Final Mitchells Report 2020

Annual
Report
2020
Contents
Company Information ...........................................................................02
Vision and Mission Statement......................................................05
Notice of Annual General Meeting ........................................08
Chairman’s Review.......................................................................................14
Directors’ Report.............................................................................................16
Key Financial Data .................................................................................... 28
Pattern of Shareholding....................................................................... 34
Statement of Compliance with the
Code of Corporate Governance .................................................37
Independent Auditor’s Review Report ............................... 39
Independent Auditor’s Report......................................................48
Statement of Financial Position ...................................................52
Statement of Profit or Loss............................................................... 54
Statement of Comprehensive Income................................55
Statement of Changes in Equity................................................ 56
Statement of Cash Flows ...................................................................57
Notes to the Financial Statements.......................................... 58
Proxy Form...........................................................................................................97
1
Company Information
Board of Directors Company Secretary
Mr. Rashid Butt (ACMA)
Mr. Najam Aziz Sethi Chairman
Syed Mohammad Mohsin Non Executive Director Auditors
Ms. Naila Bhatti MD / Chief Executive Officer
A.F. Ferguson & Company
Syeda Sitwat Mohsin Non Executive Director
Chartered Accountants
Syed Mohammad Mehdi Mohsin Executive Director
Mr. Rizwan Bashir Independent Director Legal Advisors
Mr. Manzar Hassan Non Executive Director
Lashari & Co.
Syeda Umme Kulsum Imam Non Executive Director
Tariq Rahim Manzil,
Mr. Shazad Ghaffar Non Executive Director
7 - Turner Road, Lahore
Mr. Pervez Hayat Noon Non Executive Director
Tel: 042-37324296
Mr. Aamir Amin Non Executive Director
(NIT Nominee) Bankers
Audit Committee Habib Bank Limited

Askari Bank Limited
Mr. Rizwan Bashir Chairman Allied Bank Limited
Syed Muhammad Mohsin Member Standard Chartered Bank (Pakistan) Limited
Mr. Aamir Amin Member MCB Bank Limited
National Bank of Pakistan
Chief Financial Officer Bank Al Habib Limited
JS Bank Limited
Mr. Nauman Munawar (FCA) Meezan Bank Limited
Faysal Bank Limited
Share Registrar REGIONAL SALES OFFICES

Corplink (Private) Limited,
Wings Arcade, 1-K (Commercial Central
Model Town, Lahore Renala Khurd, District Okara, Pakistan
Phone : (042) 35839182, 35887262, Phones: (044) 2635907-8, 2622908
Fax: (042) 35869037 Fax: (044) 2621416
E-Mail: [email protected]
Corporate Office Old Address:
40-A, Zafar Ali Road, Gulberg V, Lahore Islamabad
Phones: (042) 35872392-96, Plot # 102, 2nd Floor, Main China Road,
Fax: (042) 35872398 Street # 7, Sector I-10/3 - Islamabad
E-Mail: [email protected] Phones: (051) 2707357
Website: www.mitchells.com.pk E-Mail: [email protected]
New Address: 72-FCC Gulberg IV, Lahore
Karachi
FACTORY & FARMS Mehran VIP II, Ground Floor, Plot 18/3
Renala Khurd, District Okara, Pakistan Dr. Dawood Pota Road- Karachi
Phones: (044) 2635907-8, 2622908 Phones: (021) 35212112, 35212712 & 35219675
Fax: (044) 2621416 Fax: (021) 35673588
E-Mail: [email protected] E-Mail: [email protected]
2
3
4
Vision & Mission
Statement
1. To be a leader in the markets we serve by providing
quality products to our consumers while learning from
their feedback to set even higher standards.
2. To be a company that continuously enhances its superior

technological skills to remain internationally competitive in
this day and age of increasing challenges.
3. To be a company that attracts and retains competent

people by creating a culture that fosters innovation,
promotes individual growth and rewards initiative and
performance.
4. To be a company which optimally combines its people,

technology, management systems, and market
opportunities to achieve profitable growth while providing
fair returns to its shareholders.
5. To be a company that endeavours to set the highest

standards in corporate ethics.
6. To be a company that fulfills its social responsibility.
5
Notice of Annual General Meeting
Notice is hereby given that the 88th Annual General committee to the Board of Directors. The retiring
Meeting of Mitchell’s Fruit Farms Limited will be held auditors namely Messrs A. F. Ferguson & Co.
on February 25, 2021 on Thursday at 11:00 a.m. at the Chartered Accountants, being eligible offer
Registered Office of the Company at 72- FCC Gulberg themself for reappointment.
IV, Lahore to transact the following business:
OTHER BUSINESS
ORDINARY BUSINESS
1. To transact any other business which may be
1. To confirm the minutes of last Extra Ordinary placed before the meeting with the permission
General Meeting held on October 15, 2020. of the chair.
2. To receive, consider and adopt the Annual

Audited Accounts of the Company for the year
ended September 30, 2020 together with the
Directors’ and Auditors’ reports thereon.
BY ORDER OF THE BOARD
3. To appoint auditors for the year ending
September 30, 2021 and to fix their
remuneration as suggested by the audit
Lahore, Rashid Butt

February 03, 2021 Company Secretary
8
NOTES A. For Attending the Meeting:
1. The Individual Members who have not yet i) In case of individuals, the account holder or
submitted photocopy of their valid sub-account holder and / or the person whose
Computerized National Identity Card (CNIC) to securities are in group account and their
the Company / Share Registrar, are once again registration details are uploaded as per the
reminded to send the same at the earliest Regulations, shall authenticate his / her identity
directly to Company’s Share Registrar, M/s by showing his / her original Computerized
Corplink (Private) Limited, Wings Arcade , 1-K National Identity Card (CNIC) or original
(Commercial) , Model Town , Lahore. The passport at the time of attending the meeting.
Corporate Entities are requested to provide
ii) In case of corporate entity, the Board of
their National Tax Number (NTN). Please give
Directors’ resolution/power of attorney with
Folio Number with the copy of CNIC / NTN
specimen signature of the nominee shall be
details. Reference is also made to the Securities
produced (unless it has been provided earlier)
and Exchange Commission of Pakistan (SECP)
at the time of the meeting.
Notifications SRO 779 (I) dated August 18, 2011,
and SRO 831 (I) 2012 dated July 05, 2012, which B. For Appointing Proxies:
mandates that the dividend warrants should
bear CNIC number of the registered member or i) In case of individuals, the account holder or
the authorized person, except in case of sub-account holder and/or the person whose
minor(s) and corporate members. securities are in group account and their
registration details are uploaded as per the
2. The share transfer book of the Company will Regulations, shall submit the proxy form
remain closed from February 18, 2021 to accordingly.
February 25, 2021 (both days inclusive).
Transfers received in order (including deposit ii) The proxy form shall be witnessed by two
requests under CDS) at our Registrar’s office persons whose names, addresses and CNIC
Corplink (Private) Limited, Wings Arcade, 1-K numbers shall be mentioned on the form.
(Commercial) Model Town, Lahore up to 01:00
p.m. on February 17, 2021 will be considered in iii) Attested copies of CNIC or the passport of the
time. beneficial owners and the proxy shall be
furnished with the proxy form.
3. A member eligible to attend and vote at this
meeting may appoint another member as iv) The proxy shall produce his/her original CNIC at
his/her proxy to attend and vote instead of the time of meeting.
him/her. Proxies, in order to be effective, must
v) In case of corporate entity, the Board of
be received by the Company at the Registered
Directors’ resolution / power of attorney with
Office not later than 48 hours before the time
specimen signature of the person nominated to
meeting is scheduled for.
represent and vote on behalf of the corporate
entity, shall be submitted along with proxy form
4. Duly completed instrument of proxy, and the to the Company.
other authority under which it is signed, or
notarially a certified copy thereof, must be 6. Intimation of Changes of Address and
lodged with the Company Secretary at the declaration for non-deduction of Zakat:
Company’s Registered Office (72-FCC Gulberg
IV, Lahore) at least 48 hours before the time of Members who hold shares certificates should
the meeting. notify any changes in their registered address
and provide their declarations for
5. Shareholders are requested to immediately non-deduction of zakat, if applicable to the
notify the change in their address, if any. Share Registrar.
CDC Account Holders will further have to follow Members who hold shares in CDC/ participant
the under-mentioned guidelines as laid down accounts should update their address and
by the Securities and Exchange Commission of submit their declarations for non-deduction of
Pakistan: zakat, if applicable, to the CDC or their
respective participants / stock brokers.
9
7. Unclaimed Dividends and Share Certificates: Annual Audited Accounts to the shareholders
on demand at their registered addresses, free of
The Shareholders are hereby informed that in cost, within one week of such demand.
accordance with Section 244 of the Companies
Act, 2017 and the Unclaimed Shares, Modaraba 10. Consent for Video Conference:
Certificate, Dividends, Others Instruments and
Undistributed Assets Regulations, 2017, the Pursuant to SECP’s Circular No 10 dated May 21,
companies are required to deposit cash 2014, if the Company receives consent from
dividends to the credit of the Federal members holding in aggregate 10% or more
Government and the shares to the shareholding residing at geographical location,
Commission, which are unclaimed/un-collected to participate in the meeting through video
for a period of three (3) years or more from the conference at least 10 days prior to the date of
date it is due and payable. meeting, the Company will arrange video
conference facility in that city subject to
8. Circulate Annual Reports to shareholders via availability of such facility in that city. In this
e-mail: regard please fill the following and submit to
registered address of the Company at least 10
Pursuant to Notification vide S.R.O.787(1)/2014 days before the date of AGM.
dated September 8, 2014 has allowed
companies to circulate Annual Financial Consent Form for Video Conference Facility
Statements to shareholders along with notice of
Annual General Meeting (AGM) through email. I/We, _________________ of _____ being a member of
In this respect, members are hereby requested Mitchell’s Fruit Farms Limited, holder of _____________
to convey their consent via e-mail on a Ordinary shares as per Registered Folio #/ CDC
standard request form which is available at the Account No.___________________ hereby opt for video
Company’s website i.e. www.mitchells.com.pk. conference facility at ________________________
Further it is responsibility of the members to (geographical location).
timely update the Company’s Shares Registrar
of any change in their registered e-mail
addresses. ____________________
Signature of member
9. Circulate Annual Audited Accounts and
Notice of AGM through to shareholders
through CD or DVD or USB.
Annual Accounts
In pursuance of SECP notification S.R.O.
No.470(1)/2016 dated May 31, 2016 the Annual Accounts of the Company for the financial
companies have been allowed to circulate their year ended September 30, 2020 have been placed on
annual reports including annual audited the Company’s website –http://www.mitchells.com.pk/
accounts, notice of annual general meetings in addition to annual and quarterly financial
and other information contained therein of the statements for the current and prior periods.
Company to the members for future years
through CD or DVD or USB instead of
transmitting the same in hard copies. However,
the Company will supply the hard copy of the
10
11
6
12
13
Chairman’s Review
On Board’s overall performance u/s 192 of Companies Act, 2017
1- Introduction required diversity and necessary mix of skill and

experience in different relevant fields of business,
The company managed to continue its operations finance, legal, administration and management. The
amidst extreme financial crisis suffered at the close of board members are familiar with the current vision,
last financial year. It was crucial to meet business mission and values and support them. The Board
obligations in order to ensure continuity of supplies revisits mission and vision statement from time to
so as to fulfill customer orders and to avoid any time. Furthermore, they are well conversant with their
severely adverse impact on revenue. The company fiduciary duties and effectively perform their role of
under direction of Board of Directors and new strategic direction and guidance to the Management
Chairman is now set to achieve its overall objectives in accordance with applicable rules and standards.
in the best interests of its shareholders Three directors have already acquired certification as
required under Directors’ Training Program and two
Plans of taking aboard a financially sound business directors are exempt from the Directors’ Training
partner were abandoned due to various factors that Program based on experience and qualification.
emerged after the outbreak of COVID-19. Since fresh
equity was considered extremely essential for the The Board is alert to ensure that the operations of the
survival of the company, the Board of Directors company are carried out under the framework laid
decided to opt for a Rights Issue of PKR 750m down by the Code of Corporate Governance. The
underwritten by the Three Sponsors, namely Syed Company is compliant with the requirement of
Mohammad Mehdi Mohsin, Syeda Maimnat Mohsin having a female director on the Board of Directors
and Syeda Matanat Ghaffar who between them held since the Board has already three female directors.
about 58 percent of company shares. Active participation by all Board Members is
encouraged and in decision making process the
Following the election of a new Chairman of the feedback from independent director(s) is duly
Board, changes in the top management were carried considered. In year 2020, regular meetings of the
out with the objective to vitalize the potentials of the board and its committees took place with due
brand. Besides revamping business operations, the deliberations to give their consent on the matters
new management immediately got down to the task placed before them.
of plugging systemic inefficiencies and optimizing
output from available resources since the time lines Aided with the support of Audit Committee, the
of fresh equity was expected to materialize only in Board aims to ensure the fairness of the financial
the first half of the next financial year. position and effective internal controls prevailing in
the company. Human Resource Committee ensures
Considering the extreme challenges on hand during the consistency, improvements and application of
the year that included higher inputs costs and employees related policies within the company.
burden of Federal Excise Duty levied on various
products of the company, the Company managed to 3- Future Outlook
sustain its operations. Fixed costs were monitored
closely. However, increased dependence on bank With the injection of fresh equity, we are geared to
borrowings led to dilution of results and as a result revive the heritage of our brand and to make it once
loss was reported from operations. again the preferred choice of end consumers. We
intend to bring efficiency from within the business
2- Evaluation of Board’s Performance processes. New investments are planned to ensure
uninterrupted supply of high quality products to the
The Board is engaged in bringing valuable market. While we continue to strive to serve our
contributions to guide the management in carrying corporate purpose to provide shareholder value; we
out business activities. It takes on the role of also recognize our responsibility to our other
governance in ensuring effective decision making, stakeholders. We believe that the development of our
assessment of risks and controls, regulatory employees, the protection of our environment and
compliance in order to safeguard the long term dealing fairly with our suppliers is essential for the
perspective of the Company. Annual evaluation future success of our company, our community and
process as required under the Code of Corporate our country.
Governance is in place to assess the performance of
its members.
The board members of Mitchell’s Fruit Farms Limited Najam Aziz Sethi
are highly qualified professionals with rich Chairman
experience in their relevant fields. The Board has the Lahore: January 27, 2021
14
1
15
Directors’ Report
The directors are pleased to present their report on the company’s performance during the year.
1. PRINCIPAL ACTIVITY
The Company is principally engaged in the manufacture and sale of various farm and confectionery
products.
2. FINANCIAL POSITION AT A GLANCE
A brief financial analysis is presented as under:
Operating Results 2020 2019 Increase/Decrease
Turnover 2,112,492,576 1,987,552,095 6.29%

Gross Profit 442,422,812 434,413,096 1.84%
Gross Profit % 20.94 % 21.86 % (92)bps
Distribution Costs 253,637,474 282,634,196 (10.26%)
Administrative Expenses 150,668,678 135,252,097 11.40%
Operating Profit 47,016,162 26,777,465 75.58 %
Loss After Tax 55,445,435 80,005,513 30.70%
Earnings Per Share-Rupees (7.04) (10.16) 30.70%
Net Sales Distribution of Revenue

1%
2,112 3% 2% Raw Material Consumed

2,084
1,988
0%
1,945
1,894
1,696 1,679
1,628 7% Manufacturing overhead
Rupees in Million
11% Distribution & Marketing

