Annual Accounts 2018
Annual Accounts 2018
Annual Accounts 2018
LIMITED.
ANNUAL
REPORT
FOR THE YEAR ENDED JUNE 30, 2018
PIONEER CEMENT LIMITED
ENDURING
STRENGTH
Contents
89 93 94 95 Form of Proxy
92
Financial
Results
2018
Dividend Rs. 4.07
Per share (40.7%)
Breakup Value per Share ( June 30 , 2018 ) Market Value per Share ( June 30 , 2018 )
Rs. 60.00 Rs. 46.86
QUARTER 03 QUARTER 04
389:;1:))<=
Milestones
Incorporation as Commencement Start of
a Public Limited of production commissioning
Company with capacity of of production
2000 tons clinker line-II
per day
Commissioning
of production Switchover from
line-I and listing furnace oil to
of shares coal firing system
Commencement of
production line-II Received
with capacity of ‘Professional
4300 tons of clinker Excellence Award’
per day from ICAP
- Commencement of construction
of 8000 TPD clinker plant and 12
2017 MW WHRPP + 24MW CFPP
- Construction of new head office
building in Lahore started
ENVIRONMENTAL
ENSURING ENVIRONMENT
FRIENDLY OPERATIONS,
PRODUCTS AND SERVICES
The inherent processes of manufacturing cement are
widely considered to be unfriendly to the environment.
However, with the development of technology, our
modern plant is equipped with extensive dust collection
equipment heavily reducing our carbon footprint.
ISO 9001:2015 IS O 1 4 0 0 1 :2 0 1 5
Social Responsibilities
Pioneer Cement remains committed to its role as a responsible and ethical corporate citizen. We understand the
impact our operations can have on the community and the environment and therefore have an active CSR strategy
that focuses on areas such as education, health and the environment.
Pioneer Cement also funded the construction of an with the Green Office criteria to reducing
additional building in the District Public School in consumption of natural resources. In line with our
Jauharabad as well as Sargodha. The extra wings mission to be green, we have introduced several
will enable the inclusion of 500 students in both environment friendly business practices including the
cities. Other initiatives include ongoing support installation of energy efficient coal firing burners that
for SOS Schools and the Vocational Training reduce the gaseous emissions as well as a Waste
Institute of Quaidabad. We are also working with Heat Recovery Power Plant that generates electricity
Pakistan’s premiere business school IBA to ensure the from these emissions.
quality and relevance of its business curriculum. Our
partnership with IBA continues and the company has
contributed for the construction of residence for the
Local Community Development
faculty. In an effort to encourage closer ties within the
communities where we operate, Pioneer Cement
Health has rolled out several development initiatives such
Healthcare remains a key interest for Pioneer Cement. as the construction and maintenance of the Chenki
We have initiated several long term programs which village mosque, the development of 15 km long road
includes establishing Pioneer Medical Center at the connection to Chenki and Jabbi Village and thereby
plant. This facility provides free medical and helping to over thousand of commuters and the
emergency ambulance services to the entire ongoing donation support for flood and disaster
community besides our own employees and their relief efforts.
dependents. A public dispensary has been established
in Chenki Village. Financial support is also being
provided to the TB Center Foundation.
10 PIONEER CEMENT LIMITED
Art & Culture
In keeping our focus on community develop-
ment, Pioneer Cement organized an impres-
sive 2nd Artist in Residency Program, with the
objective of promoting local art and culture
using indigenous materials. This was a collabo-
rative effort with Canvas Gallery and was
centered around six internationally renowned
visual artists who lived on plant for two weeks
to create locally inspired art. A formal unveil-
ing of their work, in the presence of business
and community leaders, was held in february
this year at the plant. Beside providing a
platform to showcase local talent, this
program has fostered a sense of aesthetics and
appreciation for Visual Arts within the local
community. We intend to carry on this
Residency Program every year.
Corporate Information
01 Board of Directors 09 Legal Advisor
Mr. Aly Khan (Chairman) Hassan & Hassan
Mr. Arif Hamid Dar (CEO)
Ms. Aleeya Khan
Mr. Sha uddin Ghani Khan
10 Registered O ce
Mr. Mohammad Aftab Alam 135-Ferozepur Road, Lahore
Tel: +92 (42) 37503570-72
Mr. Jamal Nasim
Fax: +92 (42) 37503573-4
Mr. Mirza Ali Hassan Askari Email: [email protected]
Mr. Ra que Dawood
02 Audit Committee
11 Factory
Mr. Jamal Nasim (Chairman)
Chenki, District Khushab
Mr. Aly Khan
Tel: +92 (454) 898101-3
Ms. Aleeya Khan Fax: +92 (454) 898104
Mr. Sha uddin Ghani Khan Email: [email protected]
Mr. Mohammad Aftab Alam
Faisalabad O ce
06 Company Secretary
O ce No. 3, 2nd Floor, Sitara Tower,
Mr. Abdul Wahab Bilal Chowk, New Civil Lines, Faisalabad,
Tel: +92 (41) 2630030, 2640406-7
07 Bankers Fax: +92 (41) 2630923
Allied Bank Limited
Askari Bank Limited Sargodha O ce
Bank Al Habib Limited O ce No. 6, 2nd Floor, Rehman Trade Centre,
Dubai Islamic Bank University Road, Sargodha
Tel: +92 (483) 725050
Bank of Khyber
Fax: +92 (483) 722331
Habib Bank Limited
JS Bank Limited
MCB Bank Limited
13 Share Registrar
Meezan Bank Limited
National Bank of Pakistan Corplink (Pvt) Limited
The Bank of Punjab Wings Arcade, 1-K Commercial,
Model Town, Lahore
United Bank Limited
Tel: +92 (42) 35839182, 35916714
Fax: +92 (42) 35869037
08 Statutory Auditors Email: [email protected],
EY Ford Rhodes [email protected]
Chartered Accountants
BOARD OF DIRECTORS
INTERNAL AUDIT
Board of Directors
Mohammad Aftab Alam Jamal Nasim Mirza Ali Hassan Askari Rafique Dawood
Left to Right
Mr. Jamal Nasim (Chairman), Mr. Aly Khan, Ms. Aleeya Khan, Mr. Shafiuddin Ghani Khan, Mr. Mohammad Aftab Alam
Left to Right
Mr. Shafiuddin Ghani Khan (Chairman), Mr. Aly Khan, Ms. Aleeya Khan, Mr. Mohammad Aftab Alam,
Mr. Arif Hamid Dar (CEO & MD)
Chairman’s Report
It is my pleasure to present to you the annual report of
Pioneer Cement Limited along with the financial
statements for the year ended June 30, 2018.
2017
2016
Cement Sales The cost of sales increased by Rs. 1,108 million over last
Local 13,575 12,801 773 6.0 year mainly due to the following reasons:
Exports 383 189 195 103.3
- Coal prices increased during the year in international
13,958 12,990 968 7.4 market.
Clinker Sale 627 1,645 (1,018) (61.9)
- “Fuel Price Adjustment”, which had favourable impact
Total 14,586 14,636 (50) (0.3)
on power cost in the previous years, decreased gradually
and has resulted in increased production cost during the
Production and Sales Volume current year.
A summary of the production and sales volume is given - Cost of packing material also increased by Rs. 84.8
below: million due to increased prices of paper in international
Tons market.
FY 2018 FY 2017 Variance
- Total fuel and power cost for the year increased by Rs.
Production
Capacity 1,995,000 1,995,000 - 989.3 million over last year.
Clinker 1,550,704 1,564,037 (13,333)
Cement 1,543,325 1,405,092 138,233 - Depreciation of Pak rupee against US Dollar pulled the
Dispatches fuel, power and packaging cost up. At the start of finan-
Domestic
cial year the Rs./$ parity was 104.9 which went on to
Cement 1,475,956 1,356,915 119,041
Clinker 100,915 277,521 (176,606)
close at 121.5 year end.
