Annual Report 2011

Annual Report 2011
The Crescent Textile Mills Limited
Annual Report 2011
Annual Report 2011
Contents
Company Information Notice of Annual General Meeting Mission, Vision and Values Graphical Representations Directors Report to the Shareholders Key Operating and Financial Data Performance Indicators Statement of Compliance with best practices of Code of Corporate Governance Review Report to the Members on Statement of Compliance with best practices of Code of Corporate Governance Pattern of Shareholding Auditors Report to the Members Balance Sheet Profit & Loss Account Statement of Comprehensive Income Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Proxy Form
4 5 7 8 10 19 20
21 23 24 27 28 30 31 32 33 34 87
Annual Report 2011
Company information
Mr. Muhammad Anwar
Chairman & Chief Executive Director Director Director Director Director Director Director
Mr. Ahsan Mehanti Mr. Khalid Bashir Mr. Khurram Mazhar Karim Mr. Muhammad Arshad Mr. Muhammad Asif (Nominee NIT) Mr. Nasir Shafi Mr. Zeshan Afzal
Al Baraka Bank Limited Allied Bank Limited Burj Bank Limited Faysal Bank Limited Habib Bank Limited Meezan Bank Limited MCB Bank Limited National Bank of Pakistan NIB Bank Limited Standard Chartered Bank (Pakistan) Limited United Bank Limited
Audit Committee
Mr. Khalid Bashir Mr. Nasir Shafi Mr. Ahsan Mehanti Chairman Member Member
Mills & Head Office

Sargodha Road, Faisalabad, Pakistan T: + 92-041-111-105-105 F: + 92-041-111-103-104 E: crestex@ctm.com.pk
Chief Financial Officer

Mr. Sadiq Saleem
Corporate Secretary
Mr. Naseer Ahmad Chaudhary
Registered Office
40-A, Off: Zafar Ali Road, Gulberg-V, Lahore, Pakistan T: + 92-042-111-245-245 F: + 92-042-111-222-245 E: mailho@crescentbahuman.com
Head of Internal Audit

Mr. Muhammad Attiq ur Rehman
Auditors
Riaz Ahmad & Company Chartered Accountants
Share Registrar
Crescent Group Services (Pvt) Ltd, 306, 3rd Flr, Siddiq Trade Centre, 72-Main Boulevard, Gulberg, Lahore, Pakistan T: + 92-042-35787592 F: + 92-042-35787594 E: corpsecry@cresjute.com www.ctm.com.pk
Legal Advisor
Mujtaba Jamal Law Associates Raza Abbas Chaudhary Advocate
Stock Exchange Listing

The Crescent Textile Mills Limited is a listed Company and its shares are traded on all three Stock Exchanges in Pakistan. The Company's shares are quoted in leading dailies under textile personal goods sector.
Annual Report 2011
Notice of Annual General Meeting

Notice is hereby given that the 62nd Annual General Meeting of the shareholders of the Company will be held on Monday, the October 31, 2011 at 9:30 a.m. at the registered office of the company at 40-A, Off: Zafar Ali Road, Gulberg-V, Lahore to transact the following business:1. To confirm the minutes of Extra Ordinary General Meeting of the shareholders held on May
16, 2011.
2. To receive, consider and approve the audited accounts of the company for the year ended
June 30, 2011 together with the Directors' and Auditors' Reports thereon.
3. To appoint Auditors of the company and fix their remuneration for the year ending June 30,
2012. Present auditors M/s. Riaz Ahmed and Company, Chartered Accountants, retire and being eligible to offer themselves for re-appointment.
4. To transact any other business with permission of the Chairman.
Registered Office: 40-A, Off: Zafar Ali Road, Gulberg-V, Lahore: T: +92-042-111-245-245 F: +92-042-111-222-245 Dated: October 05, 2011
By Order of The Board
(Naseer Ahmad Chaudhary) Corporate Secretary
Annual Report 2011
Notes
1. The Members' Register will remain closed from October 22, 2011 to October 31, 2011 (both days inclusive). Physical / CDC transfers received at the Registered Office of the Company by the close of business on October 21, 2011. 2. A member eligible to attend and vote in this meeting may appoint another member as proxy to attend and vote in the meeting. Proxies in order to be effective must be received by the company at the Registered Office not later than 48 hours before the time for holding the meeting. 3. Shareholders are requested to immediately notify the change in address, if any. 4. CDC account holders will further have to follow the guidelines as laid down in circular No.1 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan: a. For attending the meeting: i). In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall authenticate his/her identity by showing his original Computerized National Identity Card (CNIC) or original passport at the time of attending the meeting. In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signatures of the nominee shall be produced (unless it has been provided earlier) at the time of the Meeting.
ii).
b. For Appointing Proxies i). In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall submit the proxy form as per the above requirement.
ii). The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form. iii). Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form. iv). The proxy shall produce his original CNIC or original passport at the time of the Meeting. v). In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signatures shall be submitted (unless it has been provided earlier) along with proxy form to the company.
Annual Report 2011
Mission, Vision and Values

To be the 1st Choice of Customers and achieve a leading role in the economy through enhancement of quality of life style for Stakeholders.
Annual Report 2011
Graphical Representations
Balance Sheet Composition
Shareholder Equity and Liabilities - 2011
Shareholder Equity and Liabilities - 2010
4%
6%
Share capital and reserves Surplus on revaluation of operating fixed assets
Non current liabilities Current liabilities
Share capital and reserves Surplus on revaluation of operating fixed assets
Non current liabilities Current liabilities
Assets - 2011
Assets - 2010
Property, plant and equipment Investments Other assets
Inventories Trade debts
Property, plant and equipment Investments Other assets
Inventories Trade debts
Annual Report 2011
Analysis of Profit and Loss Account
Sources of Earnings
Utilization of Earnings
Rupees in million
Rupees in million
Gross profit Share of associate profit
Other operating income
Admin, distribution & others Finance cost Taxation Share of associate (loss) / profit Transferred to retained earnings
Analysis of Cash Flows
Utilization of Available / Generated Cash during the Year 2011
Utilization of Available / Generated Cash during the Year 2010
Operating Activities
Investing Activities
Cash and Cash Equipments
Investing Activities
Financing Activities
Cash and Cash Equipments
Annual Report 2011
Directors' Report to the Shareholders

The Board of directors of your company is pleased to present the 62nd Annual Report and Audited Financial Statements of the company for the year ended June 30, 2011 together with the Auditors' Report thereon. Following are the highlights of major events of the year: Industry: Consistent rise in cotton prices to historically high levels. Year- long bridled gas supply and extreme power cuts. Imposition of Fixed Sales Tax on sale of textiles to Un Registered Persons by FBR. Company: Growth in export sales revenues depicting increase of 46.32%. Slide in finance cost despite achieving higher sales growth and despite utilizing increased level of Bank borrowings. Use of LPG as an alternate to strengthen value added manufacturing. Steam generation from Rice Husk Boiler by eliminating use of HFO. Conversion of long term debt of the company in CBL to Preference Shares. Summary of financial results is as below: (Rupees in million) Particulars 2011 2010 % Change 10,863.386 1,456.742 731.247 184.767 566.793 343.469 118.821 224.648 35.86 -6.32 21.02 -3.10 -6.99 -61.70 -16.29 -85.72 The benchmark NYC which was trading $0.76/Lb in June 2010 touched $2.14 / Lb in March 2011. Main reasons behind this hike were damage to crop in Pakistan and China inflicted with floods and heavy rains besides inflammation given by hedged funds involvement. Over and above this, policy of the Indian Govt to ban export of surplus cotton aggravated the situation. Demand and supply gap in cotton availability forced industry to import costly cotton which required huge working capital funds at increased financial cost. Later in 4th Qtr on news of bumper harvest of world cotton crop prices plummeted. This resulted into heavy pressure on selling prices and eroded margins along with colossal inventory losses due impairment in value of carrying cost of stocks held with the value added industry. Falling cotton prices coupled with prolonged gas outages curtailed business operations during last Qtr of the financial year. These circumstances forced most industrial units to opt for shutting down operational activities as heavy energy cost on alternate expensive fuel outpaced shutdown losses. Consequently these adverse business conditions in 4th Qtr affected negatively onto the performance of the entire Fy2011. Influenced by rising cotton prices based on demand supply gap, PSF followed similar trend as higher demand, increase in fuel prices, speculative trading and supply constraints kept its prices higher. On the other hand landscape of the country's macroeconomic performance reflected mixed trends as current account of FY2011 posted a positive close ($542 million surplus) after 07 years. This was achieved mainly on growth in textile exports due high cotton price impact, significant rise in home remittances, lower oil bill due subdued oil based energy generation, support of donors and last but not the least declining investment appetite due energy crises. Healthy build up of reserves helped PKR to maintain stable parity with US$ throughout the year but high interest rates on account of heavy Govt borrowings and energy crises, throughout the year, negatively affected Large Scale Manufacturing growth in general. In GDP composition the contribution of manufacturing sector remained weak and faced immense challenges due power and gas shortages, weak demand and high interest rates in the region.
Sales revenue 14,759.257 Gross profit 1,364.616 Operating expenses 884.955 Other operating income 179.043 Finance cost 527.172 Profit before tax 131.532 Taxation 99.465 Net profit after tax 32.067
Over view of industry and economy: Financial year 2011 saw record breaking cotton prices which were the highest in 160 years of recorded history.
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Annual Report 2011
In view of IMF conditions for disbursement of last SBA Tranche, FBR had detailed deliberations with the stakeholders for implementations of RGST across the board. After lots of negotiations a Fixed Sales Tax Regime was introduced in March 2011 by imposing 6% and 4% GST on sale of yarn and value added goods respectively by the Registered Persons of textile chain to the Unregistered Persons. Lack of budgetary allocations for incentives announced in the Textile Policy 2009 led to most claims being undisbursed and further dampened performance of industry. Similarly, on opposition of India GSP Plus status to Pakistan's textiles could not be achieved to give much needed impetus to exports into EU Countries Amid rising input costs and constant increase in fuel prices industry faced major concerns to absorb in selling prices as foreign buyers either refused to accept up charge or evaded their commitments. Stable PKR parity with US $ also did not help to mitigate such losses and hammered selling margin of value added industry. In general the business sentiments were dampened due contracting margins and ongoing political and security environment. Financial performance: Your company recorded robust sales growth of 35.86% over previous year on the strength of higher sales volumes as well as higher selling prices. However, this improvement was not transformed into gross margins which fell down to 9.25% of sales revenues as against 13.41% in the previous financial year. Major reason for decline in margins was attributed to jump in cost of sales in particular the performance 4th Qtr which erased most of the gains accrued to the Co. till 3rd Qtr of the FY 2011. The news on forecast of bumper cotton crop for new season played havoc and cotton prices fell drastically. This situation prompted local and foreign buyers to adopt wait and see strategy. Sluggish demand and unavailability of gas curtailed operations and there was no choice except to shut down operations as use of expensive alternate fuel source available with the company for energy generation could lead to colossal
losses due uneconomical operations. During last Qtr of the financial year slowdown in demand further aggravated the situation as inventory carrying cost increased besides impairing values at the same time. Selling and distribution cost was higher on increased rates of ocean freight due higher oil prices, enhanced volume of exports with rise foreign agents commission. Operating cost and income were slightly lower but controlled finance cost despite higher borrowing level neutralized the impact of 6.32% decline in gross margins on net profit of the company. A summarized financial impact of all those un-favouable business conditions; which caused reduction in gross margin during FY 2011 particularly in Qtr 04 is as below: Million Rs. Extra fuel cost incurred by the company for energy generation and other processes (HFO, diesel and LPG use) during gas load shedding Shut downs cost during 4th Qtr due lack of gas and decline in selling margins against subdued sales Impairment of inventories, cotton and fabric during 4th Qtr on account decline in cotton prices Grand total Segmental performance: Escalation in input cost of raw material, use of HFO, Diesel oil and LPG during gas load shedding along with adverse impact of 4th Qtr kept margins in all business segments of the company under pressure through out the FY 2011. Phenomenal increase in cotton prices helped to maintain margin in spinning but in the backdrop of mounted input costs the value added segments faced most of the brunt. Frequent gas curtailment schedules gave rise to production costs of these segments and put pressure on margins. All of these factors proved negative catalyst in dragging margins of the company downward and were also lower in comparison to last year's margin.
417.058
122.880
154.068 694.006
Annual Report 2011
11
A summarized performance of each of the segments is as below:

