MS AR 2018 (1)

DIRECTORS’ REPORT
TO THE SHAREHOLDERS (CONTD.)
Trade debts decreased from Rs. 1,347.039 million to Rs.
1,263.280 million and mainly represented receivable on
account of sale of steel re-bars to various corporate clients.
Loans and advances increased from Rs. 289.765 million
to Rs. 373.907 million and mainly represented advances
given to employees and suppliers for local billet, stores and
furnace oil.
Due from the Government have increased from Rs.
1,870.882 million to Rs. 2,298.102 million and comprised of
advance income tax, sales tax and export regulatory duty.
Advance tax mainly represented income tax deducted on
exports and imports and will be adjusted against income tax
liabilities in future years. The increase in sales tax is mainly
associated with sales tax paid at import stage on purchase
of re-meltable scrap and will be adjusted against future sales
tax liability on electricity bills. The matter of export regulatory
duty and alleged sales tax recovered by Punjab Revenue
Authority has been disclosed in detail in the financial
statements.
Cash and bank balances decreased from Rs. 2,338.892
million to Rs. 1,251.171 million. The decrease was manly
associated with utilization of right issue funds for capital
expenditure.
Equity contribution from Directors and their relatives
decreased from Rs. 1,224.037 million to Rs. 924.037 million.
The Board of Directors approved transfer of Rs. 300.000
million to current liabilities.
Long-term financing increased from Rs. Nil to Rs. 829.000
million. This mainly includes long term financing obtained
from Bank Alfalah for financing balancing, modernization
and replacement (BMR) of bar re-rolling mill.
Deferred liabilities increased from Rs. 643.052 million to Rs.
770.956 million. The increase was mainly due to increase
in deferred tax liability upon capitalization of power engines
and increase in obligation in respect of defined benefit plan.
Trade & other payables decreased from Rs. 615.104 million
to Rs. 463.465 million. Decrease is mainly due to repayment
of one time foreign supplier of billet.
Accrued profit/interest/mark-up increased from Rs. 66.547
million to Rs. 101.323 million. The increase in outstanding
borrowings was incurred during the last month of FY 2017
due to which markup accrual was less last year. However,
average outstanding borrowings remained at the same level
throughout the year, therefore markup accrual increased as
compared to FY 2017.
Short-term loans from banking companies decreased from
Rs. 7,977.002 million to Rs. 7,540.376 million. The decrease
was due to repayments.
Company’s net worth as at June 30, 2018 stood at Rs.
7,466.333 million as compared to Rs. 6,637.098 million as at
June 30, 2017 with a breakup value of Rs. 29.67 per share
as at June 30, 2018 as compared to Rs. 26.38 as at June 30,
2017.
There was no major change in contingencies during the
year. Financial commitments of the Company stood at an
aggregate of Rs. 2,574.078 million at the close of the year
in respect of purchase of goods and capital expenditure.
Details of these commitments are disclosed in the relevant
notes to the financial statements.
Resultantly, the Company’s asset base recorded an increase
of Rs. 1,451.030 million compared to last year, primarily due
to further capital expenditure made during the year.
Operational Performance Review
The furnaces generated an overall production of 211,934 MT,
recording an increase of 82.38% from previous year. The overall
production of rolling mills was recorded at 251,950 MT showing an
increase of 4.21% over the previous year. During the year, Company
obtained approval from SNGPL for enhancement in gas load
capacity from 2.80 MMCFD to 6.30 MMCFD and from LESCO for
enhancement of grid station load capacity from 19.99 MW to 79.99
MW.
Non-financial performance review
Safety, quality, innovation and productivity are key factors in our
business and hallmarks of our success. In 2018, we experienced
another year of outstanding safety performance. Our quality focus
also continued, establishing Company best records for internal
quality performances. Finally, our relentless concentration on
productivity gains and initiatives to lower operating costs generated
improved margins in 2018.
DIVIDENDS AND APPROPRIATIONS
The Board of Directors has always been committed to maximize
returns for members of the Company and that is why we have
consistently been paying out cash dividend in past. In line with this
commitment, the Board of Directors has recommended a final cash
dividend @ Rs. 2.20/- per share i.e. 22% for the year ended June 30,
2018 to you, our owners.
The proposed final cash dividend is subject to the approval of the
members at the forthcoming Annual General Meeting to be held
on October 27, 2018. These financial statements do not include
the effect of the above proposal which will be accounted for in the
period in which it is approved by the members.
30 MUGHAL IRON & STEEL INDUSTRIES LIMITED