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Mahmood Group 2019-20
Mahmood Group 2019-20
ANNIVERSARY
Corporate Governance
Statement of Compliance with Listed Companies
20 (Code of Corporate Governance) Regulations, 2017
21 Pattern of Shareholding
23 Directors Attendance at Board Meetings
Financials Statements
Independent Auditors' Review Report to the Members on The Statement of Compliance
26 contained in Listed Companies (Code of Corporate Governance) Regulations, 2017
27 Independent Auditors' Report to the Members
31 Statement of Financial Position
32 Statement of Profit or Loss
33 Statement of Other Comprehensive Income
34 Statement of Changes in Equity
35 Statement of Cash Flows
36 Notes to the Financial Statements
Legal Forms
79 Form of Proxy
82 Dividend Mandate Form
83 Income Tax Return Filing Status
Vision
To continue to be recognized globally as a dynamic business group specialized in multiple modern diversified
businesses with its credibility of value creation for all stakeholders and the society through its strategically
align innovation and sustainability framework.
Core Values
Notice is hereby given that 50th Annual General Meeting of the Company will be held on Wednesday, 28th
October, 2020 at 11.00 A.M., through video link facility at its registered office, Mehr Manzil, Lohari Gate,
Multan to transact the following business:-
1- To confirm the minutes of the Extraordinary General Meeting held on 31st January, 2020
2- To receive, consider and approve the audited Financial Statements of the company for the year ended
30th June, 2020 together with director's and auditor's reports thereon.
3- To appoint auditors for the year 2020-21 and to fix their remuneration. The present Auditors M/s.
Shinewing Hameed Chaudhri & Company, Chartered Accountants, Multan being eligible have offered
themselves for re-appointment.
4- To transact any other business as may be placed before the meeting with the permission of the Chair.
By order of The Board of Directors
Sd/-
YASIR GHAFFAR
Company Secretary
Multan.
Date: 7th October, 2020.
NOTE:
i) The Share Transfer Books of the Company will remain closed from 18th October to 28th October,
2020 (Both days inclusive).
b) Members interested in attending the AGM through Zoom application will be requested to get
themselves registered with our Head Office, at least 48th hours before the time of AGM at
''[email protected]'' by providing the following details:
The Directors of Mahmood Textile Mills Limited was so immense that it pushed the overall economic
are pleased to present their report, together with the growth of the country to negative territory.
audited financial statements of the Company, for the
The Govt. of Pakistan also took different
year ended June 30, 2020.
precautionary measures to combat the impact of
BUSINESS PERFORMANCE REVIEW: coronavirus and also imposed lock down on
industries. Because of the measures taken by the
The reporting year has witnessed unprecedented government to fight the pandemic, we had to close
challenges which have made critical impact on the production units and faced heavy production losses.
performance of the Company. This year can easily By the grace of Almighty ALLAH we neither laid off
be traced in to two periods; Pre-COVID and any workers nor made reduction in salary of any
COVID. Before COVID-19 our company's employee.
performance was highly remarkable, reporting net
profit of Rs. 116.808 M in the first quarter whereas The prices of yarn and fabrics dropped significantly
Rs. 220.558 M was reported in the interim accounts. due to slowdown in economic activities at local and
international level. In this scenario, a few buyers
At the beginning of the second half when it was the refused to lift their contracted goods and others
time to reap the fruit of our heavy investment made insisted to revise their previously agreed rate.
during previous years in BMR of spinning units and Debtors' turnover days also increased as our
establishment of state of the art new weaving unit, payments were on hold by our customers. In these
the outreach of COVID-19 de-stabilized everything. worrisome period the management devised Post
World Health Organization declared COVID-19 as a Traumatic Growth (PTG) strategy which led us to
global pandemic and recommended containment make right decisions at the right time; to cut our sales
and mitigation measures worldwide. This resulted in revenue during mid-COVID period and raw
closure of industries and non-essential services all material stocks procured before pandemic at
over the world. This economic crisis attacked prevailing high prices resulted in gross profit loss of
various businesses around the world. One of the approximately 2%. Moreover, we made an
severely affected industry is Textile Manufacturing assessment to hold our finished stocks during
that is considered as the second largest employment COVID so we could control losses on its low cost
creating industry after agriculture and accounts for sales. Our overall performance in post COVID
10% of the total GDP. The impact of coronavirus period of the year was so depressed that even the
Due to overall negative effect of COVID on business ● The Financial Statements prepared by the
performance, the profit of associate companies also management of the Company fairly present its
decreased remarkably in this reporting year. state of affairs, the results of its operations, cash
flows and changes in equity;
Summarized financial performance is as follows:
● Proper books of accounts have been maintained
Summary of 2020 2019 by the Company;
Operating Results ----- Rupees "000"-----
● Appropriate accounting policies have been
Local Sales 2,662,669 3,912,345 consistently applied in preparation of the
financial statements and accounting estimates
Export Sales 21,802,519 20,474,395
are based on reasonable and prudent judgment;
Sales - Net 24,465,188 24,386,740
● There are no doubts upon the Company's ability
Gross Profit 2,113,533 2,573,886 to continue as a going concern;
Profit Before Tax 302,184 1,062,336 ● There has been no material departure from the
best practices of the Code of Corporate
Profit After Tax 71,633 750,507
Governance, as detailed in the listing
EPS 3.82 40.03 regulations of the stock exchange;
Sd/- Sd/-
Khawaja Muhammad Iqbal Khawaja Muhammad Younus
Chief Executive Officer Director
Multan
Dated: 7th October 2020
Rupees in Million
2020 2019 2018 2017 2016 2015
Assets
FINANCED BY:
5,000 100
-
- (100) 2020 2019 2018 2017 2016 2015
2020 2019 2018 2017 2016 2015
(200)
10000
2015
9000
8000
2016
7000
2017 6000
5000
Series1 Series1
2018
4000
3000
2019
2000
2020 1000
0
0 2000 4000 6000 8000 10000 2020 2019 2018 2017 2016 2015
Composition:
Terms of Reference
The Committee makes recommendations to the Board for maintaining (i) a sound organizational plan of the
Company, (ii) an effective employee development programme and (iii) sound compensation and benefit
plans, policies and practices designed to attract and retain high caliber personnel for effective management of
business with a view to achieve said objectives.
The Terms of Reference of the Board Human Resource Committee include review and recommendations for
the Board's approval, matters relating to:
Composition:
Terms of Reference
The Committee reviews the periodic financial statements and examines the adequacy of financial policies and
practices to ensure that an efficient and strong system of internal control is in place. The Committee also
reviews the audit reports issued by the Internal Audit Department and compliance status of audit
observations.
The Audit Committee is also responsible for recommending to the Board of Directors the appointment of
external auditors by the Company's shareholders and considers any question of resignation or removal of
external auditors, audit fees and provision of any service to the Company by its external auditors in addition to
the audit of its financial statements.
The Terms of Reference of the Audit Committee are consistent with those stated in the Code of Corporate
Governance and broadly include the following:
(i) Review of the interim and annual financial statements of the Company prior to approval by the Board
of Directors.
(ii) Discussions with the external auditors of major observations arising from interim and final audits;
review of management letter issued by the external auditors and management's response thereto.
(iii) Review of scope and extent of internal audit ensuring that the internal audit function has adequate
resources and is appropriately placed within the Company.
(iv) Ascertain adequacy and effectiveness of the internal control system including financial and
operational controls, accounting system and reporting structure.
(v) Determination of compliance with relevant statutory requirements and monitoring compliance with
the best practices of corporate governance.
(vi) Institute special projects or other investigations on any matters specified by the Board of Directors.
The Board Audit Committee met four (4) times during the year with an average participation of all members
This statement is being presented to comply with the Listed a) Audit Committee
Companies (Code of Corporate Governance) Regulations 2017
Mr. Muhammad Asghar (Chairman)
(Regulations) for the purpose of establishing a framework of good
governance, whereby a listed company is managed in compliance Mr. Khawaja Muhammad Younus (Member)
with the best practices of corporate governance.
Mr. Khawaja Muhammad Anees (Member)
The company has complied with the requirements of the
Regulations in the following manner: b) HR and Remuneration Committee
1. The total number of directors are 8 as per the following: Mr. Abdul Rehman Qureshi (Chairman)
a. Male: 7 Mr. Khawaja Muhammad Ilyas (Member)
b. Female: 1 Mr. Khawaja Muhammad Muzaffar Iqbal
2. The composition of board is as follows:
13. The terms of reference of the aforesaid committees have been
Category Name formed, documented and advised to the committee for
Independent Director Mr. Abdul Rehman Qureshi compliance.