Fig's in Million Rs.
Spinning Particulars
Sales Cost of Sales Gross Profit Distribution Cost Administrative expenses Profit/(loss) before taxation and unallocated income and expenses
Weaving 2011
7,479 7,251 228 102 16 118
Processing and Home Textiles 2011

8,486 8,259 227 472 93 565
2011
6,838 6,056 782 64 81 145
2010
5,044 4,081 963 65 72 137
2010
5,082 5,021 61 42 14 56
2010
7,014 6,750 264 364 84 448
In the overall sales revenues export share was higher 5% from previous year's pie and improved to 75% as against 70% during last year. In exports the share of value added goods was steady but fabric showed massive growth of 105.55% with major contribution coming from greig exports on increased demand. On the local side yarn depicted marginal growth (13.72%) as most of volume was converted into in-house fabric manufacturing. The impetus given by cotton prices to sales volume in 09 months of the FY 2011 could not sustain in Qtr 04 as cotton prices crashed after witnessing a tremendous bull run till March 2011. Despite very difficult business conditions during the year including energy crises, higher input costs, squeezed banking facilities to private sector, weak security and political environment, lesser off take in Europe, USA due recession, higher import duties and high cotton prices, very competitive international market and stable PKR the category wise export of the company remained strong in fabric and steady in value added and yarn. This trend along with past 05 years' data has been depicted as below:
637
826
110
(338)
(184)
The aforesaid segmental results include intersegment sales but exclude trading and other processes like Power Generation and Cold Storage results. Sales revenue: Over all net sales revenues of the company were higher by 35.86% over previous year with major thrust coming from exports which recorded growth of 46.32%. The up stick in exports was largely driven by higher cotton and polyester prices thereby giving higher push to yarn prices but witnessed steady rise in prices of value added exports. Earlier better margin in end product prices helped in improving volumes of fabric exports but remained lower in yarn and local fabric sales. Nonetheless these volumes were subdued in last Qtr of the financial year as buyer held back their demand amid falling cotton prices. A summarized statement of sales revenues is as below: Sales revenue Local: Yarn Fabric Others Export: Yarn Fabric- Own manufactured Fabric- Direct purchases Home textiles 2011 Million Rs. % 2,774.118 518.198 331.554 3,623.871 19 4 2 25 2010 Million Rs. % 2,439.279 506.740 307.125 3,253.144 22 5 3 30
Year 2007 2008 2009 2010 2011
Yarn Million Rs. % 204 277 257 394 440 07 06 05 07 06
Fabric Million Rs. % 1,565 1,825 1,508 1,608 2,833 52 45 36 32 47
Home Textiles Million Rs. % 1,223 1,980 2,892 3,261 3,765 41 49 59 61 47
Total Million Rs. % 2,992 4,082 4,658 5,263 7,038 100 100 100 100 100
Over all composition of sales revenue remained growth oriented and shot up in value added category particularly in fabric and generally in home textiles. Comparison of the total sales revenue composition with previous year is given as below:
Particulars Yarn Fabric Home Textile Trading Others Total sales revenue
2011 2010 Change Million Rs. Million Rs. ( % ) 3,213 3,351 3,765 4,097 333 14,759 3,833 2,115 3,261 2,348 306 10,863 (16) 58 15 74 9 36
439.857 3 2,832.687 19 4,097.464 28 3,765.379 25 11,135.387 75 14,759.258 100
394.028 4 1,608.305 15 2,347.550 21 3,260.662 30 7,610.545 70 10,863.387 100
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Annual Report 2011
Operational performance: Cost of sales: Cost of sales of the company was up by 42.40% owing to increased input costs which increased by Rs.3,987.999 million from the last financial year (increased from Rs.9,406.644 million in 2010 to Rs.13,394.643 million during the year 2011). Main factors which were responsible for heightening of cost are as below: 2011 2010 Change Particulars Million Rs. Million Rs. ( % ) Raw materials 4,691.599 Cloth and yarn purchased 1,558.574 Weaving and processing charges 544.056 Fuel and power 1,135.444 2,848.255 1,204.721 376.585 976.608 65 29 44 16 Moreover, unprecedented gas curtailments which persisted all along the year contrary to previous years when it was in winter only. Gas curtailment days during the year were increased to 126 days as against only 55 days during last year. These higher curtailments caused enormous loss not only by increasing energy and utilities cost by opting HFO, diesel and LPG use and also halted operations during last Qtr when shut down losses were rather preferred over use of expensive fuel; which would have additional burden along with decline in margins. Other costs including stores consumption, maintenance and insurance increased due higher inflationary impact. On increased working capital requirements due raw material prices the average use of borrowing level of the company increased by Rs. 962 million (from Rs. 6,114 million to Rs. 7,076 million) but average mark up rates were down from 8.72% during last year to 7.45% in the FY 2011. This was the result of higher borrowing mix of use of US $ loans and finances provided by SBP under ERF and LTTF schemes. Almost whole of profit earned till March 2011 in 09 months of the FY 2011 was wiped out in 4th Qtr through very adverse business circumstances and company was able to close its FY at a very meager net after tax profit of Rs. 32.067 million as against Rs. 224.648 million in the last year; which was down by 85.72% over corresponding period of previous year. Summarized financial results for the year 2011 were as below:
2011 2010 Change Million Rs. Million Rs. ( % )
14,759 1,365 885 179 527 132 100 32 (151) (119) 10,863 1,457 731 185 567 344 119 225 120 345 36 -6 21 -3 -7 62 -16 -86 -226 -134
Cotton and polyester prices rose to record levels by setting new highs of Rs.14,000/ maund and Rs.196/ kg respectively as against Rs.4,800/ maund and Rs.139/ kg in last financial year. But over all consumption of both these inputs was lower as higher prices required increased investment in terms of enhanced short term borrowing at high rate of borrowing. Yarn and fabric purchases were lower due heavy investment but quantum of weaved fabric jumped by 40.90% (from 16.178 million meters in last year to 22.795 million meters) and similar trend was witnessed in weaving charges which were higher by 23.54% during the year in comparison to previous year's rates. Fuel cost increased on higher oil prices along with higher use of HFO, diesel along with consumption of LPG during gas load shedding. Unlike other competitors the company resorted to expensive fuel consumption for power generation due no WAPDA connection. In general average rates of fuels were also higher as detailed below: Particulars HFO rate- Ton Diesel rate- Ton Gas rate- m3 2011 (Rupees) 50,094 66,090 12.91 2010 Variance (Rupees) (Rupees) ( % ) 40,552 60,890 11.48 9,542 5,200 1.43 24 9 13
Particulars
Sales revenue Gross profit Operating costs Other operating income Finance cost Profit before tax Taxation Profit after tax Share of profit/ (loss) associate Net after tax (loss) / profit
Year long gas outages also increased consumption of expensive fuels as per below: Particulars HFO- Ton Diesel oil- Ton Gas- Million m3 2011 (Qty) 8,116 2,012 20,580 2010 (Qty) 6,602 1,184 30,989 Variance (Qty) ( % ) 1,514 828 (10,409) 23 70 (34)
Annual Report 2011
13
Operational review: Frequent and yearlong energy outages particularly in our case gas curtailments severally hampered the operational performance of the company. Despite using expensive fuels like HFO, Diesel oil and LPG to smooth out process the production results remained subdued and far below the levels achieved during last year. Company had to depend on outsourcing of processes of various products to fulfill its export commitments. This shift of trend not only increased order execution time but also put extra burden unabsorbed fixed costs for underutilizing its own processes. These processes were severally affected in 4th Qtr which was worst from all respects as decline in selling prices, depressed sales on sluggish demand, unavailability of gas and shutdowns deteriorated performance of FY 2011. Operational performance of different process of the company in comparison to previous year was as below:
2011 ( Qty )
31,521
Year a) Yarn (in '000' Kgs): Available for use Sold (%) Used in weaving (%) b) Grey fabric (in '000' Mtrs): Available for use Sold (%) Used in processing (%) 20,090 4,788 24 15,302 76 24,125 7,006 28 17,119 72 27,234 7,348 27 19,886 73 26,004 16,327 8,214 5,077 32 31 17,790 11,249 68 69 22,491 9,205 41 13,286 59 25,064 12,581 50 12,483 50 24,999 12,315 49 12,684 51 25,798 23,822 11,974 12,408 46 52 13,824 11,414 54 48 2011 2010 2009 2008 2007
c) Processed fabric (in '000' Mtrs): Available for use Sold (%) Used in home textile (%) 31,122 11,011 35 20,111 65 35,477 11,026 31 24,451 69 34,135 11,234 33 22,900 67 34,719 29,294 14,539 16,994 42 58 20,179 12,301 58 42
Particulars
Spinning: Yarn converted into 20's (000 kgs) Weaving: Fabric converted into 50 picks (000 Sq Meters) Processing: Fabric processed (000 in linear meters)
Predominant factor in reduction of volumes in 2011 was 2010 Decrease mainly high raw material prices, constrained availability ( Qty ) ( % ) of Banking facilities and the major cause was enhanced as well as continued yearlong gas outages. Barring gas 36,281 13 factor the company is fully equipped to manage sizeable growth in operational performance.
75,527 23
62,361
Compliance to good governance, laws, social and environmental requirements: The company is committed to fulfill its responsibilities in adhering to governance, legal including local and international, social and environmental responsibilities and commitments. It has been pioneer to implementing the aforesaid requirements and maintains a transparent and sustainable corporate set up to exhibit and promotes this culture throughout the performance by its management and employees. These are demonstrated by giving clear way forward through the guidance in policies, rules and regulations framed and implemented in true letter and spirit.
33,006
35,551 21,282
7 18
Home Textiles: Fabric stitched (000 in linear meters) 17,476
Company has sizeable capacity available to utilize all of semi finished products in upstream processes but lack of WAPDA energy connection and unavailability of gas is hampering efficiency of these processes. Spinning capacity provides natural hedge for value added goods against swings in raw material prices and reduces dependence on outsourcing as well as extra cost. This fact is eminent from table of last 05 years data as given below:
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Annual Report 2011
Company places high priority to these standards which are internally and externally monitored through the teams of experts, internal and external audit teams consisting compliance experts appointed by customers, local and international legal bodies. To protect health and safety of employees and environment the company provides able conditions and means to ensure compliance. The company has established, implemented, and maintained systems in compliance with the requirements of international standards and achieved and granted third party certifications through the accredited agencies for the following product, management and environmental systems standards:
ISO 9001:2008 ISO 14001:2004 C-TPAT/ GSV OE 100 GOTS Oeko-Tex 100 Oeko-Tex 100 SUPIMA SA 8000 BCI SADEX Quality Management Systems Environment Management Systems Security Management Systems Product Standards, Organic Exchange Product Standards, Global Organic Textiles Product Standards for Fabric, Human Ecology Product Standards for Home Textiles Certification for use SUPIMA Cotton Social accountability Better Cotton Initiative Audit Data Bank for sharing with customers