1,576,871 1,634,436 (57,565)
Operating and Financing Costs
Exports
Cement 68,950 35,258 33,692
- Distribution cost for the year increased by Rs. 72.8
Clinker - 498 (498)
million over last year mainly due to export freight and
68,950 35,756 33,194
handling charges.
1,645,821 1,670,192 (24,371)
2017
2016
Profitability
For the year under review, gross profit amortised to
Dispatches of clinker for the year declined over last year
Rs.2,810.7 million (2017: Rs. 4,428.3 million), decrease of
due to reduced demand of clinker from local cement
Rs. 1,617.6 million (36.5%) over corresponding year due
manufacturers. Local cement dispatches marked a
to the reasons explained above in the section of “Reve-
growth over the corresponding year. Cement Exports of
nues and Cost of Production”.
your Company expanded significantly and grew by 96%
over last year.
The Board
The Board comprises of seven non-executive directors including three independent directors. The position of the Chair-
man and the CEO are kept separate in line with the recommendation of the Code of Corporate Governance.
Dividends
The Board of Directors in its meeting held on September f) There are no significant doubts upon Company's ability
27, 2018 has recommended a final cash dividend @ to continue as a going concern.
40.7% i.e. Rs. 4.07 per share for the year.
g) There has been no material departure from the best
Payout ratio (%) of your Company for the recent years practices of corporate governance.
is as follows:
56.2 56.4 56.9 h) The Statement of Ethics and Business Strategy is
54.6
prepared and circulated amongst the directors and employ-
42.8 ees.
2017
2016
2015
2014
Corporate and Financial Reporting i. Key operating and financial data for six years
Framework
ii. Statement of pattern of shareholding
The Board reviews the strategic direction of the Company
on a regular basis. The business plan and budgetary iii. Statement of shares held by associated companies,
targets set by the Board are also reviewed regularly. The undertakings and related persons
Board is committed to maintain a high standard of corpo-
rate governance and ensures comprehensive compliance iv. Statement of other information
of the Code of Corporate Governance enforced by the
Securities and Exchange Commission of Pakistan.
EMPLOYEE WELFARE
The Company operates a funded Provident Fund Scheme The installation of 8,000 tons per day clinker plant
for all permanent employees while all contractual accompanied by 12 MW Waste heat recovery power
employees below the age of 60 years are provided with plant (WHRPP) is in process. 24 MW coal power plant is
an unfunded Gratuity Scheme. The audited fair value of also being installed to minimize the reliance on national
the investments of the Provident Fund as on June 30, grid. The completion of these projects shall allow your
2018 was Rs. 159.1 million (2017: Rs. 181.2 million - Company to consolidate its position in central and north-
audited). ern regions of Pakistan.
Medical and Hospitalization The above mentioned projects are being financed
through two syndicated facilities; Rs. 15 billion syndicate
All eligible employees of the Company including their
led by National Bank of Pakistan is financing cement
spouse and children are provided with medical and hospi-
plant and WHRPP whereas Meezan Bank is leading
talization facilities as per the Company policy in order to
second syndicated facility of Rs. 2.6 billion. Your Compa-
provide them peace of mind to concentrate on discharg-
ny is committed to achieve commercial operations
ing their professional duties.
within the original planned timelines.
Human Capital
In addition to the above mentioned brown field expan-
The Company recognizes its human resource as one of sion projects, your Company has also signed a non-bind-
the valuable assets. Employees with high performance ing Memorandum of Understanding with the sponsors of
are awarded to create a conducive environment and to Galadari Cement (Gulf) Limited (GCGL) for the acquisi-
motivate other employees for better performance. tion of 100% shares of GCGL. GCGL plant is situated at
Hub, District Lasbela, Balochistan province. Currently,
negotiations are underway with the existing lenders/-
Directors’ Training Program creditors of GCGL to complete the acquisition.
Auditors
EY Ford Rhodes will retire at the conclusion of the 32nd Arif Hamid Dar
Annual General Meeting. They have offered themselves Chief Executive Officer
for reappointment. The Board hereby recommends EY September 27, 2018
Ford Rhodes for reappointment as suggested by the Audit
Committee.
Rs (million)
Financial position
Assets Employed
Property plant and equipment 22,920.02 12,237.40 10,384.03 7,330.67 7,509.38 7,860.70
Other long term assets 120.47 114.85 116.16 109.54 105.66 39.69
Current assets 6,070.88 5,407.92 4,267.51 4,674.14 4,262.03 3,701.77
Total Assets 29,111.37 17,760.17 14,767.70 12,114.35 11,877.07 11,602.16
Financed by
Shareholders equity 10,517.41 9,519.11 7,820.70 6,720.32 5,134.77 4,442.68
Surplus on revaluation of fixed assets-net of tax 3,111.55 2,728.42 2,849.47 1,612.76 1,667.55 1,726.53
Long term liabilities 11,031.78 3,825.57 2,355.44 2,138.38 3,543.53 3,719.64
Other Current liabilities 4,450.63 1,687.07 1,742.09 1,642.89 1,531.21 1,713.31
Total Funds Invested 29,111.37 17,760.17 14,767.70 12,114.35 11,877.07 11,602.16
%
Vertical analysis
Share capital and reserves 36.12 53.60 52.95 55.47 43.23 38.29
Surplus on revaluation of fixed assets 10.69 15.36 19.30 13.31 14.04 14.88
Long term liabilities 37.90 21.35 15.95 17.65 29.84 32.06
Current liabilities 15.29 9.69 11.80 13.56 12.89 14.77
Total equity and liabilities 100.00 100.00 100.00 100.00 100.00 100.00
Non current assets 79.15 69.55 71.10 61.42 64.12 68.09
Current assets 20.85 30.45 28.90 38.58 35.88 31.91
Total assets 100.00 100.00 100.00 100.00 100.00 100.00
Horizontal analysis (i)
Cumulative
Share capital and reserves 136.74 114.26 76.04 51.27 15.58 100.00
Surplus on revaluation of fixed assets 80.22 58.03 65.04 (6.59) (3.42) 100.00
Long term liabilities 196.58 2.85 (36.68) (42.51) (4.73) 100.00
Current liabilities 159.77 (1.53) 1.68 (4.11) (10.63) 100.00
Total equity and liabilities 150.91 53.08 27.28 4.42 2.37 100.00
Non current assets 191.64 56.35 32.91 (5.82) (3.61) 100.00
Current assets 64.00 46.09 15.28 26.27 15.13 100.00
Total assets 150.91 53.08 27.28 4.42 2.37 100.00
Horizontal analysis (ii)
Year vs Year
Share capital and reserves 10.49 21.72 16.37 30.88 15.58 41.65
Surplus on revaluation of fixed assets 14.04 (4.25) 76.68 (3.28) (3.42) (3.09)
Long term liabilities 188.37 62.41 10.15 (39.65) (4.73) 3.24
Current liabilities 163.81 (3.16) 6.04 7.29 (10.63) 7.77
Total equity and liabilities 63.91 20.26 21.90 2.00 2.37 14.75
Non current assets 86.53 17.64 41.13 (2.30) (3.61) (3.29)
Current assets 12.26 26.72 (8.70) 9.67 15.13 90.71
Total assets 63.91 20.26 21.90 2.00 2.37 14.75
Vertical analysis
Net turnover 100.00 100.00 100.00 100.00 100.00 100.00
Cost of sales (72.23) (58.35) (57.24) (62.43) (67.74) (68.22)
Gross profit 27.77 41.65 42.76 37.57 32.26 31.78
Distribution cost (1.65) (0.88) (0.64) (0.68) (0.66) (1.19)
Administrative expenses (0.96) (0.80) (0.87) (0.84) (0.80) (0.82)
Other income / (charges) (2.36) (1.37) 0.00 5.73 1.01 (0.32)
Operating profit 22.80 38.61 41.25 41.78 31.82 29.45
Finance cost (0.94) (0.33) (0.19) (0.67) (1.93) (2.25)
Exchange gain – – – 0.44 0.40 2.51
Profit before taxation 21.86 38.28 41.07 41.56 30.28 29.71
Taxation (5.62) (10.84) (14.18) (11.93) (8.24) (9.42)
Profit after taxation 16.24 27.44 26.89 29.63 22.04 20.28
Shares held
7,380 227,148,793
Associated Companies,