Mr. Muhammad Asghar 14. The frequency of meetings (quarterly/half yearly/ yearly) of
Non-executive Director Mr. Khawaja Muhammad Younus the committee were as per following:
Mrs. Humera Jalal-ud-Din a) Audit Committee
Mr. Khawaja Muhammad Muzaffar Iqbal
Mr. Khawaja Muhammad Anees 1st Meeting: within four months of end of year
Executive Directors Mr. Khawaja Muhammad Iqbal 2nd Meeting: within one months of end of quarter
Mr. Khawaja Muhammad Ilyas
3rd Meeting: within two months of end of half year
3. The directors have confirmed that none of them is serving as a 4th Meeting: within one month of end of quarter
director on more than five listed companies, including this
company (excluding the listed subsidiaries of listed holding b) HR and Remuneration Committee
companies where applicable). 1 meeting during the year.
4. The company has prepared a “Code of Conduct” and has 15. The board has set up an effective internal audit function.
ensured that appropriate steps have been taken to disseminate it
throughout the Company along with its supporting policies and 16. The statutory auditors of the company have confirmed that
procedures. they have been given a satisfactory rating under the quality
control review program of the ICAP and registered with
5. The board has developed a vision and mission statement, Audit Oversight Board of Pakistan, that they or any of the
overall corporate strategy and significant policies of the partners of the firm, their spouses and minor children do not
Company. A complete record of particulars of significant hold shares of the company and that the firm and all its
policies along with the dates on which they were approved or partners are in compliance with International Federation of
amended has been maintained. Accountants (IFAC) guidelines on code of ethics as adopted
6. All the powers of the board have been duly exercised and by the ICAP.
decisions on relevant matters have been taken by board/ 17. The statutory auditors or the persons associated with them
shareholders as empowered by the relevant provisions of the have not been appointed to provide other services except in
Companies Act, 2017 (Act) and the Listed Companies (Code of accordance with the Act, these regulations or any other
Corporate Governance) Regulations, 2017 (Regulations). regulatory requirement and the auditors have confirmed that
7. The meetings of the board were presided over by the Chairman they have observed IFAC guidelines in this regard.
and, in his absence, by a director elected by the board for this 18. The Board has been reconstituted with 7 directors and Chief
purpose. The board has complied with the requirements of Act Executive Officer. One additional independent director and
and the Regulations with respect to frequency, recording and one female director have been added to the Board. The
circulating minutes of meeting of Board. Company currently has 2 independent directors. Both the
8. The board of directors have a formal policy and transparent independent directors have requisite competencies, skills,
procedures for remuneration of directors in accordance with knowledge and experience to discharge and execute their
the Act and these Regulations. duties competently as per laws and regulations under which
hereby fulfill the necessary requirements. At the time of
9. The board applied exemption for its six directors as they appointment of Directors in EOGM at 31 January, 2020 total
qualify for exemption of Director Training Program and no. of directors appointed were seven including two
exemption is in process while Director Training Program for independent directors which fulfil requirement of law.
one newly appointed Director has been arranged in the month
of July 2019. 19. We confirm that all other requirements of the Regulations
have been complied with.
10. The board has approved appointment of CFO, Company
Secretary and Head of Internal Audit, including their
remuneration and terms and conditions of employment and For and on behalf of the Board of Directors.
complied with relevant requirements of the Regulations.
11. CEO and CFO duly endorsed the financial statements before
approval of the Board.
12. The board has formed committees comprising of members Multan: Sd/
given below: Dated: 7th October, 2020 Chairman
We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance)
Regulations, 2019 (the Regulations) prepared by the Board of Directors of Mahmood Textile Mills Limited (“the
Company”) for the year ended June 30, 2020 in accordance with the requirements of regulation 36 of the Regulations.
The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our
responsibility is to review whether the Statement of Compliance reflects the status of the Company's compliance with
the provisions of the Regulations and report if it does not and to highlight any non-compliance with the requirements of
the Regulations. A review is limited primarily to inquiries of the Company's personnel and review of various documents
prepared by the Company to comply with the Regulations.
As a part of our audit of the financial statements, we are required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to
consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion
on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.
The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit
Committee, place before the Board of Directors for their review and approval, its related party transactions. We are only
required and have ensured compliance of this requirement to the extent of the approval of the related party transactions
by the Board of Directors upon recommendation of the Audit Committee.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does
not appropriately reflect the Company's compliance, in all material respects, with the requirements contained in the
Regulations as applicable to the Company for the year ended June 30, 2020.
The engagement partner on the audit resulting in this independent auditors' report is Mr. Talat Javed.
(246,407,919) (177,405,712)
(b) Amendments to IAS 19, ‘Employee benefits’ on plan amendment, curtailment or settlement’, are
effective for periods beginning on or after January 01, 2019. These amendments require an entity to use
updated assumptions to determine current service cost and net interest for the remainder of the period
after a plan amendment, curtailment or settlement; and recognise in statement of profit or loss as part of
past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not
previously recognised because of the impact of the asset ceiling. The amendments do not have any
material impact on the Company’s financial statements.
(c) Amendment to IAS 23 'Borrowing Costs', as part of the annual improvements 2017 applicable for annual
periods beginning on or after January 1, 2019. The amendments clarify that the general borrowings pool
used to calculate eligible borrowing costs excludes only borrowings that specifically finance qualifying
assets that are still under development or construction. Borrowings that were intended to specifically
finance qualifying assets that are now ready for their intended use or sale or any non qualifying assets
are included in that general pool. This amendment will be applied prospectively to borrowing costs
incurred on or after the date an entity adopts the amendments.
The other new standards, amendments to published accounting and reporting standards and
interpretations that are mandatory in Pakistan for the financial year beginning on July 1, 2019 are
considered not to be relevant or to have any significant effect on the Company’s financial reporting and
operations.
3.2 Standards, amendments to approved accounting standards and interpretations that are not yet
effective and have not been early adopted by the Company
There are certain standards, amendments to the IFRSs and interpretations that are mandatory for
companies having accounting periods beginning on or after July 01, 2020 but are considered not to be
relevant or to have any significant effect on the Company’s operations and are, therefore, not detailed in
these financial statements, except for the following:
(a) Amendments to IAS 1, 'Presentation of financial statements' and IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors is applicable on accounting periods beginning on or after January 1,
2020. The amendments are intended to make the definition of material in IAS 1 easier to understand and
are not intended to alter the underlying concept of materiality in IFRSs. In addition, the IASB has also
issued guidance on how to make materiality judgments when preparing their general purpose financial
statements in accordance with IFRSs.
(b) The International Accounting Standards Board (the IASB) has issued a revised Conceptual Framework
for Financial Reporting which is applicable immediately contains changes that will set a new direction
for IFRS in the future. The Conceptual Framework primarily serves as a tool for the IASB to develop
standards and to assist the IFRS Interpretations Committee in interpreting them. It does not override the
requirements of individual IFRSs and any inconsistencies with the revised Framework will be subject to
the usual due process this means that the overall impact on standard setting may take some time to
crystallise. The Companies may use the Framework as a reference for selecting their accounting policies
in the absence of specific IFRS requirements. In these cases, Companies should review those policies
and apply the new guidance retrospectively as of January 01, 2020, unless the new guidance contains
specific scope outs.
(c) Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' is applicable for
accounting periods beginning on or after January 1, 2022. Under IAS 37, a contract is ‘onerous’ when
the unavoidable costs of meeting the contractual obligations i.e. the lower of the costs of fulfilling the
contract and the costs of terminating it outweigh the economic benefits. The amendments clarify that
the ‘costs of fulfilling a contract’ comprise both the incremental costs e.g. direct labour and materials;
and an allocation of other direct costs e.g. an allocation of the depreciation charge for an item of
property, plant and equipment used in fulfilling the contract. The amendments are not likely to have any
material impact on the Company’s financial statements.
(d) Amendments to IAS 16 'Property, Plant and Equipment' effective for the annual period beginning on or
after January 1, 2022. These amendments clarifies that sales proceeds and cost of items produced while
bringing an item of property, plant and equipment to the location and condition necessary for it to be
capable of operating in the manner intended by management e.g. when testing etc, are recognized in
profit or loss in accordance with applicable Standards. The entity measures the cost of those items
applying the measurement requirements of IAS 2. The standard also removes the requirement of
deducting the net sales proceeds from cost of testing. The amendment is not likely to have any material
impact on the Company’s financial statements.
There are a number of other standards, amendments and interpretations to the published standards that
are not yet effective and are also not relevant to the Company and, therefore, have not been presented
here.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set-out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
4.4 Leases
Until June 30, 2019, leases were classified as either finance or operating leases. Payments made under
operating leases were charged to the statement of profit or loss on a straight-line basis over the period of
the lease.
Mahmood Textile Mills Limited Integrated Annual Report 2020 39
Notes To The Financial Statements
FOR THE YEAR ENDED JUNE 30, 2020
Under IFRS 16, leases are recognised as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Company. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to the statement of profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease
term on a straight-line basis.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-
line basis as an expense in the statement of profit or loss. Short-term leases are leases with a lease term
of 12 months or less.