expenses Hajj for 06 employees each year with 15 paid holidays, allows maternity leaves to females employees, distributes cycle, fan, sewing machines on easy instalments and has arranged FP Shop/ Utility Stores, School Bus and Canteen facilities. To address grievances of employees a Work Council has established which conducts regular meetings. Company is also maintaining Workers Welfare Funds from where needy / distressed employees are helped besides it has full coverage of employees under the Group Insurance Scheme. It ensures on job health and safety protection measures for employees and also has arranged Frist Aid Facility and a Dispensary to tackle minor incidents along with Social Security Protection for all the work force as well as 24 hours Ambulance facility for handling emergent and serious cases of employees and their dependence. Under the terms of agreement executed each year with CBA employees are provided financial aid for marriage of daughters and funeral expenses and also some kind of financial help to very needy cases. Company has been providing residential facilities to all its essential employment with free provision of utilities according to cadre and status. To perform religious and sports affairs the company has mosque, club and ground inside its mills colony. For leaning and growth of employees in-house and outside training courses are arranged while immediately on their hiring and then during the job. To keep work friendly environment the company has set procedures, rules and regulations which regulate employment guidance. Harmonious working environment and cordial industrial relations prevailed during the year. The operations of the company were carried out keeping in view the dignity, respect, support, protection as per national and international standards set to meet the working environment. All workmen performed their duties and jobs at standard hours and if they were required to put extra workings to meet the exigencies and to fill man power shortage they were compensated and paid per the legal criteria. There were no such complaints of any work abuses or not fulfilling their requirements. They were provided usual working environment and work relations climate remained very cordial.
Contribution to national exchequer: During the financial year, the company contributed Rs 199 million to the national exchequer in the shape of direct and indirect taxes and earned valuable foreign exchange of US $ 129 million through the export of its products. Human resource and industrial relations: The company provides a dignified and respectable work environment for all employees. This is demonstrated at all levels beyond any racism, cast, sex or religion criteria and respects human rights ethics and standards. Appropriate opportunity is provided to employees to participate in CBA activities and elect representatives of their choice under free and fair environment. Under the agreement with CBA company pays incentive bonuses besides profit bonus, bears
Annual Report 2011
15
Information technology: Company has in-house ERP set up to support and provide automated data based information for monitoring routine and overall performance of various segments of the organization. This is generated through LAN and OF (Oracle Financial) modules. The existing setup was enhanced with attachment of other modules like PIS (Purchase and Inventory System) Pay Roll & HR module. Professional teams are working on other modules to encompass with OF which will enhance capability of existing ERP set up. Meanwhile from next financial year company has already implement OF R12 which is of advance version with better options to work with by eliminating weaknesses observed in the earlier version. To protect and preserve IT based data storage required servers have placed which are upgraded to accommodate increased data and flow of information. Company allocates sizeable funds on this account for soft and hard ware procurement in order to update its performance under current highly sophisticated business environment. Corporate Social Responsibility (CSR): The company is well aware of its corporate social responsibility and has been contributing and participating to this cause to improve quality of life of the people of country. Company regularly provides donations on annual basis to the reputable as well genuine institutions which are running charitable and welfare projects. Besides contributing for construction of extension Block of the school run by Citizen Foundation (CF) company has been providing annual running expenses of two schools of the foundation at Faisalabad and Chiniot. Company is equal opportunity employer for all classes of society and has engaged number of female employees in its various operational segments along with handicapped persons at appropriate positions. Company also considers highly important to help distressed and disastrous affected people and always rose to such occasions. During the year it helped in kind and monetarily to flood affected people directly and indirectly through different people and institutions. On philanthropy services the contribution for year was Rs.13.962 million as against Rs.4.394 during last year. Internal Audit and review system: An Internal Audit Department functions in company independently for review and monitoring of various internal control systems, policies and various regulations framed. This department is headed by qualified Head of Internal Audit Department reporting to the Chief Executive and Audit Committee of the Board of Directors. This department functions directly under supervision of the Chief Executive and perform its functions under his guidance. The scope of work of the department is clearly defined as audit plan is put up to the committee for the next period to view business risk assessment to evaluate effectiveness and efficiency operations and various internal control systems. Audit reports and findings are regularly discussed in the Audit Committee meetings which are submitted to the Chief Executive after completion of audit for evaluation and taking required decisions in view of priority of the issues highlighted in the audit reports. Changes in Board of Directors: Upon election of Board on May 16, 2011 Mr. Ahsan Mehanti, Mr. Khurram Mazhar Karim and Mr. Zeshan Afzal have been elected for the next 03 years term starting from May 17, 2011 to May 16, 2014. New directors have been elected in place of Mr. Ahmad Shafi and Mr. Tariq Shafi. The Board welcomes the new directors and places on record its appreciation for the valuable contribution made by outgoing directors during their tenure. Future prospects and plans: Business outlook is very challenging as energy crises, widening gap between demand and supply of gas has been badly affecting manufacturing sector. Unlike previous years when gas curtailments were restricted to winter seasons now these have been used throughout the year. Overall performance of the industry now hinges on improvement of energy situation as otherwise use of expensive fuel and LPG is not viable under current scenario. Cotton outlook is so far promising and effects of recent floods in Sind lack severity as per recent estimates of Food and Agriculture Department. In recent past prices of cotton have shown volatility due heavy rains and supply constraints. But currently cotton prices are showing stable trend as depreciating PKR is positive for exports. EU trade incentives will play positive role for industry if approved as India is likely to withdraw its opposition due improving trade relations with Pakistan.
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Annual Report 2011
To stem gas shortage effects LPG arrangement has been made for export order processing which will help to some extent but makes our products in competitive so, future performance of the company will be influenced with gas issue. Company has also applied for WAPDA connection for electricity which is in process and will save high energy generation cost on HFO, when available. Despite above limitation your company has shown resilience to perform in difficult times and endeavors to overcome these challenges through improved operational performance and cost saving efforts in future. Appropriations: In view low profitability and funds requirement for future commitment no dividend is being distributed this year. During the year company has negative earning Rs. 2.41 per share, mainly on account of share of loss from associate as against earning of Rs. 7.00 per share in year 2010. Corporate Governance and Financial Frame work: Board was actively involved in performing their duties including those required to be performed under the Companies Ordinance, 1984 and Memorandum and Articles of Association of the company with ultimate objective of safeguarding the interests of the shareholders, enhancing profitability of the company, increasing shareholders' wealth and promoting market confidence. As required under the Code of Corporate Governance dated March 28,2002, the Board is pleased to state that: a. Financial statements prepared by the management represent fairly and accurately company's state of affairs, results of its operation, cash flows and changes in equity. Proper books of accounts have been maintained. Appropriate accounting policies have been consistently applied in preparation of financial statements and any changes in accounting policies have been disclosed in the financial statements. The accounting estimates are based on reasonable and prudent judgment. International Accounting Standards as applicable in Pakistan have been followed in preparation of financial statements and any departure there from has been adequately disclosed.
e.
f. g. h. i.
j. k.
System of internal control is sound in design and has been effectively implemented and being monitored continuously. On-going review will continue in future for further improvement in controls. The company has sound potentials to continue as going concern. There has been no material departure from best practices of corporate governance. Information about outstanding taxes and levies is given in Notes to the Accounts. Transactions undertaken with related parties during the financial year have been ratified by the Audit Committee and approved by the Board. The value of investment in respect of Employees Provident Fund was Rs.671.299 million in 2010. During the year under review, five (05) meetings of the Board were held and following were in attendance: Director's Name Mr. Muhammad Anwar Mr. Ahmad Shafi Mr. Khalid Bashir Mr. Muhammad Arshad Mr. Muhammad Asif- Nominee NIT Mr. Nasir Shafi Mr. Tariq Shafi Mr. Ahsan Mehanti Mr. Khurram Mazhar Karim Mr. Zeshan Afzal Meetings Attended 5 3 5 5 5 4 1 1 1
S# 01 02 03 04 05 06 07 08 09 10
Leave of absence was granted to the directors who could not attend the Board meetings. l. To the best our knowledge, Directors, CEO, CFO and Company Secretary, company's auditors, their spouses and minor children have not undertaken any trading of company's shares.
b. c.
Post balance Sheet Events: There was no significant balance sheet event which warrants mention in the Directors' Report. Audit Committee: The committee comprises of three members, two of them are non-executive directors including Chairman and one is independent non executive director. The committee meets every quarter for review of audit reports, interim and annual financial results prior to the approval of the Board.
d.
Annual Report 2011
17
Investment in 'Preference Shares' of Crescent Bahuman Limited- CBL. During the year long term loan of the company of Rs. 1,976 million to Crescent Bauman Limited, an associate of the company, has been converted into Preference Shares of the investee company. The terms of Preference Shares as approved by the shareholders are 5%, unlisted, non- voting, cumulative, participatory and convertible preference shares of Rupees 10 each. Pattern of shareholding: A statement showing the pattern of shareholding of the company as at June 30,2011 is included in these financial statements.
Auditors: The auditors M/s. Riaz Ahmad & Co., Chartered Accountants, retire and offer themselves for reappointment for the year 2011. Key operating financial highlights: Financial data of the last six (06) years is attached. Acknowledgements I take this opportunity to thank the Board of Directors, Management and employees of the company for their efforts and support of bankers, customers, vendors and all other stake holders for achieving this performance which faced many challenges under very difficult business conditions.
For and on behalf of the Board of Directors
(Muhammad Anwar) Chief Executive Officer
18
Annual Report 2011
Key Operating and Financial Data