Expenses
Adminstrative Expenses
57%
18%
Others
Finance Cost
16
Gross Proﬁt, Proﬁt Before and After Tax Earnings Per Share
•
600
16.81
500 13.65
400 3.44
m
300 ER (1.54) (3.92) (10.16) (7.04)
R i 0
200 Year Pu
s l
l GP Sp
100 Years
i i e
0 PBT i e
n o EPS
n -100 PAT ns
-200
-300 (37.16)
-400 -50
Years Years
3. FINANCIAL RESULTS AND DEVELOPMENTS Adverse movement in commodity prices and

foreign exchange rates; and
The financial health of the company remained
challenging during the year. Even though company’s • Adverse movement in interest rate leading to
efforts to boost its sales resulted in reduction of losses increased cost of borrowings
to some extent, the overall liquidity crunch remained
persistent to pose operational problems that
prompted the board of directors of the company in 5. MANUFACTURING OPERATIONS
their meeting held in October 2020 to decide to issue
Right Shares in order to meet the future business The Company carried out investments essentially
requirements and to mainly pay off the liabilities. required for the purposes of supporting B2B business
activities.
Despite the adverse situation prevailing post
outbreak of COVID, the Company managed to carry 6. HUMAN RESOURCE DEVELOPMENT
out its business activities uninterruptedly and
achieved net sales growth of 6% and taking it to Rs. Despite severe economic situation prevailing in the
2,112 million. The gross profit was badly hit due to country, no employee was laid-off during the year.
increase in major raw material prices and impact of
Hiring was done to fill out vacancies. Functional
Federal Excise Duty levied in 2019-20 budget on
company’s main products. teams were assigned additional responsibilities to
contribute in an efficient manner.
The increase in administrative expenses was due to
the advisory costs incurred for executing an 7. CORPORATE SOCIAL RESPONSIBILITY
investment proposition while distribution and
marketing expenses were reduced by 10% over The management kept the employees of the
previous years’ expenses. company geared to deliver their best in the
challenging situation encountered. The employees
KIBOR rates remained high during the year. High working in respective functional areas extended
financial cost for the Company contributed in a support in contributing extra where necessary for
pre-tax loss of Rs.27.5 million compared to Rs.51.2
furtherance of business.
million last year.
The provision for current taxation for the year No incident of accident, causing physical injury or
represents tax under final tax regime and minimum misconduct was reported during the year. Employees
tax on turnover. were issued proper guidelines to prevent spread of
COVID.
4. PRINCIPAL RISK AN UNCERTAINTY
The company contributed Rs.404.42 million to the
The Company is exposed to certain risks and National Exchequer on account of various
uncertainties. However, we consider the following as government levies including customs duty, sales tax,
key risk areas: federal excise duty and income tax.
• The uncertainties arising from the continued
spread of COVID; Furthermore, foreign exchange of Rs.348 million was
generated through our exports.
• Significant competition in our product categories;
17
8. SUBSEQUENT EVENTS performs reviews of the integrity and effectiveness of
control activities and provides regular reports to the
In line with decision of board of directors of the Audit Committee and the Board.
company, the company issued right shares of PKR
750 Million to strengthen its capital structure, pay off 11. CORPORATE AND FINANCIAL REPORTING
the liabilities and boost further business FRAMEWORK
opportunities. This process is scheduled to complete
by February 2021. • The financial statements, prepared by the
management of the company, present fairly its
9. FUTURE OUTLOOK state of affairs, the results of its operations, cash
flows and changes in equity.
The company’s new management is rigorously
working on a strategy to enhance its operations in an • Proper books of account of the company have
efficient and robust manner. There is a lot of been maintained.
emphasis upon increasing product availability by
revamping the national distribution network, • Appropriate accounting policies have been
boosting institutional sales and exports and bringing consistently applied in preparation of financial
all over economies of production and underlying statements and accounting estimates are based
overheads by brining efficiencies and enhancing on reasonable and prudent judgment.
systems and procedures in a transparent and
profitable manner. The Company expects reduction • International Financial Reporting Standards, as
in its financial costs after injection of further equity in applicable in Pakistan, have been followed in
the form of right shares. preparation of financial statements.
Some modernization of existing plant & machinery • The system of internal control is sound in design
equipment is also planned that shall bring further and has been effectively implemented and
production efficiencies. monitored.
The main challenges for the coming financial year • With reference to note no. 2.2 of annexed financial
shall definitely be to manage the economic statements, the financial statements have been
uncertainty and lower buying power of the prepared on going concern basis.
customers as a result of pandemic. The declining
export market also poses challenges but company • A statement regarding key financial data for the
shall overcome these hurdles with the help of a better last six years is annexed to this report.
strategy, fresh management approach towards
business enhancement and injection of further • All trades in the share of company carried out by
capital. its directors, executives and their spouses and
minor children are annexed with this annual
10. INTERNAL FINANCIAL CONTROLS report.
The Directors and management are responsible for • Where any statutory payment on account of
the Company's system of internal controls and for taxes, duties, levies and charges is outstanding,
reviewing annually its effectiveness in providing the amount with a brief descriptions and reasons
shareholders with a return on their investments that for the same is disclosed in the financial
is consistent with a responsible assessment and statement.
management of risks. This includes reviewing
financial, operational and compliance controls and 12. ENVIRONMENTAL IMPACT
risk management procedures and their effectiveness.
The Directors have completed their annual review The Company is committed to avoid any adverse
and assessment for the year ended September 30, impact to the environment caused due to its
2020.The Board and Audit Committee regularly operations. A significant portion of energy
review reports of the internal audit function of the requirements are met from agricultural by products
Company related to the Company's control while it intends to install solar power system in the
framework in order to satisfy the internal control near future as well.
requirements. The Company's internal audit function
18
15. AUDIT COMMITTEE
During the year, 5 meetings of the audit committee

were held. Attendance by each Director was as
follows: -
Name of Director Designation Meetings

Attended
Mr. Rizwan Bashir Independent Director/Chairman 4

Syed Mohammad Mohsin Non-Executive Director -
Mr. Aamir Amin Non-Executive Director 5
Leave of absence was granted to the directors who

could not attend the meetings.
16. HUMAN RESOURCE & REMUNERATION

COMMITTEE
13. COMPOSITION OF THE BOARD
During the last business year one meeting of the HR
The Board consists of 8 male directors and 3 female and Remuneration committee was held. Attendance
directors with following composition by each Director was as follows: -
Independent Directors 3 Name of Director Designation Meetings

Non-Executive Directors 6 Attended
Executive Directors 2
Mr. Pervez Hayat Noon Independent Director/Chairman -
The Board held nine (9) meetings during the year. Syeda Sitwat Mohsin Non-Executive Director -
Attendance by each Director was as follows: Syeda Umme Kulsum Imam Non-Executive Director 1
Name of Director Designation Meetings Resigned During the Year

Attended Mr. Mujeeb Rashid Executive Director 1
Mr. Najam Aziz Sethi Chairman 9 Leave of absence was granted to the directors who
Syed Mohammad Mohsin Non-Executive Director 3 could not attend the meeting.
Syeda Sitwat Mohsin Non-Executive Director 6
Syed Mohammad Mehdi Mohsin Executive Director 9 17. REMUNERATION OF DIRECTORS
Mr. Shazad Ghaffar Non-Executive Director 8
Syeda Umme Kulsum Imam Non-Executive Director 9 Details of aggregate amount of remuneration
Ms. Naila Bhatti Executive Director 1 separately of executive and non-executive directors,
Syed Manzar Hassan Independent Director 9 including salary/fee, perquisites, benefits, and other
Mr. Aamir Amin Non-Executive Director 8 allowances are disclosed in the annexed financial
Mr. Rizwan Bashir Independent Director 9 statements. The remuneration policy is approved by
Mr. Pervez Hayat Noon Independent Director 4 the Board of Directors and the Board revisits the
policy from time to time.
Resigned During the Year
18. Compliance with Listed Companies (Code of
Mr. Mujeeb Rashid Executive Director 8 Corporate Governance) Regulation 2019 (the
Regulations):
Leave of absence was granted to the directors who could not
attend the board meetings. The requirements of the Regulations relevant for the
year ended September 30, 2020 have been adopted
14. CHANGES IN DIRECTORS OFFICE by the Company and have been fully complied with.
The statement of compliance is annexed to the
Ms. Naila Bhatti replaced Mr. Mujeeb Rashid as Report.
executive director on her appointment as new
MD/CEO of the company on August 31, 2020.
19
19. PATTERN OF SHARE HOLDING ACKNOWLEDGEMENTS
The information under this head is annexed. The board of directors would like to express their
gratitude to all employees for their efforts and
commitment in successfully overcoming the
20. RELATED PARTIES challenges faced by the company during the year.
The transactions between the related parties are

made on mutually agreed terms and conditions. For and on behalf of
Details of all the transactions carried out during the The Board of Directors
year can be seen in Note 30 to the annexed financial
statements.
21. LOSS PER SHARE
Basic and diluted loss per share for the year under Najam Aziz Sethi Ms. Naila Bhatti
report is Rs. 7.04 as compared to the last year figure Chairman Managing Director /
of Rs. 10.16. Chief Executive Officer
22. DIVIDEND
Lahore,
Based on the results no dividend is proposed for the Date: January 27, 2021
year under review.
23. AUDITORS
The present Auditors, Messrs. A.F. Ferguson & Co.,

Chartered Accountants retire and offer themselves
for re-appointment. The Board of Directors, on
recommendation of Audit Committee, proposes the
re-appointment of Messrs. A.F. Ferguson & Co.,
Chartered Accountants, for the year ending
September 30, 2021.
20
21
22
23
24
25
Vertical Analysis of Financial Statements
2020 2019
Rs. In '000 % Rs. In '000 %
Statement of Financial Position
Non-current Assets 614,348 44.50 638,792 47.55

Current Assets 766,271 55.50 704,702 52.45
Total Assets 1,380,619 100.00 1,343,494 100.00
Equity 74,310 5.38 126,445 9.41

Non-current Liabilities 134,230 9.72 134,123 9.98
Current Liabilities 1,172,079 84.90 1,082,926 80.61
Total equity and Liabilities 1,380,619 100.00 1,343,494 100.00
Profit and Loss Account

Net Sales 2,112,493 100.00 1,987,552 100.00
Cost of Sales (1,670,070) (79.06) (1,553,139) (78.14)
Gross Profit 442,423 20.94 434,413 21.86

Selling and Distribution expenses (253,637) (12.01) (282,634) (14.22)
Administrative expenses (150,669) (7.13) (135,252) (6.80)
38,117 1.80 16,527 0.83

Other operating expense (3,263) (0.15) (5,341) (0.27)
Other operating income 12,162 0.58 15,592 0.78
47,016 2.23 26,777 1.35

Financial expenses (74,272) (3.52) (78,300) (3.94)
(Loss)/Profit before tax (27,256) (1.29) (51,523) (2.59)

Taxation (28,189) (1.33) (28,483) (1.43)
(Loss)/Profit for the year (55,445) (2.62) (80,006) (4.03)
28
2018 2017 2016 2015
Rs. In '000 % Rs. In '000 % Rs. In '000 % Rs. In '000 %
696,294 46.63 703,414 44.96 681,248 48.14 709,345 51.85

797,015 53.37 861,160 55.04 733,752 51.86 658,671 48.15
1,493,309 100.00 1,564,574 100.00 1,415,000 100.00 1,368,016 100.00
209,300 14.02 501,489 32.05 540,922 38.23 572,587 41.86

119,730 8.02 161,444 10.32 149,020 10.53 264,386 19.33
1,164,279 77.97 901,641 57.63 725,058 51.24 531,043 38.82
1,493,309 100.00 1,564,574 100.00 1,415,000 100.00 1,368,016 100.00
1,628,007 100.00 1,894,406 100.00 1,679,461 100.00 1,696,332 100.00

(1,375,119) (84.47) (1,445,303) (76.29) (1,286,380) (76.59) (1,292,628) (76.20)
252,888 15.53 449,103 23.71 393,082 23.41 403,704 23.80

(407,886) (25.05) (317,444) (16.76) (261,060) (15.54) (240,215) (14.16)
(136,106) (8.36) (112,698) (5.95) (103,908) (6.19) (103,015) (6.07)
(291,104) (17.88) 18,961 1.00 28,114 1.67 60,474 3.56

(2,550) (0.16) (1,350) (0.07) (2,167) (0.13) (2,998) (0.18)
25,480 1.57 13,465 0.71 19,067 1.14 16,866 0.99
(268,174) (16.47) 31,076 1.64 45,014 2.68 74,342 4.38

(49,244) (3.02) (42,187) (2.23) (42,920) (2.56) (48,485) (2.86)
(317,418) (19.50) (11,111) (0.59) 2,094 0.12 25,854 1.52

24,799 1.52 (19,772) (1.04) (14,202) (0.85) 1,215 0.07
(292,619) (17.97) (30,883) (1.63) (12,108) (0.72) 27,069 1.60
29
Horizontal Analysis of Financial Statements
2020 2019 2018 2017 2016 2015

Rs. In '000 Rs. In '000 Rs. In '000 Rs. In '000 Rs. In '000 Rs. In '000
Balance Sheet
Non-current Assets 614,348 638,792 696,294 703,414 681,248 709,345
Current Assets 766,271 704,702 797,015 861,160 733,752 658,671
Total Assets 1,380,619 1,343,494 1,493,309 1,564,574 1,415,000 1,368,016
Equity 74,310 126,445 209,299 501,489 540,922 572,587
Non-current Liabilities 134,230 134,123 119,730 161,444 149,020 264,386

Current Liabilities 1,172,079 1,082,926 1,164,280 901,641 725,058 531,043
Total equity and Liabilities 1,380,619 1,343,494 1,493,309 1,564,574 1,415,000 1,368,016
Profit and Loss Account
Net Sales 2,112,493 1,987,552 1,628,008 1,894,406 1,679,462 1,696,332
Cost of Sales (1,670,070) (1,553,139) (1,375,118) (1,445,303) (1,286,380) (1,292,628)
Gross Profit 442,423 434,413 252,890 449,103 393,082 403,704

Administrative expenses (150,669) (135,252) (136,106) (112,698) (103,908) (103,015)
Selling and Distribution expenses (253,637) (282,634) (407,887) (317,444) (261,060) (240,215)
38,117 16,527 (291,103) 18,961 28,114 60,474

Other operating expenses (3,263) (5,341) (2,551) (1,350) (2,167) (2,998)
Other operating income 12,162 15,592 25,480 13,465 19,067 16,866
47,017 26,778 (268,174) 31,076 45,013 74,342

Financial expenses (74,272) (78,300) (49,244) (42,187) (42,920) (48,485)
(Loss)/Profit before tax (27,256) (51,523) (317,418) (11,112) 2,094 25,854
Taxation (28,189) (28,483) 24,799 (19,772) (14,202) 1,215
(Loss)/Profit for the year (55,445) (80,006) (292,619) (30,884) (12,108) 27,069
Summary of Cash Flows
Net cash flows from operating activities 84,352 47,249 (147,501) (14,974) (4,732) 56,578
Net cash flows from investing activities (23,031) 5,087 (32,397) (70,773) (36,132) (71,489)
Net cash flows from financing activities 50,000 (21,333) 107,333 (42,820) (62,126) (50,855)
Net change in cash and cash equivalents 111,321 31,002 (72,565) (128,567) (102,990) (65,766)
30
% increase/ (decrease) over preceding year
2020 2019 2018 2017 2016 2015
(3.83) (8.26) (1.01) 3.25 (3.96) 1.57

8.74 (11.58) (7.45) 17.36 11.40 (6.33)
2.76 (10.03) (4.55) 10.57 3.43 (2.39)
(41.23) (39.59) (58.26) (7.29) (5.53) (1.09)
0.08 12.02 (25.84) 8.34 (43.64) (13.70)

8.23 (6.99) 29.13 24.35 36.53 2.86
2.76 (10.03) (4.55) 10.57 3.43 (2.39)
6.29 22.08 (14.06) 12.80 (0.99) (12.79)

7.53 12.95 (4.86) 12.35 (0.48) (9.21)
1.84 71.78 (43.69) 14.25 (2.63) (22.57)

11.40 (0.63) 20.77 8.46 0.87 8.26
(10.26) (30.71) 28.49 21.60 8.68 (12.91)
130.64 (105.68) (1,635.27) (32.56) (53.51) (59.78)

(38.92) 109.39 88.96 (37.72) (27.70) (68.10)
(22.00) (38.81) 89.23 (29.38) 13.05 (1.40)
75.58 (109.99) (962.96) (30.96) (39.45) (52.97)

(5.14) 59.00 16.73 (1.71) (11.48) 25.46
(47.10) (83.77) 2,756.53 (630.78) (91.90) (78.36)
(1.03) (214.85) (225.42) 39.22 (1,268.88) (110.11)
(30.70) (72.66) 847.48 155.06 (144.73) (74.81)
78.52 (132.03) 885.05 216.45 (108.36) (359.97)
(552.76) (115.70) (54.22) 95.87 (49.46) (78.30)

(334.38) (119.88) (350.66) (31.08) 22.16 (145.08)
259.06 (142.72) (43.56) 24.83 56.60 (72.41)
31
Value Addition and its Distribution
2020 2019
Wealth Generated Rs. In '000 % Rs. In '000 %
Net slaes 2,112,493 99.43 1,987,552 99.22

Other operating income 12,162 0.57 15,592 0.78
2,124,655 100.00 2,003,144 100.00
Distribution of Wealth
Cost of sales (excluding employees

remuneration) 1,503,626 70.77 1,404,550 70.12
Selling, distribution and administration
expenses (excluding employees remuneration) 252,996 11.91 260,154 12.99
Employees remuneration 317,753 14.96 311,165 15.53
Finance cost including exchange loss 74,272 3.50 78,300 3.91
Government taxes and levies (income tax,
WPPF and WWF) 31,300 1.47 28,483 1.42
Dividend to shareholders - - - -
Invested from revenue reserves
(Balancing Figure) (55,445) (2.61) (80,005) (3.99)
Charity and donation 152 0.01 497 0.02
2,124,655 100.00 2,003,144 100.00
2020 2019
32
Stakeholder Information
Financial Ratios
Unit 2020 2019 2018 2017 2016 2015
Rate of return
Return on assets % (4.02) (5.96) (19.60) (1.97) (0.86) 1.98
Return on equity % (74.61) (63.27) (139.81) 6.16 (2.24) 4.73
Return on capital employed % 22.55 10.28 (81.50) 4.69 6.52 8.88
Interest cover Times (63.30) (34.20) (5.45) 0.74 1.05 1.53
Gross profit Margin % 20.94 21.86 15.53 23.71 23.41 23.80

Net profit to sales % (2.62) (4.03) (17.97) (1.63) (0.72) 1.60
EBITDA Rs 90,321 74,859 (219,665) 82,604 109,995 136,309
EBITDA margin to sales % 4.28 3.77 (13.49) 4.36 6.55 8.04
Liquidity
Current ratio 0.65 0.65 0.68 0.96 1.01 1.24
Quick Ratio 0.37 0.39 0.29 0.50 0.49 0.65
Financial Gearing
Debt-Equity Ratio Times 0.91 0.86 0.80 0.57 0.51 0.47
Debt to Assets % 94.62 90.59 85.98 67.95 61.77 58.14
Capital Efficiency
Debtor turnover/No. of days in receivables Days 24 24 14 40 26 24
Inventory turnover/ No. of days in inventory Days 73 65 123 104 107 88
Creditor turnover/ No.of days in payables Days 87 106 98 67 40 47
Operating Cycle Days 10 (17) 38 77 93 65
Fixed assets turnover ratio Times 3.69 3.34 2.34 2.69 2.47 2.44
Total assets turnover Times 1.53 1.48 1.09 1.21 1.19 1.24
Shareholder Information
Year Closing Stock Price
(As at 30 September) (Rupees)
33
Pattern of Shareholding
As at September 30, 2020
1.1 Name of the Company MITCHELL'S FRUIT FARMS LIMITED.