4.5 Investments in Associated Companies
Investments in Associated Companies are accounted for by using equity basis of accounting, under
which the investments in Associated Companies are initially recognized at cost and the carrying amounts
are increased or decreased to recognize the Company's share of profit or loss of the Associated
Companies after the date of acquisition. The Company's share of profit or loss and other comprehensive
income of the Associated Companies is recognized in the Company's statement of profit or loss and other
comprehensive income respectively. Distributions received from Associated Companies reduce the
carrying amount of investments.
The carrying amount of investments is tested for impairment by comparing its recoverable amount
(higher of value in use and fair value less cost to sell) with its carrying amount and loss, if any, is
recognized in statement of profit or loss.
4.6 Stores, spares and loose tools
Stores, spares and loose tools are stated at the lower of cost and net realizable value. The cost of
inventory is based on moving average cost. Items in transit are stated at cost accumulated upto the
reporting date. The Company reviews the carrying amount of stores, spares and loose tools on a regular
basis and provision is made for identified obsolete and slow moving items.
4.7 Stock-in-trade
Basis of valuation are as follows:
Particulars Mode of valuation
Raw materials:
- At mills - At lower of annual average cost of both local and imported stocks and net
realizable value.
- In transit - At cost accumulated upto the reporting date.
Work-in-process - At manufacturing cost.
Finished goods - At lower of cost and net realizable value.
Waste - At net realizable value.
- Cost in relation to work-in-process and finished goods consists of prime cost and appropriate production
overheads. Prime cost is allocated on the basis of annual average cost.
- Provision for obsolete and slow moving stock-in-trade is determined based on the management's
assessment regarding their future usability.
- Net realizable value signifies the selling price in the ordinary course of business less cost of completion
and cost necessary to be incurred to effect such sale.
4.8 Trade debts and other receivables
Trade debts are initially recognized at original invoice amount, which is the fair value of consideration to
be received in future and subsequently measured at cost less loss allowance, if any.
The Company always measures the loss allowance for trade debts at an amount equal to lifetime
expected credit losses (ECL). The expected credit losses on trade debts are estimated using a provision
matrix by reference to past default experience of the debtor and an analysis of the debtor's current
financial position, adjusted for factors that are specific to the debtors, general economic conditions of the
industry in which the debtors operate and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
There has been no change in the estimation techniques or significant assumptions made during the
current reporting period.
Trade debts and other receivables considered irrecoverable are written off.
4.9 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at cost. For the purpose of
statement of cash flows, cash and cash equivalents consist of cash in hand and balances with banks.
4.10 Borrowings and borrowing cost
Borrowings are recognized initially at fair value, net of transaction costs incurred and are subsequently
measured at amortized cost using the effective interest method.
Borrowing costs are recognized as an expense in the period in which these are incurred except to the
extent of borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset. Such borrowing costs, if any, are capitalized as part of the cost of that asset.
4.11 Staff retirement benefits
The Company operates an un-funded gratuity scheme for all its eligible employees. Provision is made
annually to cover obligation under the scheme. The payable balance of gratuity is fully paid to the
employees on annual basis.
4.12 Trade and other payables
Trade and other payables are initially measured at cost, which is the fair value of the consideration to be
paid in future for goods and services, whether or not billed to the Company.
4.13 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of
past events and it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate of the obligation can be made. Provisions are reviewed at
each reporting date and adjusted to reflect the current best estimate.
4.14 Taxation
(a) Current
Provision for current year's taxation is determined in accordance with the prevailing law of taxation on
income enacted or substantively enacted by the end of the reporting period and is based on current rates
of taxation being applied on the taxable income for the year, after taking into account tax credits and
rebates available, if any, and taxes paid under the Final Tax Regime. The tax charge also includes
adjustments, where necessary, relating to prior years which arise from assessments finalized during the
year.
(b) Deferred
The Company accounts for deferred taxation using the liability method on temporary differences arising
between the tax base of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax liability is recognized for taxable temporary differences and deferred tax asset is recognized
to the extent that it is probable that future taxable profits will be available against which the deductible
temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is charged or
credited to the statement of profit or loss.
Mahmood Textile Mills Limited Integrated Annual Report 2020 41
Notes To The Financial Statements
FOR THE YEAR ENDED JUNE 30, 2020
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the reporting
date.
4.15 Dividend and appropriation to reserves
Dividend distribution to the Company's shareholders and appropriation to reserves are recognized in the
period in which these are approved.
4.16 Financial assets
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through
profit or loss), and
- those to be measured at amortized cost.
The classification depends on the Company’s business model for managing the financial assets and the
contractual terms of the cash flows.
a) Initial recognition and measurement of financial assets
All financial assets are recognized at the time when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are initially recognized at fair value plus transaction costs
for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value
through profit or loss are initially recognized at fair value and transaction costs are expensed in the profit
or loss.
i) Equity instruments
The Company subsequently measures all equity investments at fair value for financial instruments
quoted in an active market, the fair value corresponds to a market price (level 1).
For financial instruments that are not quoted in an active market, the fair value is determined using
valuation techniques including reference to recent arm’s length market transactions or transactions
involving financial instruments which are substantially the same (level 2), or discounted cash flow
analysis including, to the greatest possible extent, assumptions consistent with observable market data
(level 3).
- Fair value through other comprehensive income (FVTOCI)
Where the Company’s management has elected to present fair value gains and losses on equity
investments in other comprehensive income, there is no subsequent reclassification of fair value gains
and losses to profit or loss. Impairment losses (and reversal of impairment losses) on equity investments
measured at FVTOCI are not reported separately from other changes in fair value.
- Fair value through profit or loss (FVTPL)
Changes in the fair value of equity investments at fair value through profit or loss are recognized in other
income / (other expenses) in the statement of profit or loss as applicable.
Dividends from such investments continue to be recognized in profit or loss as other income when the
Company’s right to receive payments is established.
ii) Debt instruments
Subsequent measurement of debt instrument depends on the Company's business model for managing the
assets and the cash flows characteristics of the assets. Three categories in which the Company classifies
its debt instruments are:
- Amortized cost
Financial assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortized cost. Interest income from these
financial assets is included in other income using the effective interest rate method.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life
of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is
expected to result from default events on a financial instrument that are possible within 12 months after
the reporting date.
i) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Company compares the risk of a default occurring on the financial instrument as at the
reporting date with the risk of a default occurring on the financial instrument as at the date of initial
recognition. In making this assessment, the Company considers both quantitative and qualitative
information that is reasonable and supportable, including historical experience and forward-looking
information that is available without undue cost or effort.
Mahmood Textile Mills Limited Integrated Annual Report 2020 43
Notes To The Financial Statements
FOR THE YEAR ENDED JUNE 30, 2020
For financial guarantee contracts, the date that the Company becomes a party to the irrevocable
commitment is considered to be the date of initial recognition for the purposes of assessing the financial
instrument for impairment. In assessing whether there has been a significant increase in the credit risk
since initial recognition of a financial guarantee contracts, the Company considers the changes in the risk
that the specified debtor will default on the contract.
The Company regularly monitors the effectiveness of the criteria used to identify whether there has been
a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable
of identifying significant increase in credit risk before the amount becomes past due.
The Company assumes that the credit risk on a financial instrument has not increased significantly since
initial recognition if the financial instrument is determined to have low credit risk at the reporting date.
A financial instrument is determined to have low credit risk if:
a) The financial instrument has a low risk of default,
b) The borrower has a strong capacity to meet its contractual cash flow obligations in the near term, and
c) Adverse changes in economic and business conditions in the longer term may, but will not
necessarily; reduce the ability of the borrower to fulfil its contractual cash flow obligations.
ii) Definition of default
The Company employs statistical models to analyze the data collected and generate estimates of
probability of default (“PD”) of exposures with the passage of time. This analysis includes the
identification for any changes in default rates and changes in key macro-economic factors across various
geographies of the Company.
iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-
impaired includes observable data about the following events:
a) significant financial difficulty of the issuer or the borrower;
b) a breach of contract, such as a default or past due event (see (ii) above);
c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise
consider;
d) it is becoming probable that the borrower will enter bankruptcy or other financial re-organization; or
e) the disappearance of an active market for that financial asset because of financial difficulties.
iv) Write-off policy
The Company writes off a financial asset when there is information indicating that the counterparty is in
severe financial difficulty and there is no realistic prospect of recovery.
v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability
of default and loss given default is based on historical data adjusted by forward-looking information as
described above. As for the exposure at default, for financial assets, this is represented by the assets’
gross carrying amount at the reporting date; for financial guarantee contracts, the exposure includes the
amount drawn down as at the reporting date, together with any additional amounts expected to be drawn
down in the future by default date determined based on historical trend, the Company’s understanding of
the specific future financing needs of the debtors, and other relevant forward-looking information.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash
flows that are due to the Company in accordance with the contract and all the cash flows that the
Company expects to receive, discounted at the original effective interest rate.
4.19 Off-setting
Financial assets and liabilities are off-set and the net amount is reported in the financial statements only
when there is a legally enforceable right to set-off the recognized amounts and the Company intends
either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously.
