Annual Report 2007-2008

Contents

Company Information ...........................................................3

Board of Directors................................................................6

Committees of the Board of Directors ..................................8

Vision and Mission Statements.............................................9

Operating Highlights .............................................................10

Notice of 16th Annual General Meeting...............................11

Directors' Report...................................................................13

Statement of Compliance .....................................................23

Review Report to the Members ............................................25

Auditors' Report ....................................................................26

Balance Sheet ......................................................................28

Profit and Loss Account........................................................30

Cash Flow Statement ...........................................................31

Statement of Changes in Equity ...........................................32

Notes to the Financial Statements........................................33

Pattern of Shareholding as on 30 June 2008 .......................57

Form of Proxy .......................................................................

2

BUILDING BETTER PAKISTAN

Annual Report2008

Company Information

3

Board of Directors


Annual Report2008

Lt Gen Syed Arif Hasan, HI (M) (Retired)

Chairman

Maj Gen Malik Iftikhar Khan, HI (M) (Retired) Chief Executive / MD

Mr. Qaiser Javed Director

Mr. Riyaz H. Bokhari, IFU Director Brig Arif Rasul Qureshi, SI (M) (Retired) Director Brig Rahat Khan, SI (M) (Retired) Director Dr. Nadeem Inayat Director Brig Liaqat Ali (Retired)

Director

Brig Munawar Ahmed Rana, SI(M) (Retired)

Director

? Company Secretary: Brig Shabbir Ahmed (Retired) House No. 62, Khayaban-e-Iqbal (Margalla Road), F-7/2, Islamabad - Pakistan Tel: (051) 9221690 Fax: (051) 9221693 E-mail: [email protected] Web Site: http: //www.fccl.com.pk

? Chief Financial Officer Mr. Omer Ashraf

Tel: (051) 2651762

? Registered Office Sales Department:

Ist Floor, Aslam Plaza, 60 Adam Jee Road, Sadar, Rawalpindi – Pakistan Tel: (051) 5523836, 5528042, 5528960, 5528963-64 Fax: (051) 5528965-66

? Factory: Near Village Jhang, Tehsil Fateh Jang District: Attock Tel: 057-2538047-48, 2538138, 2538148 – 49 Fax: 057-2538025

? Auditors: M/s KPMG Taseer Hadi & Co, Chartered Accountants Fax No: (051) 2822671

? Legal Advisors:

Farooq Law Associates, Advocates & AttorneysFax No: (051) 2272643

? Registration & Shares Transfer Officer

M/s CORPLINK (PVT) LIMITED Wings Arcade, 1-K, Commercial, Model Town, Lahore

Ph No: 042-5839182, 5887262

Fax No: 042-5869037

Chairman

Lt Gen Syed Arif HasanHI (M) (Retired)

4


Annual Report2008

Chief Executive &Managing Director

Maj Gen Malik Iftikhar KhanHI (M) (Retired)

5


Annual Report2008

Brig Munawar Ahmed RanaSI (M) (Retired)

Board of Directors

6

Dr. Nadeem Inayat Brig Liaqat Ali (Retired)

Brig Shabbir Ahmed (Retired)Company Secretary

Mr. Qaiser Javed Mr. Riyaz H. Bokhari, IFUBrig Arif Rasul Qureshi

SI (M) (Retired)

Brig Rahat KhanSI (M) (Retired)


Annual Report2008

Key Management

7

Mr. Omer AshrafChief Financial Officer

Brig Muhammad Sarwar (Retired)GM (Marketing & Sale)

Mir Khawar SaleemDirector (Project) New Line

Mr. Rais AhmadGM (Project) New Line


Annual Report2008

Nabeed NajamGM (Plant)

Committees of The Board of DirectorsHuman Resources Committee

Dr. Nadeem Inayat - President

Mr. Qaiser Javed - Member

Brig Liaqat Ali (Retd) - Member

Brig Shabbir Ahmed (Retd) - Secretary

Audit Committee

Mr. Qaiser Javed - President

Mr. Riyaz H. Bokhari - Member

Brig Rahat Khan (Retd) - Member

Dr. Nadeem Inayat - Member

Brig Shabbir Ahmed (Retd) - Secretary

Technical Committee

Brig Rahat Khan (Retd) - President

- Member Brig Arif Rasul Qureshi (Retd)

Brig Liaqat Ali (Retd) - Member

Mir Khawar Saleem - Secretary

8


Annual Report2008

“To maintain as a role model cement

manufacturing Company fully aware of generally

accepted principles of corporate social

responsibilities engaged in nation building

through most efficient utilisation of resources and

optimally benefiting all stake holders while

enjoying public respect and goodwill”.

“ while maintaining its leading position in

quality of cement and through greater market

outreach will build up and improve its value

addition with a view to ensuring optimum returns

to the shareholders”.

FCCL

Vision

Mission

Vision & Mission Statements

FCCL

9


Annual Report2008

Key Indicators Operating

2002 2003 2004 2005 2006 2007 2008

Gross Profit Margin % 25.13 11.62 32.26 38.01 51.12 31.52 18.56

Operating Profit Margin % 19.98 8.09 (1.70) 34.75 47.64 28.74 16.96

Pre Tax Margin % (5.86) (34.67) (10.60) 26.68 41.48 22.76 12.82

After Tax Margin % (6.96) (35.17) 13.68 17.94 28.08 18.66 11.66

Performance

Return on total assets

%

(1.60)

(8.42)

5.32

8.20

19.42

10.10 3.32

Total Assets turnover

Times

0.23

0.24

0.39

0.46

0.69

0.54 0.28

Fixed Assets turnover

Times

0.33

0.33

0.52

0.63

0.97

0.81 0.50

Return on Paid up Share Capital

%

(2.63)

(12.67)

7.49

12.17

28.70

15.41 5.57

Leverage

Debt Equity Ratio

Times

2.05

2.66

1.88

1.26

0.60

0.38 0.09

Current Ratio

Times

1.42

1.53

1.54

0.92

1.25

1.35 2.16

Quick Ratio

Times

1.27

1.43

1.38

0.88

1.13

1.23 2.06

Valuation

Earnings per share (basic)

Rs

(0.63)

(1.42)

0.84

1.36

3.21

1.73RestatedRestatedRestatedRestatedRestatedRestated

0.85

Breakup Value per share (basic)

Rs

12.43

4.38

5.23

6.61

8.85

10.07 13.39

Breakup Value per share (diluted)

Rs

12.39

3.87

4.62

5.84

7.83

8.91 12.51

Dividend per share

Rs

Nil

Nil

Nil

Nil

1.50

-

-

Dividend payout Ratio

%

N/A

N/A

N/A

N/A

31%

-

-

Market Price per share (average)

Rs

3.40

7.23

14.15

12.76

19.38

20.09 16.06

Historical Trends

Trading Results

Sales-net

Rs in 000

1,586,606

1,510,738

2,296,231

2,845,143

4,286,138

3,463,283 3,545,902

Gross Profit

Rs in 000

398,707

175,605

740,824

1,081,576

2,191,111

1,091,495 658,112

Operating Profit / (loss)

Rs in 000

317,023

122,213

(39,068)

988,673

2,041,984

995,285 601,518

Profit / (loss) before tax

Rs in 000

(92,947)

(523,731)

(243,291)

759,039

1,777,687

788,180 454,564

Profit / (loss) after tax

Rs in 000

(110,480)

(531,381)

314,148

510,490

1,203,735

646,323 413,598

Financial Position

Shareholders Equity

Rs in 000

2,156,367

1,624,986

1,939,134

2,449,624

3,282,617

3,735,206 9,283,981

Property plant & Equipment

Rs in 000

4,854,117

4,659,449

4,729,254

4,658,272

4,563,115

4,392,450 7,106,599

Working Capital

Rs in 000

223,735

249,006

202,345

(90,112)

312,183

511,240 2,839,323

Non current liabilities Rs in 000

4,204,714 4,215,938 3,599,103 2,567,218 1,648,292 1,223,195 715,751

Operating Highlights

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Annual Report2008

Notice is hereby given that the 16th Annual General Meeting of the Company will be held at 1030 hours 30 October 2008 (Thursday) at Hotel Pearl Continental Rawalpindi, to transact the following business:-

1. To confirm the Minutes of 15th Annual General Meeting held on 23 October 2007.

2. To receive, consider and adopt the Audited Accounts of the Company together with the Directors' and the Auditors' Reports for the Year ended 30 June 2008.

3. To appoint Statutory Auditors of the Company and fix their remuneration.

4. Any other business with the permission by the Chairman.

By order of the Board

Place: Rawalpindi Brig Shabbir Ahmed (Retd)Date: 8 October 2008 Company Secretary

NOTES

(1) The Share Transfer Books of the Company will remain closed from 24 October 2008 to 31 October 2008 (both days inclusive). No transfer will be accepted for registration during this period.

(2) A member entitled to attend and vote at the Annual General Meeting may appoint a proxy to attend and vote in place of the member. Proxies, in order to be effective, must be received at the Registered Office located at First Floor, Aslam Plaza, 60 Adam Jee Road, Sadar, Rawalpindi, Pakistan duly stamped and signed, not less than 48 hours before the Meeting. A member may not appoint more than one proxy. Proxy Form is attached. A copy of shareholder's attested NIC must be attached with the proxy form.

Notice of 16th Annual General Meeting

11


Annual Report2008

12

(3) CDC Account Holders are required to follow the under mentioned guidelines as laid down by the Securities & Exchange Commission of Pakistan:-

(a) For Attending the Meeting

i. In case of individuals, the account holder or sub-account holder shall authenticate his/her identity by showing his/her original national identity card or original passport at the time of attending the Meeting.

ii. In case of corporate entity, the Board of Directors' resolution/ power of attorney with specimen signature of the nominee shall be produced at the Meeting.