2.1. Pattern of holding of the shares held by the shareholders as at 30-09-2020
...... Shareholding ......
No of Shareholders From To Total Shares Held
342 1 100 12,301
323 101 500 87,949
72 501 1,000 56,303
124 1,001 5,000 214,218
10 5,001 10,000 73,103
2 10,001 15,000 25,362
4 15,001 20,000 64,053
1 25,001 30,000 27,675
2 30,001 35,000 67,550
2 35,001 40,000 72,081
2 60,001 65,000 126,523
1 75,001 80,000 76,116
1 85,001 90,000 86,983
1 105,001 110,000 109,659
1 110,001 115,000 111,431
1 165,001 170,000 169,581
1 170,001 175,000 171,820
1 290,001 295,000 292,738
1 730,001 735,000 735,000
1 765,001 770,000 767,666
2 900,001 905,000 1,800,587
1 2,725,001 2,730,000 2,726,301
896 7,875,000
34
5. Categories of shareholders Share held Percentage
5.1 Directors, Chief Executive Officer, 4,533,325 57.5660%

and their spouse and minor childern
5.2 Associated Companies, - 0.0000%

undertakings and related
parties.
5.3 NIT and ICP 814,516 10.3431%
5.4 Banks Development 17,117 0.2174%

Financial Institutions, Non
Banking Financial Institutions.
5.5 Insurance Companies 292,738 3.72%
5.6 Modarabas and Mutual 0 0.0000%

Funds
5.7 Shareholders holding 10% 4,526,888 57.4843%

or more
5.8 General Public

a. Local 2,099,277 26.6575%
b. Foreign 0 0.0000%
5.9 Others (to be specified)

- Joint Stock Companies 51,524 0.64%
- Pension Funds 64,248 0.8158%
- Others 2,255 0.0286%
35
Categories of Shareholders as required under C.C.G.
SR. NO. NAME Shares Held Percentage
Associated Companies, Undertakings and Related Parties (Name Wise Detail):

Mutual Funds (Name Wise Detail)
1 CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST(CDC) 767,666 9.7481%
2 CDC - TRUSTEE NIT ISLAMIC EQUITY FUND (CDC) 32,550 0.4133%
3 CDC - TRUSTEE NIT EQUITY MARKET OPPERTUNITY FUND(CDC) 14,300 0.1816%
814,516 10.3113%
Directors and their Spouse and Minor Children (Name Wise Detail):
1 SYED MOHAMMAD MOHSIN 1,760 0.0223%
2 SYED MOHAMMAD MEHDI MOHSIN 2,726,301 34.6197%
3 MR. RIZWAN BASHIR 517 0.0066%
4 SYEDA UMME KULSUM IMAM 1,125 0.0143%
5 MR. NAJAM AZIZ SETHI 500 0.0063%
6 SYEDA SITWAT MOHSIN 675 0.0086%
7 MR. AAMIR AMIN (NIT NOMINEE) -- --
8 MS. NAILA BHATTI 360 0.0046%
9 SYED MANZAR HASSAN (CDC) 500 0.0063%
10 MR. SHAHZAD GHAFFAR 500 0.0063%
11 MR. PERVEZ HAYAT NOON 500 0.0063%
12 SYEDA MATANAT MOHSIN W/O MR. SHAHZAD GHAFFAR (CDC) 900,542 11.4355%
13 SYEDA MAIMANAT MOHSIN W/O MR. NAJAM AZIZ SETHI 900,045 11.4291%
Executives: 450 0.0057%

Public Sector Companies & Corporations: - -
Banks, Development Finance Institutions, Non Banking Finance 81,365 1.0332%
Companies, Insurance Companies, Takaful, Modarabas and Pension Funds:
Shareholders holding five percent or more voting intrest in the listed company (Name Wise Detail)
S. No. Name Holding Percentage
1 SYED MOHAMMAD MEHDI MOHSIN 2,726,301 34.6197%

2 SYEDA MAIMNAT MOHSIN 900,045 11.4291%
3 SYEDA MATANAT MOHSIN (CDC) 900,542 11.4355%
4 CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST (CDC) 767,666 9.7481%
5 MST. AMINA WADALAWALA 735,000 9.3333%
All trades in the shares of the listed company, carried out by its Directors, Executives and their
spouses and minor children shall also be disclosed:
S. No. Name Sale Purchase
1 MS. NAILA BHATTI - 360
36
Statement of Compliance
with the Listed Companies (Code of Corporate Governance)
Regulations, 2019
Mitchell’s Fruit Farms Limited
For the Year Ended September 30, 2020
The company has complied with the requirements of the Listed Companies (Code of Corporate Gover-
nance) Regulations, 2019 ('Regulations') in the following manner:
1. The total number of directors are 11 as per the following:
a. Male: 8
b. Female: 3
2. The composition of board is as follows:
Category Names
*Independent Directors Syed Manzar Hassan
Mr. Rizwan Bashir
Mr. Pervez Hayat Noon
Non-Executive Directors Mr. Shazad Ghaffar
Mr. Aamir Amin
Mr. Najam Aziz Sethi
Syed Mohammad Mohsin
Executive Director Syed Mohammad Mehdi Mohsin
Female Directors Ms. Naila Bhatti (Executive Director)
Syeda Umme Kulsum Imam (Non-Executive Director)
Mr. Sitwat Mohsin (Non-Executive Director)
* During the year ended September 30, 2020, the Company has not rounded up the fraction of
independent directors as one since the Company will appoint additional independent director upon
reconsitituion of the Board.
37
3. The directors have confirmed that none of them is 2. Syeda Syeda Sitwat Mohsin (Non-Executive
serving as a director on more than seven listed Director)
companies, including this company 3. Syeda Umme Kulsum Imam (Non-Executive
Director)
4. The company has prepared a Code of Conduct
and has ensured that appropriate steps have been 13. The terms of reference of the aforesaid
taken to disseminate it throughout the company committees have been formed, documented and
along with its supporting policies and procedures; advised to the committee for compliance;
5. The Board has developed a vision/mission 14. The frequency of meetings (quarterly / half yearly /
statement, overall corporate strategy and yearly) of the Committees were as per following:
significant policies of the company. The Board has
ensured that complete record Of particulars of the a) Audit Committee:
significant policies along with their date of
approval or updating is maintained by the Five meetings were held during the financial year
company; ended September 30, 2020.
6. All the powers of the Board have been duly b) Human Resource and Remuneration Committee
exercised and decisions on relevant matters have
been taken by board/ shareholders as empowered One meeting was held during the financial year
by the relevant provisions of the Companies Act, ended September 30, 2020.
2017 ('Act') and these Regulations; 15. The Board has set up an effective internal audit
7. The meetings of the Board were presided over by function which is considered suitably qualified and
the Chairman and, in his absence, by a director experienced for the purpose and are conversant
elected by the board for this purpose. The board with the policies and procedures of the Company.
has complied with the requirements of the Act and 16. The statutory auditors of the company have
the Regulations with respect to frequency, confirmed that they have been given a satisfactory
recording and circulating minutes of meeting of rating under the Quality Control review program of
board; the Institute of Chartered Accountants of Pakistan
8. The Board have a formal policy and transparent and registered with Audit Oversight Board of
procedures for remuneration of directors in Pakistan, that they and all their partners are in
accordance with the Act and these Regulations; compliance with the International Federation of
Accountants (IFAC) guidelines on code of ethics as
9. The company has already met the criteria adopted by the Institute of Chartered Accountants
specified in the Regulations till September 30, 2019 of Pakistan and that they and the partners of the
pertaining to Directors' training program. firm involved in the audit are not a close relative
Therefore, no such training program was (spouse, parent, dependent and non-dependent
conducted during the year; children) of the chief executive officer, chief
financial officer, head of internal audit, company
10. The Board has approved appointment of chief
secretary or director of the company.
financial officer, company secretary and head of
internal audit, including their remuneration and 17. The statutory auditors or the persons associated
terms and conditions of employment and with them have not been appointed to provide
complied with relevant requirements of the other services except in accordance with the Act,
Regulations; these regulations or any other regulatory
requirement and the auditors have confirmed that
11. Chief financial officer and chief executive officer
they have observed IFAC guidelines in this regard.
duly endorsed the financial statements before
approval of the Board; 18. We confirm that all requirements of regulations 3,
6, 7, 8, 27, 32, 33 and 36 of the Regulations have
12. The Board has formed Committees comprising of
been complied with.
members given below:
a) Audit Committee
1. Mr. Rizwan Bashir (Independent Director) -
Chairman
2. Syed Mohammad Mohsin (Non - Executive
Director) Najam Aziz Sethi
3. Mr. Aamir Amin (Non - Executive Director) Chairman
b) Human Resource and Remuneration Committee

Lahore,
1. Mr. Pervez Hayat Noon (Independent Director) - January 27, 2021
Chairman
38
Independent Auditor’s Review Report
To the members of Mitchell’s Fruit Farms Limited
Review Report on the Statement of Compliance contained in Listed
Companies (Code of Corporate Governance) Regulations, 2019
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 Mitchell’s Fruit Farms
Limited for the year ended September 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 September 30,
2020.
A. F. Ferguson & Co.

Name of engagement partner: Amer Raza Mir
Lahore
Date: January 29, 2021
39
Audited Financial Statements
As at 30 September 2020
Independent Auditor’s Report
To the members of Mitchell’s Fruit Farms Limited
Report on the Audit of the Financial Statements
Opinion the changes in equity and its cash flows for the year
We have audited the annexed financial statements then ended.
of Mitchell’s Fruit Farms Limited (the Company), Basis for Opinion
which comprise the statement of financial position
We conducted our audit in accordance with
as at September 30, 2020, and the statement of
International Standards on Auditing (ISAs) as
profit or loss, the statement of comprehensive
applicable in Pakistan. Our responsibilities under
income, the statement of changes in equity, the
those standards are further described in the
statement of cash flows for the year then ended, and
Auditor’s Responsibilities for the Audit of the
notes to the financial statements, including a
Financial Statements section of our report. We are
summary of significant accounting policies and
independent of the Company in accordance with
other explanatory information, and we state that we
the International Ethics Standards Board for
have obtained all the information and explanations
Accountants’ Code of Ethics for Professional
which, to the best of our knowledge and belief, were
Accountants as adopted by the Institute of
necessary for the purposes of the audit.
Chartered Accountants of Pakistan (the Code) and
we have fulfilled our other ethical responsibilities in
In our opinion and to the best of our information
accordance with the Code. We believe that the audit
and according to the explanations given to us, the
evidence we have obtained is sufficient and
statement of financial position, the statement of
appropriate to provide a basis for our opinion.
profit or loss, the statement of comprehensive
income, the statement of changes in equity and the Key Audit Matters
statement of cash flows together with the notes Key audit matters are those matters that, in our
forming part thereof conform with the accounting professional judgment, were of most significance in
and reporting standards as applicable in Pakistan our audit of the financial statements of the current
and give the information required by the Companies period. These matters were addressed in the
Act, 2017 (XIX of 2017), in the manner so required context of our audit of the financial statements as a
and respectively give a true and fair view of the state whole, and in forming our opinion thereon, and we
of the Company’s affairs as at September 30, 2020 do not provide a separate opinion on these matters.
and of the loss and other comprehensive income,
Following are the Key audit matters:
Sr.
No Key Audit Matters How the matters were addressed in our audit
1. Management Assessment of Going Concern Our audit procedures included the following:
Assumption
- Obtained the next year projection and
(Refer note to 2.2 to the annexed financial
discussed the business plans underlying
statements)
the projection with the management of
the Company;
As per International Accounting Standard 1
"Presentation of Financial Statements",
- Assessed the reasonableness of the
management is required to assess an entity's
projection by performing sensitivity
ability to continue as a going concern. In
analysis and challenging the key
assessing whether the going concern assumption
assumptions such as growth rate, future
is appropriate, management has to take into
revenue, cost, and production patterns.
account all available information about the future,
which is at least, but is not limited to, twelve
months from the end of the reporting period.
48
Sr.
No Key Audit Matters How the matter was addressed in our audit
The ability of the Company to continue as a - Checked approval of the projection by the
going concern is dependent on management's board of directors of the Company;
ability to maintain liquidity in order to pay its
existing creditors and to generate sufficient - Obtained written representations from the
funds from business operations. During the management regarding their business plans
prior years, the Company incurred losses which underlying the projection;
led to depletion of reserves, discontinuation of
dividends, substantial utilization of working - Inspected the minutes of the meetings of
capital lines, and additional borrowing from Board of Directors during and subsequent to
major shareholders of the Company. the year ended September 30, 2020;
Subsequent to the year ended September 30,
2020, the Board of Directors of the Company - Traced the amount of right issue subscription
decided to increase the paid-up capital of the money received by the Company in the
Company through issuance of right shares. designated bank account subsequent to the
year ended September 30, 2020; and
After the above injection of funds, the
management believes that there will be - Assessed the adequacy and appropriateness
sufficient liquidity in the foreseeable future to of the related going concern disclosures in
support the use of going concern assumption. the financial statements.
We considered management assessment of

going concern assumption as a key audit matter
due to significant management judgement and
significant risk involved on the matter.
2. Revenue recognition Our audit procedures included the following:
(Refer note to 22 to the annexed financial - Considered the appropriateness of the

statements) Company's revenue recognition policies,
including those relating to returns, trade
Revenue is measured net of returns, trade promotions and incentives in light of
promotions and incentives earned by the applicable accounting framework;
customers on Company's sales.
- Checked the effectiveness of the Company's
There are multiple arrangements for sales controls over proper recording of sales, trade
returns, trade promotions and incentives given promotions and incentives in the correct
to the Company's customers which are required accounting period;
to be estimated at the time of revenue
recognition. These estimates are made by - Selected a sample of sale return, trade
management based on past historical trends promotions and incentive transactions and
adjusted on the basis of current observable data. matched the amounts recorded in the
This process involves the exercise of significant general ledger with underlying supporting
judgment which may materially affect the documents;
amount of revenue recognized in the financial
statements. - Assessed the adequacy of refund liabilities in
respect of sales returns, trade promotions and
We considered revenue recognition as a key incentives by considering credit notes issued
audit matter due to significant management after the year end; and
judgment and estimation involved in
determining the amount of revenue to be - Assessed the adequacy of the related
recognized. disclosures in the financial statements.
49
Information Other than the Financial Statements Auditor’s Responsibilities for the Audit of the
and Auditor’s Report Thereon Financial Statements
Management is responsible for the other Our objectives are to obtain reasonable assurance
information. The other information comprises the about whether the financial statements as a whole
information included in the annual report, but does are free from material misstatement, whether due to
not include the financial statements and our fraud or error, and to issue an auditor’s report that
auditor’s report thereon. includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that
Our opinion on the financial statements does not an audit conducted in accordance with ISAs as
cover the other information and we do not express applicable in Pakistan will always detect a material
any form of assurance conclusion thereon.
misstatement when it exists. Misstatements can
arise from fraud or error and are considered material
In connection with our audit of the financial
if, individually or in the aggregate, they could
statements, our responsibility is to read the other
reasonably be expected to influence the economic
information and, in doing so, consider whether the
decisions of users taken on the basis of these
other information is materially inconsistent with the
financial statements or our knowledge obtained in financial statements.
the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, As part of an audit in accordance with ISAs as
we conclude that there is a material misstatement of applicable in Pakistan, we exercise professional
this other information, we are required to report that judgement and maintain professional skepticism
fact. We have nothing to report in this regard. throughout the audit. We also:
Responsibilities of Management and Board of • Identify and assess the risks of material
Directors for the Financial Statements misstatement of the financial statements,
whether due to fraud or error, design and
Management is responsible for the preparation and perform audit procedures responsive to those
fair presentation of the financial statements in risks, and obtain audit evidence that is sufficient
accordance with the accounting and reporting and appropriate to provide a basis for our
standards as applicable in Pakistan and the opinion. The risk of not detecting a material
requirements of Companies Act, 2017 (XIX of 2017) misstatement resulting from fraud is higher than
and for such internal control as management for one resulting from error, as fraud may involve
determines is necessary to enable the preparation collusion, forgery, intentional omissions,
of financial statements that are free from material misrepresentations, or the override of internal
misstatement, whether due to fraud or error. control.
In preparing the financial statements, management

