FectoCement 2010 PDF

FECTO CEMENT LIMITED ANNUAL REPORT 2010
CONTENTS
Corporate Information 2
Mission Statement, Vision Statement and Corporate Strategy 3
Notice of Meeting 4
Directors' Report 5
Pattern of Shareholding 9
Key operating and Financial Data 11
Statement of Compliance with the Code of Corporate Governance 12
Auditors' Report on Statement of Compliance with Best Practices

of Code of Corporate Governance 14
Auditors' Report 15
Balance Sheet 16
Profit & Loss Account 18
Statement of Comprehensive Income 19
Cash Flow Statement 20
Statement of Changes in Equity 21
Notes to the Accounts 22
Form of Proxy
1
CORPORATE INFORMATION
BOARD OF DIRECTORS CHAIRMAN
Mr. Mohammed Asad Fecto
CHIEF EXECUTIVE
Mr. Mohammed Yasin Fecto
DIRECTORS
Mrs. Zubeda Bai

Mr. Ijaz Ali
Mr. Altaf A Hussain
Mr. Safdar Abbas Morawala
Mr. Aamir Ghani
Mr. Muhammad Anwar Habib
Mr. Muhammad Hussain { Nominee of Saudi Pak
Industrial & Agricultural Investment Co. (Pvt.) Ltd.}
AUDIT COMMITTEE Chairman: Mr. Mohammed Asad Fecto

Members: Mr. Muhammad Anwar Habib
Mr. Safdar Abbas Morawala
SECRETARY Mr. Abdul Samad, FCA
AUDITORS KPMG Taseer Hadi & Co.

Chartered Accountants
LEGAL ADVISOR Nisar Law Associates

51, Mozang Road
Lahore
REGISTERED OFFICE 35-Darulaman Housing Society

Block 7/8, Shahra-e-Faisal
Karachi
Website http://www.fectogroup.com
FACTORY Sangjani, Islamabad
MARKETING OFFICE 2nd Floor, Majeed Plaza

Bank Road, Saddar
Rawalpindi
SHARES REGISTRAR Technology Trade (Private) Limited

241-C, Block 2, P.E.C.H.S.
Karachi
2
Mission Statement
To manage and operate the company in a manner that allows growth and
profitability without high risk for stakeholders and the company by offering
quality product to our customers, while striving to improve our product to
meet our customers needs.
Vision Statement
To compete in tough and competitive market, focusing on “Satisfaction” of

customers, and stakeholders with challenging spirit and flexibility, striving
hard to make profit, creating value for our customers and to continue as
a successful Company.
Corporate Strategy
Our Corporate Strategy and objectives for the future are to find new and
improved means of cost reduction, fuel economy and to acquire advanced
manufacturing capabilities to support our product development efforts and
product line expansion and stand ready to leverage our debts and be
responsive to the changing economic scenario. We believe in harnessing
the inherent strengths of available human resource and materials to the
utmost and a commitment for building a solid foundation poised for sustainable
growth for the long-term benefit of our shareholders and our employees.
3
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 29th Annual General Meeting of the Members of the Company will be
held at Registered Office, 35-Darulaman Housing Society, Block 7/8, Shahra-e-Faisal, Karachi on
Tuesday, October 26, 2010 at 12.00 noon to transact the following business:
1. To receive, consider and adopt the Annual Audited Accounts for the year ended June 30, 2010
together with the Directors' and Auditors' Reports thereon.
2. To appoint auditors for the year ending June 30, 2011 and to fix their remuneration. Present
auditors M/s. KPMG Taseer Hadi & Co., Chartered Accountants being eligible have offered
themselves for the re-appointment. Audit Committee has recommended the appointment of
M/s. KPMG Taseer Hadi & Co., Chartered Accountants as auditors of the Company for the year
ending June 30, 2011.
3. To transact any other business with the permission of the Chair.
By Order of the Board
(ABDUL SAMAD)
COMPANY SECRETARY
Karachi: September 27, 2010
Notes:
1. The Share Transfer Books of the Company will remain closed from Tuesday, October 19, 2010
to Tuesday, October 26, 2010 (both days inclusive). Transfers received in order by our Shares
Registrar at the close of business by Monday October 18, 2010 will be considered in time for the
entitlement of transferee.
2. A member of the Company entitled to attend and vote at this meeting may appoint another member
as a proxy to attend, speak and vote instead of him/her. An instrument appointing a proxy must
be received at the Registered Office of the Company not later than forty eight hours before the
time of holding the Meeting. The proxy shall produce his/her original Computerized National Identity
Card or passport to prove his/her identity.
3. Members are requested to notify any change in their address immediately.
4. Members who have not yet submitted photocopy of their Computerized National Identity Cards
to the Company are requested to send the same at the earliest to enable the Company to comply
with relevant laws.
5. CDC Account Holders will have to further follow the guidelines as laid down in Circular No. 1 dated
January 26, 2000 issued by the Securities & Exchange Commission of Pakistan.
4
DIRECTORS' REPORT TO THE MEMBERS

Dear Members
The Board of Directors take pleasure in presenting the annual report together with Audited Financial
Statements of the Company for the year ended June 30, 2010.
OVERVIEW
The year under review was a difficult year for the cement industry of Pakistan wherein despite achieving
highest ever sales volume in the history of the country overall profitability of the industry suffered badly
due to depressed selling prices in both local and export markets. Overall sales volume of the industry
for the year under review was 34.22 million tons as against the sales volume of 31.28 million tons of last
year. Local dispatches of the industry were 23.53 million tons as compared to 19.39 million tons of last
year registering a growth of 14.6% which is quite remarkable considering poor law and order situation,
persistent energy crises, tight monetary policy and uncertainty on the political front. On the export front
industry witnessed a breakeven as total exports during the year were 10.69 million tons as against 10.75
million tons of last year.
Your Company during the year under review achieved the highest ever sales volume in the history of
the Company by dispatching 841,822 tons of cement as against 763,468 tons of last year with a growth
of 10.26%. Out of total sales volume 290,271 tons were exported as against export of 226,505 tons of
last year with a handsome growth of 28.15% whereas local sales volume was 551,551 tons as against
the 536,963 tons of last year. The management focused more on export as the export prices were slightly
better as against the local prices which witnessed abnormal slide.
OPERATING PERFORMANCE
Production and dispatches of the Company for the year under review were as follows:
2010 2009 CHANGE IN

------------- TONS ----------- %
Production
Clinker 772,940 740,330 4.40
Cement 841,904 764,119 10.04
Dispatches
Local 551,551 536,963 2.22
Export 290,271 226,505 28.15
Total 841,822 763,468 10.26
Overall production of clinker and cement of the Company witnessed a growth of 4.40% and 10.04%
respectively. Ratio of export to overall dispatches improved substantially and reached at 34.48% as
against 29.66% of last year.
FINANCIAL PERFORMANCE
Following is the comparison of financial results of the Company for the year under review with last year.
2010 2009
Rupees in 000
Net sale 2,902,684 3,455,706

Gross Profit 152,731 913,403
(Loss)/ Profit before taxation (291,434) 396,289
(Loss)/ Profit after taxation (208,258) 314,350
(Loss)/ Earning Per Share( Rupees) (4.15) 6.27
5
During the year under review, overall sales revenue of the Company decreased by 16% as compared
to last year despite volumetric growth of 10.26%. Main reason for such reduction was depressed selling
prices in both local and export markets. Local sales revenue of the Company reduced by 29.43% as
compared to last year despite volumetric growth of 2.22% whereas export revenue of the Company
increased by 21.15% as compared to last year. Ratio of export revenue to total sales revenue increased
to 38.30% as against 26.55% of last year. The prices of cement in local market remained under sever
pressure during the year despite increase in cost of production
Cost of sales of the Company during the year decreased by 8.17% whereas cost per ton of cement
decreased by 2%. Fuel and power cost comprising coal and electricity, major component of cost of
production increased by 3.29% as against the increase in production by 10.26% and its ratio to over all
cost decreased to 67% as against 70% of last year. This reduction was mainly because of timely decision
of management to procure coal at better prices and this reduction would have been much better if the
prices of electricity were not increased by the Government frequently. Other cost components remained
under control.
Gross profit rate of the Company was reduced to 5.26% of overall sales revenue as against 26.43% of
last year. Reduction in gross profit rate was mainly because of decline is selling prices.
Distribution cost increased mainly due to increase of overall sales volume and accordingly its ratio to
overall sales revenue increased to 8.70% as against 5.30% of last year.
The finance cost reduced to Rs. 83.363 million as against Rs. 190.589 million of last year. Main reason
of such reduction was stable dollar rupee parity due to which Company realized gain of Rs. 2.682 million
on derivative financial instruments as against the loss of Rs. 83.261 million of last year. Further, repayment
of term loans also resulted reduction in markup on long term loans.
The Company has suffered net loss after taxation of Rs. 208.258 million as against the profit after taxation
of Rs. 314.350 million of last year.
DEBT OBLIGATION
By the grace of Almighty Allah the company continues to meet its financial commitments and debt
obligations on time.
WASTE HEAT RECOVERY POWER PLANT
As we have been updating you on the progress of Waste Heat Recovery Power Plant through our interim
reports that work on this project is as per schedule. By the grace of Allmighty Allah this project has been
successfully completed subsequent to the year end and is now under trial operation and its performance
during this period is quite satisfactory. Completion of this project will reduce the emission of green house
gases thus providing a cleaner and better environment to the people and nearby surroundings of the
work place. Further as we mentioned above, major cost in cement and clinker production is fuel and
power and electricity is a part of it. Sustained and reliable availability of electricity at competitive rates
is imperative for the survival of any company, accordingly completion of this project will reduce fuel and
power cost of the company as the dependence on WAPDA will reduce to the extent of power generated
by this power plant which is around 6 MW.
CONTRIBUTION TO NATIONAL EXCHEQURE
Your company contributed around Rs. 792.243 million in national exchequer as sales tax, excise duty,
income tax and other levies. In addition to that Company also brought in foreign exchange of around
US$ 14 million in the country by exporting cement.
PENDING LEGAL PROCEEDINGS
As elaborated in detail in Note No.12 to the attached financial statements, the Competition Commission
of Pakistan (CCP) had imposed penalty on all cement manufacturers including All Pakistan Cement
Manufacturers Association of Pakistan last year. Similar penalties have also been imposed on many
other institutions in various identical proceedings. The matter is pending for adjudication before Court
of Law.
6
FUTURE PROSPECTS
Demand of cement in local market increased during the year and it expected that this momentum will
maintain in the current financial year, however, local dispatches have been witnessing sluggish trend
in first quarter due to heavy and abnormal rain causing flood. Local dispatches may be improved in
remaining part of the year because of rehabilitation and reconstruction of flood affected areas. The
present momentum of export is expected to continue this year as well which will continue providing
opportunity to the industry to operate on optimal capacity. Export prices For Afghanistan have also
improved and management is making every effort to maximize its export to Afghanistan and also in the
process to expand its market to Tajikistan and other Central Asian States. Completion of Waste Heat
Recovery Power Plant will also improve competitiveness of the Company.
CORPORATE GOVERNANCE
The Directors are pleased to inform that the company has fully complied with the Code of Corporate
Governance as contained in listing regulations of Stock Exchanges.
In compliance with the Code of Corporate Governance, the Directors are pleased to state that:
1. The financial statements, prepared by the company, present fairly its state of affairs, the result
of its operations, cash flows and changes in equity;
2. Proper books of account have been maintained by the company;
3. Appropriate accounting policies have been consistently applied in preparation of financial statements
and accounting estimates are based on reasonable and prudent judgment;
4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation

of financial statements;
5. The system of internal control is sound in design and has been effectively implemented and
monitored;
6. There are no significant doubts upon the company's ability to continue as a going concern;
7. There has been no material departure from the best practices of corporate governance, as detailed
in the listing regulations;
8. The value of Provident Fund Investments as per audited accounts of Provident Fund Trust for the
year ended June 30, 2009 was Rs. 83.00 million;
9. There is no outstanding statutory payment due on account of taxes, levies and charges except
of a normal and routine nature;
Key operating and financial data for the last six years is annexed.
During the year five (5) meetings of the Board of Directors were held. Attendance by each Director is
given below:
Attended
Mrs. Zubeda Bai 3
Mr. Mohammed Yasin Fecto 5
Mr. Mohammed Asad Fecto 5
Mr. Mohammed Ilyas Khan 0
Mr. Muhammad Umer Memon 5
Mr. Aamir Ghani 4
Mr. Khalid Yacoob 1
Mr. Muhammad Hussain 5
Mr. Mohammed Shakeel 5
Mr. Ijaz Ali 2
Mr. Muhammed Anwar Habib 3
7
Directors who could not attend the meeting due to illness or some other engagements were granted
Leave of absence. During the year no casual vacancy was occurred in the Board. Members of the
Company in Annual General Meeting of the Company held on October 29, 2009 elected the directors
for the next three years term in which Mr. Ijaz Ali and Mr. Muhammed Anwar Habib elected in place of
Mr. Kalid Yaccob and Mr. Ilyas Khan who did not offer themselves for the election of directors. All other
retiring directors were re elected for the next three years term.
AUDITORS
Present auditors M/s. KPMG Taseer Hadi & Co., Chartered Accountants, retire and being eligible, have
offered themselves for the re-appointment. Audit committee has recommended the appointment of
M/s. KPMG Taseer Hadi & Co., Chartered Accountants as auditors of the company for the year ending
June 30, 2011.
PATTERN OF SHAREHOLDING
Statements showing the pattern of shareholding as at June 30, 2010 required under the Companies
Ordinance, 1984 and the Code of Corporate Governance are annexed.
APPROPRIATION
The Board of Directors has recommended passing over of dividend and/or bonus for the year ended
June 30, 2010 due to loss suffered by the Company.
ACKNOWLEDGMENT
The Directors would like to place on record their appreciation for the strenuous efforts and dedicated
work of the staff and workers and for the efforts made by the dealers in giving full support to our marketing
policies. We would also like to express our sincere thanks to all the financial institutions and banks for
their continued support and co-operation.
On behalf of the Board
MOHAMMED ASAD FECTO

Karachi: September 27, 2010 CHAIRMAN
8
PATTERN of SHAREHOLDING
AS AT JUNE 30, 2010
No. of Shareholdings Total Shares
Shareholders From To Held
109 1 100 3,056

334 101 500 72,105
779 501 1000 444,393
353 1001 5000 664,218
69 5001 10000 485,619
27 10001 15000 318,673
13 15001 20000 230,760
3 20001 25000 69,550
4 25001 30000 110,220
4 30001 35000 129,610
2 35001 40000 75,853
1 40001 45000 44,486
2 45001 50000 99,500
3 50001 55000 159,610
4 55001 60000 228,925
3 65001 70000 201,531
1 85001 90000 85,030
1 90001 95000 91,300
2 100001 105000 206,691
2 120001 125000 244,970
1 135001 140000 139,700
1 140001 145000 143,250
1 145001 150000 149,600
1 150001 155000 154,000
1 155001 160000 155,100
1 170001 175000 171,600
1 250001 255000 250,800
1 265001 270000 268,290
4 270001 275000 1,097,690
2 275001 280000 551,870
1 280001 285000 280,986
1 305001 310000 308,000
1 310001 315000 313,500
1 320001 325000 324,500
1 325001 330000 330,000
1 340001 345000 340,450
2 355001 360000 715,000
1 360001 365000 363,000
3 365001 370000 1,106,654
1 370001 375000 374,000
2 375001 380000 759,000
1 380001 385000 385,000
1 400001 405000 401,500
5 410001 415000 2,062,500
1 435001 440000 438,020
1 460001 465000 462,000
3 710001 715000 2,139,500
1 1040001 1045000 1,044,787
1 1095001 1100000 1,099,230
1 1235001 1240000 1,235,080
1 1725001 1730000 1,727,655
2 2080001 2085000 4,169,916
1 4205001 4210000 4,207,540
1 8370001 8375000 8,371,146
1 10150001 10155000 10,153,036
1,766 50,160,000
Categories of Shareholders Number of Shareholders Total Shares Held Percentage
Directors, Chief Executive Officer, and their Spouse and Minor Children 8 18,543,432 36.97
NITand ICP 4 1,731,815 3.45
Banks Development Financial Institutions, Non Banking Financial Institutions. 10 6,042,627 12.05
Insurance Companies 3 91,630 0.18
Modarabas and Mutual Funds. 1 880 0.00
General Public 1,713 23,505,140 46.86
Others -Joint Stock Companies 27 244,476 0.49
1,766 50,160,000 100.00
9
Pattern of shareholding as at June 30, 2010

Additional Information
Shareholders' Category Number of Number of
Shareholders Shares held
Associated Companies, undertakings and related parties _ _
NIT and ICP

National Bank of Pakistan - Trustee Department 1 3,188,200
Investment Corporation of Pakistan 1 2,600
Directors
Mrs. Zubeda Bai 1 5,500
Mr. Mohammed Yasin Fecto 1 10,153,036
Mr. Mohammed Asad Fecto 1 8,371,146
Mr. Ijaz Ali 1 2,750
Mr. Muhammad Umer Memon 1 2,750
Mr. Mohammad Shakeel Arif 1 2,750
Mr. Aamir Ghani 1 2,750
Mr. Muhammad Anwar Habib 1 2,750
Chief Exective Officer

Executives _ _
Public Sector Companies and Corporations _ _
Banks, Development Finance Institutions,

Non-Banking Finance Institutions, Insurance Companies,
Modarabas and Mutual Funds 12 4,044,900
Shareholders holding 10% or more voting interest

Mr. Mohammed Asad Fecto 1 8,371,146
Detail of trading in shares by the Directors,

Chief Financial Officers, Company secretary and
their spouse and Minor Children
Bonus Shares
Mrs. Zubeda Bai 500
Mr. Mohammed Yasin Fecto 923,003
Mr. Mohammed Asad Fecto 761,013
Mr. Ijaz Ali 250
Mr. Muhammad Umer Memon 250
Mr. Mohammad Shakeel 250
Mr. Aamir Ghani 250
Mr. Muhammad Anwar Habib 250
Purchase
Mr. Mohammed Yasin Fecto 539,939
Sale
Mr. Mohammed Asad Fecto 539,939
There ware no trading in shares other than as mentioned above by any

Directors, Chief Financial Officer, Company Secretary and their
Spouse and Minor Children.
10
Six Years Key Operating

And Financial Data
Year ended June 30 2010 2009 2008 2007 2006 2005
PRODUCTION SUMMARY (Tonnes)
Clinker production 772,940 740,330 763,478 729,599 537,350 573,398
Cement production 841,904 764,119 790,518 750,400 609,081 573,993
Cement despatches 841,822 763,468 792,506 741,727 612,495 574,119
(Rupees in thousand unless stated otherwise)
PROFIT & LOSS SUMMARY
Turnover (net) 2,902,684 3,455,706 2,409,364 2,226,545 2,497,4911,844,553
Gross profit 152,731 913,403 279,548 234,524 828,226 424,749
(Loss)/profit before tax (291,434) 396,289 (118,435) 29,104 637,516 297,295
BALANCE SHEET SUMMARY
Paid up capital 501,600 456,000 456,000 456,000 456,000 456,000
Reserve 50,000 50,000 50,000 50,000 50,000 50,000
Accumulated profit 412,302 666,160 351,810 433,753 483,209 202,696
Long term loans and lease finance 684,048 292,074 394,018 489,604 304,349 17,934
Deferred liabilities 138,560 196,252 180,335 220,287 209,523 139,115
Operating assets 1,316,405 1,339,752 1,151,827 953,943 980,265 668,902
MISCELLANEOUS
Contribution to national exchequer 759,579 991,662 943,407 956,726 878,111 750,600
(Loss)/ Earnings per share (Rs.) (4.15) 6.27 (1.8) 0.42 9.15 4.34
Break up value per share (Rs.) 19.26 25.7 18.81 20.61 21.69 15.54
Current ratio 01:1.42 01:0.9 01:0.8 01:0.5 01:0.5 01:0.8
Debt/equity ratio 42:58 20:80 31:69 34:66 24:76 2:98
Dividend declared - *10% - - 30% 15%
* Bonus
11
Statement Of Compliance With The

Code Of Corporate Governance
This statement is being presented to comply with the Code of Corporate Governance as contained in
Regulation No. 37 (Chapter XI), Clause 43 (Chapter XIII) and Section 36 (Chapter XI) of Listing Regulation
of Karachi, Lahore and Islamabad Stock Exchanges respectively for the purpose of establishing a
framework of good governance, whereby a listed company is managed in compliance with the best
practices of corporate governance.
The Company has applied the principles contained in the Code in the following manner:
1. The Company encourages representation of independent non-executive directors and directors

representing minority interests on its Board of Directors. At present the Board comprise of nine
directors including four independent non-executive directors, one director representing minority
shareholders and one director nominated by Financial Institution.
2. The Directors have confirmed that none of them is serving as director in more than ten listed
companies, including this company.
3. All the resident directors of the Company are registered as taxpayers and none of them has
defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member
of a stock exchange, has been declared as a defaulter by that stock exchange. None of the
directors and their spouses has been involved in the business of stock brokerage.
4. No casual vacancy occurred in the Board during the year.
5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been
signed by all the directors and management employees of the Company.
6. The Board has developed a vision/mission statement, overall corporate strategy and significant
policies of the Company. A complete record of particulars of significant policies along with the
dates on which they were approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions have
been taken by the Board. The Board of Directors and Members have approved appointment and
determination of remuneration and terms and conditions of employment of the present CEO and
other executive directors.
8. The meetings of the Board were presided over by the Chairman and in his absence one of the
directors elected for this purpose and the Board met at least once in every quarter. Written notices
of the Board meetings, along with agenda and working papers, were circulated at least seven
days before the meetings. The minutes of the meetings were appropriately recorded and circulated.
9. Directors are conversant of the relevant laws applicable to the Company, its policies and procedures
and provisions of Articles and Memorandum of Associations and are aware of their duties and
responsibilities. However, in order to apprise them of material changes, if any, in relevant laws
same were placed in Boards' meetings.
10. The Board has approved appointment of Chief Financial Officer (CFO). Company Secretary and
Head of Internal Audit, including terms and conditions of appointment as determined by the CEO.
However no new appointments of CFO, Company Secretary and Head of Internal Audit were
made during the year.
12
11. The directors' report for this year has been prepared in compliance with the requirements of the
Code and fully describes the salient matters required to be disclosed.
12. The financial statements of the Company were duly endorsed by CEO and CFO before approval
of the Board.
13. The directors, CEO and executives do not hold any interest in the shares of the Company other
than that disclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the
Code.
15. The Board has formed an audit committee. It comprises three members, of whom two are non-
executive directors. The Chairman of the Committee is an Executive Director.
16. The meetings of the audit committee were held at least once every quarter prior to approval of
interim and final results of the Company and as required by the Code. The terms of reference of
the committee have been formed and advised to the committee for compliance.
17. The Board has set-up an internal audit function.
18. The statutory auditors of the Company have confirmed that they have been given a satisfactory
rating under the quality control review programme of the Institute of Chartered Accountants of
Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold
shares of the Company and that the firm and all its partners are in compliance with International
Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered
Accountants of Pakistan.
19. The statutory auditors or the persons associated with them have not been appointed to provide
other services except in accordance with the listing regulations and the auditors have confirmed
that they have observed IFAC guidelines in this regard.
20. We confirm that all other material principles contained in the Code including the requirements of
clause ‘xiii a’ relating to related party transactions have been complied with.
On behalf of the Board
MOHAMMED ASAD FECTO