(b) For Appointing Proxies

i. In case of individuals, the account holder or sub-account holder shall submit the proxy form as per the above requirement.

ii. The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers shall be mentioned on the form.

iii. Attested copies of NIC or the passport of the beneficial owners and the proxy shall be furnished with the Proxy Form.

iv. The Proxy shall produce his/her original NIC or original passport at the time of Meeting.

v. In case of corporate entity, the Board of Directors' resolution / power of attorney with specimen signature shall be submitted along with proxy form to the Company.

(4) Members are requested to promptly notify any change in their address.

(5) For any other information, please contact Ph: 051-9221690, Fax No: 051-9221693, E-mail: [email protected] and Web Site: www.fccl.com.pk.


Annual Report2008

Directors' Report - 2008

13

Genera

1. The Directors of Fauji Cement Company Limited (FCCL) are pleased to present the 16th Annual Report together with audited financial statements of the Company for the year ended 30 June 2008 and the Auditors' Report.

Market Overview

2. The Cement Industry witnessed an unprecedented demand for its product during Fiscal Year 2007-08. Total cement despatches stood at 30 Million tons which is the highest figure ever achieved by the Cement Industry. It reflected a growth of 24.31% over 24 Million tons of sales during last fiscal year. Whereas, local demand grew by 6.47 % over the last year, the exports recorded a historic growth of 142% to an all time high level of 7.72 Million tons as compared to 3.19 Million tons during the last year. As a result of above, the overall capacity utilization of the Industry stood at 81.04% as compared to 80.07 % of the last year.

3. Comparing with the Industry, the overall performance of FCCL has been substantially higher. It achieved the capacity utilization of 101.03% as compared to 81.04% of the Industry. Similarly, the exports showed an increase of 82.63% over the last year, i.e, from 152,268 tons in Fiscal Year 2006-07 to 278,095 tons in Fiscal Year 2007-08. Apart from Afghanistan, FCCL has been able to create an effective market niche in India and expects it to expand further.

4. The highlights of the performance of the Company vis-à-vis the Industry are as under:-

COMPARISON OF DESPATCHES

a. FCCL Comparison

2007-08 2006-07 Difference (%)

(1) Domestic Despatches (tons) 899,405 960,823

(2) Exports (tons)

278,095 152,268

(3) Total Despatches (tons) 1,177,500 1,143,091

(4) Capacity Utilization (%) 101.03 98.08

-6.39

82.63

3.01

3.01

b. Industry Comparison

2007-08

2006-07

Difference (%)

(1) Domestic Despatches (tons) 22,395,522 21,034,278

(2) Exports (tons) 7,716,620 3,188,424

(3) Total Despatches (tons) 30,112,142 24,222,702

(4) Capacity Utilization (%) 81.04 80.07

6.47

142.02

24.31

1.21


Annual Report2008

Production Review

5. Performance of the plant remained above satisfactory level with an overall production level exceeding 100.83%, which is the highest ever achieved in the history of Fauji Cement. Efficiency in terms of fuel, power and raw material consumption at the plant is amongst the best, while labour cost is also one of the lowest in Cement Industry. Comparative production figures are given as under:-

2007 ~ 08 2006 ~ 07

a. Clinker ( Tons ) 1,119,221 1,098,019

b. Cement ( Tons ) 1,174,722 1,153,711

Financial Performance

6. Profitability. The Company earned a Profit After Tax of Rs. 414 Million as compared to the last year's profit of Rs. 646 Million. The profit from operations decreased from Rs. 995 Million to Rs. 602 Million depicting a decrease of 39 % owing to reduction in cement prices and higher manufacturing cost due to increase in prices of fuel, power and packing material.

7. Contribution to National Exchequer. The Company contributed a sum of Rs. 1,268 Million to the national exchequer in the form of taxes and duties during the year under review. Concurrently, Fauji Cement earned USD 13.804 Million through export of cement.

8. Presentation of Financial Statements. The financial statements prepared by the Management present the Company's state of affairs, the results of its operations, cash flows and changes in equity in a fair and accurate manner.

9. Books of Account. Proper books of account have been maintained.

10. Accounting Policies. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgement.

11. Compliance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). International Accounting Standards and International Financial Reporting Standards (IFRS) as applicable in Pakistan have been followed in preparation of financial statements.

12. Internal Control System. The system of internal control is sound in design and has been effectively implemented and monitored.

13. Going Concern. There is no doubt that the Company has the ability and strength to operate as a going concern.

14. Best Practices of Corporate Governance. There has been no material departure from the best practices of corporate governance, as given in the listing regulations.

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Annual Report2008

15

Description 2008 2007 2006 2005 2004 2003

Operating Results

(Rs. In Million)

Net Sales

3,545.902

3,463.283

4,286.138

2,845.143

2,296.231

1,510.738

Gross Profit

658.112

1,091.495

2,191.111

1,081.576

740.824

175.605

Operating Profit

601.518

995.285

2,041.984

988.673

723.084

122.213

Financial Charges

146.954

207.105

264.297

229.634

204.223

463.409

Profit/(Loss) after taxation

413.598

646.323

1,203.735

510.490

314.148

(531.381)

Balance Sheet

Shareholder’s Equity

9,283.981

3,735.206

3,282.617

2,449.624

1,939.134

1,624.986

Fixed Assets

7,106.599

4,392.450

4,563.115

4,658.272

4,729.254

4,659.449

Long Term Loans including current portion

875.000

1,425.000

1,975.000

3,075.000

3,645.347

4,325.878

EPS (Rs)

Basic

0.85

1.73

Restated

3.21

Restated

1.36

Restated

0.84

Restated

(1.42)

Restated

Diluted

0.77

1.53

Restated

2.84

Restated

1.21

Restated

0.74

Restated

(1.26)

Restated

15. Financial Data of Last Six Years. Key operating and financial data of last six years is given below:-

16. Outstanding Statutory Dues. The Company does not have any outstanding statutory dues.

17. Value of Investment of Employees. Value as on 30 June 2008 is given below:-

Management Staff Non-Management Staff

Provident Fund : Rs. 57,414,581 Rs. 35,864,510

18. Salient Aspects of Company's Control and Reporting Systems. The Company complies with all the requirements of the Code of Corporate Governance as contained in the listing regulations of the Stock Exchanges. The Board's primary role is the protection and enhancement of long term shareholders' value. To fulfil this role, the Board is responsible to implement overall corporate governance in the Company including approval of the strategic direction as recommended by the Management, approving and monitoring capital expenditure, appointing, removing and creating succession policies for the senior management, establishing and monitoring the achievement of management's goals and ensuring the integrity of internal control and Management Information Systems. It is also responsible for approving and monitoring financial and other reporting. The Board has delegated responsibility for operation and administration of the Company to the Chief Executive / Managing Director. Responsibilities are delineated by formal authority delegations. The Board has constituted the following committees which work under the guidance of Board of Directors:-


Annual Report2008

16


Annual Report2008

a. Audit Committee.

b. Technical Committee.

c. Human Resources Committee.

Attendance of Meetings

19. During the year under review, the Board of Directors held six meetings and Audit Committee held five meetings. Attendance by each director is as follows:-

Note: Chief Financial Officer (CFO) and Internal Auditor were invariably invited to attend the meetings of Audit Committee. External Auditors were also invited to attend two meetings of Audit Committee, wherein, issues related to annual and half year's financial statements were discussed.

Disclosures

20. To the best of our knowledge, the Directors, CEO, CFO, Company Secretary, Company Auditors, their spouses and their minor children have not undertaken any trading in shares of the Company during the FY 2007-08.

Board of Directors

No of Meetings

Attended

(1) Lt Gen Syed Arif Hasan, HI (M), (Retired) - 6

(2) Maj Gen Malik Iftikhar Khan, HI (M) (Retired) - 6

(3) Mr. Qaiser Javed - 4

(4) Mr. Riyaz H. Bokhari, IFU - 4

(5) Brig Munawar Ahmed Rana, SI (M) (Retired) - 1

(6) Brig Arif Rasul Qureshi, SI (M) (Retired) - 6

(7) Brig Rahat Khan, SI (M) (Retired) - 5

(8) Dr. Nadeem Inayat - 5 (9) Brig Liaqat Ali (Retd) - 3 (10)

Ms Tine Bremholm Kokfelt, FLS

-

1

b.

Audit Committee

No of Meetings

Attended

(1)

Mr. Qaiser Javed

-

5

(2)

Mr. Riyaz H. Bokhari, IFU

-

4

(3)

Brig Rahat Khan, SI (M) (Retired)

-

5

(4)

Dr. Nadeem Inayat

-

3

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Annual Report2008

Pattern of Share-holding

21. Pattern of share-holding as on 30 June 2008 is attached.

Relations With Company Personnel

22. Relations between the management and the workers continued to be extremely cordial based on mutual respect and confidence contributing to optimal efficiency. The Company has allocated funds for Provident Fund and Profit Participation Fund for its employees.

Corporate Social Responsibilities

23. Concurrently, the Company continues to enjoy a high degree of goodwill and cooperation with local community as it respects their environment through responsible business practices. The Company runs a free dispensary for the locals and also provides good education facilities up to secondary school level at reasonable fee.

Directors

24. As a result of resignation, tendered by Brig Munawar Ahmed Rana, SI (M) (Retd), Brig Liaqat Ali (Retd) has been appointed as Director of the Company with effect from 8 November 2007.

