in note 2.18 and borrowing costs as referred to in note 2.21.

Depreciation on all property, plant and equipment is charged to the profit and loss account on the reducing
balance method, except for plant and machinery which is being depreciated using the straight line method, so
as to write off the historical cost of such asset over its estimated useful life at annual rates mentioned in note
14 after taking into account their residual values.

Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial
year end and adjusted if impact on depreciation is significant.

Depreciation on additions to property, plant and equipment is charged from the month in which the asset is
acquired or capitalised, while no depreciation is charged for the month in which the asset is disposed off.

The Company assesses at each balance sheet date whether there is any indication that property, plant and
equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess
whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective
recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss



is charged to profit and loss currently. The recoverable amount is the higher of an asset's fair value less costs to
sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future
periods to allocate the asset's revised carrying amount over its estimated useful life.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the company and
the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and
loss during the period in which they are incurred.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds
and the carrying amount of the asset is recognised as an income or expense.

2.9 Capital work-in-progress

Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment
loss and represents expenditure incurred on property, plant and equipment during the construction and installation.
Cost also includes applicable borrowing costs. Transfers are made to relevant property, plant and equipment
category as and when assets are available for use.

2.10 Leases

Finance leases

Leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases.
At inception, finance leases are capitalised at the lower of present value of minimum lease payments under the
lease agreements and the fair value of the assets, less accumulated depreciation and impairment loss, if any.

The related rental obligations, net of finance costs, are included in liabilities against assets subject to finance lease.
The liabilities are classified as current and non-current depending upon the timing of the payment.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction
of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments , if any are
accounted for by revising the minimum lease payments over the remaining term of the lease when the lease
adjustment is confirmed. The interest element of the rental is charged to income over the lease term.

Assets acquired under a finance lease are depreciated over the estimated useful life of the assets on reducing
balance method except plant and machinery which is depreciated on straight line method. Depreciation of leased
assets is charged to the profit and loss account.

Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial
year-end and adjusted if impact of depreciation is significant.

Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no
depreciation is charged for the month in which the asset is disposed off.

Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit on a straight-line basis over the lease term.

2.11 Investments

Investment in equity instruments of subsidiary company
Investment in subsidiary company is measured at cost as per the requirements of IAS-27 "Consolidated and



Separate Financial Statements". However, at subsequent reporting dates, the Company reviews the carrying
amount of the investment and its recoverability to determine whether there is an indication that such investment
has suffered an impairment loss. If any such indication exists the carrying amount of the investment is adjusted
to the extent of impairment loss. Impairment losses are recognized as an expense.

Investments in equity instruments of associated companies

Investments in associates where the company has significant influence are measured at cost in the company's
separate financial statements.

The company is required to issue consolidated financial statements along with its separate financial statements,
in accordance with the requirements of IAS 27 'Consolidated and Separate Financial Statements'. Investments
in associated undertakings, in the consolidated financial statements, are being accounted for using the equity method.

Available for sale

Investments which are intended to be held for an indefinite period of time but may be sold in response to the
need for liquidity are classified as available for sale. Available for sale investments are recognised initially at fair
value plus any directly attributable transaction costs. After initial recognition, these are stated at fair values unless
fair values can not be measured reliably, with any resulting gains and losses being taken directly to equity until
the investment is disposed off or impaired. At each reporting date, these investments are remeasured at fair
value, unless fair value cannot be reliably measured. At the time of disposal, the respective surplus or deficit is
transferred to profit and loss currently. Fair value of quoted investments is their bid price on Karachi Stock
Exchange at the balance sheet date. Unquoted investments, where active market does not exist, are carried at
cost as it is not possible to apply any other valuation methodology.

Investments intended to be held for less than twelve months from the balance sheet 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.

All purchases and sales of investments are recognised on the trade date which is the date that the company
commits to purchase or sell the investment.

At subsequent reporting dates, the company reviews the carrying amounts of the investments to assess whether
there is any indication that such investments have suffered an impairment loss. If any such indication exists, the
recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment
losses are recognised as expense. Where an impairment loss subsequently reverses, the carrying amount of the
investment is increased to the revised recoverable amount but limited to the extent of initial cost of the investment.

2.12 Stores and spares

Usable stores and spares are valued principally at moving average cost, while items considered obsolete are
carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

2.13 Stock-in-trade

Stock of raw materials, except for those in transit, work in process and finished goods are valued principally at
the lower of average cost and net realisable value. Stock of packing material is valued principally at moving
average cost. Cost of work in process and finished goods comprises cost of direct materials, labour and appropriate
manufacturing overheads.

Materials in transit are stated at cost comprising invoice value plus other charges paid thereon.

Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessary
to be incurred in order to make a sale.



2.14 Financial assets and liabilities

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions
of the instrument. 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, amortised cost or cost, as the case may be. The particular measurement methods adopted are
disclosed in the individual policy statements associated with each item.

2.15 Offsetting of financial assets and financial liabilities

A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company
has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or
to realize the asset and settle the liability simultaneously.

2.16 Trade debts

Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review
of all outstanding amounts at the year end. Bad debts are written off when identified.

2.17 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash
and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value
and short term borrowings. In the balance sheet, short term borrowings are included in current liabilities.

2.18 Derivative financial instruments and hedging activities

These are initially recorded at fair value on the date on which a derivative contract is entered into and subsequently
measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates
certain derivatives as cash flow hedge.

The Company documents at the inception of the transaction the relationship between the hedging instruments
and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged
items. Derivatives are carried as asset when the fair value is positive and liability when the fair value is negative.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedge
are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit
and loss account.

Amounts accumulated in equity are recognised in profit and loss account in the periods when the hedged item
will affect profit or loss. However, when the forecast hedged transaction results in the recognition of a non-
financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and
included in the initial measurement of the cost of the asset or liability.

Any gains or losses arising from change in fair value derivatives that do not qualify for hedge accounting are taken
directly to profit and loss account.

2.19 Foreign currencies

All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing
at the balance sheet date. Transactions in foreign currencies are translated into rupees at exchange rates prevailing



at the date of transaction. Non-monetary assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary
assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at
exchange rates prevailing at the date when fair values are determined. Exchange gains and losses are included
in the income currently.

2.20 Provisions

Provisions are recognized when the Company has a legal or constructive obligation as a result of past events
and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance
sheet date and adjusted to reflect current best estimate.

2.21 Borrowing costs

Mark-up, interest and other charges on borrowings are capitalised upto the date of commissioning of the related
property, plant and equipment acquired out of the proceeds of such borrowings. All other mark-up, interest and
other charges are charged to profit in which they are incurred.

2.22 Revenue recognition

Revenue represents the fair value of the consideration received or receivable for goods sold, net of discounts
and sales tax. Revenue is recognized when it is probable that the economic benefits associated with the transaction
will flow to the Company and the amount of revenue, and the associated cost incurred, or to be incurred, can
be measured reliably.

Revenue from sale of goods is recognised when the significant risk and rewards of owner ship of the goods are
transferred to the buyer i.e. on the dispatch of goods to the customers. Return on deposits is accrued on a time
proportion basis by reference to the principal outstanding and the applicable rate of return. Dividend income
on equity investments is recognised as income when the right of receipt is established.

2.23 Dividend

Dividend distribution to the Company's shareholders is recognised as a liability in the period in which the dividends
are approved.

2.24 Related party transactions

The Company enters into transactions with related parties on an arm's length basis. Prices for transactions with
related parties are determined using admissible valuation methods, except in extremely rare circumstances
where, subject to approval of the Board of Directors, it is in the interest of the Company to do so.

2.25 Standards and amendments to published approved International Financial Reporting Standards not
yet effective

A number of new standards and amendments to standards are not yet effective for the year ended 30 June 2010,
and have not been applied in preparing these financial statements.

- Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Additional
Exemptions for First-time Adopters (effective for annual periods beginning on or after 1 January 2010). The
IASB provided additional optional exemptions for first-time adopters contains a lease if the same assessment
as that required by IFRIC 4 was made under previous GAAP; and allow entities in the oil and gas industry
to use their previous GAAP carrying amounts as deemed cost at the date of transition for oil and gas assets.
The amendment is not relevant to the Company’s operations.



- Amendment to IFRS 2 – Share-based Payment – Group Cash-settled Share-based Payment Transactions
(effective for annual periods beginning on or after 1 January 2010). Currently effective IFRSs require attribution
of group share-based payment transactions only if they are equity-settled. The amendments resolve diversity
in practice regarding attribution of cash-settled share-based payment transactions and require an entity
receiving goods or services in either an equity-settled or a cash-settled payment transaction to account for
the transaction in its separate or individual financial statements.