undertakings and related
parties 522,144 0.2299
Banks Development
Financial Institutions, Non
Banking Financial Institutions. 8,143,770 3.5852
General Public
a) Local 34,643,708 15.2515
b) Foreign 127,790 0.0563
Others
1- Leasing Companies 79,640 0.0351
2- Investment Companies 4,316 0.0019
3- Joint Stock Companies 19,845,124 8.7366
4- Pension Funds 1,723,487 0.7587
5- Foreign Companies 120,906,764 53.2280
6- Others 9,458,849 4.1642
41 CDC - TRUSTEE UBL RETIREMENT SAVINGS FUND - EQUITY SUB FUND (CDC) 8,200 0.0036
42 CDC - TRUSTEE UBL STOCK ADVANTAGE FUND (CDC) 142,200 0.0626
43 CDC - TRUSTEE UNIT TRUST OF PAKISTAN (CDC) 32,500 0.0143
44 CDC TRUSTEE - MEEZAN DEDICATED EQUITY FUDN (CDC) 98,000 0.0431
45 CDC-TRUSTEE AL-AMEEN ISLAMIC RET. SAV. FUND-EQUITY SUB FUND (CDC) 415,300 0.1828
46 CDC-TRUSTEE HBL ISLAMIC STOCK FUND (CDC) 289,500 0.1274
47 CDC-TRUSTEE NAFA SAVINGS PLUS FUND - MT (CDC) 37,500 0.0165
48 M C F S L-TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND (CDC) 30,000 0.0132
49 MCBFSL - TRUSTEE ABL ISLAMIC STOCK FUND (CDC) 478,300 0.2106
50 MCBFSL - TRUSTEE NAFA INCOME FUND - MT (CDC) 18,500 0.0081
51 MCBFSL - TRUSTEE PAK OMAN ADVANTAGE ASSET ALLOCATION FUND (CDC) 22,500 0.0099
52 MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET ALLOCATION FUND (CDC) 60,000 0.0264
53 MCBFSL TRUSTEE ABL ISLAMIC DEDICATED STOCK FUND (CDC) 340,000 0.1497
Directors and their Spouse and Minor Children (Name Wise Detail):
SALE PURCHASE
All trades in the shares of the Company, carried out
by its Directors, Executives and their spouses and minor children - -
Notice is hereby given that the 32nd Annual General Meeting of Pioneer Cement Limited will be held at 135 Ferozepur
Road, Lahore on Thursday, October 25, 2018 at 11:00 a.m. to transact the following business:
1. To confirm minutes of last Annual General Meeting held on October 26, 2017.
2. To receive, consider and adopt the audited accounts for the year ended June 30, 2018 and the reports of the
directors and auditors thereon.
3. To appoint auditors for the year ending June 30, 2019 and to fix their remuneration.
4. To approve final dividend of Rs.4.07/- (i.e.40.70%) per share as recommended by the Board of Directors for the year
ended June 30, 2018.
5. To transact any other business as may be placed before the meeting with the permission of the Chairman.
Lahore
September 27, 2018 ABDUL WAHAB
Company Secretary
(a) The shareholders through CDC are requested to bring Additionally, shareholders are informed that the rates
original Computerized National Identity Card (CNIC)/- of deduction of income tax from dividend payments
Passport for the purpose of identification to attend the under section 150 of the Income Tax Ordinance 2001
meeting. are as follows:
(b) In case of corporate entity, the Board’s Resolution or (a) Rate of tax deduction for filer of income tax returns
power of attorney with specimen signature of the nomi- 15%
nee shall be produced at the time of the meeting. (b) Rate of income tax for non-filer of income tax
3. Shareholders having physical share certificates are returns 20%
requested to immediately notify the change in address, if Where the required documents are not submitted, the
any. Company will be constrained to treat the non-comply-
4. Under the provisions of Section 242 of the Companies ing shareholders as a non-filer thereby attracting a
Act, 2017 and Circular No.18/2017, it is mandatory for a higher rate of withholding tax.
listed Company to pay cash dividend to its shareholders Consent for Video Conference Facility
ONLY through electronic mode directly into bank
account designated by the entitled shareholders. In order In compliance with Section 134(I)(b) of the Compa-
to receive dividends directly into their bank account, nies Act, 2017, if the Company receive consent from
shareholders are requested to fill in Electronic Credit members holding aggregate 10% or more shareholding
Mandate Form available on Company’s website and send residing at geographical location to participate in the
it duly signed along with a copy of CNIC to: meeting through video link facility at least 10 days
prior to the date of general meeting, the Company will
(a) The Registrar of the Company M/s. Corplink (Pvt.) arrange video link facility in that city.
Limited, Wings Arcade, 1-K Commercial, Model Town,
Lahore in case of physical shareholders. To avail this facility, please provide following informa-
tion and submit to registered address of the Company.
(b) The Broker/Participant/CDC account services in case
of shares are held in CDC. The Company will intimate members regarding venue
of video conference facility at least 5 days before the
Pursuant to the directive of the Securities and Exchange date of the general meeting along with complete
Commission of Pakistan (SECP), Dividend Warrants shall information necessary to enable them to access the
mandatorily bear the CNIC number of shareholders. All facility.
shareholders who have not yet submitted copy of their
CNIC and NTN Certificate to the Company are requested l/We,______ of ____ being a member of the PIONEER
to send the same at the earliest to Company’s Registrars CEMENT LIMITED, being holder of Ordinary Shares as
M/s. Corplink (Pvt.) Limited to mention the same on the per Register Folio No.______ hereby opt for video
dividend warrants. conference facility at _______
Signature of member
The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our
responsibility is to review whether the Statement of Compliance reflects the status of the Company’s compliance
with the provisions of the Regulations and report if it does not and to highlight any non-compliance with the
requirements of the Regulations. A review is limited primarily to inquiries of the Company’s personnel and review of
various documents prepared by the Company to comply with the Regulations.
As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to
consider whether the Board of Directors’ statement on internal control covers all risks and controls or to form an
opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures and risks.
The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit
Committee, place before the Board of Directors for their review and approval, its related party transactions and also
ensure compliance with the requirements of section 208 of the Companies Act, 2017. We are only required and have
ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board
of Directors upon recommendation of the Audit Committee. We have not carried out procedures to assess and
determine the Company’s process for identification of related parties and that whether the related party
transactions were undertaken at arm’s length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of
Compliance does not appropriately reflect the Company’s compliance, in all material respects, with the
requirements contained in the Regulations as applicable to the Company for the year ended 30 June 2018.
Further, we highlight the status of compliance as mentioned in the paragraph 18 of the Statement of Compliance,
which has been complied with subsequent to the year.
Chartered Accountants
Engagement Partner: Abdullah Fahad Masood
Lahore: October 01, 2018
ALY KHAN
Chairman of the Board
Opinion
We have audited the annexed financial statements of Pioneer Cement Limited (the Company), which comprise the
statement of financial position as at 30 June 2018, and the statement of profit or loss, the statement of
comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies and other explanatory
information, 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 the audit.