25. As a result of resignation of Ms Tine Bremholm Kokfelt, FLS, Brig Munawar Ahmed Rana,SI(M) (Retd) has been appointed as Director of the Company with effect from 28 August 2008.

26. The Board places on record its appreciation of the invaluable services rendered by the outgoing Directors and welcomes the new Directors on the Board.

External Auditors

27. The present Auditors M/s KPMG Taseer Hadi & Co, Chartered Accountants will stand retired at the conclusion of the 16th Annual General Meeting. However, they have expressed their willingness for re-appointment. They have also been recommended by the Audit Committee.

Product Quality

28. FCCL has always endeavoured to produce the best quality cement in Pakistan, which is amply reflected in the premium price and its high demand, both inside and outside the Country. As a company, FCCL is focused on customers' satisfaction, employees' morale and fair deal to its partners in the business. It strictly adheres to the following:-

a. Quality Policy. Customers' satisfaction through quality assurance.

b. Objectives

(1) To be a cost effective and efficient organisation.

(2) Continuous improvement through well planned training.

(3) Commitment to leadership and team-work.

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Annual Report2008(4) To maintain quality culture within FCCL.

(5) To remain a leading manufacturer of high quality Portland Cement in Pakistan.

29. The Company, by grace of Almighty ALLAH, is an ISO 9001-2000 and ISO-14001-2004 Certified Company.

Future Outlook

30. Keeping in view the growing demand of cement in future, FCCL has started the installation of a complete new line of 7200 tpd clinker in parallel to the existing line. The salient aspects of the Project are as under:-

a. Contracts with M/s Polysius AG, Havor & Boecker & Loesche GmbH Germany as well as ABB (Switzerland), were made effective on 1st October 2007.

b. Plant engineering / designing has been started and drawings / documents are being received from plant suppliers. So far, three design meetings have been held with the plant suppliers.

Under construction Pre-heater

Under construction Raw Material Storage

19


Annual Report2008

d. M/s DESCON Engineering has also mobilized at the site and have established their workshop, offices and residential colony for their staff.

e. Plant layout has been finalized and civil works are in progress.

f. Construction work of ancillary buildings (guest house, offices and warehouse) has been completed.

g. Commissioning of the plant is scheduled to start by end March 2010 and commercial production will commence by end May 2010.

c. The contract for civil design, local manufacturing, fabrication, erection and commissioning has been signed with M/s DESCON Engineering and contract has been made effective on 1st December 2007.

Under construction Raw Meal Silo

Under construction Clinker Silo

20


Annual Report2008

31. Power Plant for New Line of Production

a. Contract for supply and service of 16.6 MW dual fired Power Plant has been made effective with Wartsilla, Finland on 2 October 2007.

b. Engine has arrived in Pakistan and is being transported from Karachi to Site.

c. Power plant will be commissioned by end November 2008, INSHALLAH.,

Under construction Power Plant

32. Refuse Derived Fuel (RDF) Plant

a. In pursuance of its commitment to produce cement under stringent environment friendly conditions, the Company has taken the lead by installing first ever Refuse Derived Fuel (RDF) Processing Plant at a cost of Rs. 300 Million. The Plant will utilize Municipal Solid Waste collected from the dumping sites established by Rawalpindi Cantt Board and Capital Development Authority in Islamabad. The garbage will be converted into fuel for subsequent usage in the cement plant. The plant consists of screening equipment to remove clay, small dust particles, debris and metal etc, and the main plant to process and produce fuel which is then fed to the kiln through the dozing equipment.

Screening equipment separating clay, dust particles, debris andmetal from the Municipal Solid Waste

21


Annual Report2008

b. As a result of a detailed and comprehensive study by a German Firm. FCCL entered into a

contract for importing machinery from a reputable firm in Europe for processing of Municipal

Solid Waste. The Plant has a capacity of 12 tons per hour. After completing the process in

less than seven months, the RDF Plant is under commissioning and will enter into full

production by November 2008. The Company plans to enhance this capacity to 36 tons

per hour in future.

RDF Plant

22


Annual Report2008

Conclusion

34. With profound gratitude to the blessings of Allah Almighty, the Board is of the opinion that the Company remains on its way to success.

For and on behalf of the Board

Rawalpindi Lt Gen Syed Arif Hasan, HI(M) (Retd)17 September 2008 Chairman

23

Statement of Compliance with the Code of Corporate GovernanceFor the Year Ended 30 June 2008


Annual Report2008

This Statement is being presented to comply with the Code of Corporate Governance contained in listing regulations of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby, a listed company is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:-

1. The Company encourages representation of independent non-executive directors and directors representing minority interests on its Board of Directors. At present, the Board comprises nine directors, out of whom only one is an executive director. Remaining eight (including the Chairman) are non-executive directors.

2. The directors have confirmed that none is serving as a director in more than ten listed companies, including this Company.

3. All the resident directors of the Company have confirmed that they are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange.

4. Casual vacancies occurring in the Board as a result of resignation by directors were filled up by the directors expeditiously as per clause (vi) of Code of Corporate Governance.

5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been signed by all the directors and employees of the Company.

6. The Board has developed a vision and mission statement, overall corporate strategy and significant policy guidelines for the Company. The Management has further elaborated these guidelines into detailed control systems. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. The same are being updated.

7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman. The Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. All the Directors of the Board are fully conversant with their duties and responsibilities as Directors. No orientation course for Directors and officials of the Company was conducted during the period under review.

10. The Board has approved the appointment of CFO and Company Secretary including their remuneration and terms and conditions of employment as determined by the CEO. The Head of

24

Internal Audit has the access to the chair of Audit Committee, whenever necessary.

11. The Directors' Report for FY 2007-2008 has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by CEO and CFO before approval by the Board.

13. The directors, CEO and executives do not hold any interest in the shares of the Company, other than that disclosed in pattern of share-holding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

15. The Board has formed an Audit Committee. It comprises four members and all of them are non-executive directors including the President of the Committee.

16. The meetings of the Audit Committee were held at least once a quarter prior to approval of interim and annual results of the Company as required by the Code. The Committee is following the terms of reference as given in the Code of Corporate Governance.

17. The Board has set up an effective internal audit function. The officials conducting internal audit are considered suitably qualified and experienced for the purpose; and are conversant with the policies and procedures of the Company and they are involved in internal audit function on full time basis.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review Programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

20. We confirm that all other material principles contained in the Code have been appropriately complied with to ensure transparency, accountability and efficiency.

Rawalpindi Lt Gen Syed Arif Hasan, HI (M) (Retd)17 September 2008 Chairman

NIC No 37405-6648041-1


Annual Report2008

25

Review Report to the Members on Directors' Statement of Compliance with Best Practices of Code of Corporate Governance

We have reviewed the Directors' Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Fauji Cement Company Limited, (“the Company”) to comply with the Listing Regulations No. 37, 36 and Chapter VIII of the Karachi, Islamabad and Lahore Stock Exchanges respectively where the Company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls.

Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, 2008.

ISLAMABAD KPMG TASEER HADI & CO.CHARTERED ACCOUNTANTS 17 September 2008


Annual Report2008

26

Auditors’ Report to the MembersWe have audited the annexed balance sheet of Fauji Cement Company Limited ( the Company”) as at

30 June 2008 and the related profit and loss account, 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 financial 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 polices consistently applied ;

(ii) the expenditure incurred during the year was for the purpose of the Company’s

business; and

(iii) the business conducted, investments made and the expenditure incurred during

the year were in accordance with the objects of the Company;

(c) in our opinion and to the best of our information and according to the explanations given

to us, the balance sheet, profit and loss account, cash flow statement and statement of

changes in equity together with the notes forming part thereof confirm with approved

accounting standards as applicable in Pakistan, and, give the information required by the

“


Annual Report2008

27

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 2008 and of the profit, its

cash flows and changes in equity for the year then ended; and

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

1980).

ISLAMABAD KPMG TASEER HADI & CO.

17 September 2008 CHARTERED ACCOUNTANTS


Annual Report2008

28

Balance Sheet as at June 30, 2008

Chief Executive


Annual Report2008

2008 2007

Note Rupees'000 Rupees'000

SHARE CAPITAL AND RESERVES

Share capital 3 7,419,887 4,194,422

Reserves 4 1,864,094 (459,216)

9,283,981 3,735,206

NON - CURRENT LIABILITIES

5 325,000

875,000

6 9,468

8,2777 363,154

339,918

Long term financingDeferred liability - compensated absencesDeferred tax liability - netRetention money payable 18,129

-

CURRENT LIABILITIES

Trade and other payables 8 493,210

468,447

Markup accrued 33,186 48,330

Short term borrowings - secured 9 1,378,365

375,510

Current portion of long term financing 5 550,000

550,000

2,454,761

1,442,287

12,454,493

6,400,688

CONTINGENCIES AND COMMITMENTS 10

The annexed notes from 1 to 33 form an integral part of these financial statements.

These financial statements were authorised for issue by the Board of Directors of the Company in their meeting held on 17 September 2008.