- Amendments to IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Transactions
(effective for annual periods beginning on or after 1 January 2010). The IASB amended IFRS 2 to require an
entity receiving goods or services (receiving entity) in either an equity-settled or a cash-settled share-based
payment transaction to account for the transaction in its separate or individual financial statements. This
principle even applies if another group entity or shareholder settles the transaction (settling entity) and the
receiving entity has no obligation to settle the payment. Retrospective application is subject to the transitional
requirements in IFRS 2.

- Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (effective for annual
periods beginning on or after 1 January 2010). The amendments clarify that the required disclosures for non-
current assets (or disposal groups) classified as held for sale or discontinued operations are specified in
IFRS 5. These amendments are unlikely to have an impact on the Company’s financial statements.

- Amendments to IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January
2010). The amendments clarify that segment information with respect to total assets is required only if such
information is regularly reported to the chief operating decision maker. The amendment is not relevant to
the Company’s operations.

- Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after
1 January 2010). The amendments clarify that the classification of the liability component of a convertible
instrument as current or non-current is not affected by terms that could, at the option of the holder of the
instrument, result in settlement of the liability by the issue of equity instruments. These amendments are
unlikely to have an impact on the Company’s financial statements.

- Amendments to IAS 7 Statement of Cash Flows (effective for annual periods beginning on or after 1 January
2010). The amendments clarify that only expenditures that result in the recognition of an asset can be classified
as a cash flow from investing activities. These amendments are unlikely to have a significant impact on the
Company’s financial statements other than increase in disclosures.

- Amendments to IAS 17 Leases (effective for annual periods beginning on or after 1 January 2010). The IASB
deleted guidance stating that a lease of land with an indefinite economic life normally is classified as an operating
lease, unless at the end of the lease term title is expected to pass to the lessee. The amendments clarify that
when a lease includes both the land and building elements, an entity should determine the classification of
each element based on paragraphs 7 – 13 of IAS 17, taking account of the fact that land normally has an
indefinite economic life. The amendment is not relevant to the Company’s operations.

- Amendment to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues (effective for annual
periods beginning on or after 1 January 2010). The IASB amended IAS 32 to allow rights, options or warrants
to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency to be
classified as equity instruments provided the entity offers the rights, options or warrants pro rata to all of its
existing owners of the same class of its own non-derivative equity instruments. These amendments are unlikely
to have an impact on the Company’s financial statements.

- Amendments to IAS 36 Impairment of Assets (effective for annual periods beginning on or after 1 January
2010). The amendments clarify that the largest unit to which goodwill should be allocated is the operating
segment level as defined in IFRS 8 before applying the aggregation criteria of IFRS 8. The amendments apply
prospectively. The amendment is not relevant to the Company’s operations.



- Amendments to IAS 39 Financial Instruments: Recognition and Measurement (effective for annual periods
beginning on or after 1 January 2010). The amendments provide additional guidance on determining whether
loan prepayment penalties result in an embedded derivative that needs to be separated; clarify that the scope
exemption in IAS 39 paragraph 2(g) is restricted to forward contracts, i.e. not options, between an acquirer
and a selling shareholder to buy or sell an acquiree that will result in a business combination at a future
acquisition date within a reasonable period normally necessary to obtain any required approvals and to
complete the transaction; and clarify that the gains or losses on a cash flow hedge should be reclassified from
other comprehensive income to profit or loss during the period that the hedged forecast cash flows impact
profit or loss. The amendments apply prospectively to all unexpired contracts from the date of adoption.

These amendments are unlikely to have an impact on the Company’s financial statements.

3 Issued, subscribed and paid up capital

3.1 Issued, subscribed and paid up capital

2010 2009 2010 2009
----(Number of shares)---- ----(Rupees in thousand)----

270,492,177 209,642,299 Ordinary shares of Rs.10 each fully paid in cash 2,704,922 2,096,423

20,000,000 20,000,000 Ordinary shares of Rs. 10 each issued for
consideration other than cash 200,000 200,000

74,607,089 74,607,089 Ordinary shares of Rs. 10 each issued as fully
paid bonus shares 746,071 746,071

365,099,266 304,249,388 3,650,993 3,042,494

114,645,168 (2009: 95,537,640) ordinary shares of the Company are held by Nishat Mills Limited, an associated concern
as at 30 June 2010. In addition 1,407,944 (2009: 1,173,287) ordinary shares are held by the Adamjee Insurance Company
Limited, a related party as at 30 June 2010.
2010 2009
----(Number of shares)----
3.2 Reconciliation of number of shares

Number of shares as at 01 July 304,249,388 253,541,157
Issued during the year in cash 60,849,878 50,708,231

Number of shares as at 30 June 365,099,266 304,249,388

2010 2009
4 Reserves
Movement in and composition of reserves is as follows:

Capital Reserves
Share premium 4.1
At the beginning of the year 3,218,466 2,711,384
Additions during the year 608,499 507,082

At the end of the year 3,826,965 3,218,466



2010 2009

Fair value reserves 4.2
Fair value adjustments during the year 4,150,758 (10,701,560)

Capital redemption reserve fund 4.3 353,510 353,510
17,088,650 12,329,393
Revenue reserves
General reserves
Transfer from profit and loss account - -

22,160,477 17,401,220

4.1 This reserve can be utilised by the Company only for the purposes specified in section 83(2) of the Companies
Ordinance, 1984.

4.2 As referred to in note 2.11 this represents the unrealised gain on remeasurement of investments at fair value
and is not available for distribution. This amount will be transferred to profit and loss account on realisation.

4.3 This represents fund created for redemption of preference shares. In accordance with the terms of issue of
preference share, to ensure timely payments, the Company was required to maintain a redemption fund with
respect to preference shares. The Company had created a redemption fund and appropriated Rs. 7.4 million
each month from the profit and loss account in order to ensure that fund balance at redemption date is equal
to the principal amount of the preference shares. The preference shares have been redeemed during the year
ended 30 June 2007.

2010 2009

5 Long term finances

These are composed of:

- Long term loans 5.1 & 5.2 7,222,988 7,135,311
- Loan under musharika arrangement 5.3 - 2,000,000

7,222,988 9,135,311

Less: Current portion shown under current liabilities 12 2,133,481 4,759,474

5,089,507 4,375,837



5.1 Long term loans
Long term finances utilized under mark up arrangements from banking companies are composed of:
Rate of
Loan Lender 2010 2009 interest Outstanding Interest
(Rupees in thousand) per annum installments payable

1 Habib Bank Limited - 228,571 * Base rate + 3.0% The loan has been Quarterly
fully repaid during
the year

2 Habib Bank Limited - 57,143 * Base rate + 3.0% The loan has been Quarterly
fully repaid during
the year

3 National Bank of Pakistan - 85,721 ** Base rate + 0.65% The loan has been Semi annual
fully repaid during
the year

4 Standard Chartered Bank - 20,000 ** Base rate + 0.6% The loan has been Semi annual
fully repaid during
the year

5 Standard Chartered Bank - 60,000 ** Base rate + 0.6% The loan has been Semi annual
fully repaid during
the year

6 United Bank Limited - 500,000 ** Base rate + 0.60% The loan has been Semi annual
fully repaid during
the year

7 Habib Bank Limited - 300,000 ** Base rate + 2.5% The loan has been Quarterly
fully repaid during
the year

8 Allied Bank Limited 260,000 520,000 ** Base rate + 0.65% 2 equal semi-annual Semi annual
installments ending
30 June 2011

9 Habib Bank Limited 272,727 454,545 ** Base rate + 1.1% 3 equal semi-annual Quarterly
installments ending
29 September 2011

10 National Bank of Pakistan 300,000 500,000 ** Base rate + 0.65% 3 equal semi-annual Semi annual
installments ending
16 November 2011

11 Habib Bank Limited 300,000 500,000 * Base rate + 1.25% 3 equal semi-annual Quraterly
installments ending
30 December 2011

12 United Bank Limited 500,000 700,000 ** Base rate + 1.10% 5 equal semi-annual Semi annual
installments ending
30 September 2012

13 Bank Alfalah 461,091 576,364 ** Base rate + 1.00% 8 equal semi-annual Quraterly
installments ending
16 March 2014

14 Standard Chartered Bank 1,000,000 - ** Base rate + 1.5% 12 unequal quarterly Quarterly
installments ending
30 June 2012

15 Bank of Punjab 300,000 - ** Base rate + 1.5% 18 equal quarterly Quarterly
installments ending
31 March 2015

16 Allied Bank Limited 750,000 - ** Base rate + 1.5% 20 step-up quarterly Quarterly
installments ending
30 June 2016

17 Allied Bank Limited 1,000,000 - ** Base rate + 1.5% 20 step-up quarterly Quarterly
installments ending
30 November 2015
Foreign currency-unsecured

18 European Investment Bank 2,079,170 2,632,967 *** Base rate + 0.063% 6 equal semi-annual Quarterly
US$ 24.289 million installments ending on
(2009 : US$ 32.386 million) 29 March 2013

7,222,988 7,135,311

* Base rate
Average ask rate of six-month T-Bills to be set for each mark-up period.
** Base rate
Average ask rate of six-month and three-month Karachi Inter Bank Offer Rate ("KIBOR") to be set for each mark-up period.
*** Base rate
Average ask rate of three-month London Inter Bank Offer Rate ("LIBOR") to be set for each mark-up period.