4.20 Foreign currency translations
Foreign currency transactions are recorded in Pak Rupees using the exchange rates prevailing at the
dates of transactions. Monetary assets and liabilities in foreign currencies are translated in Pak Rupees at
the rates of exchange prevailing at the reporting date. Exchange gains and losses are taken to statement
of profit or loss.
4.21 Revenue recognition
The Company policy for revenue recognition under different contracts with customers stands amended
as follows:
Sale of Goods
The Company sold its products in separately identifiable contacts. The contracts entered into with the
customers generally includes one performance obligation i.e. the provision of goods to the customer.
Revenue from local sale of goods is recognized when the Company satisfies a performance obligation
under a contract by transferring promised goods to the customer. Goods are considered to be transferred
at the point in time when the customer obtains control over the goods (i.e. on dispatch of goods from the
mills to the customer). Revenue from the export sale of goods is recognized at the point in time when the
customer obtains control over the goods dependent on the relevant incoterms of shipment. Generally it is
on the date of bill of lading or at the time of delivery of goods to the destination port.
Rendering of Services
Revenue from contracts for provision of the services is recognized at the point in time when the
processed goods are dispatched from the mills to the customer.
Export rebate
Export rebate income is recognized on accrual basis as and when the right to receive the income
establishes.
Management monitors the operating results of above mentioned segments separately for the purpose of
making decisions about resources to be allocated and for assessing performance. Segment results and
assets include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Finance cost, other income and expenses and taxation are managed at the Company
level. Unallocated assets mainly include long term investments, long term deposits, tax refunds due from
the Government and cash & bank balances.
The Company did not have any property leases arrangement therefore adoption of IFRS 16 at July 01,
2019 did not have an effect on the financial statements of the Company
2020 2019
Note Rupees Rupees
7. PROPERTY, PLANT AND EQUIPMENT
Operating fixed assets 7.1 8,455,199,841 8,887,835,682
Capital work-in-progress:
- Buildings - 4,504,044
- Plant and machinery 126,095,083 48,881,699
126,095,083 53,385,743
8,581,294,924 8,941,221,425
Owned
Stand-by Computer
Particulars Leasehold land Buildings on Buildings on Plant and Furniture and Office Protective Electric Gas Tools and Weighing Total
Freehold land equipment / Vehicles and
freehold land leasehold land machinery fittings equipment dam installations installations equipment bridge
Generators accessories
--------------------------------------------------------------------------------------------------------------------------- Rupees -----------------------------------------------------------------------------------------------------------------------------------------------
Cost
Balance as at June 30, 2018 20,755,743 55,962,349 656,085,288 564,303,505 6,301,250,865 857,142,982 22,733,567 249,380,874 3,401,248 10,715,778 385,140,958 5,583,666 21,720,570 31,858,750 5,444,129 9,191,480,272
Additions during the year - - 99,989,984 92,907,752 979,127,414 19,913,790 2,060,229 70,727,883 - - 81,428,129 264,980 143,833 1,612,080 - 1,348,176,074
Disposals during the year - - - (9,734,053) (114,048,669) - - (51,402,755) - - (1,630,184) - (170,600) - (744,257) (177,730,518)
Revaluation surplus 349,020,257 1,014,487,651 1,269,322,287 253,793,586 - - - - - - - - - - - 2,886,623,781
Balance as at June 30, 2019 369,776,000 1,070,450,000 2,025,397,559 901,270,790 7,166,329,610 877,056,772 24,793,796 268,706,002 3,401,248 10,715,778 464,938,903 5,848,646 21,693,803 33,470,830 4,699,872 13,248,549,609
Depreciation
Balance as at June 30, 2018 - - 412,229,784 30,160,378 2,673,408,897 451,824,030 8,081,994 111,390,172 2,948,020 4,037,211 148,020,027 2,453,294 7,113,107 28,659,231 3,649,676 3,883,975,821
FOR THE YEAR ENDED JUNE 30, 2020
Charge for the year - - 28,824,775 61,176,501 398,064,638 41,540,802 1,586,778 33,945,554 45,323 333,928 29,173,802 332,911 1,464,874 1,180,528 151,856 597,822,270
Charge on disposals - - - (4,423,089) (84,520,620) - - (30,929,497) - - (792,715) - (74,032) - (344,211) (121,084,164)
Balance as at June 30, 2019 - - 441,054,559 86,913,790 2,986,952,915 493,364,832 9,668,772 114,406,229 2,993,343 4,371,139 176,401,114 2,786,205 8,503,949 29,839,759 3,457,321 4,360,713,927
Balance as at June 30, 2019 - - 441,054,559 86,913,790 2,986,952,915 493,364,832 9,668,772 114,406,229 2,993,343 4,371,139 176,401,114 2,786,205 8,503,949 29,839,759 3,457,321 4,360,713,927
Charge for the year - - 160,892,149 80,446,448 431,169,354 38,330,452 1,710,202 32,610,789 40,791 317,232 34,256,601 365,489 1,318,986 1,275,034 124,255 782,857,782
Charge on disposals - - - - (3,364,834) - - (6,300,132) - - - - - - - (9,664,966)
Balance as at June 30, 2020 - - 601,946,708 167,360,238 3,414,757,435 531,695,284 11,378,974 140,716,886 3,034,134 4,688,371 210,657,715 3,151,694 9,822,935 31,114,793 3,581,576 5,133,906,743
Book value as at
June 30, 2019 369,776,000 1,070,450,000 1,584,343,000 814,357,000 4,179,376,695 383,691,940 15,125,024 154,299,773 407,905 6,344,639 288,537,789 3,062,441 13,189,854 3,631,071 1,242,551 8,887,835,682
Book value as at
June 30, 2020 369,776,000 1,070,450,000 1,445,337,415 735,165,306 3,944,766,652 345,361,488 18,112,991 159,224,894 367,114 6,027,407 338,854,908 3,712,575 11,870,868 5,053,927 1,118,296 8,455,199,841
7.2 Leasehold land and buildings on leasehold land represent the leased assets allotted by the Board of
Management, Industrial Estate, Multan for a period of 99 years.
7.3 Freehold lands of the Company are located at District Muzaffargarh with area of 469 Kanal 12 Marlas
and leasehold lands of the Company are located at Industrial Estate, Multan with area of 131 Kanal and
5 Marlas.
7.4 The revaluation of leasehold land, freehold land, buildings on freehold land and buildings on leasehold
land has been carried out by M/S K. G. Traders (Private) Limited as at June 30, 2019 on the basis of
market value, which resulted in revaluation surplus of Rs. 2,886.62 millions.
7.5 Had there been no revaluation the related figures of leasehold land, freehold land, buildings on freehold
land and buildings on leasehold land as at June 30, 2020 would have been as follows:
Accumulated
Cost Net book value
depreciation
---------------------Rupees-------------------
Leasehold land 20,755,743 - 20,755,743
Freehold land 55,962,349 - 55,962,349
Buildings on freehold land 777,961,836 473,907,146 304,054,690
Buildings on leasehold land 648,731,958 143,088,211 505,643,747
1,503,411,886 616,995,357 886,416,529
7.6 Forced sale values of leasehold land, freehold land, buildings on freehold land and buildings on
leasehold land as per latest revaluation report were Rs. 295.820 million, Rs. 856.360 million, Rs.
1,267.474 million and Rs. 651.485 million respectively.
7.7 Disposal of operating fixed assets
Sale
Accumulated proceeds / Gain / Sold through negotiation to /
Particulars of assets Cost Book value
depreciation insurance (loss) insurance claim received from
claim
------------------------------- Rupees -------------------------------
Items with individual net book
value exceeding Rs. 500,000 each
2020 2019
Note Rupees Rupees
7.8 Depreciation for the year has been
apportioned as under:
Cost of sales 26 747,220,966 561,064,088
Administrative expenses 28 35,636,816 36,758,182
782,857,782 597,822,270
7.9 During the year, the Company has capitalized the borrowing cost amounting 1.349 million
(2019: Rs. 0.304 million) at the rate of 9.62% (2019: 13.40% per annum).
2020 2019
Note Rupees Rupees
8. LONG TERM INVESTMENTS
Associated Companies - Un-quoted
Masood Spinning Mills Limited (MSML) 8.1 366,524,475 337,850,111
Roomi Fabrics Limited (RFL) 8.2 775,517,012 721,830,302
Orient Power Company (Pvt.) Limited (OPCL) 8.3 3,047,520,951 2,729,013,627
4,189,562,438 3,788,694,040
Others - amortized cost
Habib Bank Limited - TFC's 8.5 - 100,000,000
4,189,562,438 3,888,694,040
8.1 Masood Spinning Mills Limited (MSML)
4,000,000 (2019: 4,000,000) ordinary shares of
Rs.10 each - cost 40,000,000 40,000,000
Equity held: 13.32% (2019: 13.32%)
Post acquisition profits brought forward 297,850,111 258,297,043
337,850,111 298,297,043
Share of (loss) / profit for the year (6,786,154) 9,456,596
Share of other comprehensive income for the year - 30,096,472
Adjustment based on last year's
audited financial statements -
- Statement of profit and loss 12,654,653 -
- Statement of comprehensive Income 22,805,865 -
366,524,475 337,850,111
8.1.1 MSML was incorporated in Pakistan on July 20, 2000 as a public limited company. It is principally
engaged in manufacture and sale of cotton yarn.