29

Director


Annual Report2008

2008 2007


FIXED ASSETS - Tangible

Property, plant and equipment 11 7,106,599 4,392,450

LONG TERM ADVANCE 12 7,200 8,100

LONG TERM DEPOSITS 13 46,611

46,611

CURRENT ASSETS

Stores, spares and loose tools 14 907,591

468,769Stock in trade 15 230,089

183,309

Trade debts 16 26,927

19,558

17 345,567

858,758Cash and bank balances 18 3,783,909

423,133

5,294,083

1,953,527

12,454,493

6,400,688

Advances, deposits, prepayments and other receivables

30

Profit and Loss AccountFor the Year Ended June 30, 2008

DirectorChief Executive


Annual Report2008

2008 2007


SALES 19 4,749,217 4,780,036Less: Government levies 19 (1,203,315) (1,316,753)

NET SALES 3,545,902 3,463,283

Less: Cost of sales 20 (2,887,790) (2,371,788)

GROSS PROFIT 658,112 1,091,495

Other income 21 107,574 73,835Distribution cost 22 (53,383) (40,645)Administrative expenses 23 (76,495) (71,302)Other operating expenses 24 (34,290) (58,098)Finance cost 25 (146,954) (207,105)NET PROFIT BEFORE TAXATION 454,564 788,180

Taxation 26 (40,966) (141,857)

NET PROFIT AFTER TAXATION 413,598 646,323

Restated

Earnings per share - Basic 27.1 0.85 1.73

Earnings per share - Diluted 27.2 0.77 1.53


31

Cash Flow StatementFor the Year Ended June 30, 2008


Annual Report2008


2008 2007


Cash flows from operating activities

Net profit before taxation 454,564 788,180

Adjustments for:

Depreciation 302,656 283,454

Provision for compensated absences 9,492 6,372

Spares written off -

931 Debt written off -

929

(Reversal of provision)/ provision for bad debt (3,500) 6,781

Workers' (Profit) Participation Fund including interest and WWF 33,690 57,661 Finance cost 146,954 207,105

Gain on disposal of property, plant and equipment (2,550) (100)

Interest income including interest on long term deposit (93,255) (68,214)

393,487 494,919

Operating cash flows before working capital changes 848,051 1,283,099

Increase in stores and stocks (485,602) (17,032)

Decrease in long-term deposit 900 -

Increase in retention money 18,129 -

Increase in trade debts (3,869) (1,793)

Increase in advances, deposits, prepayments and other receivables (185,476) (788,687)

Increase in trade and other payables 36,128 101,573

(619,790) (705,939)

Cash generated from operations 228,261 577,160

Compensated absences paid (8,241) (36,371)

Payment to Workers' (Profit) Participation Fund (41,483) (93,655)

Taxes paid (27,928) (16,550)

Net cash from operating activities 150,609 430,584Cash flows from investing activities

Additions in property, plant and equipment excluding borrowing cost capitalized (2,116,568) (112,789)

Proceeds from disposal of property, plant and equipment 2,594 100

Interest received on bank deposits 83,504 68,612

Net cash used in investing activities (2,030,470) (44,077)

Cash flows from financing activities

Repayment of long term finances (550,000) (550,000)

Dividend paid on ordinary shares (3,632) (181,575)

Dividend paid on preference shares (8,361) -

Import finance 754,988 -

Proceeds from issue of shares - net of transaction cost 5,059,174 -

Finance cost paid (259,399) (218,546)

Net cash generated from /(used in) financing activities 4,992,770 (950,121)

Increase/(decrease) in cash and cash equivalents 3,112,909 (563,614)

Cash and cash equivalents at beginning of the year 47,623 611,237Cash and cash equivalents at end of the year 28 3,160,532 47,623


32

Statement of Changes in EquityFor the Year Ended June 30, 2008


Annual Report2008


Revenue reserve

Share premium Hedging Accumulated Total

Ordinary Preference reserve loss

Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000

Balance as at June 30, 2006 3,707,430 486,992 - - (911,806) 3,282,616

Profit for the year - - - - 646,323 646,323

Total recognized income and expense - - - - 646,323 646,323

Dividends

Final 2006: Rs. 0.50 per ordinary share - - - - (185,372) (185,372)

Preference shares Rs. 0.17 per share - - - - (8,361) (8,361)

Balance as at June 30, 2007 3,707,430 486,992 - - (459,216) 3,735,206

Profit for the year - - - - 413,598 413,598

Effective portion of cash flow hedge - - - 84,364 - 84,364

Total recognized income and expense - - - 84,364 413,598 497,962

Right shares issued 3,225,465 - - - - 3,225,465

Share premium on right shares - - 1,833,709 - - 1,833,709

(net of issue cost)

Dividend on preference shares Rs. 0.17 - - - - (8,361) (8,361)

per share

Balance as at June 30, 2008 6,932,895 486,992 1,833,709 84,364 (53,979) 9,283,981


Capital reserveShare capital

33

Notes to the Financial StatementsFor the Year Ended June 30, 2008

1. LEGAL STATUS AND OPERATIONS

1.1 Fauji Cement Company Limited ("the Company") is a public limited company incorporated in Pakistan on 23 November 1992 under the Companies Ordinance, 1984. The Company commenced its business with effect from 22 May 1993. The shares of the Company are quoted on the Karachi, Islamabad and Lahore Stock Exchanges in Pakistan. The principal activity of the Company is manufacturing and sale of ordinary portland cement. The Company's registered office is situated at Aslam Plaza, Adamjee Road, Rawalpindi.

1.2 The Company is in the process of setting a new cement manufacturing line. For this purpose the Company has entered into agreements with M/s Polysius AG, M/s Loesche GmbH, M/s ABB Schweiz AG and M/s Haver and Boecker OHG for supply of machinery and related services and M/s Descon Engineering Limited for EPC related work. Refer note 10.2 for commitment in this regard.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of Compliance

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) as are notified under the Companies Ordinance, 1984 provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

2.2 Accounting convention and significant estimates

These financial statements have been prepared under the historical cost convention except for certain financial instruments which are carried at fair value.

The preparation of financial statements in conformity with the approved accounting standards require 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 are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results 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. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by the management in application of the approved accounting standards that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the ensuing paragraphs.


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Annual Report2008

2.2.1 Property, plant and equipment

The Company reviews the useful lives and residual value of property, plant and equipment on a regular basis. Any change in estimates in future years which might affect the carrying amounts of the respective items of property, plant and equipments with a corresponding effect on the depreciation charge and impairment.

2.2.2 Provision for inventory obsolescence and doubtful receivables

The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence if there is any change in usage pattern and physical form of related stores and spares. Further the carrying amounts of trade and other receivables are assessed on a regular basis and if there is any doubt about the realisability of these receivables, appropriate amount of provision is made.

2.2.3 Taxation

The Company takes into account the current income tax law and decisions taken by the taxation authorities. Instances where the Company's views differ from the views taken by the income tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities.

The Company also regularly reviews the trend of proportion of incomes between Presumptive Tax Regime income and Normal Tax Regime income and the change in proportions, if significant, is accounted for in the year of change.

2.2.4 Valuation of financial instruments

The fair value of financial instruments that are not traded in active market is determined using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions exiting at each balance sheet date.

2.2.5 Contingencies

The Company reviews the status of all the legal cases on a regular basis. Based on the expected outcome and lawyers' judgments, appropriate provision is made.

2.3 New accounting standards, interpretations and amendments that are not yet effective

The following standards, amendments and interpretations of approved accounting standards, effective for accounting periods beginning on or after 1 July 2008 are either not relevant to Company's operations or are not expected to have significant impact on the Company's financial statements other than certain increased disclosures:

"IFRS 2 (amendment)-Share-based payments (effective for annual periods beginning on or after 1 January 2009). IFRS 2 clarifies the vesting conditions and cancellations in the share-based payment arrangement.

IFRS 3 (amendment)-Business Combinations and consequential amendments to IAS 27-Consolidated and separate financial statements, IAS 28-Investment in associates and IAS 31-Interest in Joint Ventures (effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009).

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Annual Report2008

IFRS 7 - Financial Instruments: Disclosures (effective for annual periods beginning on or after 1 July 2008).

IFRS 8 - Operating Segments: (effective for annual periods beginning on or after 1 July 2008).

Revised IAS 1 - Presentation of financial statements (effective for annual periods beginning on or after 1 January 2009). The objective of revising IAS 1 is to aggregate information in the financial statements on the basis of shared characteristics.

Revised IAS 23-Borrowing costs (effective from 1 January 2009). Amendments relating to mandatory capitalisation of borrowing costs relating to qualifying assets.

IAS 29- Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 1 July 2008).

IAS 32 (amendment)-Financial instruments: Presentation and consequential amendment to IAS 1- Presentation of Financial Statements ( effective for annual period beginning on or after 1 January 2009). IAS 32 amended classification of Puttable Financial Instruments.

IFRIC 12-Service Concession Arrangements (effective for annual period beginning on or after 1 January 2008).

IFRIC 13- Customer Loyalty Programmes (effective for annual period beginning on or after 1 July 2008).

IFRIC 14-IAS 19- The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction (effective for annual period beginning on or after 1 January 2008).

IFRIC 15- Agreement for the Construction of Real Estate (effective for annual period beginning on or after 1 October 2009).

IFRIC 16- Hedge of Net Investment in a Foreign Operation (effective for annual period beginning on or after 1 October 2008).

2.4 Taxation

Income tax expense comprises current and deferred tax. Income tax is recognized in 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 for current taxation is based on taxable income at the current rate of tax after taking into account applicable tax credits, rebates and exemptions available, if any. In case of tax losses, provision for tax is provided on the basis of turnover as required under section 113 of the Income Tax Ordinance, 2001.

Deferred

Deferred tax liabilities are generally recognized for all major taxable temporary differences and deferred tax assets are recognized to the extent that is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.

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Annual Report2008

Deferred tax is accounted for using the balance sheet liability method in respect of all major taxable 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 tax. The amount of deferred tax recognized is based on expected manner of realization or settlement of the carrying amount of assets and liabilities using the tax rates enacted or substantially enacted at the balance sheet date.

The effects on deferred taxation of the portion of income expected to fall under presumptive tax regime is adjusted in accordance with the requirement of Accounting Technical Release - 27 of the Institute of Chartered Accountants of Pakistan. Deferred tax is charged or credited to income.