5.2 These loans are secured by a registered first pari passu charge on all present and future fixed assets of the
Company upto Rs. 16,547 million (2009: Rs. 14,524 million).

5.3 This finance facility was arranged under syndicated arrangement, led by Meezan Bank Limited. The aggregate
sanction limit was Rs. 2,000 million and carried four unequal semi annual rentals. Principle amount was repaid
on 08 May 2010. The facility was secured by a registered first pari passu charge on all present and future fixed
assets of the Company upto Rs. 2,666 million.
2010 2009
----(Rupees in thousand)----
6 Long term deposits

Customers 32,167 29,462
Others 48,971 44,303

81,138 73,765

These represent interest free security deposits from stockists and suppliers and are repayable on cancellation/withdrawal
of the dealership or on cessation of business with the company respectively.
2010 2009

7 Retirement and other benefits

Staff gratuity 7.1 60,678 40,537
Leave encashment 7.2 43,351 38,085

104,029 78,622

7.1 Staff gratuity - net
The amounts recognised in the balance sheet are as follows :
Present value of defined benefit obligation 75,264 56,040
Fair value of plan assets (394) (274)
Benefits payable 323 115
Unrecognised actuarial losses (14,515) (15,344)
Liability as at 30 June 60,678 40,537

7.1.1 Change in present value of defined benefit obligation

Liability as at 01 July 40,537 26,362
Charge for the year including capitalized during the year 23,086 15,328
Contributions plus benefit payments made directly
by the Company during the year (2,945) (1,153)
Liability as at 30 June 60,678 40,537

7.1.2 Movement in liability for defined benefit obligation

Present value of defined benefit obligation as at 01 July 56,040 33,122
Current service cost 15,583 11,088
Interest cost 6,725 3,975
Benefits due but not paid (323) (115)
Benefits paid during the year (2,715) (880)
Actuarial (gain)/loss on present value of
defined benefit obligation (46) 8,850
Present value of defined benefit obligation as at 30 June 75,264 56,040



2010 2009

7.1.3 Movement in fair value of plan assets

Fair value of plan assets as at 01 July 274 1
Expected return on plan assets 33 -
Contributions during the year 2,945 1,153
Benefits paid during the year (2,830) (880)
Actuarial (loss) on plan assets (28) -
Fair value of plan assets as at 30 June 394 274

7.1.4 Actual return on plan assets

Expected return on plan assets 33 -
Actuarial (loss) on plan assets (28) -
5 -

7.1.5 Plan assets consist of the following :

Cash and other deposits 394 274

7.1.6 Movement in unrecognised actuarial losses

Un recognised actuarial losses as at 01 July (15,344) (6,759)
Actuarial gain/(losses) arising during the year 18 (8,850)
Actuarial losses charged to profit during the year 811 265
Un recognised actuarial losses as at 30 June (14,515) (15,344)

7.1.7 Charge for the year (including capitalized during the year)

Expected return on plan assets (33) -
Actuarial losses charged to profit during the year 811 265
23,086 15,328

2010 2009 2008 2007 2006
(Rupees in thousand)
7.1.8 Historical Information

Present value of defined
benefit obligation 75,264 56,040 33,122 22,741 11,685

Present value of plan
assets (394) (274) (1) (36) N/A

Deficit in the plan 74,870 55,766 33,121 22,705 11,685

Experience adjustment
arising on plan liabilities (46) 8,850 1,414 2,859 (495)
arising on plan assets (28) - (39) (2) N/A



7.1.9 Assumptions used for valuation of the defined benefit schemes for management and non-management staff are
as under:
2010 2009

Discount rate Per annum 12 % 12 %
Expected rate of increase in salary Per annum 11 % 11 %
Expected rate of return on plan assets Per annum 12 % 12 %
Average expected remaining working life
time of employee Number of years 12 12

7.1.10 The Company expects to pay Rs. 28.352 million in contributions to defined benefit plan in 2011.

2010 2009
7.2 Leave encashment

Opening balance 38,085 27,656
Expenses recognized 15,023 17,272
Payments made (3,955) (2,375)
49,153 42,553
Payable within one year (5,802) (4,468)
Closing balance 43,351 38,085

7.2.1 Movement in liability for defined benefit obligation

Present value of defined benefit obligation as at 01 July 38,085 27,656
Benefits paid during the year (3,955) (2,375)
Actuarial loss on present value of defined benefit obligation 587 5,969
Payable within one year (5,802) (4,468)

Present value of defined benefit obligation as at 30 June 43,351 38,085

7.2.2 Charge for the year (including capitalized during the year)

Actuarial losses charged to profit during the year 587 5,969

15,023 17,272

2010 2009 2008 2007 2006

7.2.3 Historical Information

Present value of defined
benefit obligation 49,153 42,553 31,062 25,839 17,711

arising on plan liabilities 587 5,969 3,010 2,168 8,149



7.2.4 Assumptions used for valuation of the accumulating compensated absences are as under:

2010 2009
Discount rate Per annum 12 % 12 %
Expected rate of increase in salary Per annum 11% 11%
Average expected remaining working
life time of eployees Number of years 12 12
Expected withdrawal and early retirement rate Based on experience

Officers Workers
2010 2009 2010 2009
(days) (days) (days) (days)

Average number of leaves
- Utilized per annum 14.00 14.00 19.00 19.00
- Encashed per annum 6.00 6.00 6.00 6.00
- Utilized per annum in excess
of accrued leave of 30 days 1.00 1.00 2.00 2.00
- Encashed per annum in excess
of accrued leave of 30 days 0.25 0.25 1.00 1.00

2010 2009

8 Deferred taxation
The liability for deferred taxation comprises temporary differences relating to:

Deferred tax liability
Accelerated tax depreciation 4,288,029 4,365,652
Deferred tax assets
Provision for retirement and other benefits (23,640) (6,946)
Unabsorbed tax credits (2,798,429) (2,917,130)
1,465,960 1,441,576

9 Trade and other payables

Trade creditors 376,307 264,089
Customers' balances 552,463 446,579
Accrued liabilities 307,152 258,265
Workers' profit participation fund 9.1 20,251 41,724
Workers welfare fund payable 77,320 50,967
Sales tax payable 32,850 81,468
Federal excise duty payable 221,636 227,319
Special excise duty payable - 2,036
Withholding tax payable 6,564 5,414
Retention money 20,485 16,884
Unclaimed dividend 4,869 4,894
Advances against sale of scrap 1,030 1,504
Redeemable preference shares (non-voting) - unsecured 127 127
Other payables 58,695 34,150

1,679,749 1,435,420



2010 2009

9.1 Workers' profit participation fund

Balance as at 01 July 41,724 -
Provision for the year 28 20,251 41,724
Interest for the year 30 2,051 -
64,026 41,724
Less: Payments during the year 43,775 -
Balance as at 30 June 20,251 41,724

10 Accrued markup

Long term finances 185,223 313,097
Short term borrowing - secured 161,118 218,591
Preferred dividend on redeemable preference shares 84 84
346,425 531,772

11 Short term borrowing - secured

Short term running finances 11.1 7,906,872 5,137,780
Import finances 11.2 1,678,770 1,822,397
Export refinance 11.3 - 2,108,398
9,585,642 9,068,575

11.1 Short term running finances

Short term running finances available from a consortium of commercial banks under mark up arrangements
amount to Rs. 9,820 million (2009: Rs. 9,695 million). The rates of mark up range from 12.24% to 16.26%
(2009: 13.17% to 17.17%) or part thereof on the balance outstanding. The aggregate short term running finances
of Rs. 9,820 million (2009: Rs. 9,695 million) are secured by a first registered charge on all present and future
current assets of the company wherever situated including stores and spares, stock in trade, book debts,
investments, receivables and pledge of 10.75 million (2009: 10.0 million) shares of MCB Bank Limited, 10.0
million (2009: 18.0) shares of Nishat Mills Limited and 2.3 million (2009 : Nil) shares of Adamjee Insurance
Company Limited.