CHAIRMAN
Karachi: September 27, 2010
13
Review Report to the Members on Statement of

Compliance with Best Practices of Code of
Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of Fecto Cement Limited (“the Company”)
to comply with the Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges where the
company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors
of the Company. Our responsibility is to review, to the extent where such compliance can be objectively
verified, whether the Statement of Compliance reflects the status of the Company's compliance with the
provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily
to inquiries of the Company personnel and review of various documents prepared by the Company to
comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We are
not required to consider whether the Board's 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.
Further, Listing Regulations of the Karachi, Lahore and Islamabad Stock Exchanges require the company
to place before the Board of Directors for their consideration and approval related party transactions
distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length
transactions and transactions which are not executed at arm's length price recording proper justification
for using such alternate pricing mechanism. Further, all such transactions are also required to be
separately placed before the audit committee. We are only required and have ensured compliance of
requirement to the extent of approval of related party transactions by the Board of Directors and placement
of such transactions before the audit committee. We have not carried out any procedures to determine
whether the related party transactions were under taken at arm's length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement
of Compliance does not appropriately reflect the Company's compliance, in all material respects, with
the best practices contained in the Code of Corporate Governance as applicable to the Company for
the year ended 30 June 2010.
KPMG Taseer Hadi & Co.

Date: September 27, 2010
Karachi
14
Auditors' Report to the Members
We have audited the annexed balance sheet of Fecto Cement Limited (“the Company”) as at 30 June
2010 and the related profit and loss account, statement of comprehensive income, cash flow statement
and statement of changes in equity together with the notes forming part thereof, for the year then ended
and we state that we have obtained all the information and explanations which, to the best of our
knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Company's management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved accounting
standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an
opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
above said statements are free of any material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the above said statements. An audit also
includes assessing the accounting policies and significant estimates made by management, as well as,
evaluating the overall presentation of the above said statements. We believe that our audit provides a
reasonable basis for our opinion and, after due verification, we report that:
a) in our opinion, proper books of account have been kept by the Company as required by the
Companies Ordinance, 1984;
b) in our opinion:
i) the balance sheet and profit and loss account together with the notes thereon have been
drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with
the books of account and are further in accordance with accounting policies consistently
applied except for the changes as described in note 3.2.1 with which we concur;
ii) the expenditure incurred during the year was for the purpose of the Company's business;
and
iii) the business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Company;
c) in our opinion and to the best of our information and according to the explanations given to us,
the balance sheet, profit and loss account, statement of comprehensive income, cash flow statement
and statement of changes in equity together with the notes forming part thereof conform with
approved accounting standards as applicable in Pakistan and give the information required by the
Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view
of the state of the Company's affairs as at 30 June 2010 and of the loss, total comprehensive
income, its cash flows and changes in equity for the year then ended; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
KPMG Taseer Hadi & Co.

Mazhar Saleem
Date: September 27, 2010

Karachi
15
Balance Sheet
2010 2009
Note (Rupees in '000)
SHARE CAPITAL
Authorised
75,000,000 (2009: 50,000,000)
ordinary shares of Rs. 10/- each 5 750,000 500,000
Issued, subscribed and paid-up

50,160,000 ( 2009: 45,600,000)
ordinary shares of Rs. 10/- each 5 501,600 456,000
GENERAL RESERVE 50,000 50,000
ACCUMULATED PROFIT 412,302 666,160

963,902 1,172,160
NON-CURRENT LIABILITIES
Long term financing 6 650,000 225,000

Liabilities against assets subject
to finance lease 7 34,048 67,074
Deferred taxation 8 138,560 196,252
822,608 488,326
CURRENT LIABILITIES
Short term running finance 9 526,654 299,150

Current maturity of long term liabilities 10 107,943 103,039
Trade and other payables 11 701,571 541,788
1,336,168 943,977
CONTINGENCIES AND COMMITMENTS 12
3,122,678 2,604,463
The annexed notes 1 to 37 form an integral part of these financial statements.
16
As at 30 June 2010
2010 2009
PROPERTY, PLANT AND EQUIPMENTS
Operating assets 13 1,316,405 1,339,752

Capital work in progress 14 808,228 137,468
2,124,633 1,477,220
LONG TERM LOANS AND DEPOSITS 15 57,899 82,584
CURRENT ASSETS
Stores and spares 16 671,548 750,680

Stock-in-trade 17 108,718 167,862
Trade debts - considered good 18 10,892 65,580
Loans, advances, deposits,
prepayments and accrued mark-up 19 129,254 41,001
Cash and bank balances 20 19,734 19,536
940,146 1,044,659
3,122,678 2,604,463
(MOHAMMED YASIN FECTO) (MUHAMMAD HUSSAIN)

Chief Executive Director
17
PROFIT AND LOSS ACCOUNT

For the year ended 30 June 2010
2010 2009
Sales -net 21 2,902,684 3,455,706

Cost of sales 22 (2,749,953) (2,542,303)
Gross profit 152,731 913,403
Administrative expenses 23 122,635 121,901

Distribution cost 24 252,758 183,452
Finance cost 25 83,363 190,589
Other income 26 (14,591) (8,199)
(444,165) (487,743)
(291,434) 425,660
Workers' funds 27 - (29,371)
(Loss) / profit before taxation (291,434) 396,289
Provision for taxation 28
Current (20,129) (66,022)

Prior 45,614 -
Deferred 57,691 (15,917)
83,176 (81,939)
(Loss) / profit after taxation (208,258) 314,350
(Rupees)
(Loss) / earnings per share - basic & diluted 29 (4.15) 6.27

18
STATEMENT OF COMPREHENSIVE INCOME

2010 2009
(Rupees in '000)
Net (loss) / profit after taxation (208,258) 314,350
Other comprehensive income - -
Total comprehensive income for the year (208,258) 314,350

19
CASH FLOW STATEMENT

2010 2009
(Rupees in '000)
Cash flows from operating activities
Adjustments for:
Depreciation 65,748 63,284
Gain on disposal of operating assets (2,783) (1,760)
Finance cost 83,363 190,589
Operating (loss) / profit before working capital changes (145,106) 648,402
Decrease / (increase) in stores and spares 79,132 (109,919)

Decrease / (increase) in stock-in-trade 59,144 (52,204)
Decrease in trade debts 54,688 6,137
(Increase) / decrease in loans, advances, deposits, prepayments
and accrued mark-up (30,104) 5,981
Increase in trade and other payables 141,189 118,727
Cash generated from operations 158,943 617,124
Finance cost paid (64,766) (126,454)

Income tax paid / deducted at source (32,664) (10,946)
Long term loans and deposits 24,685 1,034
Net cash generated from operating activities 86,198 480,758
Cash flows from investing activities
Fixed capital expenditure (736,603) (364,419)

Sale proceeds of operating assets 26,223 3,929
Net cash (used) in investing activities (710,380) (360,490)
Cash flows from financing activities
Repayment of long term financing (75,000) (75,000)

Disbursement of Long Term Diminishing Musharaka 500,000 -
Repayment of lease finance (28,122) (23,660)
Dividend paid (2) (26)
Net cash from / (used in) financing activities 396,876 (98,686)
Net (decrease) / increase in cash and cash equivalents (227,306) 21,582
Cash and cash equivalents as at 01 July (279,614) (301,196)

Cash and cash equivalents as at 30 June (506,920) (279,614)
Cash and cash equivalent:

Cash and bank balances 19,734 19,536
Short term running finance (526,654) (299,150)
(506,920) (279,614)

20
STATEMENT CHANGES IN EQUITY

Share General Accumulated Total

capital reserve profit
----------------------------------- (Rupees in '000) -----------------------------------
Balance as at 01 July 2008 456,000 50,000 351,810 857,810
Total comprehensive income

for the year
Profit for the year ended 30 June 2009 - - 314,350 314,350
Balance as at 30 June 2009 456,000 50,000 666,160 1,172,160
Transactions with owners recorded

directly in equity - distribution
Bonus Shares issued @ 10%

for the year ended 30 June 2009 45,600 - (45,600) -
Total comprehensive income

for the year
Loss for the year ended 30 June 2010 - - (208,258) (208,258)
Balance as at 30 June 2010 501,600 50,000 412,302 963,902

21
NOTES TO THE ACCOUNTS

1. STATUS AND NATURE OF BUSINESS
The Company was incorporated in Pakistan on 28 February 1981 as a public limited company with its
Registered Office situated at 35-Darulaman Housing Society, Block 7/8, Shahra-e-Faisal, Karachi, Sindh.
Its shares are quoted on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in
production and sale of cement.
2. STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board as are notified under the
Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984.
In case requirements differ, the provisions of, or directives issued under the Companies Ordinance, 1984
shall prevail.
3. BASIS OF PREPARATION
3.1 Accounting Convention
These financial statements are prepared under the historical cost convention, except for the derivative
financial instruments which are stated at the fair value.
3.2 Standards, interpretations and amendments to published approved accounting standards