(Rs. in millions) 2009 2008
2011
2010
2007
2006
Summary of Profit and Loss Account Sales Gross profit Profit from operations (Loss) / profit before taxation (Loss) / profit after taxation Summary of Balance Sheet Property, plant and equipment Stock in trade Trade debts Current assets Total assets Shareholders equity Surplus on revaluation of operating fixed assets Long term financing Trade and other payables Short term borrowings Current liabilities Total equity and liabilities Summary of Cash Flow Statement Cash and cash equivalents at the beginning of the year Net cash (used in) / generated from operating activities Net cash used in investing activities Net cash from / (used in) financing activities Net increase / (decrease) in Cash and cash equivalents Cash and cash equivalents at the beginning of the year 16 (601) (302) 905 2 19 19 453 (56) (400) (3) 16 9 162 (228) 76 10 19 7 (1,084) (72) 1,157 1 9 41 518 (646) 95 (33) 7 36 4 (404) 405 5 41 4,035 1,658 3,392 5,827 12,616 2,513 1,640 567 1,319 5,936 7,896 12,616 3,981 1,047 2,580 4,203 10,989 2,672 1,640 656 521 4,840 6,011 10,989 4,182 940 2,562 4,086 10,816 2,262 1,640 1,108 315 4,883 5,806 10,816 4,226 1,241 2,106 4,387 11,146 2,412 1,640 1,287 386 4,586 5,806 11,146 4,447 978 1,258 3,189 10,251 2,989 1,640 1,674 322 3,071 3,877 10,251 2,152 963 995 2,456 7,132 2,462 1,623 224 2,322 2,957 7,132 14,759 1,365 659 (19) (119) 10,863 1,457 910 463 345 10,751 1,575 889 239 179 8,845 968 515 (47) (62) 5,730 529 582 117 88 4,973 524 340 (17) (57)
Annual Report 2011
19
Performance Indicators
2011
Profitability Ratios Gross profit ratio Net profit to sales EBITDA margin to sales * Operating leverage ratio Return on equity Return on capital employed Liquidity Ratios Current ratio Quick ratio Cash to current liabilities Cash flow from operations to sales Activity / Turnover Ratios Inventory turnover Number of days in inventory Debtor turnover Number of days in receivables Creditors turnover Number of days in payables Total assets turnover Property, plant and equipment turnover Operating cycle Investment / Market Ratio Basic and diluted earning /(loss) per share ** Price earning ratio Dividend Yield ratio *** Dividend Payout ratio *** Dividend Cover ratio *** Cash dividend *** Stock dividend *** Market value per share - At the end of the year - Highest during the year - Lowest during the year Break up value w/o surplus on revaluation Break up value with surplus on revaluation Capital Structure Ratios Financial leverage ratio Weighted average cost of debt Long term debt to Equity ratio Interest Cover ratio * **
2010
13.41 3.17 11.90 (218) 12.90 4.00 0.70 0.50 0.27 10.68 9 39 4 86 23 16 0.99 2.73 109 7.00 3.08 6.95 21.42 4.67 15.00 21.57 34.26 18.79 54.31 87.64
2009
14.65 1.67 12.37 400 7.91 2.07 0.70 0.51 0.33 9.39 8 43 5 79 27 14 0.99 2.57 109 3.64 6.73 24.50 70.10 18.50 45.96 79.30
2008
10.95 (0.70) 9.77 (5) (2.56) (0.74) 0.76 0.50 0.15 (4.62) 7 51 5 69 23 16 0.79 2.09 105 (1.25) (46.67) 58.52 75.00 48.75 49.02 82.35
2007
9.24 1.53 14.71 467 2.94 1.18 0.82 0.52 0.19 17.47 5 68 5 72 19 19 0.56 1.29 121 1.78 38.67 1.45 56.04 1.78 10.00 69.00 70.90 16.60 60.74 94.08 1.71 9.90 55.99 1.25
2006
10.54 (1.15) 10.71 (138) (2.32) (0.87) 0.83 0.44 1.37 5.63 5 80 5 75 15 25 0.70 2.31 131 (1.16) (19.42) 4.44 (86.30) (1.16) 10.00 22.50 54.80 21.70 50.03 50.03
% % % % % % Times Times % % Times Days Times Days Times Days Times Times Days Rs Times % % Times % % Rs Rs Rs Rs Rs Times % % Times
9.25 (0.80) 5.16 (141) (4.72) (1.32) 0.74 0.51 0.23 0.98 10 37 5 74 15 24 1.17 3.66 87 (2.41) (6.59) 15.90 28.00 13.25 51.06 84.40
2.73 8.24 22.55 0.96
2.23 9.22 24.56 1.82
2.81 12.93 48.99 1.29
2.60 10.77 53.37 0.92
1.73 8.68 65.93 0.95
EBITDA stands for earning before interest, taxes, depreciation and amortization. The basic and diluted earning / (loss) per share for the year 2006 and 2007 have been restated to take into account the effect of issue of bonus share. *** This includes final dividend recommended by Board of Directors subsequent to year end.
20
Annual Report 2011
Statement of Compliance with Best Practices of Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best Practices of Corporate Governance. The Company has applied the principles contained in the Code in the following manner:
1.
The Company encourages representation of independent non-executive Directors and directors representing minority interests on its Board of Directors. At present the Board includes one executive Director, four non-executive Directors and three independent non executive Director but no Directors representing minority interest. The Directors have confirmed that none of them is serving as a Director in more than ten listed companies. 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. No casual vacancy has occurred in the Board during the year ended 2011. Statement of Ethics and Business Practices has been circulated to directors and employees. The Board has developed a vision/mission statement, overall corporate strategy and significant policies. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration, terms and conditions of employment of the CEO have been taken by the Board. The meetings of the Board are presided over by the Chairman and the Board meets at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, are circulated at least seven days before the meetings. The minutes of the meetings are appropriately recorded and circulated. Directors of the company have participated in Orientation Course at group level to apprise them of their duties and responsibilities. Director(s), who have not participated in these, have been apprised and adequately briefed.
2.
3.
4. 5. 6.
7.
8.
9.
10. The Board has approved the terms of appointment and remuneration of Chief Financial Officer
(CFO), Corporate Secretary and Head of Internal Audit as determined by the CEO.
Annual Report 2011
21
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 by
the Board.
13. The Directors, CEO and Executives do not hold any interest in the shares of the Company other than
that disclosed in 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, all of them are non-
executive Directors including the Chairman of the Committee except one independent nonexecutive Director.
16. The meetings of the audit committee were held at least once in 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 effective internal audit function manned by suitably qualified and
experienced personnel who are conversant with the policies and procedures of the Company and they are involved in the internal audit function on a full time basis.
18. The statutory auditors of the Company have confirmed that they have been given a satisfactory
rating under the Quality Control Review program 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 the 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. The related party transactions have been placed before the audit committee and approved by the
Board of Directors along with pricing method for transactions carried out on terms equivalent to those that prevail in the arm's length transaction.
21. We confirm that all other material principles contained in the Code have been complied with.
On behalf of the Board
(Muhammad Anwar) Chief Executive Officer
22
Annual Report 2011
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 THE CRESCENT TEXTILE MILLS LIMITED (the Company) for the year ended 30 June 2011 to comply with the Listing Regulations of the respective 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 undertaken 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 2011.
RIAZ AHMAD & COMPANY Chartered Accountants
Name of engagement partner: Liaqat Ali Panwar
Date: October 05, 2011 Faisalabad
Annual Report 2011
23
Pattern of Shareholding - (Form 34) as at June 30, 2011