2.5 Property, plant and equipment

Property, plant and equipment except freehold land, and capital work in progress are stated at cost less accumulated depreciation and impairment loss, if any. Freehold land and capital work in progress are stated at cost less allowance for impairment, if any. Cost of property, plant and equipment includes acquisition cost, borrowing cost during construction phase of relevant asset, gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 2.16 and other directly attributable costs. Transfers from capital work in progress are made to the relevant category of property, plant and equipment as and when the assets are available for use.

Depreciation is charged to income on the straight line method so as to write off the depreciable amount of the property, plant and equipment over their estimated useful lives at the rates specified in note 11. Depreciation on depreciable assets is commenced from the month the asset is available for use upto the date when the asset is disposed off.

Depreciation methods, residual value and useful lives of the assets are reviewed at each financial year-end and adjustment is made, if impact on depreciation is significant.

The cost of replacing an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The cost of the day to day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposals with the carrying amount of property, plant and equipment and are recognized net within "other operating income" in profit or loss.

2.6 Impairment

The carrying amount of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognized as expense in the profit and loss account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. For non-financial assets, financial assets maeasured at amortized cost, available-for-sale financial assets that are debt securities, the reversal is recognised in profit and loss account. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

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Annual Report2008

2.7 Stores, spares and loose tools

These are stated at moving average cost less allowance for obsolete and slow moving stores, if any. Cost comprises invoice value and other costs incurred for bringing the store items at their present location and condition for intended use.

Items in transit are valued at cost comprising invoice value plus other charges incurred thereon up to the balance sheet date.

2.8 Stock in trade

Stock of raw material, except for those in transit, work in process and finished goods are valued principally at the lower of average cost and net realizable 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 realizable value signifies the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to be incurred in order to make a sale.

2.9 Foreign currency transactions

Transactions in foreign currencies are recorded into local currency at the rates of exchange prevailing at the date of transaction. All monetary assets and liabilities in foreign currencies are translated at exchange rates prevailing at the balance sheet date. Exchange differences are included in the profit and loss account.

2.10 Revenue recognition

Revenue from sales is recognized on dispatch of goods when significant risks and rewards of ownership are transferred to the buyer. Profit on deposits and advances is accounted for on a time proportion basis using the applicable rate of interest.

2.11 Mark-up bearing borrowings

Mark-up bearing borrowings are recognized initially at cost, less attributable transaction costs. Subsequent to initial recognition, markup bearing borrowings are stated at originally recognized amount less subsequent repayments, while the difference between the original recognized amounts (as reduced by periodic payments) and redemption value is recognized in the profit and loss account over the period of borrowings on an effective rate basis. The borrowing cost on qualifying asset is included in the cost of related asset as explained in note 2.13.

2.12 Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument and assets and liabilities are stated at fair value and amortized cost respectively. The Company de-recognizes the financial assets and liabilities when it ceases to be a party to such contractual provision of the instruments.

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Annual Report2008

Trade and other payables

Liabilities for trade and other amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received, whether or not billed to the Company.

Trade debts and other receivables

Trade debts and other receivables are recognized at original invoice amount less allowance for impairment, if any. Known bad debts are written off, when identified.

Off-setting of financial assets and 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.

2.13 Borrowing cost

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

2.14 Staff retirement benefits

Provident fund

The Company operates a defined contributory provident fund scheme for permanent employees. Monthly contributions are made to the fund @ 10% of the basic salary both by the Company and employees. The Company's contribution is charged to the profit and loss account.

Compensated absences

The Company also provides for compensated absences of its employees on unavailed leaves according to the Company's policy.

2.15 Functional and presentation currency

These financial statements are presented in Pakistani Rupee which is the Company's functional currency.

2.16 Derivative financial instruments and hedging activities

These are initially recorded at cost and are re-measured to fair value at subsequent reporting dates. The method of recognizing 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 hedges.

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.

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Annual Report2008The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the profit and loss account.

Amounts accumulated in equity are recognized in profit and loss account in the periods when the hedged item will effect 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.

2.17 Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand, deposits at banks and running finances

.2.18 Provisions

A provision is recognized in the balance sheet when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources embodying in economic benefits will be required to settle the obligation and the reliable estimate of the amount can be made.

2.19 Dividend

Dividend on ordinary shares is recognized as a liability in the period in which it is declared.

3. SHARE CAPITAL

ISSUED, SUBSCRIBED AND PAID UP CAPITAL

2008 2007 2008 2007Number '000 Number '000 Rupees '000 Rupees '000 Ordinary shares

171,310 171,310 1,713,105 1,713,105

199,433 199,433 Ordinary shares of Rs. 10 each issued at 1,994,325 1,994,325

322,546 - 3,225,465 -

693,289 370,743 6,932,895 3,707,430

Preference shares (note 3.1)

48,699 48,699 486,992 486,992

741,988 419,442 7,419,887 4,194,422

AUTHORIZED SHARE CAPITAL

This represents 951,300,813 (2007 : 951,300,813) ordinary shares of Rs. 10 each and 48,699,187 (2007 :48,699,187) preference shares of Rs. 10 each.

Preference shares of Rs. 10 each issuedat a discount of Rs. 3.85 per share - paidin cash

a discount of Rs. 3.85 per share - paid incash

Ordinary shares of Rs. 10 each issued ata premium of Rs. 6 per share-paid in cash

Ordinary shares of Rs. 10 each fully paidin cash

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Annual Report2008

3.1 Preference shares have the following characteristics :

(i) Entitling the holder to receive cumulative preferential dividend in the event the Company has funds available from operations to pay the preferential dividend, it isprofitable and current on its debt service obligations.

Year ending Amount of DividendRupees ('000)

2009 16,721 2010 33,442 2011 66,885 2012 175,573 2013 210,687 2014 227,408 2015 240,785

(ii) Convertible into ordinary shares at any time without further payment, such conversion being irreversible once exercised.

(iii) Except as provided above, having the same rights as ordinary shares in the Company including pari passu voting rights with ordinary shares.

3.2 Fauji Foundation holds 186,239,020 (2007 : 169,780,232 ) ordinary shares and 48,699,187 (2007 : 48,699,187) preference shares of the Company at the year end. In addition Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited and Fauji Oil Terminal & Distribution Company Limited hold 93,750,000, 18,750,000 and 18,750,000 ordinary shares respectively of the Company at the year end.

2008 20074. RESERVES Note Rupees'000 Rupees'000

Capital Share premium 1,833,709 - Hedging reserve 4.1 84,364 -

RevenueAccumulated loss (53,979) (459,216)

1,864,094 (459,216)

4.1 This represents the effective portion of gain arising on foreign currency options.

5. LONG TERM FINANCING

- Loans from banking companies-Secured

Habib Bank Limited 265,152 431,818

MCB Bank Limited 265,152 431,818

United Bank Limited 132,576 215,909

Bank Al Falah Limited 132,576 215,909

NIB Bank Limited 79,544 129,5465.1 875,000 1,425,000

Less: Amount payable within 12 months shown under current liabilities (550,000) (550,000) 325,000 875,000

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Annual Report2008

This is a syndicated term finance facility obtained by the Company from local banks which is secured against mortgage and first charge ranking pari passu on all assets of the Company. This carries interest rate of 6 months' KIBOR plus 0.85% (2007: 6 months' KIBOR plus 1.75%) per annum and payable on a six monthly basis. Balance amount of loan is to be repaid in half yearly installments in arrears with final installment due on March 23, 2010.

5.2 Undrawn facilities

During the year, the Company has entered into various long term borrowing facilities amounting to approximately Rs. 10,759 million with international and local lenders for new cement manufacturing line.

2008 2007

5.1 Maturity dates 2008 2007

Annual maturities of long term financing are as follows: Rupees'000 Rupees'000

2007-2008 - 550,000

2008-2009 550,000 550,000

2009-2010 325,000 325,000

875,000 1,425,000

Rupees'000 Rupees'000

11,903 41,902

9,492 6,37221,395 48,274(8,241) (36,371)13,154 11,903

6. DEFERRED LIABILITY - compensated absences

Compensated absences

Balance at beginning of the year

Add: Charge for the year

Less: Amount paid during the year

Less: Amount transferred to current liabilities (3,686) (3,626)

9,468 8,277

As per the rules of compensated absences, unavailed leaves up to 30 days are payable at the time ofretirement. Compensated absences over and above the period of 30 days are payable on discretionof employee and therefore the balance of unavailed compensated absences over that period hasbeen transferred to current liabilities. Actuarial valuation has not been carried out as the impact isconsidered to be immaterial.

2008 2007

7. DEFERRED TAX LIABILITY - Net Rupees'000 Rupees'000

Deductible temporary differences

Unused tax losses (344,515) (471,689)

Provision for doubtful debts - (2,547)

Taxable temporary difference

Excess of accounting book value of fixed assets over their tax base

707,669 814,154

363,154 339,918

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Annual Report2008

2008 2007


8. TRADE AND OTHER PAYABLES

Creditors 65,997 81,766

Accrued liabilities 174,692 118,828

Retention money 15,517 11,986

Security deposits 36,916 39,051

Advances from customers 41,344 67,770

Workers' (Profit) Participation Fund 8.1 24,413 41,483

Workers' Welfare Fund 25,362 16,085

Sales tax payable- net - 32,599

Excise duty payable 57,629 8,582

Other liabilities 36,962 32,347 Compensated absences 3,686 3,626 Dividend payable on preference shares 8,361 8,361 Unclaimed dividend 2,331 5,963

493,210 468,447

8.1 Workers' (Profit) Participation Fund (WPPF)

Balance at beginning of the year 41,483 93,562 Interest on funds utilised in the Company's business - 93 Allocation of the year 24,413 41,483 Payment to the fund during the year (41,483) (93,655)

24,413 41,483

Allocation of the year is made up as follows:Profit for the year before tax, WPPF and WWF 488,254 829,663

Charge for the year at the rate of 5% 24,413 41,483

9.