• Obtain an understanding of internal control
is responsible for assessing the Company’s ability to
relevant to the audit in order to design audit
continue as a going concern, disclosing, as
procedures that are appropriate in the
applicable, matters related to going concern and
circumstances, but not for the purpose of
using the going concern basis of accounting unless
expressing an opinion on the effectiveness of
management either intends to liquidate the
Company or to cease operations, or has no realistic the Company’s internal control.
alternative but to do so.
• Evaluate the appropriateness of accounting
Board of directors are responsible for overseeing policies used and the reasonableness of
the Company’s financial reporting process. accounting estimates and related disclosures
made by management.
50
• Conclude on the appropriateness of consequences of doing so would reasonably be
management’s use of the going concern basis expected to outweigh the public interest benefits of
of accounting and, based on the audit evidence such communication.
obtained, whether a material uncertainty exists
related to events or conditions that may cast Report on Other Legal and Regulatory
significant doubt on the Company’s ability to Requirements
continue as a going concern. If we conclude that
a material uncertainty exists, we are required to Based on our audit, we further report that in our
draw attention in our auditor’s report to the opinion:
related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our a) Proper books of account have been kept by the
opinion. Our conclusions are based on the audit Company as required by the Companies Act,
evidence obtained up to the date of our auditor’s 2017 (XIX of 2017);
report. However, future events or conditions
b) The statement of financial position, the
may cause the Company to cease to continue
statement of profit or loss, the statement of
as a going concern.
comprehensive income, the statement of
changes in equity and the statement of cash
• Evaluate the overall presentation, structure and
flows together with the notes thereon have been
content of the financial statements, including drawn up in conformity with the Companies Act,
the disclosures, and whether the financial 2017 (XIX of 2017) and are in agreement with the
statements represent the underlying books of account and returns;
transactions and events in a manner that
achieves fair presentation. c) Investments made, expenditure incurred and
guarantees extended during the year were for
We communicate with the board of directors the purpose of the Company’s business; and
regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, d) no Zakat was deductible at source under the
including any significant deficiencies in internal Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
control that we identify during our audit.
The engagement partner on the audit resulting in
We also provide the board of directors with a this independent auditor’s report is Amer Raza Mir.
statement that we have complied with relevant
ethical requirements regarding independence, and
to communicate with them all relationships and
other matters that may reasonably be thought to
bear on our independence, and where applicable,
related safeguards.
A.F. Ferguson & Co.
From the matters communicated with the board of Name of engagement partner: Amer Raza Mir
directors, we determine those matters that were of
most significance in the audit of the financial
statements of the current period and are therefore Lahore
Date: January 29, 2021
the key audit matters. We describe these matters in
our auditor’s report unless law or regulation
precludes public disclosure about the matter or
when, in extremely rare circumstances, we
determine that a matter should not be
communicated in our report because the adverse
51
Statement of Financial Position
2020 2019
Note Rupees Rupees
EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorised capital
20,000,000 (2019: 20,000,000)
ordinary shares of Rs 10 each 5 200,000,000 200,000,000

Issued, subscribed and paid up capital
7,875,000 (2019: 7,875,000)
ordinary shares of Rs 10 each 5 78,750,000 78,750,000
Reserves 6 9,635,878 9,635,878
Revenue reserve: unappropriated profit (14,076,101) 38,058,691

74,309,777 126,444,569
NON-CURRENT LIABILITIES

Deferred taxation 7 - -
Deferred liabilities 8 134,230,460 134,123,077

134,230,460 134,123,077
CURRENT LIABILITIES

Finances under markup arrangements 9 560,615,531 655,331,857
Creditors, accrued and other liabilities 10 399,806,286 255,324,377
Loan from shareholders - unsecured 11 200,000,000 150,000,000
Accrued finance cost 9,653,040 20,265,694
Unclaimed dividends 2,004,183 2,004,183

1,172,079,040 1,082,926,111
CONTINGENCIES AND COMMITMENTS 12

1,380,619,277 1,343,493,757

The annexed notes 1 to 41 form an integral part of these financial statements.
Najam Aziz Seethi Nauman Munawar Naila Bhatti

Chairman Chief Financial Officer Chief Executive Officer
52
2020 2019
Note Rupees Rupees
ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 13 572,845,202 595,452,993
Intangible assets 14 3,843,833 4,263,957
Biological assets 15 31,954,123 32,385,667
Long term receivables 16 5,705,010 6,689,480

614,348,168 638,792,097

CURRENT ASSETS

Stores, spares and loose tools 17 37,342,809 53,481,584
Stock in trade 18 335,418,696 277,274,045
Trade debts 19 138,824,036 132,933,635
Advances, deposits, prepayments and other receivables 20 66,878,401 67,977,887
Income tax recoverable 152,414,931 154,247,173
Cash and bank balances 21 35,392,236 18,787,336

766,271,109 704,701,660

1,380,619,277 1,343,493,757

53
Statement of Profit or Loss
For the year ended September 30, 2020
2020 2019
Note Rupees Rupees
Sales 22 2,112,492,576 1,987,552,095

Cost of sales 23 (1,670,069,764) (1,553,138,999)

Gross profit 442,422,812 434,413,096

Administrative expenses 24 (150,668,678) (135,252,097)

Distribution and marketing expenses 25 (253,637,474) (282,634,196)

Other operating expenses 26 (3,262,518) (5,341,413)

Other income 27 12,162,020 15,592,075

Finance cost 28 (74,272,355) (78,300,349)

Loss before tax (27,256,193) (51,522,884)

Taxation 29 (28,189,242) (28,482,629)

Loss for the year (55,445,435) (80,005,513)

Loss per share - Basic and diluted 36 (7.04) (10.16)


54
Statement of Comprehensive Income
2020 2019
Rupees Rupees

Loss for the year (55,445,435) (80,005,513)

Other comprehensive income / (loss) for the year - net of tax

Items that will not be reclassified to profit or loss

Remeasurement of retirement benefit - net of tax 3,310,643 (359,628)

Items that may be reclassified subsequently to profit or loss - -

Total comprehensive loss for the year (52,134,792) (80,365,141)


55
Statement of Changes in Equity
Reserve Revenue Reserve

Share Share General Unappropriated
capital premium reserve profit Total
Rupees Rupees Rupees Rupees Rupees
Balance as on October 01, 2018 78,750,000 9,335,878 300,000 118,423,832 206,809,710

Total comprehensive loss for the year

- Loss for the year - - - (80,005,513) (80,005,513)
- Other comprehensive loss for the year - - - (359,628) (359,628)

- - - (80,365,141) (80,365,141)

Balance as on September 30, 2019 78,750,000 9,335,878 300,000 38,058,691 126,444,569

Total comprehensive loss for the year

- Loss for the year - - - (55,445,435) (55,445,435)
- Other comprehensive income
for the year - - - 3,310,643 3,310,643

- - - (52,134,792) (52,134,792)

Balance as on September 30, 2020 78,750,000 9,335,878 300,000 (14,076,101) 74,309,777


56
Statement of Cash Flows
2020 2019
Note Rupees Rupees
Cash flows from operating activities

Cash generated from operations 33 219,414,456 161,057,350
Finance cost paid (84,885,009) (70,198,517)
Taxes paid (27,709,234) (30,492,911)
Retirement benefits paid (19,713,675) (14,286,423)
Payment for accumulated compensated absences (3,738,999) (1,835,058)
Security deposit received on purchase of vehicles 984,470 3,004,450

Net cash generated from operating activities 84,352,009 47,248,891

Cash flows from investing activities

Fixed capital expenditure (25,653,886) (5,578,113)
Purchase of intangible assets - (300,000)
Proceeds from sale biological assets 2,273,000 2,116,000
Proceeds from sale of property, plant and equipment 350,103 8,848,887

Net cash (used in) / generated from investing activities (23,030,783) 5,086,774

Cash flows from financing activities

Loan obtained from shareholder 50,000,000 -
Long term loans repaid - (21,333,333)

Net cash generated from / (used in) financing activities 50,000,000 (21,333,333)

Net increase in cash and cash equivalents 111,321,226 31,002,332
Cash and cash equivalents at the beginning of the year (636,544,521) (667,546,853)

Cash and cash equivalents at the end of the year 35 (525,223,295) (636,544,521)


57
Notes to the Financial Statements
1. Legal status and nature of business

Mitchell’s Fruit Farms Limited (“the Company”) was incorporated in Pakistan and is listed on the
Pakistan Stock Exchange. It is principally engaged in the manufacture and sale of various farm and
confectionery products. The registered office of the Company was situated at 40-A Zafar Ali Road,
Gulberg V, Lahore however subsequent to the year ended September 30, 2020 the Company
shifted the registered office to 72 F.C.C. Gulberg IV, Lahore. The manufacturing facility and the
farms are situated in Renala Khurd, Okara, Pakistan. The Company also has one sales office in
Islamabad and one in Karachi.
2.
Basis of preparation

2.1 Statement of compliance

These financial statements have been prepared in accordance with the accounting and
reporting standards as applicable in Pakistan. The accounting and reporting standards
applicable in Pakistan comprise of:

- International Financial Reporting Standards (IFRS Standards) issued by the International
Accounting Standards Board (IASB) as notified under the Companies Act, 2017;

- Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered
Accountants of Pakistan as notified under the Companies Act, 2017; and

- Provisions of and directives issued under the Companies Act, 2017.

Where provisions of and directives issued under the Companies Act, 2017 differ from the
IFRS Standards or IFAS, the provisions of and directives issued under the Companies Act,
2017 have been followed.

2.2 Going concern assumption

During the year, the Company incurred a total comprehensive loss of Rs 52.135 million and
as per the reporting date, the current liabilities of the Company have exceeded its current
assets by Rs 405.808 million. Due to the losses incurred during recent years, the reserves of
the Company have depleted. The dividends have been discontinued. The existing working
capital lines available to the Company have been substantially utilized. The financial results
led to increased short-term borrowing from financial institutions and additional borrowing
from the major shareholders of the Company. Subsequent to the year ended September 30,
2020 the Board approved the right issue scheme vide meeting held on October 26, 2020,
whereby, 15.00 million shares will be issued at a price of Rs. 50 leading to an overall
increase in paid up share capital of Rs. 750.00 million, which has already been received.
The process of allotment of the shares against the right issue shall be completed by February
2021.

Furthermore, the management has taken the following operational improvement measures
comprising of:

- improved pricing and discount structure;
- expanding new business avenues including toll manufacturing; and
- cost reductions.

Based on the above measures and future projections, the management believes that there
will be sufficient liquidity in the foreseeable future to continue as a going concern. Therefore,
the financial statements have been prepared on going concern basis.

58
2.3 Standards, interpretations and amendments to published approved accounting standards

The following amendments to existing standards have been published that are applicable
to the Company’s financial statements covering annual periods, beginning on or after the
following dates:

2.3.1 Standards, amendments to published standards and interpretations that are effective in
current year and are relevant to the Company’s operations

Certain standards, amendments and interpretations to IFRS are effective for accounting
periods beginning on October 1, 2019 but are considered not to be relevant or to have any
significant effect on the Company’s operations (although they may affect the accounting for
future transactions and events) and are, therefore, not detailed in these financial statements,
except for the following:

(a) IFRS 16, ‘Leases’

This standard has been notified by the Securities and Exchange Commission of Pakistan
(SECP) to be effective for annual periods beginning on or after January 1, 2019. This standard
replaces the previous guidance in International Accounting Standard (IAS) 17, ‘Leases’ and
is a far reaching change in accounting by lessees in particular. Under IAS 17, lessees were
required to make a distinction between a finance lease (on statement of financial position)
and an operating lease (off statement of financial position). IFRS 16 now requires lessees to
recognize a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually
all lease contracts. The International Accounting Standards Board (IASB) has included an
optional exemption for certain short-term leases and leases of low-value assets; however, this
exemption can only be applied by lessees. For lessors, the accounting stays almost the same.
However, as the IASB has updated the guidance on the definition of a lease (as well as the
guidance on the combination and separation of contracts), lessors will also be affected by the
new standard. At the very least, the new accounting model for lessees is expected to impact
negotiations between lessors and lessees. The Company has assessed that the application of
this standard does not have any material impact on these financial statements.

(b) Definition of Material – Amendments to IAS 1 and IAS 8

The IASB has made amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’ which use a consistent
definition of materiality throughout International Financial Reporting Standards and the
Conceptual Framework for Financial Reporting, clarify when information is material and
incorporate some of the guidance in IAS 1 about immaterial information.

In particular, the amendments clarify:

- that the reference to obscuring information addresses situations in which the effect is
similar to omitting or misstating that information, and that an entity assesses materiality in
the context of the financial statements as a whole, and

- the meaning of ‘primary users of general purpose financial statements’ to whom those
financial statements are directed, by defining them as ‘existing and potential investors,
lenders and other creditors’ that must rely on general purpose financial statements for much
of the financial information they need.

(c) Revised Conceptual Framework for Financial Reporting

The IASB has issued a revised Conceptual Framework which will be used in standard-setting
decisions with immediate effect.

59
Key changes include:

- increasing the prominence of stewardship in the objective of financial reporting
- reinstating prudence as a component of neutrality
- defining a reporting entity, which may be a legal entity, or a portion of an entity
- revising the definitions of an asset and a liability
- removing the probability threshold for recognition and adding guidance on derecognition
- adding guidance on different measurement basis, and
- stating that profit or loss is the primary performance indicator and that, in principle, income
and expenses in other comprehensive income should be recycled where this enhances the
relevance or faithful representation of the financial statements.

No changes will be made to any of the current accounting standards. However, entities that
rely on the Framework in determining their accounting policies for transactions, events or
conditions that are not otherwise dealt with under the accounting standards will need to
apply the revised Framework from effective date. These entities will need to consider whether
their accounting policies are still appropriate under the revised Framework.

(d) IFRIC 23, ‘Uncertainty over Income Tax Treatments’

This interpretation became effective for annual periods beginning on or after January 1, 2019.
The IFRIC clarifies how the recognition and measurement requirements of IAS 12 ‘Income
taxes’ are applied where there is uncertainty over income tax treatments. In particular,
it explains that the entity should assume a tax authority will examine the uncertain tax
treatments and have full knowledge of all related information. The IFRIC further explains that
the entity should reflect the effect of the uncertainty in its income tax accounting i.e. when it
is not probable that the tax authorities will accept the treatment using either the most likely
amount or the amount determined using the expected value method. The application of the
interpretation does not have any material impact on the amounts recognized in the financial
statements of the Company.

2.3.2 Standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Company

The following amendments and interpretations to existing standards have been published
and are mandatory for the Company’s accounting periods beginning on or after October 01,
2020 or later periods, but the Company has not early adopted them:

Standards or interpretations Effective date
(accounting periods
beginning on or after)

Classification of Liabilities as Current or Non-current
– Amendments to IAS 1 January 1, 2022

Property, Plant and Equipment: Proceeds before intended
use – Amendments to IAS 16 January 1, 2022

Reference to the Conceptual Framework – Amendments
to IFRS 3 January 1, 2022

Onerous Contracts – Cost of Fulfilling a Contract
Amendments to IAS 37 January 1, 2022

Annual Improvements to IFRS Standards 2018–2020 January 1, 2022
The above standards, amendments and interpretations are not expected to have a material
impact on the Company’s financial statements when they become effective.

60
In addition to the above standards and amendments, improvements to various accounting
standards have also been issued by the IASB in previous years. Such improvements are
generally effective for accounting periods beginning on or after January 01, 2020. The
Company expects that such improvements to the standards will not have any significant
impact on the Company’s financial statements in the period of initial application.
3. Basis of measurement

3.1 These financial statements have been prepared under the historical cost convention except
for recognition of certain employee retirement benefits at present value as referred to in note
4.2 and revaluation of biological assets and agricultural produce and financial instruments
at fair values as referred to in note 4.5 and 4.10 respectively.

The Company’s significant accounting policies are stated in note 4. Not all of these significant
policies require the management to make difficult, subjective or complex judgments
or estimates. The following is intended to provide an understanding of the policies the
management considers critical because of their complexity, judgment of estimation involved
in their application and their impact on these financial statements. Estimates and judgments
are continually evaluated and are based on historical experience, including expectations of
future events that are believed to be reasonable under the circumstances. These judgments
involve assumptions or estimates in respect of future events and the actual results may differ
from these estimates. The areas involving a higher degree of judgments or complexity or
areas where assumptions and estimates are significant to the financial statements are as
follows:

a) Retirement benefits

The Company uses the valuation performed by an independent actuary as the present value
of its retirement benefit obligations. The valuation is based on assumptions as mentioned in
note 4.2.

b) Provision for taxation

Where there is uncertainty in income tax accounting i.e. when it is not probable that the tax
authorities will accept the treatment, the impact of the uncertainty is measured using either
the most likely amount or the expected value method, depending on which method better
predicts the resolution of the uncertainty as explained in note 4.1.

c) Useful lives and residual values of property, plant and equipment

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

d) Sales returns and trade promotions and incentives

There are multiple arrangements for sales returns, trade promotions and incentives given
to the Company’s customers which are required to be estimated at the time of revenue
recognition. These estimates are made by management based on past historical trends
adjusted on the basis of current observable data, which involves the exercise of significant
management judgment.

e) Impairment of trade debts

The Company applied IFRS 9 simplified approach to measure expected credit losses using
a lifetime expected loss allowance for all Trade debts. At each reporting date, the Company
assesses on a forward-looking basis for computation of the expected credit losses associated
with the Trade debts.

61
4. 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 years presented, unless otherwise
stated.