No. of Shareholders
522 467 186 319 82 33 13 13 13 5 9 8 5 3 5 4 2 3 3 3 2 1 2 1 2 2 1 2 2 2 1 2 1 3 6 2
Shareholding From To
1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 45,001 50,001 55,001 65,001 70,001 75,001 80,001 85,001 90,001 95,001 105,001 110,001 115,001 120,001 135,001 150,001 155,001 160,001 165,001 170,001 180,001 190,001 195,001 205,001 100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 70,000 75,000 80,000 85,000 90,000 95,000 100,000 110,000 115,000 120,000 125,000 140,000 155,000 160,000 165,000 170,000 175,000 185,000 195,000 200,000 210,000
Total Shares Held

18,157 120,962 136,086 760,730 607,623 412,538 220,698 294,457 351,569 160,174 336,529 341,425 240,601 157,094 293,164 266,663 147,614 227,969 253,961 264,768 184,302 97,312 214,171 111,626 235,844 245,459 137,973 308,892 314,490 326,955 169,484 347,119 183,967 579,311 1,184,650 418,003
No. of Shareholders
3 1 1 1 1 3 1 2 1 1 1 1 1 1 1 1 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1774
Shareholding From To
210,001 215,001 220,001 230,001 235,001 240,001 245,001 260,001 275,001 295,001 300,001 305,001 310,001 320,001 345,001 375,001 390,001 405,001 410,001 415,001 440,001 450,001 485,001 510,001 550,001 675,001 1,030,001 1,045,001 1,080,001 1,270,001 1,295,001 1,440,001 1,445,001 1,815,001 2,060,001 2,680,001 12,205,001 215,000 220,000 225,000 235,000 240,000 245,000 250,000 265,000 280,000 300,000 305,000 310,000 315,000 325,000 350,000 380,000 395,000 410,000 415,000 420,000 445,000 455,000 490,000 515,000 555,000 680,000 1,035,000 1,050,000 1,085,000 1,275,000 1,300,000 1,445,000 1,450,000 1,820,000 2,065,000 2,685,000 12,210,000
Total Shares Held

635,540 218,780 221,981 231,306 239,473 729,599 247,570 524,867 276,157 299,662 300,027 307,005 313,122 324,663 347,862 376,489 789,452 815,212 414,675 419,333 440,811 452,379 488,951 510,309 552,245 675,484 1,030,861 1,049,799 1,080,077 1,271,633 1,295,031 1,442,063 1,446,129 1,819,981 2,060,068 2,681,875 12,207,111 49,209,922
Categories of Shareholders
Financial Institutation Individual Insurance Companies Joint Stock Companies Associated Companies Mutual Funds Modaraba & Modaraba Cos Executives Others G. Total Others Abondand Property Association Non Resident Trust Total
Number
8 1,693 4 41 8 2 2 4 12 1,774 3 1 5 3 12
Shares Held
811,057 18,868,709 1,859,986 7,288,343 17,003,809 1,467,446 31,719 1,867,495 11,358 49,209,922 503 13 5,128 5,714 11,358
Percentage
1.65 38.34 3.78 14.82 34.56 2.98 0.06 3.79 0.02 100.00 0.00 0.00 0.01 0.01 0.02
24
Annual Report 2011

Categories of Shareholders a) Directors, Chief Executive Officer, their Spouse and Minor Children Chief Executive/Director Muhammad Anwar Directors Nasir Shafi Muhammad Arshad Khurram Mazhar Karim Khalid Bashir Ahsan Mehanti Zeshan Afzal Muhammad Asif Nominee NIT Directors' Spouse Tanveer Khalid Bashir Shaheen Nasir Abida Anwar b) Associated Companies, Undertaking & Related Parties Arif Habib Corporation Limited Crescent Sugar Mills & Distillery Ltd. Crescent Foundation Crescent Steel and Allied Products Ltd. Trustees The Crescent Textile Mills Emp Provident Fund Trust Premier Insurance Limited Shakarganj Mills Limited Ahsan Associates (Pvt) Limited c) NIT & ICP National Bank of Pakistan-Trustee Department Ni(U)T Fund National Bank of Pakistan National Investment Trust Limited Investment Corporation of Pakistan National Bank of Pakistan Investor Accounts Ndfc Idbp (Icp Unit) 2,060,068 1,049,799 53,051 9,000 2,054 1,890 3,175,862 12,207,111 2,681,875 1,030,861 452,379 362,122 262,000 5,898 1,563 17,003,809 58,802 8,157 5,122 72,081 239,473 212,011 83,999 24,336 200 100 1,070,428 510,309 Number of shares held
Annual Report 2011
25

Number of shares held (d) Executives 1,867,495
(e) Banks, DFIs, NBFIs
811,057
(f) Insurance Companies
1,859,986
(g) Modarabas
31,719
(h) Trusts
5,714
(i) Mutual Funds
1,467,446
(j) Other Companies (Public Sector Companies & Corporations Joint Stock Cos)
4,112,481
(k) Non-Residents
5,128
(l) Abondand Property
503
(m) Association
13
(n) General Public
17,726,200 49,209,922
26
Annual Report 2011
Auditors Report to the Members

We have audited the annexed balance sheet of THE CRESCENT TEXTILE MILLS LIMITED as at 30 June 2011 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; in our opinion: 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; the expenditure incurred during the year was for the purpose of the company's business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; 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 2011 and of the loss, its comprehensive loss, its cash flows and changes in equity for the year then ended; and in our opinion, Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the company and deposited in the Central Zakat Fund established under section 7 of that ordinance.
(b) i)
ii) iii)
c)
d)
RIAZ AHMAD & COMPANY Chartered Accountants
Name of engagement partner: Liaqat Ali Panwar
Date: October 05, 2011 Faisalabad
Annual Report 2011
27
Balance Sheet as at June 30, 2011

2011 Note
EQUITY AND LIABILITIES Share capital and reserves Authorised share capital 100 000 000 (2010: 100 000 000) ordinary shares of Rupees 10 each Issued, subscribed and paid up share capital Reserves Total equity Surplus on revaluation of operating fixed assets net of deferred tax LIABILITIES Non-current liabilities Long term financing Liabilities against assets subject to finance lease Deferred income tax liability Current liabilities Trade and other payables Accrued mark-up Short term borrowings Current portion of non-current liabilities Provision for taxation Total liabilities Contingencies and commitments TOTAL EQUITY AND LIABILITIES The annexed notes form an integral part of these financial statements. 13 9 10 11 12 3 4
2010
(Rupees in thousand)
1,000,000 492,099 2,020,786 2,512,885
1,000,000 492,099 2,180,340 2,672,439
1,640,388
1,640,407
6 7 8
512,086 54,621 566,707
656,351 8,813 665,164
1,318,565 140,717 5,935,690 350,401 151,068 7,896,441 8,463,148
521,393 106,719 4,840,018 451,668 90,890 6,010,688 6,675,852
12,616,421
10,988,698
(Muhammad Anwar) Chairman & Chief Executive
28
Annual Report 2011
Balance Sheet as at June 30, 2011