8.1.2 The summary of financial information of MSML based on its financial statements for the year ended
June 30, is as follows:
2020 2019
Rupees Rupees
Un-audited Audited
Summarized Statement of Financial Position
Non-current assets 4,398,656,916 4,572,875,436
Current assets 8,023,816,544 7,097,857,187
12,422,473,460 11,670,732,623
Non-current liabilities 2,249,771,833 1,385,036,585
Current liabilities 7,422,259,245 7,484,306,554
9,672,031,078 8,869,343,139
Net assets 2,750,442,382 2,801,389,484
2020 2019
Rupees Rupees
Un-audited Audited
Reconciliation to carrying amount
Opening net assets 2,801,389,484 2,319,645,471
Profit for the year (50,947,102) 166,000,374
Other Comprehensive income for the year - 315,743,639
Closing net assets 2,750,442,382 2,801,389,484
Company's share percentage 13.32% (2019: 13.32%)
Company's share 366,358,925 373,145,079
Miscellaneous adjustments 165,550 165,550
Adjustment based on last year's
audited financial statements (35,460,518)
Carrying amount of investment 366,524,475 337,850,111
Summarized Statement of Profit or Loss
Sales 13,768,957,128 14,852,573,385
Profit before taxation 78,416,665 24,795,920
Profit after taxation (50,947,102) 161,144,754
8.2 Roomi Fabrics Limited (RFL)
4,000,000 (2019: 4,000,000) ordinary shares of
of Rs.10 each - cost 40,000,000 40,000,000
Equity held: 18.18% (2019: 18.18%)
Post acquisition profits brought forward 681,830,302 657,346,558
721,830,302 697,346,558
Share of profit for the year 36,929,763 24,483,744
Adjustment based on last year's
audited financial statements
- Statement of profit and loss 12,614,762 -
- Statement of comprehensive Income 4,142,185 -
775,517,012 721,830,302
8.2.1 RFL was incorporated in Pakistan on May 20, 2002 as a public company limited by shares. It is
principally engaged in manufacture and sale of yarn and grey cloth.
8.2.2 The summary of financial information of RFL based on its financial statements for the year ended
June 30, is as follows:
2020 2019
Rupees Rupees
Un-audited Audited
Reconciliation to carrying amount
Opening net assets 4,062,636,138 3,823,643,191
Profit for the year 203,134,007 204,062,196
Other Comprehensive income for the year - 34,930,751
Closing net assets 4,265,770,145 4,062,636,138
Company's share percentage 18.18% (2019:18.18%)
Company's share 775,517,012 738,587,250
Adjusted based on last year's audited financial statements - (16,756,948)
Carrying amount of investment 775,517,012 721,830,302
Summarized Statement of Profit or Loss
Sales 13,460,112,444 13,248,415,296
Profit before taxation 295,963,682 266,800,354
Profit after taxation 203,134,008 134,674,064
2020 2019
Note Rupees Rupees
8.3 Orient Power Company (Pvt.) Limited (OPCL)
Cost / fair value
Cost / Fair value of 87,335,969
(2019: 45,842,500) ordinary shares
of Rs.10 each 8.4 2,485,343,420 866,423,250
Acquired during the year
Nil (2019: 41,493,469) ordinary shares
of Rs.10 each - cost - 787,793,358
Post acquistion profits brought forward 243,670,207 -
Balance as at June 30,
87,335,969 (2019: 87,335,969) ordinary shares
of Rs.10 each 2,729,013,627 1,654,216,608
Equity held: 20.967% ( 2019: 20.967%)
Excess income over cost of investment 8.3.4 - 831,126,812
Share of profit for the year 534,269,736 374,674,162
Dividend received (174,671,396) (131,003,955)
Adjustment based on last year
audited financial statements
- Statement of profit and loss (41,091,016) -
3,047,520,951 2,729,013,627
8.3.1 OPCL was incorporated in Pakistan on June 16, 2003 as a private limited company and started its
operations on May 24, 2010. It has been established to set up and operate a 212.7 megawatt power
generation plant for generation of electricity and onward sale to the power purchaser.
8.3.2 The summary of financial information of OPCL based on its financial statements for the year ended June
30, is as follows:
2020 2019
Rupees Rupees
Un-audited Audited
Summarized Statement of Financial Position
Non-current assets 9,975,547,000 10,671,437,909
Current assets 13,030,380,000 14,008,175,216
23,005,927,000 24,679,613,125
Non-current liabilities - 24,422,643
Current liabilities 8,471,082,000 11,835,413,641
8,471,082,000 11,859,836,284
Net assets 14,534,845,000 12,819,776,841
Reconciliation to carrying amount
Opening net assets 12,819,776,841 11,249,352,577
Profit for the year 2,548,148,428 2,195,232,519
Dividend (833,080,269) (624,808,255)
Closing net assets 14,534,845,000 12,819,776,841
Company's share percentage 20.967% (2019: 20.967%)
Company's share 3,047,520,951 2,687,922,611
Adjustment based on last year
audited financial statements - 41,091,016
3,047,520,951 2,729,013,627
Summarized Statement of Profit or Loss
Sales 8,986,325,000 14,813,079,010
Profit before taxation 2,473,077,000 2,391,211,994
Profit after taxation 2,473,077,000 2,391,211,994
8.3.3 The Company had acquired 39,842,500 and 6,000,000 ordinary shares during the years ended June 30,
2011, and 2017. During the previous year, the Company had further acquired 41,493,469 ordinary shares
resulting in total 87,335,969 ordinary shares (20.967% holding).
8.3.4 Excess income over cost of investment includes Rs. 704.435 million based on audited financial
statements of OCPL for the year ended June 30, 2018 and the remaining Rs. 126.692 million is based on
management accounts for the period ended October 31, 2018.
2020 2019
Note Rupees Rupees
8.4 Orient Power Company (Pvt.) Limited (OPCL)
- Amortized cost
Opening balance - 542,925,000
Fair value adjustment due to the applicability
of equity accounting 29 - 323,498,250
Transferred to equity accounting 8.3 - (866,423,250)
- -
8.4.1 Fair value of already held investment was calculated on the bases of latest purchase price of further
investment acquired during previous year.
8.5 The Company had during the previous year purchased 1,000 Term Finance Certificates (TFC's) from
Habib Bank Limited having face value of Rs.100,000 each. During the year further 1,000 TFC's have been
purchased. These TFCs carried markup at the rate of 3 month KIBOR plus 1.60% payable on quarterly
basis from the date of investment. At the year-end these TFC's have been reclassified into short term
investments at fair value through profit and loss since the Company has intention to dispose of these
TFC's in near future.
2020 2019
Note Rupees Rupees
9. STORES, SPARES AND LOOSE TOOLS
Stores including in-transit inventory
valuing Rs. 12.568 million (2019: Rs. 56.867 million) 219,240,374 288,660,452
Spares 11,419,360 9,980,082
Loose tools 1,219,653 1,261,762
231,879,387 299,902,296
9.1 Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.
2020 2019
Note Rupees Rupees
13. OTHER RECEIVABLES
Cotton claims receivable 55,846,199 43,860,288
Insurance claims receivable 32,617,331 31,109,240
Containers' deposits 703,969 691,847
Duty drawbacks receivable on export sales 198,565,203 192,559,256
Receivable against shares 13.1 421,201,804 85,467,501
Others 6,670,415 6,670,644
715,604,921 360,358,776
13.1. This includes receivable of Rs. 414.449 million from Arif Habib Limited against shares.
14. SHORT TERM INVESTMENTS - Quoted
(at fair value through profit or loss)
Equity Instruments
Soneri Bank Limited (SNBL)
Nil (2019: 11,886,000) shares of Rs.10 each - 153,884,060
Lalpir Power Limited (LPL)
20,715,500 (2019: 38,485,500) shares of Rs.10 each 269,113,425 755,709,806
Arif Habib Corporation Limited (AHCL)
9,586,385 (2019: 13,705,000) shares of Rs.10 each 236,879,573 474,449,857
Jahangir Siddiqui & Company Limited (JSCL)
Nil (2019: 37,857,000) shares of Rs. 10 each - 656,009,504
505,992,998 2,040,053,227
Adjustment on re-measurement to fair value 29 23,348,437 (669,646,937)
529,341,435 1,370,406,290
Debt Instrument
Habib Bank Limited - TFC's 14.2 200,000,000 -
Adjustment on re-measurement to fair value 29 (4,000,000) -
196,000,000 -
725,341,435 1,370,406,290
14.1 Nil (2019: 11.500 million) shares of SNBL, Nil (2019: 38.300 million) shares of LPL,
Nil (2019: 13.630 million) shares of AHCL, Nil (2019: 37.819 million) shares of JSCL are pledged with
various commercial banks as security for short term finance facilities utilized.