that are effective in the current year
3.2.1 Starting 1 July 2009, the Company has changed its accounting policies in the following areas in
order to comply with the approved accounting standards:
(a) IAS 1 (Revised) - Presentation of financial statements (effective for annual periods beginning
on or after 1 January 2009). The revised standard prohibits the presentation of items of
income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes
in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner
changes in equity. All non-owner changes in equity are required to be shown in a performance
statement, but entities can choose whether to present one performance statement (the
statement of comprehensive income) or two statements (the income statement and the
statement of comprehensive income). The company has opted to present two statements;
a profit and loss account (income statement) and a statement of comprehensive income.
(b) IFRS 8 - Operating Segments (effective from 1 January 2009). This standard requires the
Company to determine and present operating segments based on the information that is
provided internally to the Company’s Chief Operating Decision Maker, that is, the organisation's
function which allocates resources to and assesses performance of its operating segments.
Management has determined that the Company has a single reportable segment and therefore
the adoption of the said IFRS has only resulted in some entity wide disclosures as mentioned
in note 30 to these financial statements.
Comparative information has been re-presented so that it is in conformity with the revised /
new standards. Since the change in accounting policies only affect presentation / disclosures
of financial statements, there is no impact on loss for the year and earnings per share.
3.2.2 Other accounting developments
Disclosures pertaining to fair values for financial instruments
The Company has applied Improving Disclosures about Financial Instruments (Amendments to
IFRS 7), issued in March 2009, that require enhanced disclosures about fair value measurements
and liquidity risk in respect of financial instruments.
22
The amendments require that fair value measurement disclosures use a three-level fair value
hierarchy that reflects the significance of the inputs used in measuring fair values of financial
instruments. Specific disclosures are required when fair value measurements are categorised as
Level 3 (significant unobservable inputs) in the fair value hierarchy. The amendments require that
any significant transfers between Level 1 and Level 2 of the fair value hierarchy be disclosed
separately, distinguishing between transfers into and out of each level. Furthermore, changes in
valuation techniques from one period to another, including the reasons therefore, are required to
be disclosed for each class of financial instruments.
Disclosures in respect of fair values of financial instruments are included in note 34.5.
3.2.3 There are other standards, amendments and interpretations that were mandatory for accounting
periods beginning on or after 1 July 2009 but were considered not to be relevant or did not have
any significant effect on the Company's operations.
3.3 New accounting standards and IFRIC interpretations that are not yet effective
The following standards, interpretations and amendments of approved accounting standards are
effective for accounting periods beginning on or after 1 July 2010:
- Improvements to IFRSs 2009 – Amendments to IFRS 5 Non-current Assets Held for Sale
and Discontinued (effective for annual periods beginning on or after 1 January 2010). The
amendments clarify that the required disclosures for non-current assets (or disposal groups)
classified as held for sale or discontinued operations are specified in IFRS 5. These
amendments are unlikely to have an impact on the Company's financial statements.
- Improvements to IFRSs 2009 – Amendments to IFRS 8 Operating Segments (effective for

annual periods beginning on or after 1 January 2010). The amendments clarify that segment
information with respect to total assets is required only if such information is regularly reported
to the chief operating decision maker. The amendment is unlikely to have an impact on
Company's financial statements.
- Improvements to IFRSs 2009 – Amendments to IAS 1 Presentation of Financial Statements

(effective for annual periods beginning on or after 1 January 2010). The amendments clarify
that the classification of the liability component of a convertible instrument as current or non-
current is not affected by terms that could, at the option of the holder of the instrument, result
in settlement of the liability by the issue of equity instruments. These amendments are unlikely
to have an impact on the Company's financial statements.
- Improvements to IFRSs 2009 – Amendments to IAS 7 Statement of Cash Flows (effective

for annual periods beginning on or after 1 January 2010). The amendments clarify that only
expenditures that result in the recognition of an asset can be classified as a cash flow from
investing activities. These amendments are unlikely to have a significant impact on the
Company's financial statements.
- Improvements to IFRSs 2009 – Amendments to IAS 17 Leases (effective for annual periods
beginning on or after 1 January 2010). The IASB deleted guidance stating that a lease of
land with an indefinite economic life normally is classified as an operating lease, unless at
the end of the lease term title is expected to pass to the lessee. The amendments clarify that
when a lease includes both the land and building elements, an entity should determine the
classification of each element based on paragraphs 7 – 13 of IAS 17, taking account of the
fact that land normally has an indefinite economic life. The amendment is unlikely to have
an impact on Company's financial statements.
- Improvements to IFRSs 2009 – Amendments to IAS 36 Impairment of Assets (effective for

annual periods beginning on or after 1 January 2010). The amendments clarify that the largest
unit to which goodwill should be allocated is the operating segment level as defined in IFRS
8 before applying the aggregation criteria of IFRS 8. The amendments apply prospectively.
The amendment is not relevant to the Company’s operations.
23
- Improvements to IFRSs 2009 – Amendments to IAS 39 Financial Instruments: Recognition

and Measurement (effective for annual periods beginning on or after 1 January 2010). The
amendments provide additional guidance on determining whether loan prepayment penalties
result in an embedded derivative that needs to be separated; clarify that the scope exemption
in IAS 39 paragraph 2(g) is restricted to forward contracts, i.e. not options, between an
acquirer and a selling shareholder to buy or sell an acquiree that will result in a business
combination at a future acquisition date within a reasonable period normally necessary to
obtain any required approvals and to complete the transaction; and clarify that the gains or
losses on a cash flow hedge should be reclassified from other comprehensive income to
profit or loss during the period that the hedged forecast cash flows impact profit or loss. The
amendments apply prospectively to all unexpired contracts from the date of adoption. These
- Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Additional

Exemptions for First-time Adopters (effective for annual periods beginning on or after 1
January 2010). The IASB provided additional optional exemptions for first-time adopters of
IFRSs that will permit entities not to reassess the determination of whether an arrangement
contains a lease if the same assessment as that required by IFRIC 4 was made under
previous GAAP; and allow entities in the oil and gas industry to use their previous GAAP
carrying amounts as deemed cost at the date of transition for oil and gas assets. The
amendment is not relevant to the Company's operations.
- Amendment to IFRS 2 – Share-based Payment – Group Cash-settled Share-based Payment

Transactions (effective for annual periods beginning on or after 1 January 2010). Amendment
provides guidance on the accounting for share based payment transactions among group
entities. The amendment is not relevant to the Company's operations.
- Amendments to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues

(effective for annual periods beginning on or after 1 January 2010). The IASB amended IAS
32 to allow rights, options or warrants to acquire a fixed number of the entity’s own equity
instruments for a fixed amount of any currency to be classified as equity instruments provided
the entity offers the rights, options or warrants pro rata to all of its existing owners of the
same class of its own non-derivative equity instruments. These amendments are unlikely to
have an impact on the Company's financial statements.
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for accounting
periods beginning on or after 1 July 2010). This interpretation provides guidance on the
accounting for debt for equity swaps. The amendment is not relevant to the Company's
operations.
- Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards –

Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters (effective
for accounting periods beginning on or after 1 July 2010). The amendment provides the same
relief to first-time adopters as was given to current users of IFRSs upon adoption of the
Amendments to IFRS 7. The amendment also clarifies the transitional provisions of the
Amendments to IFRS 7. The amendment is not relevant to the Company's operations.
Improvements to IFRSs 2010 (effective for annual periods beginning on or after 1 July 2010). The
IASB issued amendments to various standards effective. Below is a summary of the amendments
that are effective for either annual periods beginning on or after 1 July 2010 or annual periods
beginning on or after 1 January 2011.
- Improvements to IFRSs 2010 – Amendments to IFRS 3 Business Combinations (effective

for accounting periods beginning on or after 1 July 2010). The amendments clarify that
contingent consideration arising in a business combination previously accounted for in
accordance with IFRS 3 (2004) that remains outstanding at the adoption date of IFRS 3
(2008) continues to be accounted for in accordance with IFRS 3 (2004); limit the accounting
policy choice to measure non- controlling interests upon initial recognition at fair value or at
the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets to
24
instruments that give rise to a present ownership interest and that currently entitle the holder
to a share of net assets in the event of liquidation; and expand the current guidance on the
attribution of the market-based measure of an acquirer’s share-based payment awards issued
in exchange for acquiree awards between consideration transferred and post-combination
compensation cost when an acquirer is obliged to replace the acquiree’s existing awards to
encompass voluntarily replaced unexpired acquiree awards. These amendments are unlikely
to have an impact on the Company's financial statements.
- Improvements to IFRSs 2010 – Amendments to IAS 27 Consolidated and Separate Financial

Statements (effective for annual periods beginning on or after 1 July 2010). The amendments
clarify that the consequential amendments to IAS 21 The Effects of Changes in Foreign
Exchange Rates, IAS 28 and IAS 31 resulting from IAS 27 (2008) should be applied
prospectively, with the exception of amendments resulting from renumbering. These
- IAS 24 Related Party Disclosures (revised 2009) (effective for accounting periods beginning
on or after 1 January 2011). The revised IAS 24 Related Party Disclosures amends the
definition of a related party and modifies certain related party disclosure requirements for
government-related entities. These amendments are unlikely to have an impact on the
Company's financial statements other than increase in disclosures.
- Amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Assets, Minimum Funding
Requirements and their Interaction (effective for accounting periods beginning on or after 1
January 2011). These amendments remove unintended consequences arising from the
treatment of prepayments where there is a minimum funding requirement. These amendments
result in prepayments of contributions in certain circumstances being recognized as an asset
rather than an expense. These amendments are unlikely to have an impact on the Company's
financial statements.
- Improvements to IFRSs 2010 – IFRS 1 First-time Adoption of IFRSs (effective for accounting
periods beginning on or after 1 January 2011). The amendments clarify that IAS 8 is not
applicable to changes in accounting policies occurring during the period covered by an entity’s
first IFRS financial statements; introduce guidance for entities that publish interim financial
information under IAS 34 Interim Financial Reporting and change either their accounting
policies or use of the IFRS 1 exemptions during the period covered by their first IFRS financial
statements; extend the scope of paragraph D8 of IFRS 1 so that an entity is permitted to use
an event-driven fair value measurement as deemed cost for some or all of its assets when
such revaluation occurred during the reporting periods covered by its first IFRS financial
statements; and introduce an additional optional deemed cost exemption for entities to use
the carrying amounts under previous GAAP as deemed cost at the date of transition to IFRSs
for items of property, plant and equipment or intangible assets used in certain rate-regulated
activities. The amendment is not relevant to the Company's operations.
- Improvements to IFRSs 2010 – IFRS 7 Financial Instruments: Disclosures (effective for

accounting periods beginning on or after 1 January 2011). The amendments add an explicit
statement that qualitative disclosure should be made in the contact of the quantitative
disclosures to better enable users to evaluate an entity’s exposure to risks arising from
financial instruments. In addition, the IASB amended and removed existing disclosure
requirements. These amendments would result in increase in disclosures in the financial
statements of the Company.
- Improvements to IFRSs 2010 – IAS 1 Presentation of Financial Statements (effective

foraccounting periods beginning on or after 1 January 2011). The amendments clarify that
disaggregation of changes in each component of equity arising from transactions recognized
in other comprehensive income is also required to be presented, but may be presented either
in the statement of changes in equity or in the notes. The amendment is not likely to have
an impact on Company's financial statements other than increase in disclosure.
Improvements to IFRSs 2010 – IAS 34 Interim Financial Reporting (effective for accounting
periods beginning on or after 1 January 2011). The amendments add examples to the list of
25
- Improvements to IFRSs 2010 – IAS 34 Interim Financial Reporting (effective for accounting
periods beginning on or after 1 January 2011). The amendments add examples to the list
of events or transactions that require disclosure under IAS 34 and remove references to
materiality in IAS 34 that describes other minimum disclosures. The amendment is not likely
to have an impact on Company's financial statements other than increase in disclosure.
- Improvements to IFRSs 2010 – IFRIC 13 Customer Loyalty Programmes (effective for

accounting periods beginning on or after 1 January 2011). The amendments clarify that the
fair value of award credits takes into account the amount of discounts or incentives that
otherwise would be offered to customers that have not earned the award credits. The
amendment is not relevant for the Company's operation.
3.4 Functional and presentation currency
These financial statements are presented in Pakistani Rupees which is the Company's functional
currency. All financial information presented in Pak Rupees have been rounded to nearest thousand.
3.5 Use of estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amounts recognised in
the financial statements are described in note 35.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented.
4.1 Property, plant and equipments
Owned
i) Operating assets are stated at cost (including where relevant related borrowing cost and
exchange difference) less accumulated depreciation and impairment losses, if any, except
free hold land which is stated at cost. Depreciation on additions is charged for the month the
asset is put to use and no depreciation is charged in the month of disposal.
ii) Maintenance and repairs are charged to income as and when incurred. Major renewals and
improvements are capitalized. Gains and losses on disposal of assets, if any, are included
in income currently.
iii) Depreciation is charged to income applying the straight line method at the rate specified below:
Items Useful lives Residual Values