In our opinion and to the best of our information and according to the explanations given to us, the statement of
financial position, statement of profit or loss, statement of comprehensive income, the statement of changes in
equity and the statement of cash flows together with the notes forming part thereof conform with the accounting
and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX
of 2017), 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 2018 and of the profit, total comprehensive income, the changes in equity and its cash flows for the
year then ended.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the
Financial Statements section of our report. We are independent of the Company in accordance with the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the
Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in
accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matters How our audit addressed the key audit matter
1. INITIAL ENGAGEMENT OPENING BALANCES Our procedures in relation to auditing opening balances,
included:
In the year of audit transition, as auditors, we have to involve in - We conducted planning meetings with the management of
a number of considerations not associated with recurring audits. the Company in order to obtain an understanding of the
Additional planning activities and considerations necessary to business and processes;
establish an appropriate audit strategy and audit plan include, - We communicated and interacted with the predecessor
amongst others, gaining an initial understanding of the business auditors and reviewed their 2017 audit files; This built upon our
of the Company including its control environment, obtaining knowledge of business and processes gained through holding
sufficient appropriate audit evidence regarding the opening client planning meetings
balances and accounting policies adopted, assessing the risk of - We assessed the entity’s control environment including
material misstatement in opening balances, if any, and the meetings with management and other employees, to obtain
impact on the audit strategy for the year being audited and their feedback on the tone at the top set by management;
communicating with the previous auditors. - We obtained understanding of accounting policies and historic
accounting judgements by discussions with management;
Since a number of amounts recorded in the statement of - We obtained sufficient appropriate audit evidence regarding
financial position as at 30 June 2018 take account of opening the opening balances including the selection and application of
balances which form a significant part of the year-end balance, accounting policies;
we have assessed opening balances as a key audit matter.
40 PIONEER CEMENT LIMITED
Key Audit Matters How our audit addressed the key audit matter
2. ADDITIONS IN CAPITAL WORK IN PROGRESS We assessed the Company’s accounting policy for Property,
Plant and Equipment (PPE) for compliance with IAS 16 Property,
Additions in Capital Work in Progress (CWIP), as referred to in Plant and Equipment.
note 5.2, amounts to Rs. 10.7 billion. This addition in the CWIP
was due to business expansion in respect of the construction of We evaluated and tested the design and operating effectiveness
cement plant, waste heat recovery plant and coal power plant. of the controls over the additions in CWIP and also reviewed the
procurement agreements with the vendors for the procurement
We focused on the capitalization and depreciation policies of and installation of the new plant and related facilities.
the Company due to the significant amount of capital expendi-
tures incurred during the year which required substantial audit We assessed the costs incurred for a sample, and agreed to the
efforts to ascertain the nature of cost incurred and whether supporting documentation including supplier invoices, banking
such capital expenditures (including the borrowing cost) meet documents, receipts/shipping documentation, along with
the specific recognition as per the applicable financial reporting indirect cost charged and whether such costs met the capital-
requirements. For such reasons we have identified this as a key ization criteria under IAS 16 Property, Plant and Equipment.
audit matter.
We reviewed interest cost included in the capital work in
progress in respect of loan acquired specifically for the
construction and development of cement plant, waste heat
recovery plant and coal power plant and assessed appropriate
capitalization of such costs in line with IAS 23 Borrowing Cost
and related loan agreements.
3. FINANCIAL REPORTING FRAMEWORK We assessed the procedures applied by the management for
identification of the changes required in the financial
As referred in note 2 to the accompanying financial statements, statements due the application of the Act. We considered the
the Companies Act 2017 (the Act) became applicable for the adequacy and appropriateness of the additional disclosures and
first time for the preparation of the Company’s annual financial changes to the previous disclosures based on the new require-
statements for the year ended 30 June 2018. ments. We also evaluated the sources of information used by
the management for the preparation of the above referred
The Act forms an integral part of the statutory financial report- disclosures and the internal consistency of such disclosures with
ing framework as applicable to the Company and amongst other elements of the financial statements.
others, prescribes the nature and content of disclosures in
relation to various elements of the financial statements. In respect of the change in accounting policy for the accounting
and presentation of revaluation surplus as referred to note 4.1
In the case of the Company, specific additional disclosures and to the financial statements; we assessed the accounting
changes to the existing disclosures have been included in the implications in accordance with the applicable financial report-
financial statements as referred to note 4.1 to the financial ing standards and evaluated its application in the context of the
statements. Company including the related disclosures made in financial
statements.
Further, the Company has also changed its accounting policy
relating to presentation and measurement of surplus on revalu-
ation of fixed assets as a consequence of the application of the
Act with retrospective effect.
The aggregate amounts involved in such contingencies is Rs. We analyzed and tested management’s key assumptions, in
691.6 million as of 30 June 2018. particular on cases where there had been significant develop-
ments with local tax authorities, based on our knowledge and
The tax contingencies require the management to make judge- experience of the application of the tax legislation by the
ments and estimates in relation to the interpretation of tax laws relevant authorities and courts. We also evaluated whether the
and regulations and the recognition and measurement of any liabilities and exposures for uncertain tax positions were appro-
provisions that may be required against such contingencies. priately disclosed in the financial statements.
Due to inherent uncertainties and the time period such matters
may take time to resolve, the management judgements and We involved internal tax experts to assess and review the
estimates in relation to such contingencies may be complex. management’s conclusions on contingent tax matters and
evaluated whether adequate disclosures have been made in
note 25.1 to the financial statements.
Information Other than the Financial Statements and Auditors’ Report Thereon
Management is responsible for the other information. The other information comprises the information included in the Annual
Report, but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the
accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and
for such internal control as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of directors are responsible for overseeing the Company’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclo-
sures made by management.
- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the board of directors, we determine those matters that were of most significance in the
audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of 2017);
b) the statement of financial position, the statement of profit or loss, statement of comprehensive income, the statement of
changes in equity and the statement of cash flows together with the notes thereon have been drawn up in conformity with the
Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account and returns;
c) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the
Company’s business; and
d) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Com-
pany and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
Other Matter
The financial statements of the Company for the year ended 30 June 2017, were audited by another auditor who
expressed an unmodified opinion on those statements on 27 September 2017.
The engagement partner on the audit resulting in this independent auditors’ report is Abdullah Fahad Masood.