2011 2010 (Rupees in thousand)
Note
ASSETS Non-current assets
Property, plant and equipment Investment in an associate Long term investments Long term loans and advances Long term deposits and prepayments Deferred income tax - asset
14 15 16 17 18 19
4,034,955 451,550 2,255,434 2,727 2,520 42,351 6,789,537
3,981,181 617,870 255,197 1,928,720 2,827 6,785,795
Current assets Stores, spare parts and loose tools Stock-in-trade Trade debts Loans and advances Short term deposits and prepayments Accrued interest Other receivables Short term investments Cash and bank balances
20 21 22 23 24 25 26 27
160,147 1,658,003 3,391,911 309,062 67,104 2,806 181,876 37,444 18,531 5,826,884
169,769 1,047,150 2,579,901 224,556 5,956 109,446 49,706 16,419 4,202,903
TOTAL ASSETS
12,616,421
10,988,698
(Khalid Bashir) Director
Annual Report 2011
29
Profit and Loss Account for the Year Ended June 30, 2011
Note 2011 2010 (Rupees in thousand)
14,759,257 13,394,641 1,364,616 10,863,386 9,406,644 1,456,742
Sales Cost of sales Gross profit
28 29
Distribution cost Administrative expenses Other operating expenses
30 31 32
641,183 202,898 40,874 884,955 479,661
470,413 182,018 78,816 731,247 725,495 184,767 910,262 566,793 120,022 463,491
Other operating income Profit from operations Finance cost Share of (loss) / profit from associate (Loss) / profit before taxation
33
179,043 658,704
34
527,172 (150,712) (19,180)
Provision for taxation (Loss) / profit after taxation
35
99,465 (118,645)
118,821 344,670
(Loss) / earnings per share - basic and diluted (Rupees) 36 (2.41) 7.00
The annexed notes form an integral part of these financial statements.
30
Annual Report 2011
Statement of Comprehensive Income for the Year Ended June 30, 2011
(Loss) / profit after taxation Other comprehensive income Surplus arising on remeasurement of available for sale investments to fair value Total comprehensive (loss) / income for the year
(118,645)
344,670
28,123
54,658
(90,522)
399,328
Annual Report 2011
31
Cash Flow Statement for the Year Ended June 30, 2011
Note
CASH FLOWS FROM OPERATING ACTIVITIES 37 Cash generated from operations Finance cost paid Income tax paid Dividend paid Workers' profit participation fund paid Workers' welfare fund paid Net decrease / (increase) in long term deposits and prepayments Net cash (used in) / generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure on property, plant and equipment Proceeds from sale of property, plant and equipment Net (increase) / decrease in long term loans and advances Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term financing Proceeds from finance lease liabilities Repayment of long term financing Short term borrowings - net Net cash from / (used in) financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year (Note 27) 147,085 63,680 (401,676) 1,095,672 904,761 2,112 16,419 18,531 (356,845) (43,189) (400,034) (2,512) 18,931 16,419 (317,170) 16,261 (1,195) (302,104) (63,383) 6,295 1,247 (55,841) 144,193 (491,388) (153,183) (73,043) (18,935) (8,496) 307 (600,545) 1,159,785 (606,758) (94,909) (7) (4,138) (610) 453,363
32
Annual Report 2011
Statement of Changes in Equity for the Year Ended June 30, 2011
SHARE CAPITAL
CAPITAL RESERVE General Fair value
RESERVES REVENUE RESERVES Unappropriated profit / Dividend equalization (accumulated loss) 30,000
Sub total
TOTAL
TOTAL EQUITY
Balance as at June 30, 2009 Transfer from surplus on revaluation of operating fixed assets on account of incremental depreciation - net of deferred tax Share of associate's items directly credited in equity Total comprehensive income for the year Balance as at June 30, 2010 Final dividend for the year ended June 30, 2010 at the rate of Rupees 1.50 per share Transfer from surplus on revaluation of operating fixed assets on account of incremental depreciation - net of deferred tax Share of associate's items directly credited in equity Total comprehensive loss for the year Balance as at June 30, 2011
492,099
21,131
1,773,643
(55,036) 1,748,607 1,769,738 2,261,837
492,099 -
54,658 75,789 -
1,773,643 -
30,000 -
12 11,262 344,670
12 11,262 344,670
12 11,262 399,328
12 11,262 399,328
300,908 2,104,551 2,180,340 2,672,439 (73,815) (73,815) (73,815) (73,815)
492,099
28,123 103,912
1,773,643
30,000
22 4,761
22 4,761
22 4,761 (90,522)
22 4,761 (90,522)
(118,645) (118,645)
113,231 1,916,874 2,020,786 2,512,885
Annual Report 2011
33
Notes to the Financial Statements for the Year Ended June 30, 2011
1. THE COMPANY AND ITS ACTIVITIES The Crescent Textile Mills Limited (the Company) is a public limited company incorporated in Pakistan under the Companies Ordinance, 1984. The registered office of the Company is located at 40-A, Off: Zafar Ali Road, Gulberg-V, Lahore. Its shares are quoted on all the Stock Exchanges in Pakistan. The Company is engaged in business of textile manufacturing comprising of spinning, combing, weaving, dyeing, bleaching, printing, stitching, buying, selling and otherwise dealing in yarn, cloth and other goods and fabrics made from raw cotton and synthetic fiber(s) and to generate, accumulate, distribute, supply and sale of electricity. The Company also operates a cold storage unit. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated: 2.1 Basis of preparation a) 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 or directives of the Companies Ordinance, 1984 shall prevail.
b) Accounting convention These financial statements have been prepared under the historical cost convention, except freehold and leasehold land measured at revalued amounts and the financial instruments which are carried at fair value. c) Critical accounting estimates and judgments The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgments were exercised in application of accounting policies are as follows:
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Useful lives, patterns of economic benefits and impairments Estimates with respect to residual values and useful lives and pattern of flow of economic benefits are based on the analysis of the management of the Company. Further the , Company reviews the value of assets for possible impairment on annual basis. Any change in the estimates in the future might affect the carrying amount of respective item of property, plant and equipment, with a corresponding effect on the depreciation charge and impairment. Inventories Net realizable value of inventories is determined with reference to currently prevailing selling prices less estimated expenditure to make sales. Taxation In making the estimates for income tax currently payable by the Company, the management takes into account the current income tax law and the decisions of appellate authorities on certain issues in the past. Provision for doubtful debts The Company reviews its receivable balances against any provision required for any doubtful balances on an ongoing basis. The provision is made while taking into consideration expected recoveries, if any. Impairment of investment in equity method accounted associated company In making an estimate of recoverable amount of the Companys investment in equity method accounted associated company, the management considers future cash flows. d) Amendments to published approved standards that are effective in current year and are relevant to the Company The following amendments to published approved standards are mandatory for the Company's accounting periods beginning on or after July 01, 2010: International Accounting Standard (IAS) 1 (Amendment), Presentation of Financial Statements (effective for annual periods beginning on or after January 01, 2010). The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as noncurrent (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The application of the amendment does not affect the results or net assets of the Company as it is only concerned with presentation and disclosures.
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IAS 7 (Amendment), Statement of Cash Flows (effective for annual periods beginning on or after January 01, 2010). The amendment provides clarification that only expenditure that results in a recognized asset in the balance sheet can be classified as a cash flow from investing activity. The clarification results in an improvement in the alignment of the classification of cash flows from investing activities in the cash flow statement and the presentation of recognized assets in the balance sheet. The application of the amendment does not affect the results or net assets of the Company as it is only concerned with presentation and disclosures. IFRS 8 (Amendment), Operating Segments (effective for annual periods beginning on or after January 01, 2010). The amendment is part of the International Accounting Standards Board's (IASB) annual improvements project published in April 2009. The amendment provides clarification that the requirement for disclosing a measure of segment assets is only required when the Chief Operating Decision Maker (CODM) reviews that information. The application of the amendment does not affect the results or net assets of the Company as it is only concerned with presentation and disclosures. e) Interpretations and amendments to published approved standards that are effective in current year but not relevant to the Company There are other new interpretations and amendments to the published approved standards that are mandatory for accounting periods beginning on or after July 01, 2010 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements. f) Standards and amendments to published approved standards that are not yet effective but relevant to the Company Following standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after July 01, 2011 or later periods: IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after January 01, 2013). This standard is the first step in the process to replace IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Companys accounting for its financial assets. IFRS 7 (Amendment), 'Financial Instruments: Disclosures' (effective for annual periods beginning on or after July 01, 2011). The new disclosure requirements apply to transfer of financial assets. An entity transfers a financial asset when it transfers the contractual rights to receive cash flows of the asset to another party. These amendments are part of the IASB's comprehensive review of off balance sheet activities. The amendments will promote transparency in the reporting of transfer transactions and improve users understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entitys financial position, particularly those involving securitization of financial asset. The management of the Company is in the process of evaluating the impacts of the aforesaid amendment on the Company's financial statements.
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IFRS 12 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after January 01, 2013). IFRS 12 applies to entities that have an interest in subsidiaries, joint arrangements, associates or unconsolidated structured entities. IFRS 12 establishes disclosure objectives and specifies minimum disclosures that an entity must provide to meet those objectives. IFRS 12 requires an entity to disclose information that helps users of its financial statements to evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on its financial statements. The management of the Company is in the process of evaluating the impacts of the aforesaid standard on the Companys financial statements. IFRS 13 Fair Value Measurement (effective for annual periods beginning on or after January 01, 2013). IFRS 13 establishes a single framework for measuring fair value where that is required by other standards. IFRS 13 applies to both financial and non-financial items measured at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The management of the Company is in the process of evaluating the impacts of the aforesaid standard on the Companys financial statements. IAS 1 (Amendments), Presentation of Financial Statements (effective for annual periods beginning on or after July 01, 2012). It clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. There are other amendments resulting from annual improvements project initiated by International Accounting Standards Board in May 2010, specifically in IFRS 7 'Financial Instruments: Disclosures', IAS 1 'Presentation of Financial Statements' and IAS 24 'Related Party Disclosures' that are considered relevant to the Company's financial statements. These amendments are unlikely to have a significant impact on the Company's financial statements and have therefore not been analyzed in detail. g) Standards, interpretations and amendments to published approved standards that are not yet effective and not considered relevant to the Company There are other standards, amendments to published approved standards and new interpretations that are mandatory for accounting periods beginning on or after July 01, 2011 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements. 2.2 Employees retirement benefits The Company operates a recognized provident fund for all its permanent employees. Equal monthly contributions are made to the fund both by the Company and the employees at the rate of 6.25 percent of the basic salary plus cost of living allowance. Obligation for contributions to defined contribution plan is recognized as an expense in the profit and loss account as and when incurred. Employees are eligible under the scheme on completion of prescribed qualifying period of service.
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2.3 Liabilities against assets subject to finance lease Leases, where the Company has substantially all the risks and rewards of ownership of assets are classified as finance leases. At inception, finance leases are recorded at the lower of present value of minimum lease payments under the lease agreement and the fair value of the assets. The related rental obligations, net of finance cost, are included in liabilities against assets subject to finance lease. The liabilities are classified as current and non-current depending upon the timing of the payment. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The interest element of the rental is charged to profit over the lease term. 2.4 Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, 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 the obligation. Dividend and other appropriations Dividend distribution to the Companys shareholders is recognized as a liability in the Companys financial statements in the period in which the dividends are declared and other appropriations are recognized in the period in which these are approved by the Board of Directors. Taxation Current Provision for current tax is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing current tax rates or tax rates after taking into account rebates and tax credits, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss
2.5
2.6
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account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. 2.7 Property, plant and equipment
2.7.1 Operating fixed assets and depreciation a) Cost / Revalued amount Fixed assets are stated at cost less accumulated depreciation and any identified impairment loss, except freehold land which is stated at revalued amount less any identified impairment loss and leasehold land which is stated at revalued amount less accumulated depreciation and any identified impairment loss. Capital workin-progress is stated at cost less any identified impairment loss. Cost of operating fixed assets consists of purchase cost, borrowing cost pertaining to the construction / erection period referred to Note 2.14 and directly attributable cost of bringing the assets to working condition. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the period in which they are incurred. Any revaluation surplus is credited to surplus on revaluation of operating fixed assets except to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or loss, in which case the increase is recognized in profit or loss. A revaluation deficit is recognized in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognized in surplus on revaluation of operating fixed assets. An annual transfer from surplus on revaluation of operating fixed assets to unappropriated profit is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. All transfers from surplus on revaluation of operating fixed assets are net of applicable deferred taxation.
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b) Depreciation Depreciation on assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed of. Depreciation is charged to income on reducing balance method, except leasehold land on which depreciation is charged on straight line method to write off the cost of operating fixed assets over their expected useful lives at the rates mentioned in Note 14.1. c) Derecognition An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in profit and loss account in the year the asset is derecognized. 2.7.2 Assets subject to finance lease These are initially recognized at lower of present value of minimum lease payments under the lease agreements and fair value of assets. Subsequently, these assets are stated at cost less accumulated depreciation and any identified impairment loss. Assets so acquired are depreciated over their expected useful lives. Depreciation of leased assets is charged to profit and loss account. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed of. 2.7.3 Assets subject to operating lease Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss account on a straight line basis over the lease term. 2.8 Investments Classification of an investment is made on the basis of intended purpose for holding such investment. Management determines the appropriate classification of its investments at the time of purchase. Investments are initially measured at fair value plus transaction costs directly attributable to acquisition, except for Investment at fair value through profit or loss which is measured initially at fair value.
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The Company assesses at the end of each reporting period whether there is any objective evidence that investments are impaired. If any such evidence exists, the Company applies the provisions of IAS 39 'Financial Instruments: Recognition and Measurement' to all investments, except investment in an associate, which is tested for impairment in accordance with the provisions of IAS 36 'Impairment of Assets'. 2.8.1 Investments at fair value through profit or loss Investments at fair value through profit or loss includes financial assets held for trading designated upon initial recognition as at fair value through profit or loss. Investments which are acquired principally for the purpose of generating profit from short term fluctuations in price or dealers margin are classified as held for trading. After initial recognition, these are stated at fair values with any resulting gains or losses recognized directly in the profit and loss account. Transaction costs are charged to profit and loss account when incurred. 2.8.2 Held-to-maturity investments Investments with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Company has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long-term investments that are intended to be held-to-maturity, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortized cost, gains and losses are recognised in profit and loss account when the investments are derecognised or impaired, as well as through the amortization process. 2.8.3 Available for sale investments
Investments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity, or changes to interest rates or equity prices are classified as available for sale. These are sub-categorized as under:
Quoted
After initial recognition, investments which are classified as available for sale are measured at fair value. Gains or losses on available for sale investments are recognized directly in statement of other comprehensive income until the investment is sold, derecognized or is determined to be impaired, at which time the cumulative gain or loss previously reported in statement of other comprehensive income is included in profit and loss account. Fair value is determined by reference to stock exchange quoted market bids at the close of business on the balance sheet date.
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Unquoted
The investments that do not have a quoted market price in an active market and whose fair value can not be reliably measured, subsequent to after initial recognition are carried at cost less any identified impairment loss.
2.8.4 Investment in an associate