11.2 Import finances

The Company has obtained import finance facilities aggregating to Rs. 3,737 million (2009: Rs. 2,537 million)
from commercial banks. The rates of mark-up range from 3.11% to 15.98% (2009: 3.11% to 17.17%). The
aggregate import finances are secured by a registered charge on all present and future current assets of the
Company wherever situated including stores and spares, stock in trade, book debts, investments and receivables.

Of the aggregate facility of Rs. 7,077.42 million (2009: Rs. 5,277.42 million) for opening letters of credit and Rs.
1,601.4 million (2009: Rs. 1,551.4 million) for guarantees, the amount utilized as at 30 June 2010 was Rs. 1,458.95
million (2009: Rs. 986.966 million) and Rs. 989.84 million (2009: Rs. 927.1 million) respectively. The aggregate
facilities for guarantees are secured by a registered charge on current assets of the Company. Of the facility for
guarantees, Rs. 14.48 million (2009: Rs. 14.48 million) is secured by a lien over bank deposits as referred to in
note 23.2.

11.3 Export refinance

This represents ERF loans obtained from various commercial banks, which carry mark-up at 7.5% per annum
(2009: 7.5%). These loans are obtained for a period of 180 days and are against pari passu hypothecation charge
over current assets of the Company.



2010 2009
12 Current portion of non-current liabilities

Long term finances 5 2,133,481 4,759,474
Retirement and other benefits 7.2 5,802 4,468

2,139,283 4,763,942

13 Contingencies and commitments

13.1 Contingencies

13.1.1 The Income Tax Officer, while framing the assessments for the assessment years 1984-85 to 1990-91, has taxed
the income of the Company on account of interest on deposits and sale of scrap etc. The Appellate Tribunal on
appeal filed by the Company issued an order in favour of the Company for the assessment years 1984-85 to
1990-91. The Income Tax Department filed reference before the Lahore High Court. Pending final outcome of
such reference, no adjustment has been made in these financial statements for the relief granted by the Appellate
Tribunal aggregating Rs. 35.090 million.

13.1.2 During the period 1994 to 1996, the Company imported plant and machinery relating to expansion unit, for
which exemption was claimed under various SROs from the levy of custom duty and other duties including sales
tax. As per the provisions of SRO 484 (I)/92, 978 (I)/95 and 569 (I)/95, the exemption from the statutory duty
would be available only if the said plant and machinery was not manufactured locally. However, the Custom
Authorities rejected the claim of the Company by arguing that the said machinery was on the list of locally
manufactured machinery, published by the Central Board of Revenue. Consequently, the Company appealed
before the Lahore High Court, Multan Bench, which allowed the Company to release the machinery on furnishing
indemnity bonds with the Custom Authorities.

Collector of Customs and Central Excise, Multan has passed an order dated November 26, 1999, against the
Company on the grounds that the said machinery was being manufactured locally during the time when it was
imported. The total demand as raised against the Company amounts to Rs. 715.372 million out of which
Rs. 200.645 million has been paid.

An appeal against the order was filed with the Lahore High Court, which has been decided in favour of the
Company. However, the Custom Authorities have filed an appeal with the Supreme Court of Pakistan against
the orders of the Lahore High Court. Hence, no provision for the balance amount of Rs. 514.727 million has
been made in the financial statements as according to the management of the company there are meritorious
grounds that the ultimate decision would be in its favour.

13.1.3 The Competition Commission of Pakistan (the CCP) took suo moto action under Competition Ordinance, 2007
and issued Show Cause Notice on 28 October 2008 for increase in prices of cement across the country. The
similar notices were also issued to All Pakistan Cement Manufacturers Association (APCMA) and its member
cement manufacturers. The Company has filed a Writ Petition in the Lahore High Court. The Lahore High Court,
vide its order dated 24 August 2009 allowed the CCP to issue its final order. The CCP accordingly passed an
order on 28 August 2009 and imposed a penalty of Rs. 933 million on the Company. The Lahore High Court vide
its order dated 31 August 2009 restrained the CCP from enforcing its order against the Company for the time
being.

The vires of the Competition Commission of Pakistan, 2007 have been challenged by a large number of Petitioners
and all have been advised by their legal counsels that prima facie the Competition Commission Ordinance, 2007
is ultra vires of the Constitution. A large number of grounds have been raised by these Petitioners and the matter
is currently being adjudicated by the Lahore High Court, the Sindh High Court and the Supreme Court of Pakistan.
In all these cases stay orders have been granted by the Courts. Based on the legal opinion, the management is
confident that the Company has a good case and there are reasonable chances of success in the pending Petition
in the Supreme Court of Pakistan.



13.1.4 The Company has issued following guarantees in favour of :

- Collector of Customs, Excise and Sales Tax against levy of Sales Tax, custom duty and excise duty amounting
to Rs. 20.460 million (2009: Rs. 20.460 million)

- Director, Excise Collection Office, Sindh Development and Maintenance against recovery of infrastructure
fee amounting to Rs. 240.9 million (2009: Rs. 180.9 million)

- Director General, Mines and Minerals, Punjab against installation of cement factory near Khairpur, District
Chakwal amounting to Rs. 3 million (2009: Rs. 3 million)

- Director General, Mines and Minerals, Quetta against Limestone, shale amounting to Rs. 3 million (2009:
Rs. 3 million).

- The President of the Islamic Republic of Pakistan against the performance of a contract to Frontier Works
Organisation amounting to Rs. 3 Million (2009: Rs. 1 million).

- Managing Director, Pakistan Railways against the performance of a contract amounting to Rs. 1.835 million
(2009: Rs. 1.835 million)

- Sui Northern Gas Pipelines Limited against 6 MMCFD and 14 MMCFD Gas for captive power and Industrial
use for Khairpur Project and for D.G. Khan Project amounting to Rs. 715.455 million (2009: Rs. 714.883
million)

- Professional Tax imposed by Administration Zila Council (The District Coordination Officer, D. G. Khan)
amounting to Rs. 50,000 (2009: Rs. 50,000).

- Bank guarantee in respect of Alternative Energy Development Board (AEDB) amounting to Rs. 2.140 million
(2009: Rs. 1.973 million).

13.2 Commitments

(i) Contracts for capital expenditure Rs. 115.335 million (2009: Rs. 196.252 million).

(ii) Letters of credit for capital expenditure Rs. 41.891 million (2009: Rs. 0.068 million).

(iii) Letters of credit other than capital expenditure Rs. 1,375.171 million (2009: Rs. 986.898 million).

(iv) The amount of future payments under operating leases and the period in which these payments will become
due are as follows:

2010 2009

Not later than one year 331 268
Later than one year and not later than five years 1,488 917
Later than five years 6,833 3,866
8,652 5,051


28
14. Property, plant and equipment
Reconciliation of net carrying value Reconciliation of gross carrying value
Net book Net book Accumulated Net book
value (NBV) Additions/ Disposals Depreciation value (NBV) Cost depreciation value Depreciation
as at 01 July transfers (at NBV) charge as at 30 June as at 30 June as at 30 June as at 30 June rate
2009 2010 2010 2010 2010 (% per annum)
(Rupees in thousand) (Rupees in thousand)
Freehold land 340,892 - - - 340,892 340,892 - 340,892 -

ANNUAL REPORT
Leasehold land 59,850 - - (2,100) 57,750 63,000 (5,250) 57,750 3.33%
Building on freehold land
- Factory Building 3,313,310 126,775 - (332,381) 3,107,704 4,847,944 (1,740,240) 3,107,704 10%
- Office Building and housing

2010
colony 467,990 42,031 - (23,709) 486,312 681,049 (194,737) 486,312 5%
Roads 280,466 18,279 - (28,199) 270,546 434,874 (164,328) 270,546 10%
Plant and machinery 18,423,265 2,100,649 - (791,965) 19,731,949 26,045,208 (6,313,259) 19,731,949 4.76% - 4.98%
Quarry equipment 886,766 - - (149,131) 737,635 1,497,966 (760,331) 737,635 20%
Furniture, fixture and office
equipment 184,603 15,357 (279) (18,816) 180,865 284,709 (103,844) 180,865 10%
Vehicles 83,942 13,659 (9,700) (14,646) 73,255 148,301 (75,046) 73,255 20%
Aircraft 3,540 - - (1,062) 2,478 38,185 (35,707) 2,478 30%
Power and water supply line 301,169 47,302 - (30,555) 317,916 463,229 (145,313) 317,916 10%

2010 24,345,793 2,364,052 (9,979) (1,392,564) 25,307,302 34,845,357 (9,538,055) 25,307,302