(Years) (% of cost)
Factory building 23.5 - 22.5 0

Non-factory building 23.5 0
Plant, machinery and equipments 23.5 - 9 5
Quarry transport equipments 0 - 10 5
Furniture, fixtures and equipments 0 - 10 0-5
Motor vehicles 0-5 10
26
iv) Useful lives, depreciation methods and residual values are reassessed annually and change,
if any, are applied prospectively.
Leased
i) Assets subject to finance lease are accounted for by recording the assets and related liabilities.
These are stated at lower of present value of minimum lease payments under the lease
agreements and fair value of assets acquired on lease at the inception of lease. Assets
acquired under the finance lease are depreciated over the useful life of the assets in the
same manner as the owned assets.
ii) Finance charge under the lease agreements is allocated over the periods during lease term
so as to produce a constant periodic rate of financial charge on the outstanding balance of
principal liability of each period.
4.2 Capital work in progress
Capital work in progress is stated at cost including, where relevant, related financing costs less
impairment losses, if any. These costs are transferred to fixed assets as and when assets are
available for use.
4.3 Staff benefits
i) The Company operates a defined contribution plan, Provident Fund, for all its regular
permanent employees. Contributions are made equally by the Company and the employees
as per the rules of the Fund.
ii) The liability in respect of accumulated compensated absences of employees is accounted

for in the period in which these absences are earned.
4.4 Stores and spares
These are valued under the moving average cost method (less impairment loss if any) other than
stores and spares in transit which are valued at cost comprising invoice value plus other charges
paid thereon less impairment loss if any. Adequate provision is also made for slow moving items.
4.5 Stock-in-trade
Stock-in-trade is valued at lower of cost and net realisable value. Cost signifies in relation to:
Raw Material produced/excavated by At average cost comprising of excavation

the Company cost, labour and appropriate overheads.
Other Raw Material and Packing Material At cost determined on first-in-first-out basis.
Work-in-process and Finished Goods At average cost comprising direct material,

labour and appropriate manufacturing
overheads.
Net realizable value signifies the selling price less cost necessary to be incurred in order to make
the sale.
4.6 Financial assets other than derivatives
Financial assets include trade debts, loans, deposits, accrued mark-up and cash and bank balances.
These are recognised initially at fair-value plus attributable transaction costs, if any, and subsequently
measured at amortised cost using effective interest method less provision for impairment, if any.
A provision for impairment is established when there is objective evidence that the Company will
not be able to collect all amounts due according to the original terms of receivables.
27
4.7 Financial liabilities other than derivatives
Financial liabilities include long term finance, liabilities against assets subject to finance lease, short
term borrowing and trade and other payables. All financial liabilities are recognised initially at fair
value plus directly attributable transaction costs, if any, and subsequently measured at amortised
cost using effective interest rate method.
4.8 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost or fair value as applicable. Cash
and cash equivalents comprises cash and bank balances. Short term running finances that are
repayable on demand and form an integral part of the Company's cash management policy are
also included as a component of cash equivalents for the purpose of the statement of cash flows.
4.9 Foreign Currency Translation
Transactions in foreign currencies are converted into Rupees at the rate of exchange ruling on the
date of transaction. Monetary assets and liabilities in foreign currencies are translated into Rupees
at the rate of exchange ruling at the balance sheet date. All exchange differences arising on
transaction are charged to profit and loss account currently.
4.10 Derivative financial instruments
The Company uses derivative financial instruments such as interest rate swaps and cross currency
swaps to cover its risk associated with interest and exchange rate fluctuations. Such derivative
financial instruments are initially recognized at fair value on the date on which a derivative contract
is entered into and are subsequently measured at fair value. Derivatives are carried as assets when
the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising
from change in fair value of derivatives that do not qualify for hedge accounting are taken directly
to profit and loss account.
4.11 Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit
and loss account.
Current
Provision for current taxation is based on taxable income for the year at the current rates of taxation
enacted or substantively enacted at the balance sheet date after taking into account available tax
credits, rebates and any adjustment to tax payable in respect of previous years, if any.
Deferred
Deferred tax is provided using the balance sheet liability method providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and amounts
used for taxation purposes. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted
or substantively enacted at the balance sheet date. Deferred tax asset is recognised for deductible
temporary differences only to the extent it is probable that future taxable profits will be available
and the credits can be utilised.
4.12 Provisions
A provision is recognised in the balance sheet when the Company has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of obligation.
28
4.13 Revenue recognition
Sale of goods
Revenue from sale of goods is measured at fair value of the consideration received or receivable.
Revenue is recognised when the significant risks and rewards of ownership have been transferred
to the buyer, recovery of the consideration is probable, the associated cost and possible return of
goods can be estimated reliably, and there is no continuing management involvement with the
goods. The Company recognises revenue from the sale of goods (including export sales) on
despatch of goods to its customers.
Profit on term deposits and long term advances
Profit on term deposits is accounted for on time proportion basis on the principal outstanding at
the rates applicable.
4.14 Borrowing cost
Borrowing cost incurred upto the date the qualifying asset is ready for use and that is directly
attributable to the acquisition or construction of related property, plant and equipment is capitalised
as part of cost of the relevant asset. All other mark-up, interest and other related charges are
charged to income currently.
4.15 Impairment
The carrying amount of all assets not carried as fair value, is reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the
recoverable amount of such asset is estimated. Impairment loss is recognised in profit and loss
account whenever carrying amount of an assets exceeds its recoverable amount.
4.16 Offsetting
Financial assets and liabilities are offset when the Company has a legally enforceable right to offset
and intends to settle either on a net basis or to realise the asset and settle liability simultaneously.
4.17 Dividends and appropriations to reserves
Dividends and appropriations to reserves are recognised as liability in the Company's financial
statements in the period / year in which these are approved.
4.18 Research and development costs
Research and development costs are charged to income as and when incurred, except for certain
development costs which are recognised as intangible assets when it is probable that the development
project will be a success and certain criteria, including commercial and technological feasibility have
been met.
29
5. Share capital
2010 2009 2010 2009
(Number of shares) (Rupees in '000)
Authorised
75,000,000 50,000,000 Ordinary shares of Rs. 10 each 750,000 500,000
Issued, subscribed and paid up
45,600,000 45,600,000 Ordinary shares of Rs. 10 each

fully paid in cash 456,000 456,000
4,560,000 - Ordinary shares of Rs. 10 each

issued as fully paid bonus shares 45,600 -
50,160,000 45,600,000 501,600 456,000
5.1 During the year, the Company in its 28th Annual General Meeting held on 29 October 2009 resolved
to increase its authorised share capital to Rs. 750 million.
2010 2009
(Rupees in '000)
6. Long Term Financing - secured
Standard Chartered Bank Limited 6.1& 6.3 75,000 100,000

Saudi Pak Syndicate 6.2& 6.3 150,000 200,000
Diminishing musharaka 6.4 500,000 -
725,000 300,000
Less: Current Maturity of term loans 10 75,000 75,000

650,000 225,000
6.1 This represents finance facility of Rs. 150 million (2009: Rs. 150 million) obtained from Standard
Chartered Bank Limited. The amount is payable in 12 equal semi annual instalments commencing
from 24 July 2007. The facility carries mark-up @ 3 months KIBOR plus 2.75% with a floor of
6.5% and will be set on the first day of each quarter. The loan is secured by way of a first pari
passu charge on all movable and immovable properties of the Company and personal guarantee
of sponsoring directors.
6.2 This represents the syndicated term finance facility of Rs. 300 million (2009: Rs. 300 million) obtained
from Saudi Pak Industrial & Agricultural Investment Company (Private) Limited and NIB Bank
Limited (formerly PICIC Commercial Bank Limited). The amount is payable in 12 equal semi annual
instalments commencing 31 December 2007. The facility carries mark-up @ 6 months KIBOR plus
2.5% and will be set on the first day of each quarter. The loan is secured by way of a first pari
passu charge on all movable and immovable properties of the Company and personal guarantee
of sponsoring directors.
6.3 The Company has entered into cross currency interest rate swaps against long term finances for
a notional amount of Rs.437.500 million (2009 : 437.500 million), maturing upto 28 June 2013.
Under the swap arrangement the principal payable amount of Rs. 437.500 million is swapped with
US $ at Rs. 60.59 per US $ making the loan amount to US $ 7.22 million (2009 : US $ 7.22 million).
Besides the swap of the principal amount to US$, the Company would receive 6 months KIBOR
rates in local currency and pay 8.6% fixed in US$ as per the arrangements, which will be settled
semiannually. As at the balance sheet date, the net fair value of these interest rates and cross
currency swaps was Rs. 137.650 million unfavourable ( 2009: Rs. 157.352 million unfavourable).
This change in fair value has been recognised in profit and loss account. These swap arrangements
have exposed the Company to foreign currency exchange rate fluctuation risk on the US $ value
converted at the agreement date while interest rate variability risk due to change in KIBOR rates
has been covered.
30
6.4 During the year, Company has obtained a long term financing of Rs. 500 million under the diminishing
musharaka basis from a syndicate led by Standard Chartered Bank (Pakistan) Limited to finance
imported plant and machineries of Waste Heat Recovery Power Plant. Principal Amount is repayable
in eight equal semi annual instalments commencing from 23 Aug 2011. The facility carries mark-
up @ 6 months KIBOR plus 3% at the date of disbursement and will subsequently be revised on
each instalment dates. The facility is secured by a registered first pari passu charge on all present
and future fixed assets of the company up to Rs. 667 million.
2010 2009
(Rupees in '000)
7. Liabilities against assets subject to finance lease
Opening balance 95,113 118,773

Less: Repayments during the year (28,122) (23,660)
66,991 95,113
Less: Current maturity 10 (32,943) (28,039)
34,048 67,074
Lease payments due are as under:

2010 2009
Principal Finance Total Principal Finance Total
charges lease charges lease
allocated rentals allocated rentals
to future to future
years years
--------------------------------------- (Rupees in '000) ------------------------------------
Not later than one year 32,943 5,697 38,640 28,039 11,087 39,126
Later than one year but
not later than five years 34,048 785 34,833 67,074 7,138 74,212
66,991 6,482 73,473 95,113 18,225 113,338
7.1 This represents lease arrangements for machinery and vehicle repayable latest by 19 February
2012. Financing rate @ 3 months KIBOR plus 3% per annum have been used as discounting
factor. Overdue rentals are subject to additional charge up to 3% per month. Taxes, repairs,
replacement and insurance costs are to be borne by the lessee. The lessee can exercise purchase
option at the end of the lease term by adjusting security deposit of Rs.14.76 million (2009: Rs. 14.76
million) for lease.
2010 2009
(Rupees in '000)
8. Deferred taxation
Taxable temporary differences arising in respect of :