EY Ford Rhodes
Chartered Accountants
Lahore: October 01, 2018
Assets
Non-current assets
Property, plant and equipment 5 22,920,019 12,237,399 10,384,030
Investment property 6 78,690 70,836 68,910
Intangible assets 7 1,690 4,480 7,799
Long term deposits 8 40,086 39,531 39,449
23,040,485 12,352,246 10,500,188
Current assets
Stores, spare parts and loose tools 9 1,697,712 1,500,779 922,941
Stock in trade 10 470,397 235,743 181,319
Trade debts - unsecured 11 433,814 224,828 108,481
Loans and advances 12 127,239 62,512 35,254
Trade deposits and short term prepayments 13 4,188 1,937 1,991
Advance income tax 1,136,794 359,748 –
Sales tax receivable - net 700,529 90,176 –
Other receivables 14 45 – 549
Short term investments 15 1,006,904 2,623,180 2,356,497
Cash and bank balances 16 493,261 309,019 660,479
6,070,883 5,407,922 4,267,511
Total assets 29,111,368 17,760,168 14,767,699
Sales - gross
Cement - local 13,574,937 12,801,493
Cement - export 383,468 188,586
Clinker 627,118 1,645,477
14,585,523 14,635,556
Less:
Sales tax 2,337,767 2,302,145
Federal excise duty 2,008,583 1,634,436
Commission 33,884 38,363
Discount and rebate 83,969 29,618
4,464,203 4,004,562
Sales - net 10,121,320 10,630,994
Cost of sales 26 (7,310,647) (6,202,685)
Gross profit 2,810,673 4,428,309
Balance as at July 1, 2016 (as reported) 2,271,489 197,517 – 5,351,691 5,549,208 7,820,697
Impact of restatement – – 2,849,469 – 2,849,469 2,849,469
Balance as at July 1, 2016 (restated) 2,271,489 197,517 2,849,469 5,351,691 8,398,677 10,670,166
Final dividend for the year ended June 30,
2016 @ Rs. 3.75 per share – – – (851,809) (851,809) (851,809)
Interim dividend for the year ended June 30,
2017 @ Rs. 2.15 per share – – – (488,370) (488,370) (488,370)
Transaction with owners – – – (1,340,179) (1,340,179) (1,340,179)
Profit after taxation – – – 2,917,545 2,917,545 2,917,545
Other comprehensive income for the year – – (121,049) 121,049 – –
Total comprehensive income for the year – – (121,049) 3,038,594 2,917,545 2,917,545
Balance as at June 30, 2017 (restated) 2,271,489 197,517 2,728,420 7,050,106 9,976,043 12,247,532
Final dividend for the year ended June 30,
2017 @ Rs. 3.35 per share – – – (760,948) (760,948) (760,948)
Profit after taxation – – – 1,644,020 1,644,020 1,644,020
Other comprehensive income for the year – – 383,134 115,221 498,355 498,355
Total comprehensive income for the year – – 383,134 1,759,241 2,142,375 2,142,375
Balance as at June 30, 2018 2,271,489 197,517 3,111,554 8,048,399 11,357,470 13,628,959
The annexed notes from 1 to 44 form an integral part of these financial statements.
2.2 Standards, interpretation and amendments to approved accounting standards that are not yet effective
The following standards, amendments and interpretations with respect to the approved accounting standards
as applicable in Pakistan would be effective from the dates mentioned below against the respective standard
or interpretation:
Effective date
(annual periods
Standard or Interpretation beginning on after)
IFRS 2 – Share based Payments — Classification and Measurement of
Share-based Payments Transactions (Amendments). January 01, 2018
IFRS 10 – Consolidated Financial Statements and IAS 28 Investment
in Associates and Joint Ventures - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
(Amendment) Not yet finalized
IFRS 4 Insurance Contracts: Applying IFRS 9 Financial
01 January 2018 Instruments with IFRS 4 Insurance
Contracts — (Amendments) January 01, 2018
IAS 40 – Transfers to Investment Property — (Amendments) January 01, 2018
IFRIC 22 – Foreign Currency Transactions and Advance Consideration January 01, 2018
IFRS 9 – Financial Instruments: Classification and Measurement July 01, 2018
IFRS 15 – Revenue from Contracts with Customers July 01, 2018
IFRS 16 – Leases January 01, 2019
IFRS 9 – Prepayment Features with Negative Compensation – (Amendments) January 01, 2019
IAS 28 – Long-term Interests in Associates and Joint Ventures – (Amendments) January 01, 2019
IFRIC 23 – Uncertainty over Income Tax Treatments January 01, 2019
IAS 19 – Plan Amendment, Curtailment or Settlement – (Amendments) January 01, 2019
The Company expects that such improvements to the standards will not have any material impact on the
Company’s financial statements in the period of initial application except for IFRS 15 and IFRS 16. The
management is in the process of determining the effect of application of IFRS 15 and IFRS 16.
in Pakistan under the Companies Act, 2017. Previously, the Company’s accounting policy for surplus on
revaluation of property, plant and equipment was in accordance with the provisions of section 235 of the
repealed Companies Ordinance, 1984 according to which, the revaluation surplus was shown as a separate
item below equity.
The Companies Act, 2017 has not retained the above mentioned specific accounting and presentation
requirements of revaluation surplus on property, plant and equipment. Consequently, this impacted the
Company’s accounting policy for revaluation surplus on property, plant and equipment, and now the related
accounting and presentation requirements set out in IFRS are being followed by the Company. The new
accounting policy is explained in note 4.10. This change has not resulted in any impact on amounts reported in
the financial statements for prior years except for disclosure of revaluation surplus as a component of equity.
Had there been no change in accounting policy revaluation surplus have been disclosed under equity.
4.2 Property, plant and equipment
4.2.1 Operating property, plant and equipment
Owned:
These are stated at cost less accumulated depreciation and accumulated impairment losses, if any, except
for, factory building, plant & machinery, coal firing system and waste heat recovery plant which are stated
at revalued amount less subsequent accumulated depreciation and subsequent accumulated impairment
losses, if any, and freehold land is stated at revalued amount. Valuations are performed by independent valuer
with sufficient frequency to ensure that fair value of a revalued asset does not differ materially from its carrying
amount.
Depreciation is calculated at the rates specified in note 5.1 to these financial statements on straight line
method except for plant and machinery and coal firing system on which depreciation is charged on the basis
of units of production method. Depreciation on additions is charged from the month in which the asset is
available for use and on disposal up to the preceding month of disposal. Assets’ residual values and useful
lives are reviewed and adjusted, if appropriate at each reporting date.
Subsequent costs are included in the assets carrying amount or recognized as separate assets as appropriate
only when it is probable that future economic benefits associated with them will flow to the Company and cost
of items can be measured reliably.
Maintenance and normal repairs are charged to statement of profit or loss as and when incurred. Major
renewals and improvements are capitalized. Gain or loss on disposal of an asset represented by the difference
of the sale proceeds and the carrying amount of the asset is recognized in the statement of profit or loss.
Maintenance and normal repairs are charged to statement of profit or loss as and when incurred. Major
renewals and improvements are capitalized.
4.2.2 Capital work in progress
These are stated at cost less impairment loss, if any. It consists of expenditure incurred and advances paid
to acquire fixed assets in course of their construction and installation. These are transferred to property, plant
and equipment when they are available for use.
4.3 Investment property
Property not held for own use or leased out under operating lease is classified as investment property.
Net realizable value signifies estimated selling price in ordinary course of business less estimated cost of
completion and estimated cost necessary to make the sale.
4.7 Trade debts and other receivables
Trade debts and other receivables are stated at original invoice amount less provision for doubtful debts, if
any. Provision for doubtful debts / other receivables is recognized in statement of profit or loss, based on the
management’s assessment of counter party’s credit worthiness. Trade debts and other receivables are written
off when considered irrecoverable.
4.8 Short term investments
Financial assets are classified as held for trading and included in the category of financial assets at fair
value through statement of profit or loss and are acquired for the purpose of selling and purchasing in near
term. These investments are initially recognized at fair value of the consideration given. Subsequent to initial
recognition, these are recognized at fair value unless fair value cannot be reliably measured. Any surplus and
deficit on remeasurement of investment is recognized in statement of profit or loss. All purchases and sales of
investment are recognized on trade date, which is the date that the Company commits to purchase or sell the
investments.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of
current assets or current liabilities in the statement of financial position.
Any gain / (loss) on the recognition and derecognition of the financial assets and liabilities is included in the
statement of profit or loss for the year to which it arises.