Reconciliation of net carrying value Reconciliation of gross carrying value
Net book Net book Accumulated Net book

value (NBV) Additions/ Disposals Depreciation value (NBV) Cost depreciation value Depreciation
as at 01 July transfers (at NBV) charge as at 30 June as at 30 June as at 30 June as at 30 June rate
2008 2009 2009 2009 2009 (% per annum)
(Rupees in thousand) (Rupees in thousand)
Freehold land 275,999 64,893 - - 340,892 340,892 - 340,892 -
Leasehold land 61,950 - - (2,100) 59,850 63,000 (3,150) 59,850 3.33%
Building on freehold land
- Factory Building 3,437,421 230,454 - (354,565) 3,313,310 4,721,169 (1,407,859) 3,313,310 10%
- Office Building and housing
colony 430,270 61,134 - (23,414) 467,990 639,018 (171,028) 467,990 5%
Roads 252,816 56,058 - (28,408) 280,466 416,595 (136,129) 280,466 10%
Plant and machinery 17,074,195 2,082,744 (257) (733,417) 18,423,265 23,944,559 (5,521,294) 18,423,265 4.76% - 4.98%
Quarry equipment 869,786 174,380 - (157,400) 886,766 1,497,966 (611,200) 886,766 20%
Furniture, fixture and office
equipment 181,183 23,285 (729) (19,136) 184,603 269,752 (85,149) 184,603 10%
Vehicles 91,872 9,932 (1,025) (16,837) 83,942 153,434 (69,492) 83,942 20%
Aircraft 5,059 - - (1,519) 3,540 38,185 (34,645) 3,540 30%
Power and water supply line 297,343 35,895 - (32,069) 301,169 415,927 (114,758) 301,169 10%

2009 22,977,894 2,738,775 (2,011) (1,368,865) 24,345,793 32,500,497 (8,154,704) 24,345,793


14.1 Freehold land and building include book values of Rs 12 million (2009: Rs 12 million) and Rs 9.177 million
(2009: Rs 9.177 million) respectively which are held in the name of Chief Executive of the Company. This
property is located in the locality of Defense Housing Authority where the by-laws restrict transfer of title of
the residential property in the name of the Company.

14.2 The depreciation charge for the year has been allocated as follows:
2010 2009

Cost of sales 25 1,379,750 1,354,851
Administrative expenses 26 11,538 12,679
Selling and distribution expenses 27 1,276 1,335
1,392,564 1,368,865

14.3 Disposal of property, plant and equiment
Detail of property, plant and equipment disposed off during the year is as follows:
Particulars of assets Sold to Cost Accumulated Book Sales Gain/(Loss) Mode of
depreciation value proceeds on disposal Disposal
Office equipment Limton Innovative System 326 66 260 100 (160) Auction

Vehicles Performance Automotive
(Private) Limited 10,407 4,716 5,691 10,500 4,809 Negotiation
International Motors 3,233 1,110 2,123 2,800 677 -do-
Mr. Irfan Ahmed 1,125 542 583 813 230 Auction
Mr. Irfan Ahmed 575 408 167 383 216 -do-
Mr. Rashid Maqbool 571 402 169 408 239 -do-
Mr. Agha Naveed Ahmed 566 402 164 421 257 -do-
Mr. Agha Naveed Ahmed 566 398 168 401 233 -do-
Mrs. Nawaz Heraj 571 170 401 203 (198) -do-
Mr. Salahuddin (Employee) 576 405 171 431 260 -do-
Others
Assets with book value
less than Rs. 50,000 676 594 82 325 243 Auction
2010 19,192 9,213 9,979 16,785 6,806
2009 5,110 3,099 2,011 4,076 2,065

2010 2009

15 Capital work in progress

Civil works 84,874 120,157
Plant and machinery 226,353 1,474,504
Advances 28,988 10,434
Others 78,491 110,944

Expansion project :

- Civil works 18,992 34,166
- Others 27,952 3
46,944 34,169

465,650 1,750,208



2010 2009
16 Investments

Investment in subsidiary company 16.1 203,629 203,629
Available for sale 16.2 4,493,293 2,968,879
4,696,922 3,172,508

16.1 Investment in subsidiary company
Un-quoted
Nishat Paper Products Company Limited
23,268,398 (2009: 23,268,398) fully paid ordinary
shares of Rs. 10 each
Equity held: 50% (2009: 50%) 203,629 203,629

16.2 Available for sale

Related parties 16.2.1 1,846,505 1,406,068
Others 16.2.2 519 519
1,847,024 1,406,587
Revaluation surplus 2,646,269 1,562,292
4,493,293 2,968,879
16.2.1 Related parties

Quoted
Nishat Mills Limited - associated company
shares of Rs. 10 each 1,371,619 1,029,373
Transferred from short term investments
shares of Rs. 10 each 21.1 205,555 -
Market value - Rs. 1,306.084 million
(2009: Rs. 719.096 million)
Less: Cumulative impairment loss (250,615) (184,915)
1,326,559 844,458
Nishat (Chunian) Limited
shares of Rs. 10 each 45,254 48,872
Market value - Rs. 77.746 million
(2009: Rs. 65.15 million)
Nil (2009: 3,804,582) fully paid Preference - 38,046
shares of Rs. 10 each
Market value - Rs. Nil (2009: Rs. 38.046 million)
MCB Bank Limited
shares of Rs. 10 each 125,834 125,834
Market value - Rs. 2,825.817 million
(2009: Rs 2,050.881 million)
Adamjee Insurance Company Limited - associated company
shares of Rs. 10 each 348,858 348,858
(2009: Rs. 270.401 million)
519,946 561,610
1,846,505 1,406,068



Nishat Mills Limited, MCB Bank Limited and Adamjee Insurance Company Limited are associated undertakings
as per the Companies Ordinance, 1984, however, for the purpose of measurement, these have been classified
as available for sale and measured at fair value as the Company does not have significant influence over these
companies.

2010 2009

16.2.2 Others-Quoted

Maple Leaf Cement Factory Limited
13,747 (2009: 13,747) fully paid ordinary
shares of Rs. 10 each 282 282
Market value - Rs. 0.0428 million (2009: Rs. 0.058 million)
Less: Impairment loss (128) (128)
154 154
1,999 (2009: 1,999) fully paid
preference shares of Rs. 10 each 20 20
17 17
First Capital Mutual Fund
89,000 (2009: 89,000) certificates of Rs. 10 each 890 890
212 212
Habib Bank Limited
145 (2009: 132) fully paid ordinary shares of Rs. 10 each 24 24
18 18
Oil and Gas Development Company Limited
2,353 (2009: 2,353) fully paid ordinary shares of Rs. 10 each 76 76

Pakistan Petroleum Limited

Kot Addu Power Company Limited
519 519

16.3 Investments with a face value of Rs. 230.5 million (2009: Rs. 280 million) are pledged as security against bank
facilities. 2,396,924 (2009: 2,396,924) shares of MCB Bank Limited are blocked in CDC account.



2010 2009

17 Long term loans, advances and deposits

Loans to employees - considered good
- Executives 17.1 410 17
- Others 3,204 5,017
3,614 5,034
Less: Receivable within one year
- Executives 113 17
- Others 1,282 1,604
1,395 1,621

2,219 3,413

Loan to related party - considered good 17.2 120,440 137,645
Less : receivable within one year 22 17,206 17,206
103,234 120,439
Security deposits 53,224 43,088
158,677 166,940

17.1 Executives

Opening balance 17 89
Transfer from Others to Executives 505 -
Interest accrued 26 -
548 89
Less: Repayment during the year 138 72
410 17

These represent secured loans given to executives and other employees for house building and purchase of motor
vehicles and are recoverable in equal monthly installments over a period of 24 to 96 months. The loans given
to executives and other employees carry interest at the rate 10% per annum (2009: 10% per annum) except
for loans given to workers which are interest free.

The loans of Rs. 3.614 million (2009: Rs. 5.034 million) are secured against the employees' respective retirement
benefits.

The maximum aggregate amount due from executives at any time during the year was Rs. 0.298 million (2009:
Rs. 0.082 million).

17.2 This represents un-secured loan of Rs. 85.750 million and Rs. 34.690 million (2009 : Rs. 98 million and Rs. 39.645
million ) given to Sui Northern Gas Pipelines Limited for the development of infrastructure for supply of natural
gas to the plants at D. G. Khan and Khairpur respectively. Mark-up is charged at rates ranging from 1.5% to 2%
per annum (2009: 1.5% to 2% per annum) respectively and is receivable annually. This amount is receivable in
10 annual installments commencing 01 January 2007 and 28 March 2008.