Import finances 9.1 754,988 - Running finance 9.2 623,377 375,510

1,378,365 375,510

9.1 Import finances

9.2 Running finance

SHORT TERM BORROWINGS - secured

The Company has obtained running finance facilities of Rs. 1,500 million (2007: Rs. 1,500 million)from banking companies. These facilities are secured against first charge ranking pari passu by wayof hypothecation over the present and future assets of the Company (excluding land and building)retaining 25% margin and carry markup ranging from 1 month's KIBOR plus 1 %-1.25% per annumof the utilized amount and payable on a quarterly basis.

Import credit facilities has been arranged from a banking company under mark-up arrangements atsix months' LIBOR plus 3 % per annum. These facilities are secured against first charge ranking paripassu by way of hypothecation over the present and future assets of the Company.

43


Annual Report2008

10. CONTINGENCIES AND COMMITMENTS

10.1 Contingencies

a) The Custom Authorities allowed release of plant and machinery imported by the Company at

concessionary rates of duty in terms of SRO 484(1)/92 dated May 14, 1992 against an

undertaking provided by the Company. Subsequent to the release of plant and machinery

the Custom Authorities raised a demand of Rs. 828.343 million in respect of items which are

considered by the Federal Board of Revenue (FBR) as not qualifying for the concessionary

rate of duty. The status of the cases out of the above amount are as follows:

(i) Case for Rs. 347.048 million was decided in the Company's favour by the Sindh

High Court (SHC).

(ii) Case for Rs. 15.797 million was decided by the SHC against the Company.

Both the above cases are pending in appeals before the Supreme Court of Pakistan.

(iii) Case for Rs. 87.442 million is pending before SHC.

(iv) Demand for Rs. 39.285 million is pending with Custom Authorities.

(v) A demand of Rs. 20.257 million has been raised by the Assistant Collector of

Customs on September 21, 2004 and the Company has asked for details of this

claim.

(vi) Remaining amount of Rs. 318.514 million has been claimed by Custom Authorities

by revising the above custom duty as being short levied as per letter No.

SI/NISC/IB/191/96-VI dated 31 December 1999

.

The Company filed an application before FBR under Section 47A of the Sales Tax Act, 1990

and Section 195C of the Customs Act, 1969 for constitution of an Alternate Dispute

Resolution Committee (ADRC) on the above cases. The proceedings of ADRC have been

concluded and final recommendations forwarded to FBR. Final order from FBR is still

pending. However the management of the Company is confident of a favourable outcome.

b) The Company is contesting a claim for damages in civil court, filed by a supplier of raw

materials upon termination of its contract of services. Arbitrators of the case have

ascertained a liability of Rs. 32.979 million payable by the Company out of which Rs. 14.923

million has been provided for in these financial statements. The net liability of Rs. 18.056

million so arising, has not been accounted for, as the management is confident that the case

will ultimately be decided in favour of the Company.

c) The Company is contesting a claim for damages amounting to Euros 833,120 equivalent

Pak Rs. 64.15 million in a tribunal of Arbitrators filed by a supplier of plant and machinery

against which the Company has filed a counter claim of Euros 410,914 equivalent Pak Rs.

31.64 million and Rs. 11.284 million (less the aggregate sum of equivalent Pak Rs. 21.33

million previously recovered/adjusted by the Company). No liability has been accounted for

as the management is confident that the case will ultimately be decided in favour of the

Company.

44


Annual Report2008

d) The Company is contesting a claim of damages amounting to Rs. 19.75 million filed by a

supplier of plant and machinery arising from encashment by the Company of bank guarantee

amounting to Rs. 5.32 million which is appearing under payables in these financial

statements. The case is currently in Islamabad High Court. No provision has been made

against any liability as the management is confident that the case will be decided in favour of

the Company.

e) The Company is contingently liable in respect of guarantees amounting to Rs. 270 million

(2007: Rs. 154 million) issued by banks and insurance companies on behalf of the Company

in the normal course of business.

f) For tax related contingency refer note 26.2

10.2 Commitments

a) Capital commitments of Rs. 9,269 million (2007: 5,540 million) in respect of new cement

manufacturing line. The Company has entered into agreements with various suppliers for

the construction of new line with 7,200 tons per day clinker capacity.

b) The Company has opened letters of credit for the import of machinery, spare parts and coal

valuing Rs. 7,541 million (June 2007: Rs. 188.26 million).

45


Annual Report200811

. PRO

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46


Annual Report2008BUILDING BETTER PAKISTAN

Annual Report2008

Cost of sales 290,477 276,244 Distribution cost 2,704 1,746 Administrative expenses 9,475 5,464

302,656 283,454

11.3 Detail of property, plant and equipment disposed off during the year has not been given as there was no single item having a book value of more than Rs. 50,000.

2008 2007Note Rupees'000 Rupees'000

169,136 92,453 5,199 37,127 1,752 -

- 3,228 176,087 132,808

11.1.1 1,389,199 - 457,209 - 795,389 -

11.1.2 132,021 - 2,773,818 -

2,949,905 132,808

407,109 - 982,090 -

1,389,199 -

16,032 - 11.1.3 97,301 -

9,946 -

11.1 Capital work in progress

Breakup of capital work in progress is as follows:

Existing project:Plant and machineryCivil worksDirectly attributable expenditureAdvances

Expansion project:

AdvancesPlant and machineryCivil worksDirectly attributable expenditure

11.1.1 Advances

Advances for civil worksAdvances for plant and machinery

11.1.2 Directly attributable expenditure

Salaries, wages and other benefitsBorrowing costProfessional chargesOthers 8,742

132,021 -

11.1.3 Borrowing cost has been capitalized at a capitalization rate of 10.7 % per annum.

11.2 Depreciation charge for the year has been allocated as follows:

47


Annual Report2008

Considered good - 7,769

Considered doubtful 4,848 8,348

4,848 16,117

Secured considered good 26,927 11,789

Less: Provision for doubtful debts (4,848) (8,348)

2008 2007


12. LONG TERM ADVANCE - Considered good

Sui Northern Gas Pipelines Limited 12.1 8,100 9,000

Less: Amount receivable within 12 months shown under current assets (900) (900)

7,200 8,100

12.1

2008 2007

13. LONG TERM DEPOSITS Rupees'000 Rupees'000

Islamabad Electric Supply Company Limited 21,600 21,600

Sui Northern Gas Pipelines Limited 25,011 25,011

46,611 46,611

14. STORES, SPARES AND LOOSE TOOLS

415,358 61,997

14.1 478,579 394,046

Loose tools 13,654 12,726

907,591 468,769

14.1

15. STOCK IN TRADE

31,271 23,931

152,529 115,221

Raw and packing material

Work in process

Finished goods 46,289 44,157

230,089 183,309

16. TRADE DEBTS

Unsecured

26,927 19,558

This represents long term advance for construction of gas pipeline. It is repayable annually in equalinstallments over 10 years and carries mark-up @ 1.5% per annum.

Stores (Including items in transit of Rs. 2.46 million (2007: Nil)

This includes spares stated at net realizable value of Rs. 4.89 million (2007 : Rs 4.89 million).

Spares (Including items in transit of Rs. 64.82 million (2007: Rs. 83 million)

48


Annual Report2008

2008 2007


17.

Note

Advances - Considered good

To suppliers 15,521 815,588

To employees 2,473 621

Due from associated undertaking -unsecured 17.1 539 5,464

Current portion of long term advance 900 900

Deposits 5,737 1,795

Prepayments 3,966 3,125

Advance tax-net 23,302 13,104

Sales tax refundable -net 82,719 -

Derivative foreign currency options used as hedging instrument 17.2 84,364 -

Interest accrued 14,828 5,077

Prepaid arrangement fee for loans 17.3 74,670 11,000

Margin on letters of credit 29,369 -

Other receivables- Considered good 7,179 2,084

345,567 858,758

17.1

17.2

17.3

2008 2007Rupees'000 Rupees'000

18. CASH AND BANK BALANCES

Cash at banks

Deposit accounts 18.1 & 18.2 3,756,611 402,907

Current accounts 27,039 20,048

3,783,650 422,955

Cash in hand ` 259 178

3,783,909 423,133

This represents amount due from Fauji Foundation Resident Director Office, Karachi. This relates tonormal business operations of the Company and is interest free.

ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER

RECEIVABLES

This represents arrangement and agency fees paid to banks for arranging finances for setting up newline and will be amortized over the term of relevant finances. For detail of undrawn facilities refer note 5.2

The Company has entered into foreign currency forward options to hedge the possible adversemovements in exchange rates (exchange rate risk) arising on foreign currency payments required tobe made for the purchase of cement line. As the hedging relationship was effective and met thecriteria of cash flow hedge, this arrangement qualified for hedge accounting specified in IAS 39"Financial Instruments: Recognition and Measurement".

18.1

18.2

Balances with banks include Rs. 36.916 million (2007 : Rs. 39.051 million) in respect of security

Deposits of Rs. 4 million (2007 : Rs. 4 million) with banks are under lien for letters of guarantee issued

on behalf of the Company.