These are measured at fair value adjusted by transaction cost. Subsequent measurement of financial assets
are described below:
a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortized cost using the effective
interest rate method, less provision for impairment. Discounting is omitted where the effect of discounting is
immaterial. These are included in current assets, except for maturities for greater than twelve months after
the reporting date, which are classified as non-current assets. Loans and receivables with less than twelve
months maturities are classified as current assets. The Company’s trade debts, trade deposits, loans and
advances, interest accrued and other receivables fall into this category of financial instruments. Loans and
receivables are subject to review for impairment at each reporting date to identify whether there is objective
evidence that the financial asset is impaired.
b) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading and financial assets
designated upon initial recognition as at fair value through profit or loss. A financial asset is classified as
held for trading if acquired principally for the purpose of selling in the short term. Assets in this category are
classified as current assets.
c) Available for sale financial assets
Available for sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the categories of loans and receivables, financial assets at fair value through profit or loss
and financial assets held to maturity. These are included in non-current assets unless management intends to
dispose off the investments within twelve months from the end of reporting period.
d) Held to maturity
Financial assets with fixed or determinable payments and fixed maturity, where management has the intention
and ability to hold till maturity are classified as held to maturity and are stated at amortized cost.
4.19 Offsetting of financial assets and financial liabilities
A financial asset and a financial liability is offset and the net amount is reported in the statement of financial
position 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 assets and settle the liability simultaneously. Corresponding income on
the assets and charge on the liabilities is also off set.
4.20 Revenue recognition
– Revenue from sale is recognized when the significant risks and rewards of ownership of the goods have
passed to the customers, which usually coincides with the dispatch of goods to customers.
– Return on bank deposits is recognized on time proportion basis using effective interest method.
– Rental income arising from investment property is accounted for on accrual basis over the lease period
and is included in revenue due to its operating nature.
Rupees in thousand
Cost / Revaluation Depreciation Written Down Value
Owned
Freehold land 5.1.1 75,920 – 15,184 – 91,104 – – – – – – 91,104
Factory building on freehold land 5.1.1 2,625,536 128,160 155,216 – 2,908,912 5 1,458,308 – 87,751 98,496 1,644,555 1,264,357
Leasehold improvements 10,833 – – – 10,833 33.3 10,833 – – – 10,833 –
Roads and quarry development 56,008 – – – 56,008 20 56,008 – – – 56,008 –
Plant and machinery line I 5.1.1 5,592,668 11,514 1,016,927 – 6,621,109 Units of 3,940,096 – 732,877 98,362 4,771,335 1,849,774
production
FOR THE YEAR ENDED JUNE 30, 2018
method
Plant and machinery line II 5.1.1 7,423,746 867,349 7,545 8,298,640 Units of 1,729,969 – 1,769 213,698 1,945,436 6,353,204
production
method
Coal firing system 5.1.1 381,679 – 69,265 – 450,944 Units of 241,819 – 45,394 8,318 295,531 155,413
production
method
Power generation plant 5.1.1 1,618,286 10,899 8,690 – 1,637,875 4 29,312 – 502 64,816 94,630 1,543,245
Furniture and fixture 33,083 2,858 – (34) 35,907 10 24,395 (34) – 1,350 25,711 10,196
Office equipment 48,995 3,694 – – 52,689 10 27,602 – – 3,834 31,436 21,253
Computers and accessories 27,743 1,280 – (223) 28,800 33 24,678 (223) – 2,222 26,677 2,123
Vehicles 114,323 19,743 – (3,416) 130,650 20 54,331 (3,210) – 20,134 71,255 59,395
Total 2017-18 18,008,820 1,045,497 1,272,827 (3,673) 20,323,471 7,597,351 (3,467) 868,293 511,230 8,973,407 11,350,064
NOTES TO THE FINANCIAL STATEMENTS
Owned
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2018
5.1.1 Revaluation of freehold land, factory building, plant & machinery, coal firing system and power generation
plant has been conducted during the year ended June 30, 2018 by Hamid Mukhtar & Company creating
additional revaluation surplus of Rs. 405 million over net book value of these assets amounting to Rs. 10,852
million.
5.1.2 Had there been no revaluation, written down values of such assets would have been as follows:
5.1.3 Forced Sale Values of the assets under “Revaluation” are as follows:
Aggregate amount
of assets disposed Negotiations
off having book &
value less than Company’s
Rs 500,000/- each Policy Various
2018 3,673 3,468 206 2,411 2,205
2017 2,571 2,571 – 1,666 1,666
6 INVESTMENT PROPERTY
Carrying amount as on July 01 70,836 68,910
Fair value remeasurement gain for the year 7,854 1,926
78,690 70,836
6.1 The property was reclassified from owner-occupied property to investment property during financial year 2013
and comprises of an office building in Karachi leased out under operating lease agreement.
6.2 Investment property is stated at fair value, which has been determined based on valuations performed by M/s
Surval, as at June 30, 2018 and forced sale value of the said property is Rs. 66.89 million.
6.3 Net profit arising from investment property amounts to Rs. 3.994 million (2017: Rs. 3.400 million).
Breakup is given below:
7 INTANGIBLE ASSETS
Computer software
Cost:
As at July 01 7.1 11,066 11,066
Additions during the year – –
As at June 30 11,066 11,066
Accumulated amortization:
As at July 01 6,586 3,267
Amortization during the year 7.2 2,790 3,319
As at June 30 9,376 6,586
Net book value 1,690 4,480
Rate of amortization
20 - 33.3% 20 - 33.3%
7.1 The cost of intangible assets includes fully amortized assets amounting to Rs. 4.326 million (2017: Rs. 1.099
million).
7.2 The amortization charge for the year has been allocated as follows:
10 STOCK IN TRADE
Raw material 26.1 45,909 29,595
Packing material 55,729 35,249
Work in process 26 301,807 109,176
Finished goods 26 66,862 61,723
470,397 235,743
11.2 As at June 30, 2018, the aging analysis of trade debts is as follows:
Neither past due nor impaired – –
Past due but not impaired
1-30 days 410,610 220,193
31-90 days 19,782 2,215
91-180 days 77 859
181-365 days 1,970 436
366-720 days 1,375 1,125
Past due and impaired 11.1 13,175 13,175
446,989 238,003
11.3 Provision for bad and doubtful debts
Opening balance 13,175 13,175
Provision for the year – –
Closing balance 13,175 13,175
12 LOANS AND ADVANCES
Advances - unsecured & considered good
Employees 7,162 5,297
Bank margins against letters of credit 4,060 3,921
Suppliers 90,841 50,786
Contractors 1,016 2,508
Service providers 24,160 –
127,239 62,512
12.1 These are non-interest bearing and are generally for a term of less than 12 months.
20.2 The Company has obtained Diminishing Musharaka / Ijarah facility of up to Rs. 600 million (2017: Rs. 600
million) for cement grinding capacity enhancement project as at price of 3 months KIBOR plus 1.1%. The
facility is secured by creation of specific hypothecation charge over complete cement grinding enhancement
project up to Rs. 650 million. The facility is re-payable in five years including a grace period of one year on
quarterly basis.
20.3 During the year, the Company has obtained syndicated facility amounting to Rs. 15,000 million to finance new
8000 tons per day clinker plant supported by a 12 MW Waste Heat Recovery Plant. This comprises of Rs.
13,000 million term finance loan and Rs. 2,000 million musharaka facility. National Bank of Pakistan is the lead
arranger and agent of this facility. This facility carries markup / profit at 6 months KIBOR plus 1.1% per annum
payable quarterly whereas the principal is repayable in seven years including a grace period of two years.
This facility is secured by way of pari passu charge over all present and future fixed assets of the Company
excluding existing Waste Heat Recovery Power Plant, Cement /Grinding Mills and 24 MW Coal Power Plant.