Accelerated tax depreciation 158,601 185,795
Finance lease arrangements 13,380 10,457
171,981 196,252
Deductible temporary difference arising
in respect of carried forward losses (33,421) -
138,560 196,252
31
9. Short term running finance - secured
The Company has aggregate running finance facilities of Rs. 520 million (2009: Rs. 520 million) available
from commercial banks. These arrangements are secured by way of first pari passu charge over all the
Company's movable and immovable properties and hypothecation of Company's stock-in-trade, stores
and spares, book debts, machinery and personal guarantee of sponsoring directors of the Company. The
rate of mark-up ranges from 3 months KIBOR plus 1.75% - 3% (2009: 3 months KIBOR plus 1.75% -
3.5%) per annum. The facilities are available for various periods expiring between 01 November 2010
and 31 January 2011.
2010 2009
(Rupees in '000)
10. Current maturity of longterm liabilities
Long term financing 6 75,000 75,000

Liabilities against assets subject to finance lease 7 32,943 28,039
107,943 103,039
11. Trade and other payables
Creditors for Goods:

Other creditors 89,865 23,006
Associated company 66,208 52,396
Bills payable 125,127 7,125
Accrued expenses 54,410 46,762
Workers' funds 11.1 - 29,371
Accrued mark-up - secured 11.2 46,538 8,239
Advances from customers 89,692 37,004
Deposits from dealers, contractors and suppliers 11,028 11,812
Royalty payable 82 74
Excise duty payable 35,277 38,646
Sales tax payable 3,597 3,361
Income tax withheld 1,542 2,447
Unclaimed dividend 11,103 11,105
Unpaid dividend 257 257
Fair value of derivative 6.3 137,650 157,352
Other liabilities 29,195 112,831
701,571 541,788
11.1 Workers' Funds
Workers' profit participation fund

Opening balance 21,283 -
Add: Charge for the year 27 - 21,283
Interest accrued 2,660 -
23,943 21,283
Less: Payment during the year 23,943 -

- 21,283
Workers' welfare fund 27 - 8,088
- 29,371
32
2010 2009
(Rupees in '000)
11.2 Accrued mark-up - secured
Long term loans 30,277 4,203

Lease finance 145 531
Running finance 16,116 3,505
46,538 8,239
12. Contingencies and Commitments
12.1 Contingencies
The Competition Commission of Pakistan (the CCP) took Suo Moto action under Competition
Commission Ordinance, 2007 and issued a Show Cause Notice on 28 October 2008 for increase
in prices of cement across the country. Similar notices were also issued to All Pakistan Cement
Manufacturers Association (APCMA) and its member cement manufacturers. The Company filed
a writ petition before the Honourable Lahore High Court (LHC), the LHC wide its order dated 24
August 2009 allowed the CCP to issue its final order. The CCP accordingly passed an order on
27 August 2009 and imposed a penalty of Rs. 174.06 million on the company. The Lahore High
Court vide its order dated 31 August 2009 restrained the CCP from enforcing its order against the
Company for the time being.
During the period, the company has filed an appeal before the Honourable Supreme Court of
Pakistan and Lahore High Court against the Order of the CCP dated 27 August 2009. The petition
filed by the company and other cement manufacturers before the Lahore High Court are also
pending for adjudication meanwhile order passed by the Lahore High Court on 31 August 2009 is
still operative.
2010 2009
(Rupees in '000)
12.2 Commitments
Outstanding letters of credit 103,214 473,012
33
13. Operating assets

2010
Cost Accumulated depreciation Written
down value
Items As at Additions Disposals As at As at Additions Disposals As at as at
01 July 30 June 01 July 30 June 30 June
2009 2010 2009 2010 2010
---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------
Owned
Freehold land 152,330 8,026 - 160,356 - - - - 160,356

Factory building on freehold land 294,903 - - 294,903 217,381 3,780 - 221,161 73,742
Non-factory building on freehold land 113,144 7,855 - 120,999 66,658 2,559 - 69,217 51,782
Plant, machinery and equipments 2,128,850 41,231 (34,982) 2,135,099 1,291,905 36,944 (15,664) 1,313,185 821,914
Quarry transport equipments 185,549 - (62,997) 122,552 130,824 5,784 (60,944) 75,664 46,888
Furniture, fixtures and equipments 41,585 664 - 42,249 33,825 2,097 - 35,922 6,327
Motor vehicles 68,332 8,067 (10,811) 65,588 40,117 7,614 (8,740) 38,991 26,597
2,984,693 65,843 (108,790) 2,941,746 1,780,710 58,778 (85,348) 1,754,140 1,187,606
Leased
Plant, machinery and equipments 144,622 - - 144,622 12,213 6,106 - 18,319 126,303
Motor vehicles 4,800 - - 4,800 1,440 864 - 2,304 2,496
149,422 - - 149,422 13,653 6,970 - 20,623 128,799
3,134,115 65,843 (108,790) 3,091,168 1,794,363 65,748 (85,348) 1,774,763 1,316,405
2009
Cost Accumulated depreciation Written
down value
Items As at Additions Disposals As at As at Additions Disposals As at as at
01 July 30 June 01 July 30 June 30 June
2008 2009 2008 2009 2009
---------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------

Owned
Freehold land 18,084 134,246 - 152,330 - - - - 152,330

Factory building on freehold land 294,903 - - 294,903 213,600 3,781 - 217,381 77,522
Non-factory building on freehold land 111,180 1,964 - 113,144 64,420 2,238 - 66,658 46,486
Plant, machinery and equipments 2,053,838 75,012 - 2,128,850 1,257,090 34,815 - 1,291,905 836,945
Quarry transport equipments 209,821 29,101 (53,373) 185,549 177,352 5,093 (51,621) 130,824 54,725
Furniture, fixtures and equipments 36,865 4,720 - 41,585 31,936 1,889 - 33,825 7,760
Motor vehicles 64,226 8,336 (4,230) 68,332 35,431 8,498 (3,812) 40,117 28,215
2,788,917 253,379 (57,603) 2,984,693 1,779,829 56,314 (55,433) 1,780,710 1,203,983
Leased
Plant, machinery and equipments 144,622 - - 144,622 6,107 6,106 - 12,213 132,409
Motor vehicles 4,800 - - 4,800 576 864 - 1,440 3,360
149,422 - - 149,422 6,683 6,970 - 13,653 135,769
2,938,339 253,379 (57,603) 3,134,115 1,786,512 63,284 (55,433) 1,794,363 1,339,752
2010 2009
(Rupees in '000)
13.1 Allocation of depreciation
Excavation cost 14,141 13,134

Manufacturing cost 43,945 42,045
Administrative expenses 5,653 5,949
Distribution cost 2,009 2,156
65,748 63,284
34
13.2 Disposals
Details of disposals of Cost Accumulated Written Sale Mode of

Cost Particulars of Purchasers
Operating assets Depreciation Down Value Proceeds Disposal
--------------------------------(Rupees in '000)--------------------------------
Plant, machinery and equipments

Coal plant 34,982 15,664 19,318 5,000 Negotiation M/s. Pak Machinery Co. (Pvt) Ltd.
Plot # 3 & 3-A, Sector 47, Korangi
Creek Road, Karachi
Quarry equipments
Earth moving machineries 62,997 60,944 2,052 14,775 Negotiation M/s. National Engineering &
Transportation Company (Pvt) Ltd.
Ibrahim Trade Tower, Room # M-9,
Block 7/8, Mchs Shahrah E Faisal, Karachi
Motor vehicles
Toyota Camry ALP-644 2,750 1,485 1,265 1,600 Negotiation Mr. Zubair Bawany House # 51/2/1,
Street # 26, Khayaban E Janbaz,
Defense Phase -5, Karachi
Honda City ADU - 648 779 701 78 350 Negotiation Mr. Adnan Motiwala House # 108,
Street # 12, Defense Phase -2, Karachi
Honda City IDL4528 784 705 79 611 Negotiation Mr. Malik Sher Bahadur Mirpur
Road, Atman Abad, Hassan Abdal, Attock
Suziki Cultus IDL-4523 550 495 55 432 Negotiation Mr. Naveed Sabir House # 22, Street # 4,
Officers Housing Scheme 2, Rawalpindi
Suzuki Baleno IDK2076 688 619 69 437 Negotiation Mr. Shehnaz Malik House # 61-A,
Street # 2, Mukarum Town, Rawalpindi
Honda City IDL-4526 784 705 79 627 Negotiation Mr. Ashiq Khan Takkar, Post Office
Mujahid Abad, Rawlakot
Honda City IDL-265. 783 705 78 610 Negotiation Mr. Saif Ali Tehsil Pind Dadan Khan, Jehlum
Honda Civic ADY955 1,186 1,068 118 631 Negotiation Mr. Muhammad Riaz Bokhari
House #1-B, Almumtaz Colony,
Adiala Road, Rawalpindi
Suzuki Cultus IDL-4522 555 499 56 200 Negotiation Mr. Fayyaz Ahmad Nauman
House # 949,Street # 16, G-10/1, Islamabad
Honda City IDL-4527 783 705 78 250 Negotiation Mr. M. Ibrar Khan House # 45,
Street # 11, F-10/2, Islamabad
Toyota Corolla AFY-565 1,169 1,053 116 700 Negotiation Mr. Abdul Waheed Kassim
House # 16-A, Adamjee Nagar, Karachi
10,811 8,740 2,071 6,448
108,790 85,348 23,441 26,223
2010 2009
14. Capital work in progress (Rupees in '000)
Building
Expenditure incurred during the year 14.1 19,092 7,902
Transferred to operating assets (6,376) (2,631)
19,092 6,376
Plant, Machinery and equipments
Expenditure incurred during the year 14.1 684,884 144,611
Transferred to operating assets (26,840) (38,842)
789,136 131,092
808,228 137,468
14.1 This represents expenditure incurred in respect of waste heat recovery power plant which is expected
to be completed during next year.
35
2010 2009
(Rupees in '000)
15. Long term loans and deposits
Long term deposits 15.1 30,612 51,770

Long term loans - -unsecured, considered good
Employees - interest free 15.2 6,597 7,620
Executives - interest free 15.2 2,078 2,426
Sui Northern Gas Pipelines Limited 15.3 25,406 28,271
34,081 38,317
Less: Current portion 19 (6,794) (7,503)
27,287 30,814
57,899 82,584
15.1 This includes Rs. 11.00 million (2009: Rs. 32.839 million) margin given to Silkbank Limited (formerly
Saudi Pak Commercial Bank Ltd.) against the bank guarantee of Rs. 110 million (2009: Rs. 328.399
million) issued in favour of Sui Northern Gas Pipeline Ltd. as security for the payment of gas bill.
15.2 The maximum aggregate amount due from executives of the Company at the end of any month
during the year was Rs. 2.752 million (2009: Rs. 3.211 million). The loan to executives and employees
are in accordance with the terms of their employment.
15.3 This represents the unsecured loan of Rs. 44.48 given to Sui Northern Gas Pipelines Limited for laying
of gas pipeline and is repayable in 10 equal yearly instalments after grace period of two years. This loan
had been measured to its present value using prevailing market rate of mark-up at 8.0% per annum for
a similar instrument, having similar terms and credit risk profile, at the time the loan was granted.
16. Stores and spares

Stores 113,810 144,868
Spares 491,134 520,017
Stores in transit 66,604 85,795
671,548 750,680
17. Stock-in-trade
Finished goods 28,674 28,518
Work-in-process 33,456 110,378
Raw Material 8,523 8,173
Packing Material 38,065 20,793
108,718 167,862
18. Trade debts
This includes foreign currency receivable amounting to Rs. 4.741 million (2009: Rs. 9.64 million) secured by
letter of credits.
19. Loans, advances, deposits

prepayments and accrued mark-up
Current portion of long term loans -unsecured,
considered good 15 6,794 7,503
Advances to Suppliers and contractors - unsecured,
considered good 13,398 4,539
Income tax payments less provisions 75,532 17,383
Advance sales tax 29,197 5,704
Deposits 220 -
Prepayments 3,851 5,573
Accrued mark-up 262 299
129,254 41,001
36
2010 2009
(Rupees in '000)
20. Cash and bank balances
In hand 550 554