14.2 These TFC's have been re-classified from long term investments at amortized cost to short term
investments at fair value through profit or loss (Refer note 8.5).
15. TAX REFUNDS DUE FROM THE
GOVERNMENT
Income tax refundable, advance tax
and tax deducted at source 303,248,805 354,364,832
Sales tax refundable 15.1 300,743,604 188,649,774
603,992,409 543,014,606
15.1 Sales tax refund bonds have been encashed during the year.
17.5 The Company has no reserved shares for issuance under options and sale contracts.
17.6 During the year the Company has issued 25% bonus shares in the ratio of 25 bonus share for every 100
shares held by the shareholders as approved by the members in the Annual General Meeting of the
Company held on October 30, 2019. The effect of this adjustment has been accounted for in these
Finanical Statements.
2020 2019
Note Rupees Rupees
18. LONG TERM FINANCING - Secured
From banking companies
Habib Bank Limited (HBL) 18.1 1,492,057,668 1,578,924,336
MCB Bank Limited (MCB) 18.2 357,474,733 419,632,702
Meezan Bank Limited (MBL) 18.3 221,415,313 159,090,834
United Bank Limited (UBL) 18.4 382,882,745 441,308,302
Allied Bank Limited (ABL) 18.5 581,670,032 584,860,184
Bank Al Habib Limited (BAH) 18.6 510,000,000 510,000,000
The Bank of Punjab (BOP) 18.7 - 90,000,000
National Bank of Pakistan (NBP) 18.8 1,962,263,474 -
Bank Alfalah Limited (BAF) 18.9 155,013,967 -
Balance as at June 30, 5,662,777,932 3,783,816,358
Deferred Income - Government Grant 18.9 14,940,418 -
5,677,718,350 3,783,816,358
Less: current portion grouped under current liabilities:
- HBL 41,828,682 169,054,373
- MCB 20,553,400 82,713,605
- MBL 10,061,202 65,204,284
- UBL 30,114,371 58,420,872
- ABL 35,357,449 38,547,601
- BOP - 20,000,000
- BAF 35,444,739 -
Deferred Income - Government Grant 7,128,703 -
180,488,546 433,940,735
5,497,229,804 3,349,875,623
18.2 MCB
18.5 ABL
18.6 BAH
Finance 1 16 equal quarterly 2.45% flat 510,000,000 510,000,000
September, 2020
510,000,000 510,000,000
18.7 BOP
Demand Finance 10 half-yearly 1.00% over - 90,000,000
February, 2019 6 months KIBOR
- 90,000,000
18.8 NBP
Demand Finance 12 half-yearly 1.50% over 1,962,263,474 -
June, 2022 6 months KIBOR
1,962,263,474 -
18.9 BAF
Demand Finance 8 equal quarterly 1.00% Flat 155,013,967 -
January, 2021
155,013,967 -
18.10 The finance facilities available from HBL are secured against JPP charge of Rs. 2,648 million on entire
fixed assets on land consisting total area of 366 kanals and 13 marlas, 10.435 acares and 70 kanal 3 marlas
building and plant and machinery on units located at Multan Road, Muzaffargarh, D.G Khan, Chowk
Sarwar Shaheed and Industrial Estates Multan (Note 18.1)
18.11 The finance facilities available from MCB is secured against JPP charge of Rs. 634 million on entire fixed
assets on land consisting total area of 366 kanals and 13 marlas, 10.435 acares and 70 kanal 3 marlas
building and plant and machinery on units located at Multan Road, Muzaffargarh, D.G Khan, Chowk
Sarwar Shaheed and Industrial Estates Multan (Note 18.2).
18.12 Diminishing Musharakah finance facilities available from MBL are secured against exclusive registered
charge over underlying plant & machinery and ranking charge over fixed assets of the Company with 25%
safety margin. During the year the company has futher obtained Diminishing Musharak under Islamic
financing facility for renewable Energy (IFRE) secured against exclusive charge of Rs. 150.00 million over
musharakah assets and Joint Pari Passu charge over all fixed assets (Note 18.3).
18.13 The finance facilities available from UBL is secured against JPP charge of Rs. 613 million on entire fixed
assets on land consisting total area of 366 kanals and 13 marlas, 10.435 acares and 70 kanal 3 marlas
building and plant and machinery on units located at Multan Road, Muzaffargarh, D.G Khan, Chowk
Sarwar Shaheed and Industrial Estates Multan (Note 18.4).
18.14 The finance facilities available from ABL is secured against JPP charge over specific machinery imported to
cover the principal amount of Rs. 800 million on entire fixed assets, on land consisting total area of 366
kanals and 13 marlas, 10.435 acares and 70 kanal 3 marlas building and plant and machinery on units
located at Multan Road, Muzafargarh, D.G Khan, Chowk Sarwar Shaheed and Industrial Estates Multan.
(Note 18.5).
18.15 The finance facilities available from BAH is secured against JPP charge of Rs. 680 million on entire fixed
assets, on land consisting total area of 366 kanals and 13 marlas, 10.435 acares and 70 kanal 3 marlas
building and plant and machinery on units located at Multan Road, Muzaffargarh, D.G Khan, Chowk
Sarwar Shaheed and Industrial Estates Multan (Note 18.6).
18.16 The finance facility available from BOP is secured against ranking charge of Rs. 134 million over all present
and future fixed assets the Company (Note 18.7).
18.17 During the year the Company has obtained long term finance facility from NBP amounting Rs. 2,000
million. This finance is obtained for re-profiling of balance sheet. Tenor of loan is up to a maximum of 7
years with 1 year grace period. This finance carry markup at the rate of 6 month kibor plus 1.5% p.a.
This finance is secured against Ranking Charge by way of hypothecation over all present and future
movable fixed assets of the Company with 25% margin and equitable mortgage through MOCTD over land
and building of the Company.
The transaction cost amounting to Rs. 40.600 million has been adjusted against this finance and amortized
over the tenure of the finance. During the year amortization of Rs. 2.863 million has been recognized (Note
18.8).
18.18 The Company has obtained long term finance of Rs. 170.293 million from Bank Alfalah Limited for
financing of salaries and wages under SBP Refinance Scheme for payment of salaries and wages. The rate
of markup on this loan is 1% per annum. This loans is for two and half year period and is repayable in eight
equal quarterly installments commencing from January 2021. The facility available under the above
arrangement amounted to Rs. 257.191 million of which the amount remained unutilized as at June 30, 2020
was Rs. 86.898 million.
Due to the effects of pandemic, State Bank of Pakistan took various steps to support the economy. SBP
introduced a refinance scheme for payment of salaries and wages at subsidized rate of borrowing. The
Company has obtained the said finance at subsidized rate on June 17, 2020, at a concessional interest rate
of 1% and is repayable by October 2022 in 8 quarterly installments.
Government grant amounting to Rs. 15.279 million has been recognized during the year ended 30 June,
2020 and Rs. 0.339 million has been amortized during the year. In accordance with the terms of the grant,
the Company is prohibited to lay-off the employees during April 2020 to June 2020.
This finance is secured against 1st JPP Charge over present and future fixed assets of amounting Rs. 420
million with a deferral of 180 days with ranking charge into 1st JPP to secure payroll of Rs. 315 million
inclusive of 25% margin (Note 18.9).
18.19 The effective mark-up rates that prevailed during the year on these finance facilities ranged from 1% to
15.08% (2019: 2.45% to 14.11%) per annum.
2020 2019
Note Rupees Rupees
20. TRADE AND OTHER PAYABLES
Creditors 302,669,979 222,251,690
Bills payable - secured 20.1 776,283,469 195,302,894
Due to an associated undertaking 20.2 7,840,983 48,736,920
Accrued expenses 603,921,226 729,859,338
Contract liabilities - advances from customers 38,136,755 71,811,670
Advance against sale of property 12.2 - 118,668,000
Tax deducted at source 19,794,291 4,004,615
Workers' welfare fund 20.3 - 39,155,252
Others 12,337,722 11,853,124
1,760,984,425 1,441,643,503
20.1 These are secured against the securities as detailed in note 22.2.
20.2 This represents amount payable to M/s Khawaja Muzaffar Mahmood Muhammad Masood on account of
normal trading transactions.
20.3 During the year the Company has reversed the excess provision of WWF relating
to prior years after the
finalization of orders from FBR for deletion of demands for relevant years.