4.1 Taxation

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

Current

Provision of current tax is based on the taxable income for the year determined in accordance
with the prevailing law for taxation of income. The charge for current tax is calculated
using prevailing tax rates or tax rates expected to apply to profit for the year if enacted
after taking into account tax credits, rebates and exemptions, if any. The charge for current
tax also includes adjustments, where considered necessary, to provision for tax made in
previous years arising from assessments framed during the year for such years. Where there
is uncertainty in income tax accounting i.e. when it is not probable that the tax authorities
will accept the treatment, the impact of the uncertainty is measured using either the most
likely amount or the expected value method, depending on which method better predicts the
resolution of the uncertainty. Such judgements are reassessed whenever circumstances have
changes or there is new information that affects the judgements. Where, at the assessment
stage, the taxation authorities have adopted a different tax treatment and the Company
considers that the most likely outcome will be in favor of the Company, the amounts are
shown as contingent liabilities.

Deferred

Deferred tax is accounted for using the liability method in respect of all temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of the taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences and
deferred tax assets are 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 assets and liabilities are calculated at the rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on the tax rates and tax
laws that have been enacted or substantively enacted by the reporting date. Deferred tax is
charged or credited to the statement of profit or loss, except in the case of items charged or
credited to equity in which case it is included in the statement of changes in equity.

4.2 Employee retirement benefits

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

(a) Defined benefit plans

The Company operates an unfunded gratuity scheme for all employees according to the
terms of employment subject to a minimum qualifying period of service . Annual provision
is made on the basis of actuarial valuation to cover obligations under the scheme for all
employees eligible to gratuity benefits irrespective of the qualifying period.

The latest actuarial valuation for gratuity scheme was carried out as at September 30,
2020. Projected Unit Credit Method, using the following significant assumptions is used for
valuation of the scheme:

62
- Discount rate: 9.75 percent per annum (2019: 12.5 percent per annum)
- Expected rate of increase in salary level: 8.75 percent per annum (2019: 11.5 percent
per annum)
- Average duration of the defined benefit obligation: 8 years (2019: 8 years)
- The Mortality rates assumed were based on SLIC 2001 - 2005 Setback 1 Year (2019:
SLIC 2001 - 2005 Setback 1 Year)

(b) Accumulating compensated absences

The Company provides accumulating compensated absences, when the employees render
service that increase their entitlement to future compensated absences. Under IAS 19, the
accumulated compensated absences are treated as other long term employee benefits.

Provisions are made annually to cover the obligation for accumulating compensated
absences for executives based on actuarial valuation and are charged to profit.

The latest actuarial valuation was carried out as at September 30, 2020. Projected Unit Credit
Method, using the following significant assumptions is used for valuation of accumulating
compensated absences.

- Discount rate: 9.75 percent per annum (2019: 12.5 percent per annum)
- Expected rate of increase in salary level: 8.75 percent per annum (2019: 11.5 percent
per annum)
- Average duration of the plan: 11 years (2019: 12 years)
- The Mortality rates assumed were based on SLIC 2001 - 2005 Setback 1 Year (2019:
SLIC 2001 - 2005 Setback 1 Year)

Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to equity in other comprehensive income in the period
in which they arise.

Retirement benefits are payable to staff on completion of prescribed qualifying period of
service under these schemes.

4.3 Property, plant and equipment

4.3.1 Operating fixed assets

Operating fixed assets except freehold land are stated at cost less accumulated depreciation
and any identified impairment loss. Freehold land is stated at cost less any identified
impairment loss. Cost in relation to certain property, plant and equipment signifies historical
cost and borrowing cost as referred to in note 4.17.

Depreciation on all operating fixed assets is charged to statement of profit or loss on the
reducing balance method except for Pulping Plant, Steam Boiler and ancillaries which are
being depreciated using the straight line method, so as to write off the depreciable amount
of an asset over its estimated useful life at following annual rates, after taking into account
the impact of their residual values, if considered significant:
Freehold land 0%
Buildings on freehold land 10%
Buildings on leasehold land 20%
Plant and machinery:
- pulping plant, steam boiler and ancillaries ( on straight line basis ) 2.5% to 3.7%
- others 10%
Vehicles 20%
Furniture and fittings 20%
Electric installations 20% to 33%
Computer hardware 20%
63
The assets’ residual values and useful lives are reviewed, at each financial year end, and
adjusted if the impact on depreciation is significant. The Company’s estimate of the residual
value and useful life of its operating fixed assets as at September 30, 2020 has not required
any adjustment.

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

An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount as mentioned in
note 4.6.

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

Fixed assets received as a grant / donation are debited to the property, plant and equipment
account at fair value and a corresponding amount credited to the deferred income account
in the statement of financial position. Such items are thereafter depreciated as per the
policy of the company while a corresponding amount is transferred from deferred income to
statement of profit or loss.

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

4.3.2 Capital work-in-progress

Capital work-in-progress is stated at cost less any identified impairment loss. All expenditure
connected with specific assets incurred during installation and construction period are
carried under capital work-in-progress. These are transferred to operating fixed assets as
and when these are available for use.

4.4 Intangible assets

Intangible assets represent the cost of computer software acquired and are stated at cost
less accumulated amortization and any identified impairment loss. Intangible assets are
amortized using the reducing balance method at the rate of 20% so as to write off the cost
of an asset over its estimated useful life.

Amortization on additions is charged from the month in which an asset is acquired or
capitalized while no amortization is charged for the month in which the asset is disposed off.
Amortization is being charged as mentioned in note 15.

An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount as mentioned in
note 4.6.

4.5 Biological assets and agriculture produce

Biological assets comprise of livestock and trees. These are measured at fair value less
estimated costs to sell with any resultant gain/loss being recognized in the statement of profit
or loss. Fair value of livestock is determined on the basis of market prices of livestock of
similar age, breed and genetic merit. Fair value of trees is determined on the basis of market
prices of similar items in local areas. Costs to sell include all costs that are necessary to sell
the assets, excluding costs necessary to get the assets to the market.

64
4.6 Impairment of non-financial assets

Assets that have an indefinite useful life, for example land, are not subject to depreciation/
amortization and are tested annually for impairment. Assets that are subject to depreciation/
amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Non-financial assets
that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.

4.7 Leases

4.7.1 Lessee accounting

At inception of a contract, the Company assesses whether a contract is, or contains, a lease
based on whether the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.

The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date. The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined, which is generally the case for
leases of the Company, the lessee’s incremental borrowing rate is used, being the rate that
the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right of use asset in a similar economic environment with similar terms,
security and conditions.

To determine the incremental borrowing rate, the Company:

- where possible, uses the recent third party financing received by the Company as a starting
point, adjusted to reflect the changes in financing conditions since third party financing
was received;

- uses expected terms of third party financing based on correspondence with the third party
financial institutions, where third party financing was not received recently; and

- makes adjustments specific to the lease e.g. terms and security

Lease payments include fixed payments, variable lease payment that are based on an index
or a rate, amounts expected to be payable by the lessee under residual value guarantees,
the exercise price of a purchase option if the lessee is reasonably certain to exercise that
option, payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising that option, less any lease incentives receivable.

In determining the lease term, management considers all facts and circumstances that create
an economic incentive to exercise an extension option or not to exercise a termination
option. Extension options (or periods covered by termination options) are only included in
the lease term if the lease is reasonably certain to be extended (or not terminated). While
making this assessment, the Company considers significant penalties to terminate (or not
extend) as well as the significant cost of business disruption.

The lease liability is subsequently measured at amortized cost using the effective interest rate
method. It is remeasured when there is a change in future lease payments arising from a
change in fixed lease payments or an index or rate, change in the Company’s estimate of
the amount expected to be payable under a residual value guarantee, or if the Company
65
changes its assessment of whether it will exercise a purchase, extension or termination
option. The corresponding adjustment is made to the carrying amount of the right-to-use
asset, or is recorded in profit and loss if the carrying amount of right-to-use asset has been
reduced to zero.

The right-of-use asset is initially measured based on the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the underlying asset
or to restore the underlying asset or the site on which it is located, less any lease incentive
received. The right-of-use asset is depreciated on a straight line method over the lease term
as this method most closely reflects the expected pattern of consumption of future economic
benefits. The right-of-use asset is reduced by impairment losses, if any, and adjusted for
certain remeasurements of the lease liability.

4.7.2 Lessor accounting

Lease income from operating leases where the Company is a lessor is recognized in income
on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an
operating lease are added to the carrying amount of the underlying asset and recognized as
expense over the lease term on the same basis as lease income. The respective leased assets
are included in the statement of financial position based on their nature.

4.8 Stores, spares and loose tools

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

Provision is made in the financial statements for obsolete and slow moving stores and spares
based on management’s best estimate.

4.9 Stock in trade

Stock of raw materials is valued principally at the lower of moving average cost and net
realizable value.

Cost of work in process and finished goods comprises direct production costs, labor and
appropriate manufacturing overheads. Work in process is measured at lower of moving
average cost and net realizable value while finished goods are measured at lower of annual
average cost and net realizable value.

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 costs necessarily to be incurred in order to make a sale.

Provision is made in the financial statements for obsolete and slow moving stock in trade
based on management’s best estimate.

4.10 Financial assets

In accordance with the requirements of IFRS 9, the Company classifies its financial assets at
amortized cost, fair value through other comprehensive income or fair value through profit
or loss on the basis of the Company’s business model for managing the financial assets and
the contractual cash flow characteristics of the financial asset.

66
a) Financial assets at amortized cost

Financial assets at amortized cost are held within a business model whose objective is to
hold financial assets in order to collect contractual cash flows and the contractual terms
of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding. Interest income from these
financial assets, impairment losses, foreign exchange gains and losses, and gain or loss
arising on derecognition are recognized directly in statement of profit or loss.

b) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income are held within a business
model whose objective is achieved by both collecting contractual cash flows and selling
financial assets and the contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount
outstanding.

c) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are those financial assets which are
either designated in this category or not classified in any of the other categories. A gain or
loss on debt investment that is subsequently measured at fair value through profit or loss is
recognized in profit or loss in the period in which it arises.

Financial assets are initially measured at cost, which is the fair value of the consideration
given and received respectively. These financial assets and liabilities are subsequently
remeasured to fair value, amortized cost or cost as the case may be. Any gain or loss on the
recognition and de-recognition of the financial assets and liabilities is included in the profit
or loss for the period in which it arises.

Equity instrument financial assets / mutual funds are measured at fair value at and subsequent
to initial recognition. Changes in fair value of these financial assets are normally recognized
in profit or loss. Dividends from such investments continue to be recognized in profit or loss
when the Company’s right to receive payment is established. Where an election is made
to present fair value gains and losses on equity instruments in other comprehensive income
there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment.

Financial assets are derecognized when the rights to receive cash flows from the assets have
expired or have been transferred and the Company has transferred substantially all risks
and rewards of ownership. Assets or liabilities that are not contractual in nature and that
are created as a result of statutory requirements imposed by the Government are not the
financial instruments of the Company.

The Company assesses on a forward looking basis, the expected credit losses associated
with its financial assets carried at amortized cost and fair value through other comprehensive
income. The Company computes historical loss rates using the historical credit losses which
are then adjusted to reflect current and forward looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. For trade debts, the
Company applied the simplified approach, which requires expected lifetime losses to be
recognized from initial recognition of the receivables. To measure the expected credit losses,
trade receivables have been grouped based on shared credit risk characteristics and the
days past due. The Company recognizes in statement of profit or loss, as an impairment gain
or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss
allowance at the reporting date.

67
4.11 Financial liabilities

All financial liabilities are recognized at the time when the Company becomes a party to the
contractual provisions of the instrument.

A financial liability is derecognized when the obligation under the liability is discharged
or cancelled or expired. Where an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability, and the difference in respective
carrying amounts is recognized in the statement of profit or loss.

4.12 Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the
financial statements only when there is a legally enforceable right to set off the recognized
amount and the Company intends either to settle on a net basis or to realize the assets and
to settle the liabilities simultaneously.

4.13 Trade debts and other receivables

Trade debts and other receivables are recognized initially at the amount of consideration
that is unconditional, unless they contain significant financing component in which case
such are recognized at fair value. The Company holds the trade debts with the objective of
collecting the contractual cash flows and therefore measures the trade debts subsequently at
amortized cost using the effective interest rate method.

4.14 Segment reporting

Operating segments are reported in a manner consistent with the internal reports issued to
the chief operating decision-maker. The Chief Executive Officer has been identified as the
‘chief operating decision-maker’, who is responsible for allocating resources and assessing
performance of the operating segments. Currently the Company is functioning as a single
operating segment.

4.15 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 flow, cash and cash equivalents comprise cash in hand,
demand deposits, other short term highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of change in value and
finances under mark-up arrangements. In the statement of financial position, finances under
mark-up arrangements are included in current liabilities.

4.16 Share capital

Ordinary shares are classified as equity and recognized at their face value. Incremental costs
directly attributable to the issue of new shares are shown in equity as a deduction, net of tax.

4.17 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings
are subsequently stated at amortized cost, any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in the statement of profit or loss
over the period of the borrowings using the effective interest method. Finance costs are
accounted for on an accrual basis and are reported under accrued finance costs to the
extent of the amount remaining unpaid.

68
Borrowings are classified as current liabilities unless the Company has an unconditional right
to defer settlement of the liability for at least twelve months after the statement of financial
position date.

4.18 Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalized during
the period of time that is required to complete and prepare the asset for its intended use.
Other borrowing costs are expensed in the statement of profit or loss in the period in which
they arise.

4.19 Trade and other payables

Trade and other payables are recognized initially at fair value and subsequently measured
at amortized cost using the effective interest method. Exchange gains and losses arising on
translation in respect of liabilities in foreign currency are added to the carrying amount of
the respective liabilities.

4.20 Provisions

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

4.21 Revenue recognition

Revenue is recognized when or as performance obligations are satisfied by transferring
control of a promised good or service to a customer and the control transfers at a point in
time. Revenue is measured at fair value of the consideration received of receivable excluding
discounts, rebates and other considerations payable to customers. A contract liability is
recorded for advances received from customers against which performance obligations have
not been satisfied. Furthermore, refund liability is recognized for estimated sales returns,
volume discounts and other incentives payable to customers.

Return on bank deposits is accrued on a time proportion basis, by reference to the principal
outstanding, at the applicable rate of return.

4.22 Foreign currency transactions and translation

a) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency
of the primary economic environment in which the Company operates (the functional
currency). The financial statements are presented in Pak Rupees, which is the Company’s
functional and presentation currency.

b) Transactions and balances

Foreign currency transactions are translated into Pak Rupees using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognized in the
statement of profit or loss. All non-monetary items are translated into rupees at exchange
rates prevailing on the date of transaction or on the date when fair values are determined.

69
4.23 Dividend

Dividend distribution to the Company’s members is recognized as a liability in the period in
which the dividends are approved.
5. Share capital
5.1 Authorised share capital

2020 2019 2020 2019
(Number of Shares) Note Rupees Rupees

20,000,000 20,000,000 Ordinary shares of Rs 10 each 5.1.1 200,000,000 200,000,000
20,000,000 20,000,000 200,000,000 200,000,000
5.1.1
During the year ended September 30, 2020, the Board of Directors of the Company
recommended an increase of Rs 200 million in authorized share capital, for the purpose of
raising equity via right issue, in their meeting held on September 22, 2020. Subsequent to
the year end, the shareholders of the Company approved the increase in authorized share
capital in an Extra Ordinary General Meeting held on October 15, 2020.

5.2 Issued, subscribed and paid up capital

2020 2019 2020 2019
(Number of Shares) Note Rupees Rupees

1,417,990 1,417,990 Ordinary shares of Rs 10 each fully paid in cash 14,179,900 14,179,900
44,020 44,020 Ordinary shares of Rs 10 each issued as fully 440,200 440,200
paid for consideration other than cash
6,412,990 6,412,990 Ordinary shares of Rs 10 each issued as fully 64,129,900 64,129,900
paid bonus shares
7,875,000 7,875,000 78,750,000 78,750,000
70
2020 2019
Note Rupees Rupees
6. Reserves
Composition of reserves is as follows:

Capital Reserve
- Share premium 6.1 9,335,878 9,335,878

Revenue
- General reserve 300,000 300,000
9,635,878 9,635,878

6.1 This reserve can be utilized by the company only for the purposes specified in section 81(2)
of the Companies Act, 2017.