The Companys investment in its associate is accounted for under the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the Companys share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized. The profit and loss account reflects the share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes and discloses this, when applicable, in the statement of changes in equity.
The reporting dates of the associate and the Company are identical and the associates accounting policies conform to those used by the Company for like transactions and events in similar circumstances. 2.9 Inventories Inventories, except for stock in transit and waste materials, are stated at lower of cost and net realizable value. Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make such sale. Cost is determined as follows: Stores, spare parts and loose tools Usable stores, spare parts and loose tools are valued at moving average cost, while items considered obsolete are carried at nil value. Items-in-transit are stated at invoice amount plus other charges paid thereon. Stock-in-trade Stock of raw materials, except for stock-in-transit, is valued principally at the lower of weighted average cost and net realizable value. Raw materials-in-transit are valued at cost comprising invoice value plus other charges paid thereon. Cost of work-in-process and finished goods comprises of cost of direct materials, labour and appropriate manufacturing overheads. Stock of waste materials is stated at net realizable value.
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2.10 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at banks on current accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in values. 2.11 Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Sale of goods and electricity Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on the delivery of the goods. Revenue from sale of electricity is recognized at the time of transmission. Interest income Revenue is recognized as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Dividends Dividend income is recognized when right to receive the dividend is established. 2.12 Financial instruments Financial instruments carried on the balance sheet include investments, deposits, trade debts, loans and advances, interest accrued, other receivables, cash and bank balances, long term financing, liabilities against assets subject to finance lease, short term borrowings, accrued mark-up and trade and other payables etc. Financial assets and liabilities are recognized at the time the Company becomes a party to contractual provisions of the instruments. Initial recognition is made at fair value plus transaction costs directly attributable to acquisition, except for "financial instruments at fair value through profit or loss" which is measured initially at fair value. The particular measurement methods adopted are disclosed in the following individual policy statements associated with each item and in the accounting policy of investments.
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a) Borrowings All loans and borrowings are initially recognized at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, long term interest-bearing loans and borrowings are measured at amortized cost using the effective interest method while short term borrowings are measured at fair value. Gains and losses are recognized in net profit or loss when the liabilities are derecognized as well as through the amortization process. b) Trade debts Trade debts originated by the Company are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. Known bad debts are written off and provision is made against debts considered doubtful when collection of the full amount is no longer probable. c) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortized cost using the effective interest method. Gains and losses are recognized in profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortization process. d) Trade and other payables Liabilities for trade and other amounts payable are initially recognized at fair value, which is normally the transaction cost. 2.13 Derivative financial instruments The Company uses derivative financial instruments such as forward currency contracts and forward currency swaps to hedge its risks associated with interest rate and foreign currency 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 remeasured 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 changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to profit or loss. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of cross currency swap contracts is determined by reference to market values for similar instruments.
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If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain in equity until the forecast transaction or firm commitment occurs. 2.14 Borrowing cost Interest, mark-up and other charges on long term finances are capitalized upto the date of commissioning of respective qualifying assets acquired out of the proceeds of such long term finances. All other interest, mark-up and other charges are charged to profit and loss account. 2.15 Impairment a) Impairment of assets other than financial assets The carrying amounts of the assets other than financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit and loss account. b) Impairment of financial assets The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. Assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognized in profit and loss account.
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Available for sale financial assets If an available for sale asset is impaired, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from equity to the income statement. Reversals in respect of equity instruments classified as available for sale are not recognized in profit. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in profit and loss account. 2.16 Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where: the rights to receive cash flows from the asset have expired; the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass-through' arrangement; or the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Where the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Companys continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Companys continuing involvement is the amount of the transferred asset that the Company may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Companys continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
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modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. 2.17 Related party transactions and transfer pricing Transactions and contracts with related parties are carried out at arm's length price determined in accordance with comparable uncontrolled price method. 2.18 Off setting Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is legally enforceable right to set off and the Company intends either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 2.19 Foreign currencies These financial statements are presented in Pak Rupees, which is the Company's functional currency. Transactions in foreign currency during the year are initially recorded in the functional currency at the rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at functional currency using the rate of exchange prevailing at the balance sheet date. All differences are taken to the profit and loss account. 2.20 Segment reporting Segment reporting is based on the operating (business) segments of the Company. An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Company's other components. An operating segment's operating results are reviewed regularly by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those income, expenses, assets, liabilities and other balances which can not be allocated to a particular segment on a reasonable basis are reported as unallocated. The Company has six reportable business segments. Spinning (Producing different quality of yarn using natural and artificial fibres), Weaving (Producing different quality of greige fabric using yarn), Processing and Home Textile (Processing greige fabric for production of printed and dyed fabric and manufacturing of home textile articles), Trading (Buying and selling of garments and home textile articles), Power Generation (Generating and distributing power) and Cold Storage (Making of ice and warehousing of perishable goods). Transactions among the business segments are recorded at arm's length prices using admissible valuation methods. Inter segment sales and purchases are eliminated from the total.
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3. ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL 2011 2010 (Number of Shares) Ordinary shares of Rupees 10 each fully paid in cash Ordinary shares of Rupees 10 each issued as fully paid bonus shares 2011 2010 (Rupees in thousand)
19 781 136
19 781 136
197,811
197,811
29 428 787 49 209 923