2020 2019
Note Rupees Rupees
21. ACCRUED MARK-UP
Mark-up accrued on:
- long term financing 124,617,955 57,789,768
- short term borrowings 169,408,806 321,929,542
294,026,761 379,719,310
22. SHORT TERM BORROWINGS
Short term borrowings - secured 22.1 2,329,434,181 2,412,844,787
Short term running finances - secured 22.1 6,412,093,932 8,435,848,156
7,557,816,577 10,848,692,943
Temporary bank overdrafts - unsecured 22,245,269 14,393,216
8,763,773,382 10,863,086,159
22.1 Short term finance facilities available from various commercial banks under mark-up arrangements
aggregate Rs. 15,390 million (2019: Rs. 22,100 million) including facilities aggregating Rs. 300 million
(2019: Rs. 1,400 million) available on Group basis. These finance facilities, during the year, carried
mark-up at the rates ranging from 9.08% to 15.56% (2019: 7.01% to 13.80%) per annum. The aggregate
finance facilities are secured against charge over the Company's current assets, pledge of quoted shares,
lien over export bills and banks' lien over letters of credit. These facilities are expiring on various dates
by August 31, 2021.
22.2 Facilities available for opening letters of credit and guarantee from various commercial banks aggregate
Rs. 12,929 million (2019: Rs. 6,389.2 million) including facilities aggregating Rs. 2,450 million (2019:
Rs. 2,350 million) available on Group basis. Out of the available facilities, facilities aggregating Rs.
10,767 million (2019: Rs. 6,213 million) remained unutilized at the year-end. These facilities are secured
against lien over import documents and charge over current assets of the Company. These facilities are
expiring on various dates by August 31, 2021.
2020 2019
Rupees Rupees
23. TAXATION - Net
Opening balance 231,000,000 62,500,000
Add: provision made during the year:
- current 262,000,000 231,000,000
- prior years - net (55,337,289) 219,098
Tax expense for the year - net 206,662,711 231,219,098
437,662,711 293,719,098
Less: payments / adjustments made during the year
against completed assessments 175,662,711 62,719,098
262,000,000 231,000,000
24. CONTINGENCIES AND COMMITMENTS
24.1 Guarantees given by various commercial banks, in respect of financial and operational obligations of the
Company, to various institutions and corporate bodies aggregated Rs. 783.858 million as at June 30,
2020 (2019: Rs. 673.592 million).
24.2 Sui Northern Gas Pipelines Limited (SNGPL) had raised arrears demand aggregating Rs.75.221 million
from the Company against the charge that sui gas meter of the Company was not working properly. The
Company challenged the said demand by filing a petition before the General Manager SNGPL, Lahore
(the GM). Now the case has been referred to Gas Utility Court ("the Court") as per the requirement of
Gas (Theft control and Recovery) Act, 2016 and as per direction of the Court, the Company has
deposited Rs. 75.221 million under protest and grouped it under loans and advances (note 12). If the case
is decided in the Company's favour, the Company will receive back the demand paid under protest.
24.3 The Company has filed a petition before the Civil Court, Multan against SNGPL, which has alleged that
the Company's gas meter was not functioning properly during the period from May, 2012 to September,
2013. SNGPL has raised demand amounting Rs.1.101 million. The Company's petition is pending
adjudication.
24.4 The Company had challenged the imposition of infrastructure cess by the Directorate of Excise &
Taxation, Karachi (the Directorate) at the rate of 0.85% of the value of imported goods by filing a suit
before the High Court of Sindh at Karachi (the Court). The Court had directed the Company to furnish a
bank guarantee covering the disputed amount of cess. The Company, during the period from December
28, 2006 to May 30, 2011, had utilized bank guarantees to the tune of Rs.32.489 million. The
Directorate, vide its letter dated July 13, 2011, had requested the Company to furnish a bank guarantee
of 50% of the aforementioned amount along with a demand draft for the balance 50% of the
aforementioned amount in order to return of the previous bank guarantees.
The Company had submitted a bank draft amounting Rs.16.245 million to the Directorate during
September, 2011, which was grouped under loans and advances. Habib Bank Limited, on behalf of the
Company in consideration of allowing the release of consignments imported from time to time for the
purpose of carriage of goods by road within the province of Sindh, has undertaken and guaranteed to pay
an amount of Rs.16.245 million to the Directorate in case if the Court decides that the cess imposed
under the Sindh Finance Act, 1994 is lawful and validly imposed. The bank guarantee is valid upto
August 15, 2019. The management, during year ended June 30, 2013, had expensed the advance of
Rs.16.245 million.
24.5 Foreign and local bills discounted outstanding as at June 30, 2020 aggregated Rs. 260.727 million (2019:
Rs. 2,964.208 million) and Rs. 168.462 million (2019: 17.340 million).
2020 2019
(Rupees in million)
24.6 Commitments for irrevocable letters of credit:
- capital expenditure 3.939 120.093
- others 1,374.141 68.484
1,378.080 188.577
2020 2019
Note Rupees Rupees
25. SALES - Net
Local
- yarn 2,976,642,730 1,404,552,842
- cloth 433,162,710 990,606,085
- waste 645,942,282 699,671,020
- doubling / sizing income 13,160,797 4,363,600
- cotton 998,452,998 815,634,048
5,067,361,517 3,914,827,595
Export
- yarn 13,981,381,938 14,636,564,239
- cloth 7,535,685,393 5,750,712,685
- waste 285,451,486 87,118,145
25.1 21,802,518,817 20,474,395,069
26,869,880,334 24,389,222,664
Sales tax (2,404,692,040) (2,482,968)
24,465,188,294 24,386,739,696
25.1 Gain aggregating Rs. 69.912 million - net (2019: gain aggregating Rs. 294.565 million - net) arisen upon
realization of foreign currency export debtors has been grouped under export sales.
26. COST OF SALES
Raw materials consumed 26.1 18,540,515,687 18,231,713,066
Stores and spares consumed 401,407,282 ` 348,084,930
Packing materials consumed 215,137,609 216,315,999
Salaries, wages and benefits 26.2 1,274,200,925 1,167,637,918
Power and fuel 1,451,112,640 1,507,898,823
Repair and maintenance 27,145,538 27,569,311
Depreciation 7.8 747,220,966 561,064,088
Insurance 71,463,048 64,683,237
Doubling charges 34,501,986 19,551,243
22,762,705,681 22,144,518,615
Adjustment of work-in-process
Opening stock 179,399,733 145,020,952
Closing stock 10 (180,673,772) (179,399,733)
(1,274,039) (34,378,781)
Cost of goods manufactured 22,761,431,642 22,110,139,834
Adjustment of finished goods
Opening stock 788,449,202 467,253,526
Impact of restatement due to IFRS 15 - 23,909,670
Closing stock 10 (1,198,225,904) (788,449,202)
(409,776,702) (297,286,006)
22,351,654,940 21,812,853,828
2020 2019
Note Rupees Rupees
26.1 Raw materials consumed
Opening stock 6,625,648,828 3,610,903,781
Purchases and purchase expenses 17,583,319,234 17,826,872,159
Transfer from Ginning Section - net 26.3 - 3,406,323,042
17,583,319,234 21,233,195,201
24,208,968,062 24,844,098,982
Closing stock 10 (5,680,317,258) (6,625,648,828)
18,528,650,804 18,218,450,154
Cotton cess 11,864,883 13,262,912
18,540,515,687 18,231,713,066
26.2 Expense for the year includes staff retirement benefits - gratuity amounting Rs. 46.746 million (2019:
Rs. 45.361 million).
26.4 During the year there were no ginning operations since the Company has not acquired Cotton Ginning
Factories on operating lease.
2020 2019
Notes Rupees Rupees
28. ADMINISTRATIVE EXPENSES
Salaries and benefits 28.1 214,496,677 146,200,500
Travelling and conveyance 28.2 76,900,142 75,351,480
Rent, rates and taxes 3,420,593 2,349,199
Entertainment 27,364,196 25,546,377
Utilities 3,946,303 3,189,105
Communication 20,205,867 21,012,489
Printing and stationery 12,533,207 6,772,556
Insurance 3,449,108 4,194,368
Repair and maintenance 27,448,184 38,048,522
Vehicles' running and maintenance 14,989,152 15,375,756
Subscription and licensing fees 16,768,467 13,838,764
Auditors' remuneration:
- statutory audit 1,000,000 1,000,000
- half yearly review 140,000 138,000
- certification charges 123,200 51,500
1,263,200 1,189,500
Legal and professional charges (other than Auditors) 2,109,680 1,089,077
Depreciation 7.8 35,636,816 36,758,182
General 16,558,282 16,640,221
477,089,874 407,556,096
28.1 Expense for the year includes staff retirement benefits - gratuity amounting Rs. 8.954 million (2019: Rs.
8.531 million).