2020 2019
Rupees Rupees
7. Deferred taxation

The liability for deferred taxation comprises temporary
differences relating to:
Accelerated tax depreciation & amortization 83,655,370 84,452,541
Retirement benefits (34,235,291) (33,207,011)
Provisions (19,728,860) (15,529,766)
Deferred income (1,089,363) (1,215,163)
Unabsorbed depreciation (28,601,856) (34,500,601)

- -

The gross movement in net deferred tax liability during
the year is as follows:
Opening balance - 3,144,530
Credited / (charged) to other comprehensive income (1,352,234) (146,890)
Credited to statement of profit or loss 1,352,234 (2,997,640)

Closing balance - -

The Company has not recognized deferred tax asset amounting to Rs 121.14 million (2019:
93.55 million) in respect of minimum tax under section 113 of the Income Tax Ordinance, 2001 as
sufficient taxable profits may not be available to set off these before these are set to expire in years
2021 to 2026. The Company has also not recognized deferred tax asset of Rs 135.49 million
(2019: Rs 113.34 million) in respect of business losses of Rs 467.20 million (2019: Rs 390.83
million) as sufficient taxable profits may not be available to set off these losses. Included in these
business losses is an amount of Rs 327.43 million (2019: Rs 308.88 million) which is set to expire
in years 2023 to 2027.
2020 2019
Note Rupees Rupees
8. Deferred liabilities
Retirement and other benefits 8.1 129,922,003 129,335,903

Deferred income 8.2 4,308,457 4,787,174

134,230,460 134,123,077

71
2020 2019
Note Rupees Rupees
8.1 Retirement and other benefits

Staff gratuity 8.1.1 114,561,553 114,858,662
Accumulating compensated absences 8.1.2 15,360,450 14,477,241

129,922,003 129,335,903

8.1.1 Staff gratuity

The movement in the present value of defined
benefit obligation is as follows:
Present value of defined benefit obligation at
the start of the year 114,858,662 99,432,792
Charge to statement of profit or loss
- Current service cost 14,861,489 13,645,736
- Past service cost 1,241,613 7,353,155
- Interest cost 12,968,424 9,178,946

29,071,526 30,177,837

Benefits due but not paid (4,992,083) (972,062)
Benefits paid (19,713,675) (14,286,423)
Remeasurements recorded in other

comprehensive income
- Actuarial gains from changes in financial assumptions (288,471) 243,327
- Experience adjustments (4,374,406) 263,191

(4,662,877) 506,518
Present value of defined benefit obligation at
the end of the year 114,561,553 114,858,662

Year end sensitivity analysis on present value of defined benefit obligation:

Discount rate + 100 bps 105,824,841 106,381,775
Discount rate - 100 bps 124,800,539 124,777,023
Increase in salary level + 100 bps 124,810,775 124,814,457
Increase in salary level - 100 bps 105,669,586 106,209,258
The Company faces the following risks on account of staff gratuity scheme:

- Final Salary Risk (linked to inflation risk) – the risk that the final salary at the time of
cessation of service is greater than what we assumed. Since the benefit is calculated on the
final salary (which will closely reflect inflation and other macroeconomic factors), the benefit
amount increases as salary increases.

- Mortality Risk - The risk that the actual mortality experience is different than the assumed
mortality. This effect is more pronounced in schemes where the age and service distribution
is on the higher side.

- Withdrawal Risk - The risk of actual withdrawals experience is different from assumed
withdrawal probability. The significance of the withdrawal risk varies with the age, service
and the entitled benefits of the beneficiary.

72
2020 2019
Note Rupees Rupees
8.1.2 Accumulating compensated absences

Opening liability 14,477,240 11,833,347
Transferred from current liability - 1,745,755
Charged to profit and loss 5,109,578 5,312,640
Payments made during the year (3,738,999) (4,414,502)
15,847,819 14,477,240
Current portion shown under current liability (487,370) -
Liability as at year end 15,360,449 14,477,240

8.2 Deferred income

These represent assets donated to the Company, recognized and amortized in accordance
with the Company’s policy. The movement in the deferred income during the year is as
follows:

2020 2019
Note Rupees Rupees

Opening balance 4,787,174 5,319,082
Amortization during the year (478,717) (531,908)

Closing balance 4,308,457 4,787,174
9. Finances under mark up arrangements - secured

Finances under mark up arrangements - secured 9.1 560,615,531 655,331,857
560,615,531 655,331,857

9.1 Short term running finances available from commercial banks under mark-up arrangements
amount to Rs 717.296 million (2019: Rs 706.681 million), out of which the amount Rs
617.244 million (2019: Rs 655.33 million) has been availed at September 30, 2020.
The rate of mark-up range from 3 month KIBOR plus 0.5% to 1.25% margin and 1 month
KIBOR plus 1% to 2.5% margin and is payable quarterly. The effective rate charged during
the year ranges from 7.32% to 13.81% per annum (2019: 8.82% to 16.30% per annum)
on the balance outstanding.

9.1.1 Of the aggregate facility of Rs 140 million (2019: Rs 120 million) for opening letter of credits
and Rs 32 million (2019: Rs 32 million) for guarantees, the amount utilized at September
30, 2020 was Rs 99.042 million (2019: Rs 77.82 million) and Rs 17.20 million (2019: Rs
17.20 million) respectively.

9.1.2 The aggregate short term facilities are secured by a hypothecation of stores and spares, stock
in trade, trade debts and a charge on the present and future fixed assets of the company.
73
2020 2019
Note Rupees Rupees
10. Creditors, accrued and other liabilities

Trade creditors 224,476,427 134,626,691
Accrued liabilities 68,743,611 41,615,606
Contract liabilities 10.1 32,342,036 17,293,775
Interest free deposits repayable on demand 135,000 135,000
Workers’ welfare fund 3,323,809 3,323,809
Provision for duties payables 15,955,313 15,955,313
Withholding tax payable 4,325,671 2,108,680
Refund liabilities 10.2 49,428,413 38,923,500
Others 1,076,006 1,342,003

399,806,286 255,324,377
10.1 This represents amount received in advance from customers against sales made subsequent
to year end. Revenue recognized during the year that was included in contract liabilities
balance at the beginning of the year amounts to Rs 17.29 million (2019: Rs 25.53 million).
2020 2019
Note Rupees Rupees

10.2 Refund liabilities

Liability relating to sales returns 10.2.1 40,000,000 30,000,000
Liability relating to trade promotions
and incentives 10.2.2 9,428,413 8,923,500

49,428,413 38,923,500

10.2.1 Liability relating to sales returns

Opening balance 30,000,000 26,931,515
Add: Provision for sales returns 22 64,221,249 96,045,286
Less: Actual sales returns (54,221,249) (92,976,801)

Closing balance 40,000,000 30,000,000

10.2.2 Liability relating to trade promotions and incentives

Opening balance 8,923,500 25,321,793
Add: Provision for trade promotions and incentives 22 68,809,273 76,345,514
Less: Claim and incentives given (68,304,360) (92,743,807)

Closing balance 9,428,413 8,923,500
11. Loan from shareholders - unsecured

Loan from shareholders - Interest free 11.1 150,000,000 150,000,000
Loan from shareholders - Interest bearing 11.2 50,000,000 -

200,000,000 150,000,000
74
11.1 This represents loan amounting to Rs 75.00 million borrowed from Mr. S.M. Mohsin and
Mr. Mehdi Mohsin each to meet working capital needs of the Company. During the year, the
loans were transferred in the name of Syeda Maimant Mohsin and Syeda Matanat Mohsin
on August 14, 2020 and September 1, 2020 respectively. The loans are interest free and
repayable on demand.

11.2 This represents loan received from Syeda Maimanat Mohsin, a shareholder of the Company
(19.85%), for the purpose of meeting working capital requirements. The loan bears markup
at 9 % per annum payable quarterly and is repayable on demand. The loan agreement was
approved by the Board of the Company in their meeting held on September 22, 2020.
12. Contingencies and commitments
12.1 Contingencies
Letter of guarantee in favor of Sui Northern Gas Pipelines Limited on account of payment
of dues against gas consumption amounting to Rs 17.2 million (2019: Rs 17.2 million).

The Company has issued post dated cheques amounting to Rs 182.30 million (2019: Rs 182.30
million) to Collector of Customs Lahore Dry Port on account of taxable duty which might
become payable against Duty and Tax Remission on Export under SRO # 450 (I)/2001
dated June 30, 2001 under Customs Rules 2001.
Description of legal proceedings

(i) The Deputy Commissioner Inland Revenue (‘DCIR’) has issued various orders relating to
tax year 2007, 2008, 2010, 2011, 2012, 2013, 2014 and 2015 and raised demands,
including default surcharge aggregating to Rs 38.61 million against the Company under
sections 161 of Income Tax Ordinance 2001 (‘ITO 2001’) on account of non-withholding
of taxes while making certain payments . Being aggrieved the Company filed appeals in the
Appellate Tribunal Inland Revenue (‘ATIR’) which are pending adjudication. Based on legal
advisor’s opinion, the Company’s management expects a favorable outcome due to which
no provision has been recorded in these financial statements.

(ii) The Additional Commissioner Inland Revenue (‘AdCIR’) under section 122 of ITO 2001 vide
order dated May 28, 2013 in respect of tax year 2011, raised a demand of Rs 27.62 million
on account of disallowance of certain expenditures and adjustment of minimum tax of prior
years. The Company paid the said demand under protest and preferred an appeal before
the Commissioner Inland Revenue (Appeals) which was partially decided in Company’s
favour resulting in a refund of Rs 18.93 million vide order dated September 5, 2013. The
Company contested the decision of the Commissioner Inland Revenue (Appeals) and filed an
appeal before the Appellate Tribunal Inland Revenue (‘ATIR’) on September 09, 2013 which
was decided against the Company vide order dated March 18, 2020. Being aggreived, the
Company filed an appeal in Lahore High Court which is pending adjudication. Based on
legal advisor’s opinion, the Company’s management expects a favorable outcome due to
which no provision has been recorded in these financial statements.

(iii) The Additional Commissioner Inland Revenue (‘AdCIR’) under section 122 of ITO 2001 vide
order dated March 28, 2014 in respect of tax year 2013, raised a demand of Rs 39.47
million on account of disallowance of certain expenditures under section 21 (l) and 21 (m) of
Income Tax Ordinance 2001. The Company preferred an appeal before the Commissioner
Inland Revenue (Appeals) which was partially decided in favor of the Company vide order
dated July 14, 2014 resulting in reduction of demand to Rs 8.57 million. Being aggrieved, the
Company filed an appeal before Appellate Tribunal Inland Revenue (‘ATIR’) on August 18, 2014
for the remaining grounds relating to proration of expenses in respect of export sales which
is pending adjudication. Based on legal advisor’s opinion, the Company’s management
75
expects a favorable outcome due to which no provision has been recorded in these financial
statements.

(iv) The Deputy Commissioner Inland Revenue (‘DCIR’) raised a demand of Rs 8.03 million on
account of short sales tax withheld as withholding agent, excess input claimed and short
output tax declaration vide order dated June 30, 2014. The Company filed an appeal
before Commissioner Inland Revenue (Appeals) which was partially decided in favour of the
Company vide order dated September 11, 2015 resulting in reduction of demand by Rs
4.17 million. Being aggrieved the Company has filed an appeal before Appellate Tribunal
Inland Revenue (‘ATIR’) which is pending adjudication. Based on legal advisor’s opinion, the
Company’s management expects a favorable outcome due to which no provision has been
recorded in these financial statements.

(v) The Deputy Commissioner Inland Revenue (‘DCIR’) raised a demand of Rs 16.47 million
along with a penalty of Rs 16.37 million on account of input tax claimed on invoices issued
by blacklisted vendors, inadmissible input tax claimed and non payment of further tax vide
order dated July 30, 2019. The Company filed an appeal before Commissioner Inland
Revenue (Appeals) which was partially decided in favor of the Company vide order dated
November 11, 2019 resulting in reduction of demand to Rs 2.03 million with the penalty
being recalculated at the time of the appeal effect. Being aggrieved the Company has filed
an appeal before Appellate Tribunal Inland Revenue (‘ATIR’) which is pending adjudication.
Based on legal advisor’s opinion, the Company’s management expects a favorable outcome
due to which no provision has been recorded in these financial statements.

12.2 Commitments

(i) Letters of credit for purchase of raw and packing materials Rs 85.45 million (2019: Rs 13.34
million).

(ii) The Company has entered into operating lease agreements, including Ijara financing
agreement with Bank Al Habib Limited in order to obtain vehicles for employees. The amount
of future payments under this lease and the period in which these payments will become due
are as follows:

2020 2019
Note Rupees Rupees

Not later than one year 8,181,866 15,697,342
Later than one year and not later than five years 5,873,982 24,095,827
Later than five years - 1,005,000

14,055,848 40,798,169

13. Property, plant and equipment

Operating fixed assets 13.1 572,288,167 595,452,993
Capital work-in-progress 13.2 557,035 -

572,845,202 595,452,993
76
13.1 Reconciliation of the carrying amounts at the beginning and end of the year is as follows:
Operating Fixed Assets
Buildings Leasehold Plant and Furniture Electric Computer
Freehold on freehold improve- machinery Vehicles and installations hardware Total
land land ments fittings
-------------------------------------------------------- (Rupees) -------------------------------------------------------
Net carrying value basis
At 30 September 2020
Opening net book value 15,547 93,647,326 2,187,783 480,681,648 4,024,077 2,022,966 9,008,796 3,864,850 595,452,993
Additions - - - 16,014,315 3,855,670 - 507,825 301,143 20,678,953

Disposals
Cost - - - - (209,755) (28,500) (829,040) (476,245) (1,543,540)
Accumulated depreciation - - - - 53,044 25,621 272,796 233,218 584,679

- - - - (156,711) (2,879) (556,244) (243,027) (958,861)
Depreciation charge - (9,364,732) (437,557) (29,048,530) (991,729) (404,149) (1,871,033) (767,188) (42,884,918)

Closing net book value 15,547 84,282,594 1,750,226 467,647,433 6,731,307 1,615,938 7,089,344 3,155,778 572,288,167

Gross Carrying Value basis
Cost 15,547 195,722,525 8,410,476 994,390,710 12,191,978 7,816,430 57,452,625 12,978,353 1,288,978,644
Accumulated depreciation - (111,439,931) (6,660,250) (526,743,277) (5,460,671) (6,200,492) (50,363,281) (9,822,575) (716,690,477)

Net Book Value 15,547 84,282,594 1,750,226 467,647,433 6,731,307 1,615,938 7,089,344 3,155,778 572,288,167

Operating Fixed Assets
Buildings Leasehold Plant and Furniture Electric Computer
Freehold on freehold improve- machinery Vehicles and installations hardware Total
land land ments fittings
-------------------------------------------------------- (Rupees) -------------------------------------------------------
Net carrying value basis
Opening net book value 15,547 104,052,584 2,734,729 504,966,224 12,135,473 2,769,177 11,475,750 4,704,316 642,853,800
Additions - - - 7,289,477 664,375 - 508,932 140,530 8,603,314

Disposals
Cost - - - (863,291) (12,826,594) (392,286) (1,195,983) (310,410) (15,588,564)
Accumulated depreciation - - - 275,335 5,798,743 157,095 627,635 290,796 7,149,604

- - - (587,956) (7,027,851) (235,191) (568,348) (19,614) (8,438,960)
Depreciation charge - (10,405,258) (546,946) (30,986,097) (1,747,920) (511,020) (2,407,538) (960,382) (47,565,161)

Closing net book value 15,547 93,647,326 2,187,783 480,681,648 4,024,077 2,022,966 9,008,796 3,864,850 595,452,993

Gross Carrying Value basis


Cost 15,547 195,722,525 8,410,476 978,376,395 8,546,063 7,844,930 57,773,840 13,153,455 1,269,843,231
Accumulated depreciation - (102,075,199) (6,222,693) (497,694,747) (4,521,986) (5,821,964) (48,765,044) (9,288,605) (674,390,238)

Net Book Value 15,547 93,647,326 2,187,783 480,681,648 4,024,077 2,022,966 9,008,796 3,864,850 595,452,993

13.1.1 Immovable properties of the company are situated at manufacturing facility in Renala Khurd,
Okara, Pakistan. Freehold land represents 46.762 acres of land of which approximately
7.381 acres represents covered area .

13.1.2 The cost of fully depreciated assets which are still in use as at September 30, 2020 is Rs 23.217
million (2019: Rs 23.217 million).
13.1.3 The depreciation charge for the year has been allocated as follows:
2020 2019
Note Rupees Rupees
Cost of sales 23 38,701,910 41,680,003

Administration expenses 24 2,910,482 3,718,136
Distribution and marketing expenses 25 1,272,527 2,167,022

42,884,919 47,565,161
77
13.1.4 Disposal of operating fixed assets
Detail of operating fixed assets sold during the year is as follows:

2020
Accumulated Book Sale Gain/ (Loss) Mode of

Particulars of assets Sold to/Transferred to Cost depreciation value proceeds on sale disposals
Assets with book value greater
than Rs 0.50 million None - - - - - -
Other assets with book value

less than Rs 0.50 million Various 1,543,540 584,678 958,862 350,102 (608,760) Various

1,543,540 584,678 958,862 350,102 (608,760)
Detail of operating fixed assets sold during the year is as follows:

2019
Accumulated Book Sale Gain/ (Loss) Mode of

Particulars of assets Sold to/Transferred to Cost depreciation value proceeds on sale disposals
Assets with book value greater

than Rs 0.50 million
Vehicles
Mercedes Benz E 250 Mr. Rana Ahsan (third party) 9,958,644 4,455,158 5,503,486 5,095,000 (408,486) Highest bidder
Toyota Corrolla 1.6 Altis Third party 2,040,860 763,886 1,276,974 1,052,439 (224,535) Highest bidder

Other assets with book value
less than Rs 0.50 million Various 3,589,060 1,930,560 1,658,500 2,701,448 1,042,948 Various
15,588,564 7,149,604 8,438,960 8,848,887 409,927

2020 2019
Rupees Rupees

13.2 Capital work-in-progress

Civil works 398,000 -
Plant and machinery 159,035 -

557,035 -

78
2020 2019
Note Rupees Rupees
14. Intangible Assets

Opening net book value 4,263,957 2,379,947
Additions at cost - 2,400,000
Amortization charge 14.1 (420,124) (515,990)

Closing net book value 3,843,833 4,263,957

Gross carrying value basis

Cost 11,614,750 11,614,750
Accumulated amortization (7,770,917) (7,350,793)

Net book value 3,843,833 4,263,957

Amortization rate % per annum 20 20

14.1 The amortization charge for the year has been
allocated as follows:

Cost of sales 23 17,812 22,265
Administration expenses 24 274,143 293,513
Distribution and marketing expenses 25 128,169 200,212

420,124 515,990
15. Biological assets

Livestock 30,129,999 29,894,000
Trees 1,824,124 2,491,667

31,954,123 32,385,667
15.1 Reconciliation of carrying amounts of biological assets

Livestock Trees Livestock Trees
2020 2020 2019 2019
Rupees Rupees Rupees Rupees

Carrying amount at the beginning of the year 29,894,000 2,491,667 36,290,000 2,641,667

Increase due to purchases - - - -

Changes in fair value (price change, exchange
fluctuations and biological transformation) 4,343,616 (528,334) 414,000 (125,000)

Less: Decrease due to deaths & sale (4,107,617) (139,209) (6,810,000) (25,000)
Carrying amount at the end of the year
which approximates the fair value 30,129,999 1,824,124 29,894,000 2,491,667
15.2 As on September 30, 2020 the Company held 142 animals (2019: 144 animals) including
cows, calves and horses and estimates to beneficially own 828 (2019: 877 trees) of various
kinds including jamboline, kachnar, ceruse, amla, spikenard, borh and sheesham etc.