2010 2009

18 Stores, spares and loose tools

Stores [including in transit Rs. 9.556 million
(2009: Rs. 462.422 million)] 870,113 1,669,358
Spares [including in transit Rs. 306.053 million 2,130,891 1,251,795
(2009: Rs. 45.189 million)]
Loose tools 16,738 14,727

3,017,742 2,935,880

Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.

2010 2009
19 Stock-in-trade

Raw materials 127,756 121,414
Packing material [including in transit Rs. Nil
(2009: Rs. 14.633 million)] 152,216 141,062
Work-in-process 537,539 387,444
Finished goods 219,365 249,916
1,036,876 899,836

20 Trade debts - considered good

Secured 252,980 417,680
Unsecured
- Related parties 20.1 2,776 11,106
- Others 48,193 85,180
303,949 513,966

20.1 Due from related parties

Nishat Mills Limited - 11,106
Nishat (Chunian) Limited 1,100 -
Nishat Power Limited 1 -
Nishat Developers 1,675 -
2,776 11,106

These are in the normal course of business and are interest free.

21 Investments

Available-for-sale
Related parties 21.1 479,066 590,843
Add: Revaluation surplus 10,261,906 7,195,125

10,740,972 7,785,968



2010 2009
21.1 Related parties-Quoted

Nishat Mills Limited - associated company
2,719,703 (2009: 1,875,658) fully paid
ordinary shares of Rs. 10 each 205,555 171,794
Market value -Rs. 117.274 million
(2009: Rs. 70.937 million)
Less: Impairment Loss (65,700) (65,700)
139,855 106,094

Less : transferred to long term investments 16.2.1 (139,855) -
- 106,094

Nishat (Chunian) Limited
Nil (2009: 166,318) fully paid
ordinary shares of Rs. 10 each - 11,638
83,159 (2009: Nil) fully paid
ordinary shares of Rs. 10 each 21.2 832 -
(2009: Rs. 1.432 million)
Less: Impairment Loss - (5,955)
832 5,683
Nil (2009: 83,159) fully paid preference
of Rs. 10 each - 832
Market value - Rs Nil (2009: Rs. 0.832 million )

MCB Bank Limited
55,304,911 (2009: 50,277,195) fully paid
ordinary shares of Rs. 10 each 478,234 478,234
Market value Rs. 10,739.661 million
(2009: Rs 7,794.474 million)
479,066 590,843

Nishat Mills Limited and MCB Bank Limited are associated undertakings as per the Companies Ordinance, 1984,
however, for the purpose of measurement, these have been classified as available for sale and measured at fair
value as the Company does not have significant influence over these companies.

21.2 During the year the preference shares of Nishat (Chunian) Limited have been converted into fully paid ordinary
shares.
2010 2009

22 Advances, deposits, prepayments and other receivables

Loans to employees - considered good 17 1,395 1,621
Advances - considered good
- to employees 22.1 2,025 3,386
- to trade suppliers 22.2 430,169 325,063

432,194 328,449

Current portion of long term receivable from related party 17 17,206 17,206
Due from related parties 22.3 30,828 9,774



2010 2009

Mark-up receivable from related party 22.4 40,834 1,116
Derivative financial instruments 22.5,22.6 & 22.7 9,422 213,072
Profit receivable on bank deposits 981 1,282
Prepayments - 180
Letters of credit - margins, deposits, opening charges, etc. 35,341 21,807
Excise duty recoverable 3,019 -
Claims recoverable from government
Income tax 381,654 222,159
Sales tax 22.8 51,307 50,699
Freight subsidy 27,422 -
Excise duty 17,243 17,243
Export rebate 35,514 17,646
513,140 307,747

Other receivables 2,801 5,846
1,087,161 908,100

22.1 Included in advances to employees are amounts due from executives of Rs. 1,009 thousand (2009: Rs. 277
thousand).
22.2 This includes amount due from Subsidiary company amounting to Rs. 346.414 million (2009: Rs. 266.973 million)
relating to advance for purchase of paper bags carrying interest at average borrowing rate of the Company.

2010 2009
22.3 Due from related parties
Nishat Mills Limited 22.3.1 30,656 9,602
Nishat Hotels and Properties Ltd. 22.3.1 172 172
30,828 9,774
22.3.1 These relate to normal business of the Company and are interest free.

22.4 This represents mark-up receivable from Sui Northern Gas Pipelines Limited against the loan as referred to in note 17.2.

22.5 The Company had entered into two interest rate cross currency swap agreements with banks for a notional
amount of USD 15 million (2009: USD 15 million), which were settled pre-maturely during the year. The
outstanding balance of these arrangements as at 30 June 2010 is USD Nil (2009: USD 11.138 million). Under
interest rate swap arrangements the Company had to pay 3 months KIBOR rates and receive 3 months LIBOR
rates as per the respective arrangements on quarterly basis, further under cross currency swap arrangements
the Company had to pay PKR and receive USD, which had to be settled semi annually.

22.6 The Company had entered into an interest rate cross currency swap agreements with a bank for a notional
amount of Rs. 750 million (2009: Rs 750 million), which matured during the year. The outstanding balance of
these arrangements as at 30 June 2010 is Rs. Nil (2009: Rs 750 million). Under interest rate swap arrangements
the Company had to receive 6 months KIBOR rates and pay 6 months LIBOR rates as per the respective
arrangements, further under cross currency swaps arrangements the Company would pay USD and receive PKR,
which had to be settled semi annually.

22.7 The Company has entered into 9 forward agreements with various banks for a total amount of USD 16.5 million
(2009 : USD Nil), having 1 to 6 months maturity. Under forward agreement, the Company would sell the
contracted quantity of USD to the bank at the Contracted rate. As at 30 June 2010, the unrealized gain on these
forward contracts amount to Rs. 9.422 million (2009 : Nil).

22.8 Sales tax recoverable represents amounts which have been recovered by the sales tax department against
miscellaneous demands raised by it. The Company has filed appeals against the demands at different forums.



2010 2009
23 Cash and bank balances

At banks
Saving accounts
Pak rupee 61,426 29,785
Foreign currency US $ 22.20 (2009: US $ 22.22) 2 2
Current accounts 168,268 212,060
229,696 241,847
Cash in hand 1,096 1,995
230,792 243,842

23.1 The balances in saving accounts bear mark-up which ranges from 0.1% to 5% per annum (2009: 0.1% to 5%
per annum).

23.2 Included in balances at banks on saving accounts are Rs 14.480 million (2009: Rs 14.480 million) which are under
lien to secure bank guarantees referred to in note 11.2.
2010 2009
24 Sales - net

Local sales 18,337,945 17,590,823
Export sales 24.1 3,698,676 5,801,994
22,036,621 23,392,817
Less: Government levies 5,509,345 5,046,757
Commission to stockists and export agents 251,922 307,851
5,761,267 5,354,608
16,275,354 18,038,209

24.1 Export sales include rebate on exports amounting to Rs. 23.020 million (2009: Rs. 11.936 million).

2010 2009
25 Cost of sales

Raw and packing materials consumed 1,912,808 1,527,430
Salaries, wages and other benefits 25.1 695,739 641,408
Electricity and gas 1,991,243 1,427,631
Furnace oil and coal 6,100,305 6,603,908
Stores and spares consumed 25.2 1,096,570 879,772
Repair and maintenance 165,951 131,911
Insurance 52,727 45,573
Depreciation on property, plant and equipment 14.2 1,379,750 1,354,851
Depreciation on assets subject to finance lease - 80
Royalty 185,052 86,514
Excise duty 34,839 30,023
Vehicle running 21,041 18,208
Postage, telephone and telegram 4,829 4,188
Printing and stationery 4,821 8,149
Legal and professional charges 2,079 2,856
Traveling and conveyance 8,652 6,297
Estate development 12,514 10,285
Rent, rates and taxes 1,492 7,731
Freight charges 4,924 5,600
Other expenses 19,834 16,150
13,695,170 12,808,565


2010 2009

Opening work-in-process 387,444 118,292
Closing work-in-process (537,539) (387,444)
(150,095) (269,152)
Cost of goods manufactured 13,545,075 12,539,413

Opening stock of finished goods 249,916 78,369
Closing stock of finished goods (219,365) (249,916)
30,551 (171,547)
Less : own consumption 5,632 9,387
13,569,994 12,358,479

25.1 Salaries, wages and other benefits include Rs. 19.256 million (2009: Rs. 16.323 million), Rs. 17.584 million (2009:
Rs. 11.640 million) and Rs. 12.394 million (2009: Rs. 13.937 million) respectively, in respect of provident fund
contribution by the Company, provision for gratuity and staff compensated absences.