21 DEFERRED LIABILITIES
Deferred tax liability 21.1 2,150,059 2,292,655
Gratuity - vested contractual employees 21.2 115,939 107,165
2,265,998 2,399,820
21.1 Deferred tax liability
Credit balance arising due to:
- accelerated tax depreciation 1,181,660 1,232,647
- surplus on revaluation of fixed assets 19 1,028,568 1,179,524
2,210,228 2,412,171
Debit balance arising due to:
- employee benefits and others (60,169) (119,516)
2,150,059 2,292,655
Deferred tax is calculated in full on temporary differences
under the liability method
Opening balance 2,292,655 2,248,880
Credited to statement of profit or loss 32 (41,537) 43,775
Charge recognized in other comprehensive income (101,059) –
Closing balance 2,150,059 2,292,655
21.2 Defined benefits plan: Gratuity
21.2.1 The amounts recognized in the statement of financial position are as follows:
Defined benefit
Rupees in thousand Sensitivity level Assumption obligation
24.6 During the year, the Company has obtained FATR/LC sight facility up to Rs. 400 million from United Bank
Limited. The facility is secured against ranking charge over current assets of the Company which shall be
subsequently upgraded to first pari passu with 25% margin. FATR carries markup at the rate of 1 month
25.1.5 The Additional Commissioner Inland Revenue (ADCIR) passed an amended order dated 25 November 2016
under section 122(5A) of the Income Tax Ordinance, 2001 (the Ordinance) for tax year 2015, wherein certain
additions were made which resulted into taxable income of Rs. 4,131 million and income tax demand of Rs.
514 million. Being aggrieved with the said order, the Company filed an appeal before Commissioner Inland
Revenue Appeals [CIR(A)] who deleted all the additions except the addition made under section 18(1)(d) of
the Ordinance amounting to Rs. 550 million. Being aggrieved with the Order of CIR(A), both the Company
and tax department filed appeals before the Appellate Tribunal Inland Revenue (ATIR), wherein the ATIR
vide its combined order dated 13 September 2017 decided the appeals in favour of the Company. Against
the said order of the ATIR, the tax department filed a reference bearing No.121750/17, before the honorable
Lahore High Court, Lahore (LHC), which is pending adjudication. The management believes that there is a
reasonable probability that the matter will be decided in favor of the Company. Pending the outcome of the
matter, no provision has been made in these financial statements.
25.1.6 The Deputy Commissioner Inland Revenue (DCIR) issued a show cause notice under section 205(1B) of
the Ordinance to the Company showing intention to impose default surcharge for short payment of advance
income tax liability for tax year 2015. The Company file a writ petition against the said show cause notice
before the LHC on May 30, 2016. The LHC disposed off the said writ petition with the direction that the officer
issuing the notice shall proceed to finalize the assessment after taking into account the stance of the Company
with regard to the Alternate Corporate Tax (ACT) and applicable rate for the tax year in question within a period
of one month of receipt of order. However, assessment has not been finalized yet. The management believes
that there is a reasonable probability that the matter will be decided in favor of the Company. Pending the
outcome of the matter, no provision has been made in these financial statements.
25.1.7 Commissioner passed an order that during the tax period 2008-2009, one of the suppliers of the Company
namely M/s Al-Noor General Order Supplier allegedly did not deposit the tax paid by it on the supplies and
therefore, the Company was not entitled to claim input tax in its monthly sales tax returns and a demand of Rs.
9.064 million was created. ATIR decided the order against the Company. The Company has filed an appeal
against the said order in LHC which is pending adjudication.
Other Matters
25.1.8 The Company has filed writ petition on 19 January 2015 before the LHC on the issue of chargeability of ACT
for the tax year 2014. The learned Judge allowed filing of return without payment of ACT upon submission
of post-dated cheque amounting to Rs. 113.724 million with the Commissioner (to the extent of ACT). The
Company has deposited the said cheque with the Commissioner as a collateral against Company’s tax liability.
The case is still pending in LHC.
25.1.9 The issue pertaining to interpretation of sub-section (2) of section 4 of the Central Excise Act, 1944 (the “1944
Act”) has been adjudicated by the Honourable Supreme Court of Pakistan vide judgment dated 15-02-2007
(the “Supreme Court Judgment”) in appeal nos. 1388 and 1389 of 2002, 410 to 418 of 2005, 266, 267 & 395
of 2005 (the “Appeal”). By way of background it is pointed out that the controversy between the department
and the assesses pertained to whether in view of the words of sub-section (2) of section 4 of the 1944
Act “duty shall be charged on the retail price fixed by the manufacturer, inclusive of all charges and taxes,
other than sales tax...” retail prices would include the excise duty leviable on the goods. The Honourable
Lahore High Court as well as the Honourable Peshawar High Court held that excise duty shall not be included
as a component for determination of the value (retail price) for levying excise duty (the “Judgments”). The
department being aggrieved of the judgments impugned the same before the Supreme Court of Pakistan vide
the Appeals, in pursuance whereof leave was granted to determine in the aforesaid issue. The Honourable
Supreme Court of Pakistan vide the Supreme Court Judgment upheld the Judgments and the Appeals filed
by the department were dismissed. In the Supreme Court Judgment it has been categorically held that excise
duty is not to be included as a component for determination of the value (retail price) for levying excise duty
under sub-section (2) of section 4 of the 1944 Act.
In view of the above, during the year ended June 30, 2008, the Company had filed a refund claim amounting
to a sum of Rs. 734.056 million before Collector, sales tax and federal excise duty, Government of Pakistan
(the Department). During the year ended June 30, 2010, the aforesaid refund claim has been rejected by the
Department, however, the Company filed an appeal before Commissioner (Appeals) Inland Revenue, Lahore
which has been decided in favour of the Company. Later on, tax department filed an appeal to the Appellate
Tribunal Inland Revenue where case has also been decided in favour of the Company. However, same will be
accounted for at the time of it’s realization.
26 COST OF SALES
Raw material consumed 26.1 620,267 570,652
Packing material consumed 620,195 535,400
Fuel and power 4,956,475 3,967,170
Stores and spare parts consumed 266,657 224,851
Salaries, wages and benefits 26.2 465,943 410,859
Travelling and conveyance 21,114 21,420
Insurance 8,670 8,048
Repairs and maintenance 76,695 55,981
Depreciation 5.1.4 426,717 427,061
Amortization of intangible assets 7.2 1,395 1,660
Other manufacturing expenses 44,379 39,308
Total manufacturing cost 7,508,507 6,262,410
Work in process
Opening balance 109,176 92,788
Closing balance 10 (301,897) (109,176)
(192,721) (16,388)
Cost of goods manufactured 7,315,786 6,246,022
Finished goods
Opening balance 61,723 18,386
Closing balance 10 (66,862) (61,723)
(5,139) (43,337)
7,310,647 6,202,685
26.1 Raw material consumed
Opening balance 29,595 24,200
Quarrying / transportation / purchases and other overheads 636,581 576,047
666,176 600,247
Closing balance 10 (45,909) (29,595)