49


Annual Report2008

2008 2007

Rupees'000 Rupees'00019. SALES - Net

Sales - Local 3,889,630 4,354,132

- Export 859,587 425,904

4,749,217 4,780,036

Less: Sales tax 510,010 573,238

Excise duty 691,165 742,395

Export development surcharge 2,140 1,120

1,203,315 1,316,753

3,545,902 3,463,283

2008 2007

20. COST OF SALES

Note


Raw materials consumed:

Opening stock 4,567

8,955

Purchases 233,542

230,991

Closing stock (10,696)

(4,567)

227,413 235,379

Packing material consumed 281,916

221,116

Stores and spares consumed 10,914

11,171

Spares written off -

931

Salaries, wages and benefits

(including retirement benefits of Rs.11.239 million(2007:Rs. 6.04 million) 133,451

133,780

Rent, rates and taxes 5,284

2,213

Insurance 12,221

12,363

Fuel consumed 1,441,919

979,044

Power consumed 451,419

431,609

Depreciation 11.2 290,477

276,244

Repairs and maintenance 70,250

85,712

Technical assistance 1,314

8,772

Vehicle running and maintenance expenses 6,938

7,111

Printing and stationery 864

920

Traveling and conveyance 2,412

3,167

Communication, establishment and other expenses 3,952 4,556

2,940,744 2,414,088

Add: Opening work-in-process 115,221 93,671

Less: Closing work-in-process (152,529) (115,221)

Cost of goods manufactured 2,903,436 2,392,538

Add: Opening finished goods 44,157 23,407

Less: Closing finished goods (46,289) (44,157)

2,901,304 2,371,788

Less: Own consumption capitalized (13,514) -

2,887,790 2,371,788

50


Annual Report2008

21. OTHER INCOME

Income from financial assets

Profit on bank deposits 93,133 68,079

Others 6,928 -

Interest on long term advance 122 135

100,183 68,214

Income from assets other than financial assets

Gain on disposal of property, plant and equipment 2,550 100

Others 4,841 5,521

107,574 73,835

22. DISTRIBUTION COST


(including retirement benefits of Rs. 2.567 million (2007:Rs. 3.382 million) 18,791 20,651

Export freight and other charges 24,482 -

Traveling and entertainment 1,127 705

Vehicle running and maintenance expenses 1,641 2,745

Rent, rates and taxes 1,468 1,353

Repairs and maintenance 288 173

Printing and stationery 545 416

Depreciation 11.2 2,704 1,746


Advertisement and sale promotion expenses 2,207 2,029

Trade debts written off - 929

(Reversal of provision)/provision for doubtful debts (3,500) 6,781

Insurance 388 246

53,383 40,645

2008 2007

Rupees'000 Rupees'000Note

51


Annual Report2008

2008 2007

23. ADMINISTRATIVE EXPENSES Note Rupees'000 Rupees'000


(including retirement benefits Rs. 2.008 million (2007: Rs. 1.691 million) 41,153

42,439

Traveling and entertainment 7,483

3,487

Vehicle running and maintenance expenses 2,145

2,385

Insurance 602

594

Rent, rates and taxes 6,465

5,934

Repairs and maintenance 590

960

Printing and stationery 1,318 1,941


Legal and professional charges 1,935 2,281

Depreciation 11.2 9,475 5,464

76,495 71,302

24. OTHER OPERATING EXPENSES

Auditors' remuneration:

Annual audit 375 325

Half yearly review 125 100

Out of pocket expenses 50 50

Other certifications 50 50

Out of pocket expenses - other certifications - 5

600 530

Workers' (Profit) Participation Fund 8.1 24,413 41,483

Workers' Welfare Fund 9,277 16,085

34,290 58,098

25. FINANCE COST

Fee and charges on loans 500 500

Interest/mark-up on long term finance 129,928 200,642

Interest on short term borrowings and other charges 11,609 779

Interest on Workers' Profit Participation Fund - 93

Guarantee commission 665 972

Bank charges and commission 4,252 4,119

146,954 207,105

26. TAXATION

Current 17,730 17,320

Deferred 23,236 124,537

40,966 141,857

52


Annual Report2008

Others (Rupees '000) 8,622 2,231

26.1

2008 2007

Accounting profit for the year (Rupees '000) 454,564 788,180

Applicable tax rate 35% 35%

Income tax at applicable rate (Rupees '000) 159,097 275,863

(106,216) (119,509) Tax effect of low rates on certain income (Rupees '000) (29,693) (29,789) Minimum tax under section 113 of the Ordinance (Rupees '000) 9,156 13,061

40,966 141,857

26.2

27. EARNINGS PER SHARE

2008 2007Restated

27.1 Basic

Profit after taxation (Rupees '000) 413,598 646,323

489,456 374,473

Earnings per share -basic (Rupees) 0.85 1.73

The charge for current taxation represents tax on export proceeds of Rs. 8.574 million (2007 :Rs. 4.259 million) under section 154 the Income Tax Ordinance, 2001 and Rs. 9.156 million (2007 :Rs. 13.061 million) payable minimum tax under section 113 of the Ordinance. The following is areconciliation of relationship between tax charge and accounting profit:

No provision has been made in these financial statements in respect of outstanding issues asmanagement is confident of a favourable outcome.

Tax returns filed by the Company for Tax Years 2003 to 2007 (years ended 30 June 2003 to 2007)stand assessed in terms of section 120 of the Ordinance. However, tax authorities are empowered toreopen the assessment at any time within 5 years from date of assessment.

Assessments of the Company upto Assessment Year 2002-2003 were finalized by the taxation officermainly by treating advances received from customers as deemed income and curtailing administrativeexpenses ,claimed by the ,company aggregating to Rs. 19.3 million up to and including AssessmentYear 2001-2002, the appeals filed by the Company were decided by the Commissioner (Appeals) forthe most part in the Company’s favour. However, appeal filed for Assessment Year 2002-2003 wasdecided against the Company. The tax department and the Company are contesting the AppellateOrders of the Commissioner (Appeals) before the Income Tax Appellate Tribunal (ITAT) for issues not decided in their favour in Assessment Years 1998-1999 to 2002-2003. The appeals are pending disposal by the ITAT.

Tax effect of change in proportion of export sales to local sales ontemporary differences (Rupees '000)

Weighted average number of ordinary shares outstanding during theyear (Numbers’000)

53


Annual Report2008

Utilities and upkeep 906 864 1,544 1,016

4,819 4,512 35,241 20,775

No of persons 2 1 20 13

29.1

29.2 Meeting fee of directors charged during the year was Rs. 0.323 million (2007 : Rs. 0.023 million), numberof directors: 8 (2007 : 6).

In addition, the above were provided with free medical facilities. The Managing Director and certainexecutives were also provided Company's maintained cars and household equipment in accordance withthe Company's policy.

29. REMUNERATION OF DIRECTORS AND EXECUTIVES

2008 2007 2008 2007

Rupees'000 Rupees'000 Rupees'000 Rupees'000

Managerial remuneration 3,434 3,199 31,884 18,293

Provident fund 170 150 939 612

Compensated absences 309 299 874 854

The aggregate amounts charged in the year for remuneration, including benefits and perquisites, were asfollows:

ExecutivesManaging Director

Earnings per share -diluted (Rupees) 0.77 1.53

28. 2008 2007


3,783,909 423,133 (375,510)

Cash and bank balances

(Numbers '000)

Running finances

CASH AND CASH EQUIVALENTS

27.2 Diluted

Profit after taxation (Rupees '000) 413,598 646,323

538,468 423,662

(623,377)

3,160,532 47,623

Weighted average number of ordinary shares andconvertible preference shares outstanding during the year

2008 2007Restated

54


Annual Report2008

Financial liabilities

Long term financing 550,000 325,000 - - - - - 875,000

Short term borrowings 1,378,365 - - - - - - 1,378,365

Trade and other payables - - - - - - 394,237 394,237

Markup accrued - - - - - - 33,186 33,186

1,928,365 325,000 - - - - 427,423 2,680,788

2007

Financial assets

Long term deposits - - - - - - 46,611 46,611

Long term advance 900 900 900 900 900 4,500 - 9,000

Trade debts - - - - - - 19,558 19,558

- - - - - - 14,420 14,420

Cash and bank balances 402,907 - - - - - 20,226 423,133

403,807 900 900 900 900 4,500 100,815 512,722

Financial liabilities

Long term financing 550,000 550,000 325,000 - - - - 1,425,000

Short term running finances 375,510 - - - - - - 375,510

Trade and other payables - - - - - - 359,496 359,496

Markup accrued - - - - - - 48,330 48,330

925,510 550,000 325,000 - - - 407,826 2,208,336

30.2 Interest rates for financial assets and liabilities are as follows:

2008 2007

Assets

Long term advance 1.50 1.50

Cash and bank balances 1.50-14.85 1.50-12.20

Liabilities

Long term financing 11.38 11.89

Short term borrowings 10.98 10.60

Advances, deposits and other receivables

Interest rates %

Maturity upto

one year

Maturity

between one

to two years

Maturity

between two

to three

Maturity

between

three to four

Maturity

between four

to five years

Maturity

after five

years

Total

Markup/Interest bearing

Non interest

bearing

years years

Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000

Maturity upto

one year

Maturity

between one

to two years

Maturity

between two

to three

Maturity

between

three to four

Maturity

between four

to five years

Maturity

after five

years

Total

Markup/Interest bearing

Non interest

bearing

years years

Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000 Rupees'000Financial assets

Long term deposits - - - - - - 46,611 46,611

Long term advance 900

900 900 900 900 3,600 - 8,100

Trade debts - - - - - - 26,927 26,927

- - - - - - 142,016 142,016

Cash and bank balances 3,756,611 - - - - - 27,298 3,783,909

3,757,511 900 900 900 900 3,600 242,852 4,007,563

2008

Advances, deposits and other receivables

30. Financial Instruments and related disclosures

30.1 Financial assets and liabilities

55


Annual Report2008

30.3 Fair value of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in these financial statements approximate their fair values.