With banks in current accounts 19,184 18,982
19,734 19,536
21. Sales - net
Sales - Local 2,550,134 3,529,063

- Export 1,111,756 917,643
3,661,890 4,446,706
Less: Excise duty 404,432 503,818

Sales tax 355,147 487,844
Export rebate (373) (662)
759,206 991,000
2,902,684 3,455,706
22. Cost of sales
Raw and packing material consumed:

Opening stock 28,966 30,863
Purchases 326,155 270,301
Excavation cost 22.1 158,093 150,166
513,214 451,330
Closing stock (46,588) (28,966)

466,626 422,364
Fuel and power 1,847,047 1,788,116

Stores and spares consumed 76,617 92,559
Salaries, wages and benefits 22.1 170,407 175,839
Insurance 25,971 26,953
Repairs and maintenance 2,445 9,858
Depreciation 13.1 43,945 42,045
Other manufacturing overheads 40,129 38,670
2,673,187 2,596,404
Opening work-in-process 110,378 63,395

Closing work-in-process (33,456) (110,378)
Cost of goods manufactured 2,750,109 2,549,421
Opening finished goods 28,518 21,400

Closing finished goods (28,674) (28,518)
2,749,953 2,542,303
22.1 Excavation cost includes salaries, wages and benefits and Company's contribution to provident
fund amounting to Rs. 6.806 million (2009: Rs. 5.997 million) and Rs. 0.39 million (2009: Rs. 0.33
million) respectively.
37
2010 2009
(Rupees in '000)
23. Administrative expenses

Travelling and conveyance 8,297 6,503
Vehicles running expenses 6,707 6,677
Communications 2,461 2,869
Printing and stationery 835 921
Rent, rates and taxes 10,188 7,256
Utilities 7,368 7,240
Repairs and maintenance 1,030 991
Legal and professional charges 2,212 2,353
Auditors' remuneration 23.2 738 1,089
Donations 23.3 2,863 2,258
Depreciation 13.1 5,653 5,949
Miscellaneous 9,821 5,711
122,635 121,901
23.1 This includes Company's contribution to provident fund amounting to Rs. 2.10 million (2009: Rs.
1.97 million).
23.2 Auditors' remuneration 2010 2009

Khalid Majid
KPMG Taseer Rahman KPMG Taseer
Hadi & Co. Sarfaraz Rahim Hadi & Co.
Iqbal Rafiq
(Rupees in '000)
Audit fee 375 250 250
Half yearly review 75 75 75
Other services 260 50 260
Out of pocket expenses 28 49 80
738 424 665
738 1,089
23.3 None of the directors or their spouses have any interest in the donee funds.
2010 2009
24. Distribution cost (Rupees in '000)

Commission 136,309 96,388
Export Expenses 78,413 48,587
Travelling and conveyance 504 379
Vehicles running expenses 2,271 1,787
Communications 1,089 1,062
Rent, rates and taxes 3,192 2,893
Repairs and maintenance 442 679
Advertisement 1,608 2,357
Marking fee 2,949 3,499
Depreciation 13.1 2,009 2,156
Miscellaneous 1,536 2,029
252,758 183,452
24.1 This includes Company's contribution to provident fund amounting to Rs. 0.85 million (2009: Rs. 0.69 million).
38
2010 2009
(Rupees in '000)
25. Finance cost
Mark-up on:
Long term loans 40,827 59,288
Lease finance 10,365 15,600
Running finance 28,972 24,863
Interest on workers profit participation fund 11.1 2,660 -
Exchange loss 396 2,356
Legal documentation fee 890 334
Bank commission and charges 1,935 4,887
(Gain) / loss on derivative financial instrument 25.1 (2,682) 83,261
83,363 190,589
25.1 Movement in the fair value of cross currency swap (19,702) 66,376
Realized during the year - unfavourable 17,020 16,885
(2,682) 83,261
26. Other income
Mark-up on bank deposits 1,024 1,508

Mark-up on long term advance 497 599
Accretion of discount 1,583 1,734
Gain on sale of operating assets 2,783 1,760
Scrap sales 8,526 2,450
Miscellaneous 178 148
14,591 8,199
27. Workers' funds

Workers' profit participation fund 27.1 - 21,283
Workers' welfare fund 27.1 - 8,088
- 29,371
27.1 Accrual of Workers' Fund has not been made in these financial statements due to the accounting
and taxable loss for the year.
28. Taxation
Relationship between income tax expense and accounting (loss)/ profit
Tax at the applicable rate of 35% (2009: 35%) (102,002) 138,701
Net tax effect of export sales taxed at different rate 93,043 3,053
Net tax effect of gain on sale of operating assets
excluded in determination of taxable income 2,872 -
Deferred Tax effect due to Export Sales (36,676) (63,359)
Tax effect of inadmissible expenses 1,002 790
Tax effect of prior years (45,614) -
Tax effect of prior year's assessed loss (4,811) -
Others 9,010 2,754
Net tax charge for the year (83,176) 81,939
The income tax assessments of the Company have deemed to be finalized up to and including Tax year
2009.
39
2010 2009
(Rupees in '000)
29. Earnings per share - Basic and Diluted
Earning after taxation (208,258) 314,350

(Number in '000)
Weighted average number of ordinary shares 50,160 50,160
(Rupees)
(Loss)/ Earnings per share (4.15) 6.27
30. OPERATING SEGMENTS
These financial statements have been prepared on the basis of single reportable segment.
30.1 Revenue from sale of cement represents 100% (2009 : 100%) of the total revenue of the company.
30.2 70% (2009: 79%) gross sales of the Company relates to customers in Pakistan.
30.3 All non-current assets of the Company at 30 June 2010 are located in Pakistan.
30.4 The Company does not have any customer having sales of 10% or more during the year ended
30 June 2010.
31. Remuneration of directors and executives
2010 2009
Chief Chief
Director Executives Director Executives
Executive Executive
------------------------------------------ (Rupees in '000) --------------------------------------------
Managerial Remuneration 5,274 5,274 53,281 5,274 5,274 47,006

Bonus/ Ex-Gratia 908 908 4,849 1,211 1,211 4,290
Retirement Benefits - - 3,425 - - 2,816
Reimbursable Perquisites 726 726 3,359 726 726 2,795
6,908 6,908 64,914 7,211 7,211 56,907
Number 1 1 33 1 1 29
Meeting fee - 120 - - 110 -
Number of non executive

directors - 7 - - 7 -
The Chief Executive, Director and certain Executives are provided with the use of Company cars and the
operating expenses are borne by the Company to the extent of their entitlement.
Executives are employees whose basic salaries exceeds Rs. 500,000 in a financial year.
40
32. Transactions with related parties
The related parties comprise of group companies (associated companies), directors, and their close family
members, staff provident fund, executives and major shareholders of the Company. Remuneration and
benefits to executives of the Company are in accordance with the terms of their employment while
contribution to the provident fund is in accordance with the staff service rule. Transactions with related
parties during the period other than those disclosed elsewhere in the financial statements were as follows:
2010 2009
(Rupees in '000)
Associated company
Purchases (Frontier Paper Products (Private) Ltd.) 137,194 123,374
Others
Disbursement of advances to key management personnel 600 2,900
Repayment of advances by key management personnel 1,094 3,136
Sale of vehicles - 155
Balance with related parties are disclosed in note 11 and 15.
2010 2009
(Tons)
33. Capacity and production (Clinker)
Rated Capacity 780,000 780,000

Actual Production 772,940 740,330
34. Financial instruments
Financial risk management
The Board of Directors of the Company has overall responsibility for the establishment and oversight of
the Company's risk management framework. The Company has exposure to the following risks from its
use of financial instruments:
- Credit risk
- Liquidity risk
- Market risk
- Operational risk
34.1 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss, without taking into account the fair value of any
collateral. Concentration of credit risk arises when a number of financial instruments or contracts
are entered into with the same party, or when counter parties are engaged in similar business
activities, or activities in the same geographic region, or have similar economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in economics,
political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the
Company's performance to developments affecting a particular industry.
41
The carrying amount of financial assets represents the maximum credit exposure. To reduce the
exposure to credit risk the Company has developed a policy of obtaining advance payments from
its customers. Except for customers relating to the Government and certain small and medium sized
enterprises, the management strictly adheres to this policy. For any balances receivable from such
small and medium sized enterprises, the management continuously monitors the credit exposure
towards them and makes provisions against those balances considered doubtful of recovery. Cash
is held only with banks with high quality credit worthiness.
The maximum exposure to credit risk at the reporting date is as follows:
2010 2009
Balance Maximum Balance Maximum
sheet exposure sheet exposure
---------------------------- (Rupees in '000) ----------------------------
Trade debts 10,892 10,892 65,580 65,580

Loans, advances, deposits
and accrued mark-up 78,573 78,573 94,925 94,925
Bank balances 19,184 19,184 18,982 18,982
108,649 108,649 179,487 179,487
34.1.1 The maximum exposure to credit risk at the balance sheet date by geographic region is as
follows:
2010 2009
(Rupees in '000)
Domestic (Pakistan) 6,151 55,855

Exports ( India and Afghanistan) 4,741 9,725
34.1.2 The maximum exposure to credit risk for trade debts and other receivable at the balance sheet
date by type of customer is as follows:
2010 2009
(Rupees in '000)
Dealer / distributor 10,443 14,534
End-user customers 449 51,046
34.1.3 Impairment losses

The aging of trade debtors at the balance sheet date was:
2010 2009
Gross Impairment Gross Impairment
Not past due - - - -
Past due 1-60 days 6,304 - 64,971 -
Past due 61 days -1 year 4,100 - 464 -
More than one year 488 - 145 -
Total 10,892 - 65,580 -
34.1.4 Based on past experience, consideration of financial position, past track records and recoveries,
the Company believes that trade debtors past due upto one year do not require any impairment.
None of the other financial assets are either past due or impaired.
42
34.2 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated
with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk
arises because of the possibility that the Company could be required to pay its liabilities earlier than
expected or difficulty in raising funds to meet commitments associated with financial liabilities as
they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
The following are the contractual maturities of financial liabilities, including interest payments:
2010
Carrying Contractual Six months Six to Two to five More than
amount cash flows or less twelve years five years
months
--------------------------------------------(Rupees in '000)-------------------------------------------
Non-Derivative
Financial liabilities
Long term financing 725,000 1,001,704 60,553 90,197 850,954 -
Liabilities against assets
subject to finance lease 66,991 73,473 19,320 19,320 34,833 -
Short-term running finance 526,654 579,471 579,471 - - -
Trade and other payables 523,423 523,423 512,395 - - 11,028
Derivatives
Cross Currency Swap 137,650 137,650 137,650 - - -
1,979,718 2,315,721 1,309,389 109,517 885,787 11,028
2009
Carrying Contractual Six months Six to Two to five More than
amount cash flows or less twelve years five years
months
--------------------------------------------(Rupees in '000)-------------------------------------------
Non-Derivative
Financial liabilities
Long term financing 300,000 396,906 53,790 57,597 285,519 -
Liabilities against assets
subject to finance lease 95,113 113,338 19,563 19,563 74,212 -
Short-term running finance 299,150 318,693 318,693 - - -
Trade and other payables 339,908 339,908 328,096 - - 11,812
Derivatives
Cross Currency Swap 157,352 157,352 157,352 - - -
1,191,523 1,326,197 877,494 77,160 359,731 11,812
34.2.1 The contractual cash flows relating to the above financial liabilities have been determined on
the basis of mark-up rates effective as at 30 June (and includes both principal and interest
payable thereon). The rates of mark-up have been disclosed in notes 6, 7 and 9 to these financial
statements.
34.3 Market risk
Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes
in market interest rates or the market price due to a change in credit rating of the issuer or the
instrument, change in market sentiments, speculative activities, supply and demand of securities
and liquidity in the market. Market risk comprises of currency risk, interest rate risk and other price
risk. The Company is exposed to currency risk and interest rate risk only.
43
34.3.1 Currency risk
Foreign currency risk is the risk that the value of financial asset or a liability will fluctuate due
to a change in foreign exchange rates. It arises mainly where receivables and payables exist
due to transactions entered into foreign currencies.
Exposure to currency risk
The Company's exposure to foreign currency risk was as follows based in notional amount:
2010 2009
Rupees US Dollars Rupees Rupees
---------------------------------(in '000)---------------------------------
Trade debts 4,741 55 9,725 119