620,267 570,652
26.2 Includes amount pertaining to employee benefits as follows:
Defined contribution plan 8,881 7,120
Gratuity - vested contractual employees 10,207 21,760
Compensated absences 17,724 8,075
36,812 36,955
27 DISTRIBUTION COST
Salaries, wages and benefits 27.1 48,449 39,207
Travelling and conveyance 814 735
Vehicle running expenses 2,019 1,778
Communication 2,635 1,606
Printing and stationery 1,524 1,392
Rent, rates and taxes 5,637 5,356
Utilities 2,101 1,787
Repairs and maintenance 1,305 1,328
Legal and professional charges 196 588
Insurance 265 292
Fee and subscription 1,341 882
Advertisements / sales promotion 3,434 1,849
Freight and handling charges 27.2 92,279 32,179
Entertainment 1,792 1,664
Depreciation 5.1.4 2,425 2,591
Amortization 7.2 697 830
166,913 94,064
27.1 Includes amount pertaining to employee benefits as follows:
Defined contribution plan 1,666 1,351
Compensated absences 2,389 1,249
4,055 2,600
27.2 It represents freight and handling charges against export sales.
28 ADMINISTRATIVE EXPENSES
Salaries, wages and benefits 28.1 63,945 52,356
Travelling and conveyance 1,787 1,440
Vehicle running expenses 3,246 2,392
Communication 1,019 1,381
Printing and stationery 2,645 2,491
Rent, rates and taxes 5,495 5,337
Utilities 20 18
Repairs and maintenance 2,484 2,522
Legal and professional charges 4,141 1,393
Insurance 856 708
Auditors’ remuneration 28.2 2,000 4,615
Fee and subscription 1,971 2,298
Depreciation 5.1.4 6,525 6,348
Amortization 7.2 697 829
Entertainment 461 281
Others 246 172
97,538 84,581
31 FINANCE COST
Profit on Musharaka finance 64,019 18,782
Mark-up on:
Short-term borrowings 25,725 11,595
Fee, charges and commission
Bank charges 5,152 4,317
94,896 34,694
32 TAXATION
Current tax:
Current year 601,968 1,114,940
Prior year 8,234 (6,754)
610,202 1,108,186
Deferred tax:
Relating to the reversal of and origination of
temporary differences 32.2 (41,537) 43,774
568,665 1,151,960
32.1 Numerical reconciliation between average effective tax rate and the applicable tax rate.
32.3.2 Income tax assessments are deemed finalized by the management up to the Tax Year 2017 as tax returns
were filed under the self assessment scheme.
32.3.3 Subsequent to the amendment to section 5(A) of the Income Tax Ordinance, 2001, tax at the applicable rate
shall be imposed on every public company which derives profit for the year. However, this tax shall not apply
in case of a Company which distributes at least specified percentage of its tax profits within six months of the
end of the tax year in the form of cash dividend. Liability in respect of such tax, if any, is recognized when the
prescribed time period for distribution of dividend expires.
32.3.4 The Company computes tax based on the generally accepted interpretations of the tax laws to ensure that the
sufficient provision for the purpose of taxation is available. The comparison of estimated provision for taxation
and actual tax assessed as per income tax return filed for previous years can be analysed as follows:
Rupees in thousand Provision for Tax (Shortage)
taxation assessed / Excess
2017 1,108,186 1,116,420 (8,234)
2016 1,340,440 1,333,686 6,754
2015 783,340 987,911 (204,571)
This relates to the adjustment of excess provision charged in financial statements in tax year 2014.
Rupees in thousand 2018 2017
Bank balances
Banks having A1+ rating (PACRA) 30,211 91,739
Banks having A-1+ rating (JCR-VIS) 281,518 –
Banks having A-1 rating (JCR-VIS) 16 23,344
311,745 115,083
Short Term investments
Funds having AAA rating (PACRA) 12 644,924
Funds having AA rating (PACRA) – 384,550
Funds having A rating (JCR-VIS) 116,856 111,225
Funds having A- rating (PACRA) 541 519
Unrated (equity based funds) 889,495 1,481,962
1,006,904 2,623,180
35.6 Foreign exchange risk management
Foreign currency risk arises mainly where balances exists due to the transactions with foreign undertakings.
The Company is not exposed to foreign currency exchange risk at the reporting date.
35.7 Other price risk
Equity price risk is the risk arising from uncertainties about future values of investment securities. As at
reporting date, the Company is exposed to sensitivity equity price risk as the Company holds investments in
mutual funds (Note 15).
Level 3 Inputs for the assets or liability that are not based on observable market data (unobservable
inputs).
The following table show the carrying amounts and fair values of financial assets according to there respective
category, including their levels in the fair value hierarchy for financial instruments measured at fair value. It
does not include fair value information for financial assets not measured at fair value if the carrying amount is
reasonable approximation of fair value.
35.8.2 The Company doesn’t hold any financial liability at fair value.
35.8.4 At 30 June, the Company had following financial instruments with respect to their level of fair value modelling
which is determined on the basis of objective evidence at each reporting date.
Rupees in thousand Level 1 Level 2 Level 3
2018
Short term investments – 1,006,904 –
– 1,006,904 –
2017
Short term investments – 2,623,180 –
– 2,623,180 –
36.1 In addition, the chief executive officer, executive director and all the executives of the Company have been
provided with free use of Company owned and maintained cars and other benefits in accordance with their
entitlements as per rules of the Company.
36.2 No remuneration is paid / payable to the directors of the Company except meeting fee which is paid to each
non-executive director at the rate of Rs. 15,000 per meeting attended.
2018 2017
37 NUMBER OF EMPLOYEES
Number of employees at year end including
permanent and contractual - total 951 938
Average number of employees during the year - total 941 874
Number of employees at year end including
permanent and contractual - factory 865 853
Average number of employees during the year - factory 860 797
38 PROVIDENT FUND TRUST
38.1 The Company has maintained an employee’s provident fund trust and investments out of provident fund
have been made in accordance with the provisions of section 218 of the Companies Act, 2017 and conditions
specified thereunder. The salient audited information of the fund is as follows:
40 PRODUCTION CAPACITY
Rated capacity - clinker
- Line I 705,000 705,000
- Line II 1,290,000 1,290,000
1,995,000 1,995,000
Actual production - clinker
- Line I 522,760 503,997
- Line II 1,027,944 1,060,040
1,550,704 1,564,037
Sales
- Local - Cement 1,475,956 1,356,915
- Local - Clinker 100,915 277,521
1,576,871 1,634,436
- Exports 68,950 35,756
1,645,821 1,670,192
40.1 The difference between installed capacity and actual production is due to the demand and supply variations
of the Company’s products.
41 DATE OF AUTHORIZATION FOR ISSUE
These financial statements were authorized for issuance by the Board of Directors of the Company on
September 27, 2018.
42 CORRESPONDING FIGURES
Following figures have rearranged for the purpose of better presentation.
Rupees in thousand
From To
Note Account Note Account 2017
22 Trade and other payables Retention money 34,045
22 Trade and other payables Unclaimed dividend 53,185
29 Other income 30 Other expenses 154,532
29 Other income 30 Other expenses 64,992
22 Creditors 22 Accrued expenses 219
22 Creditors 22 Withholding tax payable 96
43 EVENTS AFTER REPORTING DATE
Subsequent to the year ended June 30, 2018, the Board of Directors has proposed a final cash dividend in
their meeting held on September 27, 2018 for the year ended June 30, 2018 of Rs. 4.07 (2017: Rs. 3.35) per
share for the approval of the members at the annual general meeting.
44 GENERAL
Figures have been rounded off to the nearest thousand rupees, unless otherwise stated.
I/We
Name
of
Address
Name
of
Address
or failing him
Name
of
Address
(also being a member of the Company) as my/ our proxy to attend, act and vote for me/ us and on my/
our behalf, at the 32nd Annual General Meeting of the Company to be held on Thursday, October 25,
2018 at 135 Ferozepur Road, Lahore and at any adjournment thereof.
WITNESSES
Signature of the Shareholder/ Appointer
1. Name
Address
CNIC #
2. Name
Address
CNIC #
NOTE: Proxies in order to be effective must reach the Company’s Registered Office not less than 48
hours before the time for holding the meeting and must be duly stamped, signed and
witnessed. Proxies of the Members through CDC shall be accompanied with attested copies
of their CNIC.
AFFIX
CORRECT
POSTAGE
Company Secretary
Pioneer Cement Limited
135 - Ferozepur Road, Lahore
Tel : +92 (42) 37503570-2
Fax : +92 (42) 37503573-4
Email: [email protected]
PIONEER CEMENT
LIMITED.
Head Office
135-Ferozepur Road, Lahore, Pakistan.
Phone (+92-42) 37503570-72
Email: [email protected]
Factory
P.B. No. 50, Jouharabad,
District Khushab, Pakistan.
[email protected]
www.pioneercement.com