25.2 Stores and spares consumed during the year include Rs. Nil (2009: Rs. 3.814 million) being stores and spares
written off.
2010 2009

26 Administrative expenses

Electricity, gas and water 3,868 3,482
Repair and maintenance 6,052 6,753
Insurance 1,596 1,707
Depreciation on property, plant and equipment 14.2 11,538 12,679
Depreciation on assets subject to finance lease - 9
Postage, telephone and telegram 9,568 3,353
Legal and professional charges 26.2 8,478 8,014
Rent, rates and taxes 1,480 185
Entertainment 1,492 1,441
School expenses 11,292 9,790
Fee and subscription 4,948 3,818
172,436 141,852


26.2 Legal and professional charges

Legal and professional charges include the following
in respect of auditors' services for:
Statutory audit 1,100 1,000
Half yearly review 250 225
Certification and sundry services 50 20
Out of pocket expenses 100 75
1,500 1,320



2010 2009
27 Selling and distribution expenses

Electricity, gas and water 1,100 1,064
Repair and maintenance 557 366
Insurance 238 294
Depreciation on property, plant and equipment 14.2 1,276 1,335
Postage, telephone and telegram 2,400 932
Rent, rates and taxes 3,520 3,030
Legal and professional charges 16 263
Entertainment 578 393
Advertisement and sales promotion 5,271 1,657
Freight charges -local 70 64
Freight and handling charges -export 916,975 1,802,298
994,418 1,871,517


2010 2009
28 Other operating expenses

Workers' profit participation fund 20,251 41,724
Donations 28.1 351 7,387
Worker welfare fund 26,353 15,855
Exchange loss 142,060 730,888
189,015 795,854

28.1 None of the directors and their spouses had any interest in any of the donees.

2010 2009

29 Other operating income

Income from financial assets
Income on bank deposits 2,372 2,712
Interest on loans to employees 45 67
Gain on sale of shares 79,215 5,039
Dividend income from:
- Related parties 29.1 765,930 707,206
- Others 468 25
766,398 707,231
848,030 715,049



2010 2009

Income from non-financial assets
Rental income 1,406 1,602
Profit on disposal of property, plant and equipment 6,806 2,065
Scrap sales 13,085 11,170
Mark-up on loan/advances to related parties 42,273 40,126
Provisions and unclaimed balances written back - 125
63,570 55,088
Others 72 -
911,672 770,137

29.1 Dividend income from related parties

Nishat Mills Limited 41,779 50,394
Nishat (Chunian) Limited 50 -
MCB Bank Limited 714,443 649,495
Adamjee Insurance Company Limited 9,658 7,317

765,930 707,206

30 Finance cost

Interest and mark-up on:
- Long term loans 731,659 1,210,330
- Short term borrowings 1,088,143 1,066,099
- Finance lease - 10
- Workers' profit participation fund 2,051 -
Loss on derivative financial instruments 28,470 261,519
Guarantee commission 29,843 34,381
Bank charges 22,594 34,019
1,902,760 2,606,358

30.1 During the year borrowing cost amounting to Rs. 150.084 million (2009: Rs. 22.948 million) has been capitalized
in the property, plant and equipment pertaining to the new expansion project.

2010 2009

31 Provision for taxation

For the year
- Current 31.1 (100,998) (128,743)
- Deferred (24,383) (122,576)

(125,381) (251,319)

31.1 The provision for current taxation represents minimum tax under section 113 of the Income Tax Ordinance,
2001 at the rate of 0.5% of turnover from local sales. In addition to this, it includes tax on exports and rental
income which is full and final discharge of Company's tax liability in respect of income arising from such source.

31.2 For purposes of current taxation, the tax credits available for carry forward as at 30 June 2010 are estimated
approximately at Rs. 7,995 million (2009: Rs. 8,163 million).

31.3 Since the Company is liable to pay minimum tax, therefore, no numerical tax reconciliation is given.



2010 2009
Restated

32 Earnings per share

32.1 Earnings per share - Basic

Profit for the year Rupees in thousand 233,022 525,581
Weighted average number of ordinary shares Number 325,273,021 321,652,453
Earnings per share - basic Rupees 0.72 1.63

32.2 Earnings per share - Diluted

There is no dilution effect on the basic earnings per share as the Company has no such commitments.

2010 2009

33 Cash flow from operating activities

Profit before tax 358,403 776,900

Adjustment for :
- Depreciation on property, plant and equipment 1,392,564 1,368,865
- Depreciation on assets subject to finance lease - 89
- Profit on disposal of property, plant and equipment (6,806) (2,065)
- Gain on disposal of investments (79,215) -
- Dividend income (766,398) (707,231)
- Impairment loss - 257,386
- Store and spares directly written off - 3,814
- Markup income (42,273) (42,905)
- Retirement and other benefits accrued 38,109 32,600
- Exchange loss - net 142,060 730,888
- Finance cost 1,902,760 2,606,358
2,580,801 4,247,799

Profit before working capital changes 2,939,204 5,024,699

Effect on cash flow due to working capital changes:

- Increase in stores, spares and loose tools (81,862) (640,444)
- Increase in stock-in-trade (137,040) (453,980)
- Decrease / (increase) in trade debts 210,017 (147,793)
- Increase in advances, deposits, prepayments
and other receivables 19,926 (18,112)
- Increase in trade and other payables 244,354 65,617
255,395 (1,194,712)
Cash generated from operations 3,194,599 3,829,987

34 Cash and cash equivalents

Short term borrowings - secured (9,585,642) (9,068,575)
Cash and bank balances 230,792 243,842
(9,354,850) (8,824,733)



35 Remuneration of Chief Executive, Directors and Executives

35.1 The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits,
to the chief executive, full time working directors and executives of the Company is as follows:
Chief Executive Directors Executives
2010 2009 2010 2009 2010 2009
(Rupees in thousand) (Rupees in thousand) (Rupees in thousand)

Managerial remuneration 6,518 5,668 10,310 8,964 121,805 101,538
Contributions to provident
and gratuity funds - - 1,031 896 10,271 8,297
Housing 270 270 683 594 38,874 21,755
Utilities - - - - 8,289 6,508
Leave passage - - 635 697 3,173 2,185
Medical expenses 1,359 385 109 30 2,213 1,236
Others 4,843 4,238 2,045 1,266 38,849 37,157
12,990 10,561 14,813 12,447 223,474 178,676

Number of persons 1 1 2 2 105 92

The Company also provides the chief executive and some of the directors and executives with free transport
and residential telephones.

35.2 Remuneration to other directors

Aggregate amount charged in the financial statements for the year for fee to 5 directors (2009: 5 directors) was
Rs. Nil (2009: Rs. Nil).

36 Transactions with related parties

The related parties comprise subsidiary company, associated companies, other related companies, directors of the
company, key management personnel and post employment benefit plans. The directors of the related companies are
close members of the family of the directors of the company. The company in the normal course of business carries
out transactions with various related parties. Amounts due from and due to related parties are shown under receivables
and payables, dividend income is disclosed in note 29, expense charged in respect of staff retirement benefit plans is
disclosed in note 7 and remuneration of the key management personnel is disclosed in note 35. Other significant
transactions with related parties are as follows:
2010 2009

Relationship with the company Nature of transaction

i. Subsidiary Company Purchase of goods 1,186,862 912,294
Rental income 776 762
Interest income 39,859 37,390

ii. Other related parties Sale of goods 29,002 33,345
Insurance premium 75,046 58,152
Purchase of services 742,971 811,471
Insurance claims received 202 729
Mark-up income on balances with
related parties 2,414 5,374
Dividend income 765,930 707,206

All transactions with related parties have been carried out on commercial terms and conditions.



37. Plant capacity and actual production
Capacity Actual production
2010 2009 2010 2009

Clinker (M. Tons)

Unit 1 810,000 810,000 951,397 913,872
Unit 2 1,200,000 1,200,000 1,328,353 1,086,267
Unit 3 2,010,000 2,010,000 2,404,629 1,945,962

38. Operating segments

38.1 The financial information has been prepared on the basis of a single reportable segment.

38.2 Sale from cement and clinker represent 98.57% and 1.43% (2009: 95.59% and 4.41%) of total revenue of the
company respectively.

38.3 All non-current assets of the company as at 30 June 2010 are located in Pakistan.

39. Financial instruments

The company has exposure to the following risks from its use of financial instruments.:

- Credit risk
- Liquidity risk
- Market risk

The Board of Directors have the overall responsibility for the establishment and oversight of Company’s risk management
framework. The Board is also responsible for developing and monitoring the Company's risk management policies.