28.2 These include directors' travelling expenses aggregating Rs. 56.354 million (2019: Rs. 54.155 million).
2020 2019
Note Rupees Rupees
30. OTHER EXPENSES
Donations (without directors' interest) 30.1 10,775,204 10,203,270
Loss on disposal of operating
fixed assets - net 7.7 - 2,397,930
Exchange fluctuation loss - net 14,453,570 -
Realized loss on sale of short term investments
at fair value through profit or loss - net - 92,127,250
Unrealized loss on re-measurement of
short term investments at fair value
through profit or loss 14 - 669,646,937
Bad debts - write off - 1,750,994
25,228,774 776,126,381
30.1 During the year, the Company has made donations exceeding higher of 10% of total donations or Rs.
1,000,000/- to following:
Punjab Social Security Health
Management Company (PSSHMC) 2,443,444 1,973,609
Friends of MIC (Mediquips) 1,200,000 2,267,204
Minar Welfare Society - 2,176,956
Care High School Foundation 2,100,000 2,100,000
Prime Minister Relief fund (COVID-19) 2,500,000 -
8,243,444 8,517,769
32.1 Income tax assessments of the Company have been finalized by the Income Tax Department or deemed
to be assessed under section 120 of the Income Tax Ordinance, 2001 (the Ordinance) upto the financial
year ended June 30, 2019 (tax year 2019).
32.2 No numeric tax rate reconciliation is presented in these financial statements as the Company is only
liable to pay tax due under sections 5 (Tax on dividends), 37 A (Tax on capital gain on disposal of
securities), 113 (Minimum tax on the income of certain persons) and 154 (Tax on export proceeds) of the
Ordinance.
Sales to domestic customers in Pakistan are 19.04% (2019: 16.05%) and to customers outside Pakistan
are 80.96% (2019: 83.95%%) of the revenues during the year.
The Company's customer base is diverse with no single customer accounting for more than 10% of net
revenues.
Geographical Segments
All segments of the Company are managed on nation-wide basis and operate manufacturing facilities and
sale offices in Pakistan.
Sensitivity analysis
At June 30, 2020, if Rupee had strengthened by 10% against U.S.$, Euro, JPY, CHF and CNY with all
other variables held constant, profit before taxation for the year would have been lower by the amount
shown below mainly as a result of foreign exchange losses on translation of foreign currency financial
assets, whereas profit before taxation for the year would have been higher by the amount shown below
mainly as a result of foreign exchange gain on translation of foreign currency financial liabilities.
Effect on profit for the year:
2020 2019
Rupees Rupees
U.S.$ to Rupee (89,589,035) (26,109,758)
Euro to Rupee (1,074,984) -
JPY to Rupee - -
CHF to Rupee - -
CNY to Rupee (5,910,642) -
The weakening of Rupee against U.S. $, Euro, JPY, CHF and CNY would have had an equal but
opposite impact on profit before taxation.
The sensitivity analysis prepared is not necessarily indicative of the effects on before tax profit for the
year and assets / liabilities of the Company.
(b) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of change in market interest rates. At the reporting date, the interest rate profile of the
Company's interest bearing financial instruments is as follows:
risk indicate the relative sensitivity of the Company's performance to developments affecting a particular
industry. The Company does not have any significant exposure to customers from any single country or
single customer.
The trade debts are due from foreign and local customers for export and local sales respectively. Trade
debts from foreign customers are secured against letters of credit. Management assesses the credit
quality of local and foreign customers, taking into account their financial position, past experience and
other factors. For bank balances, financial institutions with strong credit ratings are accepted. Credit risk
on bank balances is limited as these are placed with banks having good credit ratings.
36.3.1 Exposure to credit risk
The maximum exposure to credit risk as at June 30, 2020 along with comparative is tabulated below:
2020 2019
Rupees Rupees
Long term investments - 100,000,000
Long term deposits 9,980,881 9,980,881
Trade debts 3,102,628,027 1,685,878,358
Loans and advances 6,690,073 16,690,443
Other receivables 715,604,921 360,358,776
Short term investments 725,341,435 1,370,406,290
Bank balances 39,209,268 18,951,720
4,599,454,605 3,562,266,468
2020 2019
Rupees Rupees
The ageing of trade debts at the year-end was as follows:
Not past due 2,754,011,718 1,424,168,537
Past due less than 3 months 330,545,320 249,542,287
Past due less than 6 months 10,268,479 8,073,631
Past due more than 6 months 7,802,510 4,093,903
3,102,628,027 1,685,878,358
The Company always measures the loss allowance for trade debts at an amount equal to lifetime ECL
using the simplified approach. The expected credit losses on local trade debts are estimated using a
provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s
current financial position, adjusted for factors that are specific to the debtors, general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as
the forecast direction of conditions at the reporting date.
Credit rating
The credit ratings of the banks in which the Company has maintained its deposits are as follows:
Rating Credit Rating Date of
Agency Short Term Long Term Rating
Bank Alfalah Limited PACRA A1+ AA+ June/20
Bank Al-Habib Limited PACRA A1+ AA+ June/20
Bank Islami Pakistan Limited PACRA A1 A+ June/20
Habib Bank Limited JCR-VIS A-1+ AAA June/20
MCB Bank Limited PACRA A1+ AAA June/20
National Bank of Pakistan PACRA A-1+ AAA June/20
Soneri Bank Limited PACRA A1+ AA- June/20
Standard Chartered Bank (Pakistan) Limited PACRA A1+ AAA June/20
The Bank of Punjab PACRA A1+ AA June/20
United Bank Limited JCR-VIS A-1+ AAA June/20
The contractual cash flows relating to the above financial liabilities have been determined on the basis of
interest / mark-up rates effective at the respective year-ends. The rates of interest / mark-up have been
disclosed in the respective notes to these financial statements.
39.1 The chief executive, all directors and some of the executives have been provided with the Company's
maintained cars, residential and cell phones.
Following are the related parties with whom the Company had entered into transactions or have
arrangement / agreement in place:
Sr.
Name Basis of relationship
No.
1 Masood Spinning Mills Limited Common directorship / 13.32% shareholding
2 Masood Fabrics Limited Common directorship
3 Roomi Fabrics Limited Common directorship / 18.18% shareholding
4 Multan Fabrics (Private) Limited Common directorship
5 Roomi Enterprises (Private) Limited Common directorship
6 M/S Khawaja Muzaffar Mahmood Muhammad Masood Common directorship
7 Orient Power Company (Private) Limited Common directorship / 20.967% shareholding
2020 2019
41. CAPACITY AND PRODUCTION
Yarn
Number of spindles installed 115,920 115,824
Number of spindles-shifts worked 116,482,122 118,145,628
Production capacity at 20's count
1,096 shifts (2019: 1,095 shifts) Kgs. 45,022,045 44,943,745
Actual production converted into 20's count Kgs. 39,415,329 38,622,781
Cloth
Number of looms installed 196 196
Number of looms-shifts worked 214,728 214,620
Installed capacity at 60 picks
1,096 shifts (2019: 1,095 shifts) Mtrs. 45,358,665 50,690,061
Actual production converted into 60 picks Mtrs. 41,649,895 46,814,592
Power House
Number of generators installed 10 10
Number of shifts worked 1,096 1,095
Generation capacity in Mega Watts 20.25 20.45
Actual generation in Mega Watts 15.15 11.25
It is difficult to describe precisely the production capacity in spinning / weaving mills since it fluctuates
widely depending on various factors such as count of yarn spun, spindles' speed, twist, the width and
construction of fabric woven, etc. It also varies according to the pattern of production adopted in a
particular year.
2020 2019
------ Numbers ------
42. NUMBER OF EMPLOYEES
Number of persons employed as at June 30,
- permanent 2,947 2,934
- contractual 96 143
Average number of employees during the year
- permanent 2,941 2,932
- contractual 120 143
45. RE-CLASSIFICATION
During the year the following comparative figure has been re-classified to reflect its more
appropriate classification:
2019
Previous classification Current classification
Rupees
Advance for purchase of Receivable against
investment - Loans and shares - Other
advances receivables 85,467,501
47. FIGURES
The corresponding figures have been rearranged and reclassified, wherever considered necessary.
of
my / our behalf at the 50 th Annual General Meeting of the Company to be held on Wednesday, October 28 , 2020
at Company's Registered Office, Mehr Manzil Lohari Gate, Multan. and / or any adjournment thereof.
Signature of Member
in the presence of
Signature on
Revenue Stamp
2. Any individual beneficial owner of CDC, entitled to attend and vote at this meeting, must bring his/her CNIC or
Passport, to prove his/her identity, and in case of Proxy must enclose an attested copy of his/her NIC or Passport,
Representatives of corporate members should bring the usual documents required for such purpose.
Mills Ltd, holder of _________________________Ordinary Share(s) as per Register Folio No./CDC Account
No.________________ hereby opt for e-voting through intermediary and hereby consent the appointment of
execution officer ___________________________ as proxy and will exercise e-voting as per the Companies
(E-Voting) Regulations, 2016 and hereby demand for poll for resolutions.
Signature of Member
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name:__________________________________________ Name:____________________________________
Address:______________________________________ Address:______________________________________
Mahmood Textile
1) IBAN number
2) Title of Bank Account;
3) Bank Account number;
4) Bank Code and Branch; Code
5) Bank Name, Branch Name and Address;
6) Cell/Landline Number;
7) CNIC number; and
8) Email Address.