79
15.3 The valuation of dairy livestock as at September 30, 2020 has been carried out by an
independent valuer. In this regard, the valuer examined the physical condition of the
livestock, assessed the key assumptions and estimates and relied on the representations
made by the Company as at September 30, 2020. Further, in the absence of an active
market of the Company’s dairy livestock in Pakistan, market and replacement values of
similar live stock from active markets in Australia, have been used as basis of valuation
model by the independent valuer. The cost of transportation to Pakistan is also considered.
The milking animals have been classified according to their lactations. As the number of
lactations increase, the fair value keeps on decreasing.

16. Long term receivables
This represents long term security deposits in the normal course of business and are interest free.

2020 2019
Note Rupees Rupees
17. Stores, spares and loose tools

General stores 17.1 10,940,999 26,745,594
Engineering stores 26,401,810 26,735,990

37,342,809 53,481,584

17.1 Included in general store is stock held by third parties amounting to Nil (2019:Rs 10.65
million).
17.2 Stores and spares include items which may result in fixed capital expenditure but are not
distinguishable.

2020 2019
Note Rupees Rupees
18. Stock in trade

Raw materials 21,175,742 24,600,416
Packing materials [including in transit : NIL 111,007,278 112,385,661
(2019: Rs 13.34 million)]
Work in process 93,033,860 62,982,864
Finished goods 128,089,330 90,414,945

353,306,210 290,383,886
Less: Provision for obsolete items - Raw material 18.1 (17,887,514) (13,109,841)

335,418,696 277,274,045

18.1 The movement in provision for obsolete items during the year is as follows:
2020 2019
Note Rupees Rupees
Balance as at October 1 13,109,841 7,737,905

Provision for the year 4,777,673 5,371,936

Balance as at September 30 17,887,514 13,109,841

80
2020 2019
Note Rupees Rupees
19. Trade debts

Considered good 138,824,036 132,933,635
Considered doubtful 14,262,337 13,797,646

19.1 153,086,373 146,731,281
Less: Loss allowance 19.2 (14,262,337) (13,797,646)

138,824,036 132,933,635
19.1 These include trade debts related to export sales of Rs 8.54 million (2019: Rs 30.53 million).
2020 2019
Note Rupees Rupees
19.2 Loss allowance

Balance as at beginning of the year 13,797,646 11,262,793
Impairment loss on financial asset 464,691 2,534,853

Balance as at end of the year 14,262,337 13,797,646

20. Advances, deposits, prepayments and other receivables

Advances - considered good
- To employees 2,444,571 2,236,424
- To suppliers 9,100,497 11,670,257
Prepayments 4,807,546 4,874,084
Letters of credit - margins, deposits, opening charges, etc. 6,634,320 -
Claims recoverable from the government
- considered good
- Sales tax 35,344,595 38,283,973
- Custom duty and surcharge 8,204,642 8,204,642

43,549,237 46,488,615
Due from related parties - Considered good - -
Other receivables - Considered good 342,230 2,708,507

66,878,401 67,977,887

21. Cash and bank balances

Bank balances
- Balances at banks on current accounts 33,388,053 16,783,153
- Special account related to dividend payable 2,004,183 2,004,183

35,392,236 18,787,336
Cash in hand - -

35,392,236 18,787,336
81
2020 2019
Note Rupees Rupees
22. Sales

Gross sales - Local 22.1 & 22.2 2,143,202,948 2,080,046,322

Less: Sales returns 10.2.1 64,221,249 96,045,286
Rebates 245,746,344 218,928,945
Trade promotion and incentives 10.2.2 68,809,273 76,345,514

378,776,866 391,319,745
Net sales - Local 1,764,426,082 1,688,726,577
- Export sales 348,066,494 298,825,518

2,112,492,576 1,987,552,095

22.1 These are exclusive of sales tax of Rs 361.81 million (2019: Rs 293.05 million).

22.2 These include milk sales of Rs 24.03 million (2019: Rs 26.46 million).
2020 2019
Note Rupees Rupees
23. Cost of sales
Raw and packing material consumed 1,342,060,516 1,059,841,617

Salaries, wages and other benefits 23.2 166,443,401 153,432,855
Furnace oil consumed 25,497,533 15,656,883
Freight and octroi 791,677 229,994
Travelling and vehicle running 4,319,148 5,175,491
Repairs and maintenance 29,838,969 26,561,507
Power, water and gas 55,773,495 43,852,252
Insurance 4,213,587 5,370,942
Rent, rates and taxes 3,045,068 2,920,653
Depreciation on property, plant and equipment 13.1.3 38,701,910 41,680,003
Dairy expenses 30,107,417 34,086,481
Amortization of intangible assets 14.1 17,812 22,265
Other expenses 23.1 36,984,612 16,200,301

1,737,795,145 1,405,031,244
Opening work-in-process 62,982,864 101,006,250

Closing work-in-process (93,033,860) (62,982,864)

(30,050,996) 38,023,386

Cost of goods manufactured 1,707,744,149 1,443,054,630
Opening finished goods 90,414,945 200,499,314

Closing finished goods (128,089,330) (90,414,945)

(37,674,385) 110,084,369

1,670,069,764 1,553,138,999

23.1 This includes Federal Excise Duty amounting to Rs 17.04 million (2019: Rs Nil).

82
2020 2019
Note Rupees Rupees
23.2 Salaries, wages and other benefits include

the following:

Gratuity
- Service cost 5,874,763 11,280,309
- Interest cost for the year 5,593,767 4,930,801
11,468,530 16,211,110
Accumulated compensated absences 3,020,135 3,140,160
14,488,665 19,351,270

24. Administrative expenses
Entertainment 778,474 719,889
Repairs and maintenance 2,069,184 1,520,799
Insurance 433,325 519,974
Power, water and gas 4,006,195 4,006,055
Printing and stationery 1,470,371 1,174,914
Postage and telephone expenses 2,523,990 2,543,622
Professional services 24.1 & 24.4 28,309,568 17,036,479
Other expenses 4,133,483 2,747,129

150,668,678 135,252,097
24.1 These include fines and penalties amounting to Rs 0.151 million (2019: Rs 0.165 million)
charged by Punjab Food Authority.
24.2 Salaries, wages and other benefits include the following:
2020 2019
Note Rupees Rupees
Gratuity
- Service cost 6,455,911 5,032,599

10,238,579 7,232,427
Accumulated compensated absences 725,107 778,392

10,963,686 8,010,819
83
2020 2019
24.3 Number of employees
Total number of employees at the end of the year 253 279

Average number of employees during the year 266 296

24.4 Professional services

The charges for professional services include the following in respect of auditors’ services
for:
2020 2019
Note Rupees Rupees

Statutory audit 1,573,000 1,430,000
Half yearly review 775,000 700,000
Certifications and sundry services 1,043,250 357,500
Out of pocket expenses 261,410 237,645
3,652,660 2,725,145

25. Distribution and marketing expenses

Entertainment 606,844 937,725
Freight expenses
- Local 63,769,282 63,162,688
- Export 15,114,151 13,200,039

78,883,433 76,362,727

Advertisement 12,995,746 21,706,455
Distributors expenses 41,314,779 38,991,927
Trade promotion expenses 6,856,603 4,556,114
Repairs and maintenance 90,535 193,016
Insurance 429,821 356,343
Power, water and gas 442,644 510,851
Printing and stationery 244,587 322,834
Postage and telephone 1,989,644 2,199,264
Loss allowance 19.2 464,691 2,534,853
Other expenses 16,487,615 18,423,928

253,637,474 282,634,196

84
25.1 Salaries, wages and other benefits include the following:
2020 2019
Note Rupees Rupees
Gratuity
- Service cost 3,772,428 4,685,983

7,364,417 6,734,300
Accumulated compensated absences 1,364,336 1,394,088

8,728,753 8,128,388

26. Other operating expenses

Loss on revaluation of trees 528,334 125,000
Loss on disposal of biological assets 1,973,826 4,719,000
Loss on sale of fixed assets 608,758 -

Donations:
Related party - AKRA 26.1 - 250,000
Others 151,600 247,413

151,600 497,413

3,262,518 5,341,413
26.1 Mr. S.M.Mohsin, Director of the Company is a member of Anjuman Khudam e Rasool Allah
(AKRA).
2020 2019
Rupees Rupees
27. Other income

Income from financial assets
Exchange gain 1,402,046 3,906,700

Income from non financial assets
Profit on revaluation of live stock 3,023,616 414,000
Profit on sale of fixed assets - 409,927
Scrap sales 3,949,540 4,827,946
Rental income 2,457,575 2,454,693

9,430,731 8,106,566
Others
Amortization of deferred income 478,717 531,908
Others 850,526 3,046,901

1,329,243 3,578,809

12,162,020 15,592,075

85
2020 2019
Note Rupees Rupees
28. Finance cost

Mark-up on
- Finances under mark up arrangements -secured 68,966,699 72,562,896
- Loan from shareholders - unsecured 36,986 815,112
Bank and other charges 5,268,670 4,922,341

74,272,355 78,300,349

29. Provision for taxation

Current tax
- Current 29,541,476 31,480,269
- Prior years - -

29,541,476 31,480,269
Deferred tax (1,352,234) (2,997,640)

28,189,242 28,482,629

29.1 The provision for current taxation represents tax under final tax regime and minimum tax on
turnover under section 113 of the Income Tax Ordinance, 2001. Minimum tax under section
113 is available for set off for five years against normal tax liability arising in future years,
whereas tax under final tax regime is not available for set off against normal tax liability
arising in future years.

29.2 Tax charge reconciliation
2020 2019
% %
Numerical reconciliation between the average
effective tax rate and the applicable tax rate.
Applicable tax rate 29.00 29.00
Unrecognized losses and tax credits (125.50) (70.82)

Tax effect under presumptive tax regime and others (12.59) (16.68)
Tax credits 6.06 1.51
Tax effects of amounts that are exempt / inadmissible (0.39) 2.77
Change in tax rates - (1.06)
(132.42) (84.28)
Average effective tax rate charged to statement

of profit or loss (103.42) (55.28)
86
30. Transactions with related parties

The related parties comprise of associated undertakings, directors and key management
personnel. The company in the normal course of business carries out transactions with various
related parties. Amounts due from and to related parties are shown under receivables in note 20,
loan from shareholders in note 11 and payables in note 10 respectively. Remuneration of the key
management personnel is disclosed in note 31. Other significant transactions with related parties
are as follows:

Relationship Name and Percentage Transactions 2020 2019
with the of Shareholding of during the year Rupees Rupees
company Related Party

i. Director Syed Mohammad Mehdi Mohsin Purchase of goods 4,363,402 9,632,799
(Shareholding: 60.14%) Rent paid 3,166,541 3,014,161
Expenses incurred
on their behalf 1,983,910 4,256,248

ii. Spouse of Syeda Maimanat Mohsin Purchase of goods 1,092,840 1,350,906
director (Shareholding: 19.85%) Obtained loan 50,000,000 -

iii. Associated
undertaking AKRA Donation paid - 250,000

All transactions with related parties have been carried out on mutually agreed terms and conditions.
The related parties with whom the Company had entered into transactions or had arrangements/
agreements in place during the year have been disclosed above along with their basis of
relationship.

31. Remuneration of Chief Executive, Directors and Executives

The aggregate amount charged in the financial statements for the year for remuneration, including
certain benefits, to the Chief Executive, directors and executives of the Company is as follows:
Chief Executive Directors Executive

2020 2019 2020 2019 2020 2019
Non Non
Executive Executive Executive Executive
Directors Directors Directors Directors
Rupees
Managerial remuneration 10,108,064 8,833,587 - - - - 28,348,214 33,819,121
Retirement benefits 1,583,333 2,617,764 - - - - 5,034,058 8,947,530
House rent allowance 3,133,871 2,598,134 - - - - 12,756,696 15,218,604
Utilities 103,226 308,793 376,282 62,982 343,135 143,833 2,834,829 3,381,912
Car allowance - - - - - - 537,209 330,000
Club expenses 23,731 38,960 60,014 - 65,210 12,265 - -
Bonus - - - - - - - -
Meeting fee - - 980,116 - 500,000 - - -

14,952,225 14,397,238 1,416,412 62,982 908,345 156,098 49,511,006 61,697,167

Number of persons 1 1 8 2 8 2 13 17

The Company also provides the Chief Executive, directors and certain employees with free use of
Company maintained cars.

The Chief Executive and employees are entitled to reimbursement of medical expenses up to an
amount equal to three basic salaries.

87
32. Capacity and production

The capacity of the plant is not determinable as it is a multi product plant capable of producing
several interchangeable products.
2020 2019

Actual production:
Groceries - in cartons 1,328,394 1,319,196
Confectioneries - in cartons 241,246 258,166
Milk - in liters 413,307 415,589
2020 2019
Note Rupees Rupees
33. Cash generated from operations

Loss before tax (27,256,193) (51,522,884)
Adjustments for:
Provision for retirement benefits 8.1.1 29,071,526 30,177,837
Provision for leave absences 8.1.2 5,109,578 4,966,321
Amortization of deferred income 8.2 (478,717) (531,908)
Depreciation on operating fixed assets 13.1 42,884,918 47,565,161
Amortization on intangibles 14 420,124 515,990
Provision for obsolete stocks 18.2 4,777,673 5,371,936
Provision for sale returns 22 64,221,249 96,045,286
Provision for trade promotions and incentives 22 68,809,273 76,345,514
Loss allowance 25 464,691 2,534,853
(Profit) / loss on revaluation and sale of
biological assets 26 & 27 (1,841,456) 4,430,000
Loss/ (profit) on sale of property, plant
and equipment 27 608,758 (409,927)
Exchange gain 27 (1,402,046) (3,906,700)
Finance cost 28 74,272,355 78,300,349

Profit before working capital changes 259,661,733 289,881,828

Effect on cash flow due to working capital changes
- Decrease / (increase) in stores, spares and loose tools 20,556,673 (20,107,412)
- Increase in stock in trade (62,922,324) 178,970,881
- Increase in trade debts (4,953,046) (18,077,805)
- Decrease / (increase) in advances, deposits,
prepayments and other receivables 1,099,486 (710,618)
- Increase in creditors, accrued and other liabilities 5,971,934 (268,899,524)

(40,247,277) (128,824,478)

Cash generated from operations 219,414,456 161,057,350
88
34. Reconciliation of movement of liabilities to cash flows arising from financing activities
Loan from Loan from Total

shareholders shareholders
(Interest free) (Interest
bearing)
Rupees Rupees Rupees

Balance as at October 01, 2019 150,000,000 - 150,000,000
Financing obtained - 50,000,000 50,000,000
Repayments during the year - - -

Balance as at September 30, 2020 150,000,000 50,000,000 200,000,000
2020 2019
Note Rupees Rupees
35. Cash and cash equivalents

Cash and bank balances 21 35,392,236 18,787,336
Short term running finances-secured 9 (560,615,531) (655,331,857)

(525,223,295) (636,544,521)
36. Loss per share

36.1 Basic loss per share

Net loss for the year Rupees (55,445,435) (80,005,513)
Weighted average number of ordinary shares Number 7,875,000 7,875,000
Basic loss per share Rupees (7.04) (10.16)

36.2 Diluted loss per share

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

37. Financial risk management

37.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including
currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The
Company’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the financial performance.

Risk management is carried out by the Board of Directors (the Board). The Board provides
principles for overall risk management, as well as policies covering specific areas such as
foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. All
treasury related transactions are carried out within the parameters of these policies.

(a) Market risk

(i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from
future commercial transactions or receivables and payables that exist due to transactions in
foreign currencies.

89
The Company is exposed to currency risk arising from various currency exposures, primarily
with respect to the United States Dollar (USD). Currently, the Company’s foreign exchange
risk exposure is restricted to the amounts receivable/payable from/to the foreign entities. The
Company’s exposure to currency risk at the reporting date is as follows:

2020 2019

Trade debts - USD 51,500 195,509

The following significant exchange rates were applied during the year:

Rupees per USD

Average rate 160.96 140.15
Reporting date rate 165.71 156.20

If the functional currency, at reporting date, had fluctuated by 5% against the USD with all
other variables held constant, the impact on profit before taxation for the year would have
been Rs 0.43 million (2019: Rs 1.53 million) higher/lower, mainly as a result of exchange
gains/losses on translation of foreign exchange denominated financial instruments. Currency
risk sensitivity to foreign exchange movements has been calculated on a symmetric basis.