30.4 Concentration of credit risk

All financial assets except cash in hand are subject to credit risk. Since major part of the Company's sales is against advance payment, the Company believes that it is not exposed to major concentration of credit risk . To manage exposure to credit risk, the Company applies credit limits to its customers besides obtaining guarantees and by dealing with a variety of major banks and financial institutions.

30.5 Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions with foreign buyers and suppliers. The Company, where considered necessary, used forward contracts and foreign currency forward options against payables exposed to foreign currency risks.

30.6 Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulties in funds to meet commitments associated with financial instruments. The Company believes that it is not exposed to any significant level of liquidity risk.

30.7 Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as net profit after taxation divided by total shareholders' equity. The Board of Directors also monitors the level of dividend to ordinary shareholders. There were no changes to the Company's approach to capital management during the year and the Company is not subject to externally imposed capital requirements.

31. Related Party Transactions

Fauji Foundation holds 26.86% ordinary shares and 100% preference shares of the Company at the year-end. Therefore all subsidiaries and associated undertakings of Fauji Foundation are related parties of the Company. Other related parties comprise of directors, key management personnel, entities over which the directors are able to exercise influence and employees' funds. Amount due from the related party is shown under receivables and the remuneration of the Chief Executive and executives is disclosed in note 29 to these financial statements. Transactions with related parties, other than remuneration and benefits to key management personnel under the terms of their employment are as follows:

56


Annual Report2008

2008 2007

Rupees'000 Rupees'000Transactions with associated undertakings/companies due to common directorship

- Sale of cement 10,693 15,610 - Dividends paid on ordinary shares - 84,890 - Payment for use of medical facilities 22 86 - Payment on account of clearance of shipments 17,700 32,000 - Preference dividend 8,361 8,361

- Proceeds from issue of right shares 2,363,341 -

Employees Funds - Payments made into the fund 6,233 5,952

32. PLANT CAPACITY AND ACTUAL PRODUCTION 2008 2007

Metric Tons Metric Tons

Current installed capacity 1,165,500 1,165,500

Actual production 1,174,722 1,153,711

33. GENERAL

33.1 Facilities of letters of guarantee and letters of credit

Facilities of letters of guarantee and letters of credit amounting to Rs. 354.50 million and Rs. 950 million (2007: Rs. 204.50 million and Rs. 600 million) respectively are available to the Company. Letter of guarantees are secured by way of hypothetication charge on present and future assets of the Company (excluding land and building) and lien on bank deposits.

33.2 Figures have been rounded off to the nearest thousand of Rupee unless otherwise stated.


57

Pattern of Share-holdingas on 30 June 2008


Annual Report2008

No. of Shareholders From ToTotal Number

of Shares

1 100 1645101 500 621965501 1000 1953714

1001 5000 106400285001 10000 9472857

10001 15000 487184215001 20000 525250520001 25000 462875825001 30000 334966030001 35000 213764035001 40000 172949040001 45000 129180645001 50000 290877550001 55000 133400055001 60000 147449060001 65000 131817365001 70000 124105070001 75000 96223075001 80000 95000080001 85000 83625085001 90000 70930090001 95000 74724095001 100000 3790486

100001 105000 720860105001 110000 540645110001 115000 1126415115001 120000 231440120001 125000 858255125001 130000 517825130001 135000 267500135001 140000 558500140001 145000 1564800145001 150000 1194270150001 155000 462600155001 160000 471480160001 165000 816000165001 170000 504110170001 175000 690000175001 180000 178500180001 185000 547390185001 190000 376000190001 195000 577685195001 200000 1796350

481256196035131129369281192117644530592525211813121088

3875

1027424

11833534132391 200001 205000 203820

58


Annual Report2008

5 205001 210000 10397002 210001 215000 4250002 215001 220000 4346502 220001 225000 4484002 225001 230000 4540002 230001 235000 4670002 235001 240000 4730201 240001 245000 2431004 245001 250000 9945003 250001 255000 7566801 255001 260000 2590001 260001 265000 2650001 280001 285000 2801942 285001 290000 5777803 295001 300000 8975003 300001 305000 9105001 310001 315000 3105002 315001 320000 6370002 320001 325000 6430002 325001 330000 6590002 330001 335000 6650001 335001 340000 3400001 340001 345000 3425002 345001 350000 7000001 355001 360000 3571201 365001 370000 3688382 375001 380000 7545001 385001 390000 3864404 395001 400000 15979001 405001 410000 4081261 420001 425000 4207501 435001 440000 4375801 455001 460000 4588411 460001 465000 4610001 465001 470000 4660001 480001 485000 4840002 490001 495000 9860652 495001 500000 10000003 500001 505000 15139001 520001 525000 5236001 550001 555000 5525001 555001 560000 5600001 560001 565000 5620002 570001 575000 11475001 590001 595000 5940001 595001 600000 6000001 610001 615000 6125001 625001 630000 6300001 665001 670000 6677001 685001 690000 6870002 695001 700000 14000001 700001 705000 7018651 720001 725000 724500

59


Annual Report2008

730001 735000 731450785001 790000 788500795001 800000 796500895001 900000 1797500930001 935000 933075940001 945000 941000995001 1000000 1000000

1095001 1100000 11000001155001 1160000 11590001275001 1280000 12780101345001 1350000 13500001390001 1395000 13925001435001 1440000 14400001475001 1480000 14791701495001 1500000 15000001595001 1600000 16000001685001 1690000 16875001760001 1765000 17605621795001 1800000 18000001995001 2000000 20000002235001 2240000 22385004480001 4485000 44805004580001 4585000 45805005025001 5030000 50280005285001 5290000 52897006185001 6190000 61855006935001 6940000 69352388950001 8955000 89540009380001 9385000 93850009855001 9860000 9856483

13200001 13205000 1320421818500001 18505000 3750000046740001 46745000 4674250048695001 48700000 4869918793745001 93750000 93750000

116665001 116670000 116669975186235001 186240000 186239020

111211111111111111111111111111121

111

9464 741988686

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Annual Report2008

Categories of Shareholders as on 30 June 2008 Shares held Percentage

Directors

Lt Gen Syed Arif Hasan, HI (M) (Retd) 1

Maj Gen Malik Iftikhar Khan, HI (M) (Retd) 1

Mr. Qaiser Javed 1

Brig Arif Rasul Qureshi (Retd) 1

Brig Rahat Khan (Retd) 1

Dr. Nadeem Inayat 1

Brig Liaqat Ali (Retd) 1

Spouses and minor children of Directors/CEO NIL

Executive NIL

Associated companies, undertaking and related parties:-

Fauji Foundation 234,938,207 31.6633

Fauji Fertilizer Company Limited (FFC) 93,750,000 12.6350

Fauji Fertilizer Bin Qasim Limited (FFBL) 18,750,000 2.5270

Fauji Oil Terminal & Distribution Company Ltd (FOTCO) 18,750,000 2.5270

Total: 366,188,207 49.3523

NIT and ICP NIL

-

Banks, Development Finance Institution, Non Banking Finance Institutions

158,698,997 21.3883

Insurance Companies 3,256,692 0.4389

Mudarabas and Mutual Funds 16,813,057 2.2659

General Public

Local 99,835,086 13.4551

Foreign - -

Others (Local)

Investment Companies 50,160 0.0068

Leasing Companies 900,000 0.1213

Joint Stock Companies 90,956,780 12.2585

Foreign

Industrialization Fund for Developing Countries (IFU) 5,289,700 0.7129

Total Shares held 741,988,686 100.0000

Share holders holding 10% and above Shares held Percentage

Fauji Foundation 234,938,207 31.6633 Fauji Fertilizer Company Limited 93,750,000 12.6350 United Bank Limited 116,669,975 15.7240 Total 445,358,182 60.0222

Form of Proxy - 16th Annual General MeetingI/We________________________________________________________________________________

of__________________________________________________________________________________

being Member (s) of Fauji Cement Company Limited hold ________________________

Ordinary Shares hereby appoint Mr./Mrs./Miss of ____________________________________________

__________________ or failing him/her __________________________________________________

of _______________________

As witness my/our hand/seal this _______________________ day of _______________________2008.

Signed by___________________________________________________________________________

said in the presence of:

(1) Name ______________________________ Address:______________________________________

______________________________________ N.I.C No:_____________________________________

(2) Name ______________________________ Address: _____________________________________

______________________________________ N.I.C. No: ____________________________________

IMPORTANT:

1. This Form of proxy, duly completed and signed, must be received at the registered office of the Company, at First Floor, Aslam Plaza, 60 Adam Jee Road, Sadar, Rawalpindi Pakistan, not less than 48 hours before the time of holding the meeting.

2. If a member appoints more than one proxy and more than one instruments of proxy are deposited by a member with the Company, all such instruments of proxy shall be rendered invalid.

as my / our proxy in my / our absence to attend and vote for me/us and

on my/our behalf at the 16th Annual General Meeting of the Company to be held on Thursday,

30 October 2008 and at any adjournment thereof.

Folio No CDC Account #

Participant I.D. Account #

Signature onFour Rupees

Revenue Stamp

The signatureshould agree with

the specimen registeredwith the Company


Annual Report2008

AFFIXCORRECTPOSTAGE

The Company Secretary

Fauji Cement Company LimitedFirst Floor, Aslam Plaza,60 Adam Jee Road,Saddar,Rawalpindi - Pakistan

Annual Report 2007-2008

Documents

Transcript of Annual Report 2007-2008