Trade payables (125,127) (1,462) (7,125) (88)
Gross balance sheet exposure (120,386) (1,407) 2,600 31
Estimated forecast sales 101,562 1,186 1,384 17

Estimated forecast purchases (103,214) (1,206) (469,736) (5,770)
Gross exposure (1,652) (20) (468,352) (5,753)
Cross currency and interest rate

swap - US Dollars (353,186) (4,126) (403,060) (4,951)
(353,186) (4,126) (403,060) (4,951)

Net exposure (475,224) (5,553) (868,812) (10,673)
The following significant exchange rates applied during the year:

Average rates Balance sheet date rate
2010 2009 2010 2009
US Dollars 83.51 79.73 85.60 81.41
Sensitivity Analysis
A 10 percent strengthening of the Rupee against US Dollar at 30 June would have increased / (decreased)
profit and loss account by the amounts shown below. This analysis assumes that all other variables, in
particular interest rates, remain constant. The analysis is performed on the same basis for 2009.
Profit and loss Equity

(Rupees in '000)
As at 30 June 2010
Effect in US Dollars (12,039) -
As at 30 June 2009
Effect in US Dollars 260 -
44
A 10 percent weakening of the Rupees against the above currency at 30 June would have had the
equal but opposite effect on the above currencies to the amounts shown above, on the basis that
all other variables remain constant.
34.3.2 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Majority of the interest rate exposure
arises from short and long term borrowings from banks and term deposits with banks. At the
balance sheet date the interest rate profile of the Company’s interest-bearing financial instruments
was as follows:
Carrying amount
2010 2009
(Rupees in '000)
Fixed rate instruments
Financial assets 25,406 28,271
Financial liabilities - -
25,406 28,271
Variable rate instruments
Financial assets - -
Financial liabilities 1,318,645 694,263
1,318,645 694,263
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 and loss. Therefore, a change in interest rates at the reporting date would not
affect the profit and loss account and equity of the Company.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased /
(decreased) profit or loss by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant. The analysis is performed on
the same basis for current and last year.
Profit and loss Equity

(Rupees in '000)
As at 30 June 2010
Cash flow sensitivity-Variable rate instruments 13,186 -
As at 30 June 2009
Cash flow sensitivity-Variable rate instruments 6,943 -
34.4 Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated
with the processes, technology and infrastructure supporting the Company’s operations either
internally within the Company or externally at the Company’s service providers, and from external
factors other than credit, market and liquidity risks such as those arising from legal and regulatory
requirements. Operational risks arise from all of the Company’s activities.
45
The primary responsibility for the development and implementation of controls over operational risk
rests with the board of directors. This responsibility encompasses the controls in the following areas:
- requirements for appropriate segregation of duties between various functions, roles and
responsibilities.
- requirements for the reconciliation and monitoring of transactions;
- compliance with regulatory and other legal requirements;
- documentation of controls and procedures;
- requirements for the periodic assessment of operational risks faced, and the adequacy of controls
and procedures to address the risks identified;
- ethical and business standards;
- risk mitigation, including insurance where this is effective.
34.5 Fair value of financial assets and liabilities
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm's length transaction. Consequently, differences can arise
between carrying values and the fair value estimates.
The carrying amounts of all financial assets and liabilities reflected in the financial statements
approximate their fair values.
The company measures fair values using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements:
Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2: Fair value measurements using inputs other than quoted prices included within Level that
are observable for the asset or liability, either directly or indirectly.
Level 3: Fair value measurements using inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs).
As at 30 June 2010, cross currency and interest rate swap was categorised in level 3.
The following table shows a reconciliation from the beginning balances to the ending balances for
fair value measurements in level 3 of the fair value hierarchy.
2010 2009
(Rupees in '000)
Balance as at 01 July 2009 157,352 90,976

Settled during the year - unfavourable (17,020) (16,885)
(Gain) / loss on derivative financial instrument (2,682) 83,261
Balance as at 30 June 2010 137,650 157,352
46
34.6 Capital risk management
The management's policy is to maintain a strong capital base so as to maintain investor, creditor
and market confidence and to sustain future development of the business. The management closely
monitors the return on capital along with the level of distributions to ordinary share holders.
The management seeks to maintain a balance between higher returns that might be possible with
higher levels of borrowings and the advantages and security afforded by a sound capital position.
The Company is not required to maintain any regulatory capital.
35. Accounting estimates and judgements
35.1 Income taxes
In making the estimates for income taxes currently payable by the Company, the management
considers the current income tax law and the decisions of appellate authorities on certain issues
in the past.
35.2 Property, plant and equipment
The Company's management determines the estimated useful lives, residual value and related
depreciation charge for its plant and equipment. The Company reviews the value of the assets for
possible impairment on an annual basis. Any change in the estimates in future years might affect
the carrying amounts of the respective items of property, plant and equipments with a corresponding
effect on the depreciation charge and impairment.
35.3 Stock-in-trade and stores and spares
The Company’s management reviews the net realisable value (NRV) and impairment of stock-in-
trade and stores and spares respectively, to assess any diminution in the respective carrying values
and wherever required provision for NRV / impairment is made. The difference in provision, if any,
is recognised in the future period.
35.4 Trade debts and other debts
Impairment loss against doubtful trade and other debts is made on judgemental basis, for which
provision may differ in the future years based on the actual experience. The difference in provision
if any, would be recognised in the future years.
35.5 Fair value of derivates financial instrument
The management reviews the changes in fair values of cross currency swap at each reporting date
based on the valuations received from the contracting bank. These valuations represent estimated
fluctuations in the relevant currencies and interest rate over the reporting period.
47
36. Reclassification
Following corresponding figures have been reclassified for better presentation.
From To Rupees in '000

Profit and loss account
Sales - net Distribution cost 144,975
37. General
These financial statements were authorised for issue in the Board of Directors meeting held on
27 September, 2010.

48
FORM OF PROXY
I/We
of
being a member of FECTO CEMENT LIMITED hereby appoint
(NAME)
of
who is also a member of the Company vide Registration Folio Number____________ as my/our proxy
in my/our absence to vote for me/us and on my/our behalf at the 29th Annual General Meeting of the
Company to be held on Tuesday, October 26, 2010 at 12:00 noon at Registered Office, 35-Darulaman
Housing Society, Block 7/8, Shahra-e-Faisal, Karachi and at any adjournment thereof.
Folio No.
Member’s Signature
Shares held (Nos.)
On Rupee Five
Revenue Stamp Place Date
Witness:
Signature
Name:
Address :
Note:
1. Proxies in order to be effective be received at the Company’s Registered Office (35-Darulaman

Housing Society, Block 7/8, shahra-e-Faisal, Karachi) no less than 48 hours before the meeting
and must be duly stamped, signed and witnessed.
2. Member’s signature must agree with the specimen signature registered with the Company.

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FECTO CEMENT LIMITED ANNUAL REPORT 2010

Mission Statement, Vision Statement and Corporate Strategy 3

Key operating and Financial Data 11

Statement of Compliance with the Code of Corporate Governance 12

Auditors' Report on Statement of Compliance with Best Practices

Profit & Loss Account 18

Statement of Comprehensive Income 19

Cash Flow Statement 20

Statement of Changes in Equity 21

Notes to the Accounts 22

BOARD OF DIRECTORS CHAIRMAN

Mr. Mohammed Asad Fecto

Mr. Mohammed Yasin Fecto

Mrs. Zubeda Bai

AUDIT COMMITTEE Chairman: Mr. Mohammed Asad Fecto

SECRETARY Mr. Abdul Samad, FCA

AUDITORS KPMG Taseer Hadi & Co.

LEGAL ADVISOR Nisar Law Associates

REGISTERED OFFICE 35-Darulaman Housing Society

FACTORY Sangjani, Islamabad

MARKETING OFFICE 2nd Floor, Majeed Plaza

SHARES REGISTRAR Technology Trade (Private) Limited

To compete in tough and competitive market, focusing on “Satisfaction” of

NOTICE OF ANNUAL GENERAL MEETING

3. To transact any other business with the permission of the Chair.

By Order of the Board

Karachi: September 27, 2010

3. Members are requested to notify any change in their address immediately.

DIRECTORS' REPORT TO THE MEMBERS

2010 2009 CHANGE IN

Net sale 2,902,684 3,455,706

WASTE HEAT RECOVERY POWER PLANT

CONTRIBUTION TO NATIONAL EXCHEQURE

PENDING LEGAL PROCEEDINGS

2. Proper books of account have been maintained by the company;

4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation

On behalf of the Board

MOHAMMED ASAD FECTO

109 1 100 3,056

Categories of Shareholders Number of Shareholders Total Shares Held Percentage

1,766 50,160,000 100.00

Pattern of shareholding as at June 30, 2010

NIT and ICP

Chief Exective Officer

Public Sector Companies and Corporations _ _

Banks, Development Finance Institutions,

Shareholders holding 10% or more voting interest

Detail of trading in shares by the Directors,

There ware no trading in shares other than as mentioned above by any

Six Years Key Operating

PRODUCTION SUMMARY (Tonnes)

Clinker production 772,940 740,330 763,478 729,599 537,350 573,398

Cement production 841,904 764,119 790,518 750,400 609,081 573,993

Cement despatches 841,822 763,468 792,506 741,727 612,495 574,119

(Rupees in thousand unless stated otherwise)

PROFIT & LOSS SUMMARY

Turnover (net) 2,902,684 3,455,706 2,409,364 2,226,545 2,497,4911,844,553

Gross profit 152,731 913,403 279,548 234,524 828,226 424,749

(Loss)/profit before tax (291,434) 396,289 (118,435) 29,104 637,516 297,295

BALANCE SHEET SUMMARY

Paid up capital 501,600 456,000 456,000 456,000 456,000 456,000

Reserve 50,000 50,000 50,000 50,000 50,000 50,000

Accumulated profit 412,302 666,160 351,810 433,753 483,209 202,696