(ii) Other price risk

Other price risk represents the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than those arising from
interest rate risk or currency risk), whether those changes are caused by factors specific
to the individual financial instrument or its issuer, or factors affecting all similar financial
instruments traded in the market. The Company is not exposed to equity price risk since there
are no investments in equity securities. The Company is also not exposed to commodity price
risk since it has a diverse portfolio of commodity suppliers.

(iii) Interest rate risk

Interest rate risk represents the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates.

The Company has no significant long term interest bearing assets. The Company’s interest
rate risk arises from long term and short term borrowings. Borrowings obtained at variable
rates expose the Company to cash flow interest rate risk.

At the reporting date, the interest rate profile of the Company’s interest bearing financial
instruments was:

2020 2019
Rupees Rupees
Fixed rate instruments

Financial liabilities
Loan from shareholders - interest bearing (50,000,000) -

Net exposure (50,000,000) -

Floating rate instruments


Short term running finances (560,615,531) (655,331,857)

Net exposure (560,615,531) (655,331,857)

90
Fair value sensitivity analysis for fixed rate instruments

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

Cash flow sensitivity analysis for variable rate instruments

If interest rates on long term finances, at the reporting date, fluctuate by 1% higher/lower
with all other variables held constant, profit before taxation for the year would have been
Rs 5.61 million (2019: Rs 6.55 million ) lower/higher, mainly as a result of higher/lower
interest expense on floating rate borrowings.

(b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial
loss for the other party by failing to discharge an obligation. Credit risk arises from amounts
receivable from customers of the Company, deposits with banks and other receivables.

(i) Exposure to Credit risk
The management has a credit policy in place and exposure to credit risk is monitored on a
continuous basis. Credit evaluations are performed on all customers requiring credit over a
certain amount. The Company does not require collateral in respect of financial assets. Out
of total financial assets of Rs 246.80 million (2019: Rs 226.39 million) following are subject
to credit risk:

2020 2019
Rupees Rupees
Financial Assets

Trade debts 153,086,373 146,731,281
Loans, advances, deposits and other receivables 11,887,298 16,615,188
Bank balances 35,392,236 18,787,336
200,365,907 182,133,805

Impairment of financial Assets

The Company’s financial assets are subject to the expected credit losses model. While bank
balances, loans, advances, deposits and other receivables are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was immaterial.

Trade Debts

The Company applies the IFRS 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade debts.

To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. These trade receivables are netted
off with the collateral obtained from these customers to calculate the net exposure towards
these customers. The Company has concluded that the expected loss rates for trade debts
against local sales are different from the expected loss rates for trade debts against export
sales.

The expected loss rates are based on the payment profiles of sales over a period of 12 months
before September 30, 2020 and the corresponding historical credit losses experienced
within this period. The historical loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the
91
receivables. The Company has identified the Gross Domestic Product and the Consumer
Price Index of the country in which it majorly sells its goods and services to be the most
relevant factors, and accordingly adjusts the historical loss rates based on expected changes
in these factors.

On that basis, the loss allowance as at September 30, 2020 and September 30, 2019 was
determined as follows:
September 30, Expected Credit Trade Debts Loss

2020 Loss Rate Allowance

0 - 30 days 1.85% 128,305,525 2,369,032
31 - 60 days 2.29% 5,842,546 133,970
61 - 90 days 11.25% 1,624,401 182,810
91 - 120 days 29.00% 798,451 231,527
121 - 150 days 42.28% 753,390 318,518
151 - 180 days 51.65% 567,961 293,369
181 - 210 days 60.00% 528,044 316,800
211 - 240 days 69.29% 164,165 113,745
241 - 270 days 78.17% 182,952 143,010
271 - 300 days 85.28% 223,288 190,431
301 - 330 days 89.91% 345,589 310,712
331 - 360 days 95.13% 110,011 104,656
Above 360 days 100.00% 9,553,757 9,553,757
Total 149,000,080 14,262,337

September 30, Expected Credit Trade Debts Loss

2019 Loss Rate Allowance

0 - 30 days 0.73% 75,837,620 554,594
31 - 60 days 1.72% 4,612,028 79,138
61 - 90 days 8.60% 651,128 55,987
91 - 120 days 17.89% 1,935,127 346,227
121 - 150 days 24.20% 924,567 223,767
151 - 180 days 27.01% 395,988 106,937
181 - 210 days 27.61% 3,148,051 869,324
211 - 240 days 51.57% 212,866 109,767
241 - 270 days 58.59% 240,754 141,054
271 - 300 days 59.19% 74,654 44,188
301 - 330 days 73.43% 210,849 154,832
331 - 360 days 80.44% 1,421,058 1,143,103
Above 360 days 100.00% 9,968,728 9,968,728
Total 99,633,418 13,797,646

(ii) Credit quality of major financial assets

The credit quality of major financial assets that are neither past due nor impaired can be
assessed by reference to external credit ratings (if available) or to historical information
about counterparty default rate:
92
Rating Rating
Short term Long term Agency 2020 2019
(Rupees) (Rupees)

National Bank of Pakistan A-1+ AAA PACRA 2,124,000 685,773
MCB Bank Limited A1+ AAA PACRA 787,333 787,333
Habib Bank Limited A-1+ AAA JCR-VIS 10,217,029 16,907,895
Bank Al Habib A-1+ AA+ PACRA 884,611 406,335
Meezan Bank Limited A-1+ AA+ JCR-VIS 21,279,262 -
Faysal Bank Limited A-1+ AA PACRA 100,001 -
35,392,236 18,787,336

With respect to the Company’s other financial assets and due to its long standing business
relationships with these counterparties and after giving due consideration to their strong
financial standing, management does not expect non-performance by these counter parties
on their obligations to the Company. Accordingly, the credit risk is minimal.

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated
with financial liabilities.

The Company manages liquidity risk by maintaining sufficient cash and the availability of
funding through an adequate amount of committed credit facilities. At September 30, 2020,
the Company had Rs 777.29 million (2019: Rs 706.68 million) available borrowing limits
from financial institutions [unutilized: Rs 216.68 million (2019: Rs 51.35 million)] and Rs
35.39 million (2019: Rs 18.79 million) cash and bank balances.

The following are the contractual maturities of financial liabilities as at September 30, 2020:

Carrying Less than One to five More than
amount one year years five years
Rupees

Finances under markup
arrangements - secured 560,615,531 560,615,531 - -
Trade and other payables 367,464,250 367,464,250 - -
Accrued finance cost 9,653,040 9,653,040 - -
Loan from shareholders
- unsecured 200,000,000 200,000,000 - -
Unclaimed dividend 2,004,183 2,004,183 - -
1,139,737,004 1,139,737,004 - -
The following are the contractual maturities of financial liabilities as at September 30, 2019:

Carrying Less than One to five More than
amount one year years five years
Rupees

Long term finance - secured - - - -
Finances under markup
arrangements - secured 655,331,857 655,331,857 - -
Trade and other payables 238,030,602 238,030,602 - -
Accrued finance cost 20,265,694 20,265,694 - -
Loan from shareholders - unsecured 150,000,000 150,000,000 - -
Unclaimed dividend 2,004,183 2,004,183 - -

1,065,632,336 1,065,632,336 - -
93
37.2 Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. In estimating
the fair value of an asset or a liability, the Company takes into account the characteristics
of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. The different levels for fair value
estimation used by the Company have been explained as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

- Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

- Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).

The following table presents the Company’s non financial asset that are measured at fair
value at September 30, 2020:
Level 1 Level 2 Level 3 Total
Assets Rupees
Recurring fair value measurements
of biological assets
Livestock - 30,129,999 - 30,129,999

- 30,129,999 - 30,129,999

The following table presents the Company’s non financial asset that are measured at fair
value at September 30, 2019:
Level 1 Level 2 Level 3 Total
Assets Rupees
Recurring fair value measurements
of biological assets

Livestock - 29,894,000 - 29,894,000
- 29,894,000 - 29,894,000

There were no transfers between Levels 1 and 2 & Levels 2 and 3 during the period and there
were no changes in valuation techniques during the periods.

Valuation techniques used to measure level 2 assets

The fair value of these assets is determined by an independent professionally qualified valuer.
Latest valuation of these assets was carried out on September 30, 2020. Level 2 fair value of
biological assets has been determined using a replacement cost approach, whereby, current
cost of similar livestock in the international market has been adjusted for transportation costs
to arrive at fair value.

37.3 Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the financial statements
approximate their fair values. Fair value is determined on the basis of objective evidence at
each reporting date.
94
At amortized cost
2020 2019
Rupees Rupees
37.4 Financial instruments by categories
Financial Assets

Trade debts 153,086,373 146,731,281
Loans, advances, deposits and other receivables 55,436,535 63,103,803
Cash and bank balances 35,392,236 18,787,336

243,915,144 228,622,420


Finances under markup arrangements 560,615,531 655,331,857
Trade and other payables 396,482,477 252,000,568
Accrued finance cost 9,653,040 20,265,694
Loan from shareholders - unsecured 200,000,000 150,000,000
Unclaimed dividends 2,004,183 2,004,183

1,168,755,231 1,079,602,302
37.5 Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability
to continue as a going concern in order to provide returns for shareholders and benefits for
other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of
dividends paid to shareholders, return capital to shareholders through repurchase of shares,
issue new shares or sell assets to reduce debt. Consistent with others in the industry and
the requirements of the lenders, the Company monitors the capital structure on the basis of
gearing ratio.

This ratio is calculated as net debt divided by total capital. Net debt is calculated as total
borrowings including current and non-current borrowings, as disclosed in note 9. Total
capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.
The gearing ratio as at September 30, 2020 and September 30, 2019 is as follows:
2020 2019
Note Rupees Rupees
Loan from shareholders 11 200,000,000 150,000,000

Short term borrowings net of cash at
bank and in hand 35 525,223,295 636,544,521
Net debt 725,223,295 786,544,521

Total equity 74,309,777 126,444,569
Total capital 799,533,072 912,989,090

Gearing ratio Percentage 91% 86%

95
38. Date of authorization

These financial statements were authorized for issue on January 27, 2021 by the Board of Directors
of the Company.

39. Summary of significant events and transactions in the current reporting period

The pandemic COVID-19 that rapidly spread all across the world has not only endangered
human lives but has also adversely impacted the global economy. On March 23, 2020, the
Government of the Punjab, announced measures; temporary lockdown, temporary closure of
businesses, curtailment of intercity movements and cancellation of major events. These measures
were followed by other provinces as well. These measures have resulted in an overall economic
slowdown and disruptions to various businesses. The Government of Pakistan and State Bank of
Pakistan also announced several monetary and fiscal policy measures to mitigate the adverse
economic impacts of the COVID-19.

The lockdown caused disruptions in supply and distribution chain affecting the sales of the products
of the Company. In order to mitigate the effects of COVID-19, the management has adopted
several measures comprising of increase in prices of certain products and reduction in expenses.
The management has also assessed the accounting implications of these developments on these
financial statements, including but not limited to the following areas:

- expected credit losses under IFRS 9, ‘Financial Instruments’;
- the impairment of tangible and intangible assets under IAS 36, ‘Impairment of nonfinancial assets’;
- the net realisable value of inventory under IAS 2, ‘Inventories’;
- Provision for taxation in accordance with IAS 12, ‘Income taxes’
- provisions and contingent liabilities under IAS 37
- going concern assumption used for the preparation of these financial statements.

According to management’s assessment, there is no significant accounting impact of the effects of
COVID-19 in these financial statements.

40. Events after the date of statement of financial position

No significant events have occurred subsequent to September 30, 2020, other than those
mentioned elsewhere in these financial statements.

41. Corresponding figures

The corresponding figures have been rearranged and reclassified, wherever considered necessary.
However, no significant reclassifications have been made.

96
Proxy Form
88th Annual General Meeting
I/We
of
being a member of Mitchell’s Fruit Farms Limited, hereby appoint
(Name)
of
or failing him/her
(Name)
of
another member of the Company, as my/our proxy in my/our absence to attend and vote for me/us and
on my/our behalf at the 88th Annual General Meeting of the Company to be held on February 25, 2021
on Thursday at 11:00 a.m at the Registered Office of the Company located at 72-FFC, Gulberg IV,
Lahore.
Signed this day of 2021
Please affix
revenue
stamp
Please quote folio number Signature of Member
IMPORTANT:
This instrument, appointing a proxy, duly completed, must be received at the Registered Office of the
Company located at 72-FCC, Gulberg IV, Lahore not later than 48 hours before the scheduled time of
the meeting.
97
AFFIX
CORRECT
POSTAGE
The Company Secretary

72-FCC, Gulberg IV, Lahore.
98
Incorporated in 1933
Citrus fruit growers and makers of premium

quality squashes, syrups, fruit drinks & nectars,
jams, jellies, marmalade, tomato ketchup, sauces,
pickles, vinegars, canned foods, pastes & pulps, sugar
confectioneries, chocolates and sugar free products.
Factory & Farms:

Mitchell’s Fruit Farms Ltd.
Renala Khurd, District Okara, Pakistan.
P: (+92) (44) 2622908, 2635907-8
F: (+92) (44) 2621416
E: [email protected]
Head Office:
72-FCC Gulberg IV, Lahore.
P: (+92) (42) 2622908, 35872393-96
F: (+92) (42) 35872398
E: [email protected]
Mitchell’sFruitFarms
Mitchell’sChocolates&Sweets

Final Mitchells Report 2020

Uploaded by

Copyright:

Available Formats

Final Mitchells Report 2020

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Mitchells Report 2020

Uploaded by

Copyright:

Available Formats

Annual

Audit Committee Habib Bank Limited

Share Registrar REGIONAL SALES OFFICES

2. To be a company that continuously enhances its superior

3. To be a company that attracts and retains competent

4. To be a company which optimally combines its people,

5. To be a company that endeavours to set the highest

6. To be a company that fulfills its social responsibility.

2. To receive, consider and adopt the Annual

Lahore, Rashid Butt

1- Introduction required diversity and necessary mix of skill and

2. FINANCIAL POSITION AT A GLANCE

A brief financial analysis is presented as under:

Operating Results 2020 2019 Increase/Decrease

Turnover 2,112,492,576 1,987,552,095 6.29%

Net Sales Distribution of Revenue

2,112 3% 2% Raw Material Consumed

11% Distribution & Marketing

3. FINANCIAL RESULTS AND DEVELOPMENTS Adverse movement in commodity prices and

During the year, 5 meetings of the audit committee

Name of Director Designation Meetings

Mr. Rizwan Bashir Independent Director/Chairman 4

Leave of absence was granted to the directors who

16. HUMAN RESOURCE & REMUNERATION

Independent Directors 3 Name of Director Designation Meetings

Name of Director Designation Meetings Resigned During the Year

The transactions between the related parties are

21. LOSS PER SHARE

The present Auditors, Messrs. A.F. Ferguson & Co.,

Non-current Assets 614,348 44.50 638,792 47.55

Total Assets 1,380,619 100.00 1,343,494 100.00

Equity 74,310 5.38 126,445 9.41

Total equity and Liabilities 1,380,619 100.00 1,343,494 100.00

Profit and Loss Account

Gross Profit 442,423 20.94 434,413 21.86

38,117 1.80 16,527 0.83

47,016 2.23 26,777 1.35

(Loss)/Profit before tax (27,256) (1.29) (51,523) (2.59)

(Loss)/Profit for the year (55,445) (2.62) (80,006) (4.03)

696,294 46.63 703,414 44.96 681,248 48.14 709,345 51.85

1,493,309 100.00 1,564,574 100.00 1,415,000 100.00 1,368,016 100.00

209,300 14.02 501,489 32.05 540,922 38.23 572,587 41.86

1,493,309 100.00 1,564,574 100.00 1,415,000 100.00 1,368,016 100.00

1,628,007 100.00 1,894,406 100.00 1,679,461 100.00 1,696,332 100.00

252,888 15.53 449,103 23.71 393,082 23.41 403,704 23.80

(291,104) (17.88) 18,961 1.00 28,114 1.67 60,474 3.56

(268,174) (16.47) 31,076 1.64 45,014 2.68 74,342 4.38

(317,418) (19.50) (11,111) (0.59) 2,094 0.12 25,854 1.52

(292,619) (17.97) (30,883) (1.63) (12,108) (0.72) 27,069 1.60

2020 2019 2018 2017 2016 2015

Equity 74,310 126,445 209,299 501,489 540,922 572,587

Non-current Liabilities 134,230 134,123 119,730 161,444 149,020 264,386

Gross Profit 442,423 434,413 252,890 449,103 393,082 403,704

38,117 16,527 (291,103) 18,961 28,114 60,474

47,017 26,778 (268,174) 31,076 45,013 74,342

(3.83) (8.26) (1.01) 3.25 (3.96) 1.57

(41.23) (39.59) (58.26) (7.29) (5.53) (1.09)

0.08 12.02 (25.84) 8.34 (43.64) (13.70)

2.76 (10.03) (4.55) 10.57 3.43 (2.39)