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives,
policies and processes for measuring and managing risk, and the Company’s management of capital.

The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to react to changes in market conditions and the Company's activities.

39.1 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 Company's receivables from customers
and loans to/due from related parties. Out of the total financial assets of Rs. 16,702 million (2009: Rs. 12,483
million) financial assets which are subject to credit risk amount to Rs. 16,701 million (2009: Rs. 12,481 million).

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer.
To manage exposure to credit risk in respect of trade receivables, management reviews credit worthiness,
references, establish purchase limits taking into account the customer's financial position, past experience and
other factors. Export sales are secured through letters of credit. The management has set a maximum credit
period of 30 days to reduce the credit risk. Limits are reviewed periodically and the customers that fail to meet
the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

Concentration of credit risk arises when a number of counter parties are engaged in similar business activities
or have similar economic features that would cause their abilities to meet contractual obligation to be similarly
effected by the changes in economic, political or other conditions. The Company believes that it is not exposed
to major concentration of credit risk.



The carrying amount of financial assets represents the maximum credit exposure before any credit enhancements.
The maximum exposure to credit risk at the reporting date is:
2010 2009

Available for sale financial assets
- Non Current Investments 4,696,922 3,172,509
- Current Investments 10,740,972 7,785,967
Long term loans, advances and deposits 158,677 166,940
Trade debts 303,949 513,966
Advances, deposits and other receivables 561,580 387,101
Bank balances 229,696 241,847
Derivative financial instruments 9,422 213,072
16,701,218 12,481,402

The trade debts as at the balance sheet date are classified as follows:

Foreign 216,093 417,680
Domestic 87,856 96,286
303,949 513,966
The aging of trade receivables at the reporting date is:

Past due 1 - 3 Months 139,950 490,181
Past due 4 - 6 Months 22,718 2,620
Past due 7 - 10 Months 6,979 1,967
Past due 11 - 12 Months 4,075 1,060
Past due above one year 130,227 18,138
303,949 513,966

Based on past experience the management believes that no impairment allowance is necessary in respect of trade
receivables past due as some receivables have been recovered subsequent to the year end and for other receivables
there are reasonable grounds to believe that the amounts will be recovered in short course of time.

39.2 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions. For this purpose the Company has
sufficient running finance facilities available from various commercial banks to meet its liquidity requirements.
Further liquidity position of the Company is closely monitored through budgets, cash flow projections and
comparison with actual results by the Board.

Following is the maturity analysis of financial liabilities:

Less than 6 Between 6 to Between 1 to Between 6 to Over 10 Total
months 12 months 5 years 10 years years
Non derivative financial liabilities
Long term finances 1,066,740 1,066,740 4,677,008 412,500 - 7,222,988
Long term deposits - - 81,138 - - 81,138
Trade and other payables 767,635 - - - - 767,635

2009-2010 1,834,375 1,066,740 4,758,146 412,500 - 8,071,761



Less than 6 Between 6 to Between 1 to Between 6 to Over 10 Total
months 12 months 5 years 10 years years
Non derivative financial liabilities
Long term finances 1,629,737 3,129,737 4,315,837 60,000 - 9,135,311
Long term deposits - - 73,765 - - 73,765
Trade and other payables 578,409 - - - - 578,409

2008-2009 2,208,146 3,129,737 4,389,602 60,000 - 9,787,485

39.3 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Company's income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.

39.3.1 Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency
other than the functional currency primarily U.S. Dollars (USD). The Company uses forward exchange and
derivative contracts to hedge its currency risks. The Company's exposure to foreign currency risk for US Dollars
is as follows:
2010 2009

Foreign debtors 216,093 417,680
Foreign currency bank accounts 2 2
Less: Long Term Loans (2,079,170) (2,632,967)
Less: Import Finances (1,602,507) -
Less: Payables (4,255) (10,904)
Derivative financial instruments - asset 9,422 213,072
Gross balance sheet exposure (3,460,415) (2,013,117)
Outstanding letter of credits (539,059) (685,418)
Net exposure (3,999,474) (2,698,535)

The following significant exchange rates have been applied:
Reporting date rate
2010 2009

USD to PKR - Buy 85.40 81.10
USD to PKR - Sell 85.60 81.30

Average rate
2010 2009

USD to PKR - Buy 83.38 78.69
USD to PKR - Sell 84.26 78.89

Sensitivity analysis:

At reporting date, if the PKR had strengthened by Rupee one against the foreign currencies with all other variables
held constant, post-tax profit for the year would have been higher by the amount shown below, mainly as a result
of net foreign exchange gain on translation of foreign debtors, foreign currency bank account and outstanding
letter of credits.



2010 2009

Effect on profit and loss 46,832 33,274

The weakening of the PKR against foreign currencies would have had an equal but opposite impact on the post
tax profit.

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and assets /
liabilities of the Company.

39.3.2 Interest rate risk

Interest rate risk is the risk that the value of financial instrument will fluctuate due to changes in market interest
rates. Significant interest rate risk exposures are primarily managed by a mix of borrowings at fixed and variable
interest rates and entering into interest rate swap contracts. At the reporting date the interest rate profile of
the Company's significant interest bearing financial instruments was as follows:

2010 2009 2010 2009
Effective rate Carrying amount
(in Percentage) (Rupees in 000)

Financial liabilities

Fixed rate instruments:

Short term borrowings - PKR - 7.5 - 2,108,398

Variable rate instruments:

Long term finances - PKR 13.08 to 15.11 12.59 to 16.62 5,143,818 6,502,344
Long term finances - USD 0.314 to 0.664 2.45 2,079,170 2,632,967
Short term borrowings - PKR 12.24 to 16.66 13.17 to 17.17 7,983,134 6,079,898
Short term borrowings - USD 3.11 to 3.75 3.11 to 6.89 1,602,508 880,279

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss.
Therefore a change in interest rates at the reporting date would not affect profit and loss account.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/ (decreased) profit for the
year by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant. The analysis is performed on the same basis for 2009.

100bps
Increase Decrease

Effect on profit - 30 June 2010 (150,216) 150,216

Effect on profit - 30 June 2009 (139,762) 139,762

The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities
of the Company.



39.3.3 Fair value hierarchy
Financial instruments carried at fair value are categorised as follows:
Level 1 : quoted market prices
Level 2 : valuation techniques (market observable)
Level 3 : valuation techniques (non-market observable)

The Company held the following financial instruments measured at fair value:

Total Level 1 Level 2 Level 3
Financial assets 30 June 2010
Available for sale financial assets 15,234,265 15,234,265 - -
Derivative financial assets 9,422 - 9,422 -
15,243,687 15,234,265 9,422 -

Financial assets 30 June 2009
Available for sale financial assets 10,754,847 10,754,847 - -
Derivative financial assets 213,072 - 213,072 -
10,967,919 10,754,847 213,072 -

39.3.4 Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market prices (other than those arising from interest rate risk or currency risk). Equity price risk
arises from available-for-sale equity securities held. Material investments within the portfolio are managed on an
individual basis and all buy and sell decisions are approved by the Board. The primary goal of the Company's
investment strategy is to maximise investment returns.

Sensitivity analysis:

A 1% increase / decrease in share prices at year end would have decreased / increased the Company's surplus
on re-measurement of investments in case of 'available for sale' investments as follows:

2010 2009

Effect on profit and loss 152,343 107,548

39.4 Fair value of financial instruments

The 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.

39.5 Capital management

The Board’s policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence
and to sustain the future development of its business. The Board of Directors monitors the return on capital
employed, which the Group defines as operating income divided by total capital employed. The Board of Directors
also monitors the level of dividends to ordinary shareholders.



The Group's objectives when managing capital are:

(i) to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and

(ii) to provide an adequate return to shareholders.

The Group manages the capital structure in the context of economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Group may, for example, adjust
the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt.

The Group monitors capital on the basis of the debt-to-equity ratio - calculated as a ratio of total debt to equity.

The debt-to-equity ratios as at 30 June 2010 and at 30 June 2009 were as follows:

2010 2009

Total debt 17,155,055 18,735,658
Total equity and debt 43,674,275 39,654,100
Debt-to-equity ratio 39% 47%

The decrease in the debt-to-equity ratio in 2010 resulted primarily due to net repayment of long term and short
term borrowings.

Neither there were any changes in the Group’s approach to capital management during the year nor the Group
is subject to externally imposed capital requirements.

40. Date of authorisation

These financial statements were authorised for issue on 17 September 2010 by the Board of Directors of the Company.

41. General

41.1 Figures have been rounded off to the nearest thousand of Rupees.

41.2 Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However,
no significant re-arrangements have been made.



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