3.1
29 428 787 49 209 923
294,288 492,099
294,288 492,099
Ordinary shares of the Company held by related parties as at year end are as follows: 2011 2010 (Number of Shares) Arif Habib Corporation Limited (formerly Arif Habib Securities Limited) Crescent Sugar Mills and Distillery Limited Crescent Foundation Crescent Steel and Allied Products Limited The Crescent Textile Mills Limited-Employees Provident Fund-Trustee Premier Insurance Limited Shakarganj Mills Limited Ahsan Associates (Private) Limited Jubilee Spinning and Weaving Mills Limited
12,207,111 2,681,875 1,030,861 452,379 362,122 262,000 5,898 1,563 17,003,809
12,207,111 2,681,875 1,030,861 452,379 313,122 262,000 5,898 1,563 827 16,955,636
4.
RESERVES 2011 2010 (Rupees in thousand) Composition of reserves is as follows: Capital Fair value reserve (Note 4.1) Revenue Dividend equalization General Unappropriated profit
103,912
75,789
30,000 1,773,643 113,231 1,916,874 2,020,786
30,000 1,773,643 300,908 2,104,551 2,180,340
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4.1
This represents the unrealized gain on remeasurement of investments at fair value and is not available for distribution. This will be transferred to profit and loss account on realization. Reconciliation of fair value reserve is as under: 2011 2010 (Rupees in thousand) Balance as at July 01, Add: Fair value adjustment during the year Balance as at June 30,
75,789 28,123 103,912
21,131 54,658 75,789
5.
SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS - NET OF DEFERRED TAX Surplus on revaluation of operating fixed assets as at July 01, Transferred to unappropriated profit in respect of incremental depreciation Related deferred income tax liability
1,640,526 22 2 24 1,640,502 119 (3) (2) 114 1,640,388
1,640,539 12 1 13 1,640,526 146 (26) (1) 119 1,640,407
Less: Deferred income tax liability as at July 01, Adjustment of deferred income tax liability due to re-assessment at year end Incremental depreciation charged during the year transferred to profit and loss account
5.1
This represents surplus resulting from revaluation of freehold land and leasehold land carried out on June 30, 2007 by Messrs Hamid Mukhtar and Company (Private) Limited, an independent valuer enrolled on panel of the State Bank of Pakistan (SBP) as per the basis stated in Note 14.1.1 to the financial statements.
LONG TERM FINANCING - SECURED Financing from banking companies (Note 6.1) Term finance certificates (Note 6.2) Less: Current portion shown under current liabilities (Note 12)
6.
803,435 49,993 853,428 341,342 512,086
1,008,034 99,985 1,108,019 451,668 656,351
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6.1 Lender 2011 2010
Rate of interest per annum
Number of installments
Date of repayment Of first installment
Interest Payable
Security
(Rupees in thousand) 33,318 National Bank of Pakistan 37,546 62,576 99,955 6 months KIBOR plus 2% without any floor or cap SBP refinance rate for LTF-EOP plus 2% 70,864 National Bank of Pakistan 83,333 162,531 125,000 SBP refinance rate for LTF-EOP plu 2% Allied Bank Limited 50,000 150,000 6 months KIBOR plus 1.90% without any floor or cap Allied Bank Limited 69,500 92,667 SBP refinance rate for LTF-EOP plus 2% Habib Bank Limited 264,468 340,029 SBP refinance rate for LTF-EOP plus 2% Allied Bank Limited 41,351 50,541 SBP refinance rate for LTF-EOP plus 2% Habib Bank Limited 26,250 32,083 SBP refinance rate for LTF-EOP plus 3% Habib Bank Limited 50,584 55,183 SBP refinance rate for LTF-EOP plus 3% MCB Bank Limited 147,085 6 months KIBOR plus 2% without any floor or cap 803,435 6.2 Lender 2011 2010 1,008,034 12 equal half yearly installments 10 equal half yearly installments 12 equal half yearly installments 10 equal half yearly installments 12 equal half yearly installments 12 equal half yearly installments 12 equal half yearly installments 8 equal half yearly installments January 27, 2012 Half yearly Joint pari passu charge over fixed and current assets of the Company. June 08, 2011 Quarterly Joint pari passu charge over fixed and current assets of the Company. March 03, 2010 Quarterly Joint pari passu charge over fixed and current assets of the Company. February 23, 2010 Quarterly Joint pari passu charge over fixed and current assets of the Company. January 23, 2010 Quarterly Joint pari passu charge over fixed and current assets of the Company. December 29, 2007 Quarterly Joint pari passu charge over fixed and current assets of the Company. March 29, 2007 Half yearly Joint pari passu charge over fixed and current assets of the Company. September 22, 2006 Quarterly Joint pari passu charge over fixed and current assets of the Company. 12 equal half yearly installments January 03, 2006 Half yearly Joint pari passu charge over fixed and current assets of the Company.
Rate of interest per annum
Number of installments
Date of repayment Of first installment
Interest Payable
Security
(Rupees in thousand) United Bank Limited 49,993 99,985 6 months KIBOR plus 1.45% without any floor or cap 11 equal half yearly installments December 17, 2006 Half yearly Joint pari passu charge over fixed and current assets of the Company.
50
Annual Report 2011
6.2.1 Syndicated loan facility of Rupees 550 million (2010: Rupees 550 million) obtained from United Bank Limited for Balancing, Modernization and Replacement (BMR) of existing facilities of the Company was converted in financial year 2004 to privately placed term finance certificates having face value of Rupees 5,000 each. United Bank Limited has been appointed to act as trustee for the issue. The trust deed, dated March 27, 2004 between the Company and United Bank Limited, specifies the rights and obligations of the trustees. The deed requires that the trustees will ensure adherence to terms and conditions of the security documents.
2011 2010 (Rupees in thousand) 7. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
Future minimum lease payments Less: Un-amortized finance charge Present value of future minimum lease payments Less: Current portion shown under current liabilities (Note 12)
93,377 29,697 63,680 9,059 54,621
7.1
The minimum lease payments have been discounted at an implicit interest rate of six months KIBOR plus 2.75% per annum with floor of 13% per annum. The implicit interest rate used to arrive at the present value of minimum lease payments ranges from 16.32% to 16.54% per annum. Since the implicit interest rate is linked with KIBOR so the amount of minimum lease payments and finance charge may vary from period to period. Taxes, repairs and insurance costs are to be borne by the Company. These are secured against the leased assets. Minimum lease payments and their present values are regrouped as under:
2011 Later than one Not later than year and not later one year than five years 2010 Later than one Not later than year and not later one year than five years
7.2
--------------- (RUPEES IN THOUSAND) --------------Future minimum lease payments Less: Un-amortized finance charge Present value of future minimum lease payments
18,859 9,800 9,059
74,518 19,897 54,621
Annual Report 2011
51
8. DEFERRED INCOME TAX LIABILITY
Taxable temporary differences Tax depreciation allowance Tax on investment in associate Surplus on revaluation of operating fixed assets Deductible temporary differences Unused tax losses
118,107 34,861 119 153,087 (144,274) 8,813
9.
TRADE AND OTHER PAYABLES

Creditors (Note 9.1) Accrued liabilities Advances from customers Retention money due to contractors Income tax deducted at source Unclaimed dividend Payable to Employees Provident Fund Trust Workers' profit participation fund (Note 9.2) Other payables Workers' welfare fund
986,966 242,000 69,180 1,359 26 6,728 310 7,389 1,923 2,684 1,318,565
286,972 169,293 26,204 455 2,472 5,956 943 17,380 3,222 8,496 521,393
9.1
This includes amounts in aggregate of Rupees 22.153 million (2010: Rupees 5.619 million) due to related parties.
Workers' profit participation fund
Balance as on July 01, Interest for the year (Note 34) Add: Provision for the year (Note 32) Less: Payments during the year
9.2
17,380 1,786 7,158 26,324 18,935 7,389
3,932 206 17,380 21,518 4,138 17,380
9.2.1 The Company retains workers' profit participation fund for its business operations till the date of allocation to workers. Interest is paid at prescribed rate under the Companies Profit (Workers' Participation) Act, 1968 on funds utilized by the Company till the date of allocation to workers.
52
Annual Report 2011
2011 2010 (Rupees in thousand) 10. ACCRUED MARK-UP Long term financing Short term borrowings Liabilities against assets subject to finance lease
29,503 110,821 393 140,717
22,938 83,781 106,719
11.
SHORT TERM BORROWINGS From banking companies - secured Short term finances (Note 11.1 and Note 11.4) State Bank of Pakistan (SBP) refinance (Note 11.2 and Note 11.4) Short term foreign currency finances (Note 11.3 and Note 11.4) Others - unsecured (Note 11.5)
793,561 2,158,620 2,859,509 5,811,690 124,000 5,935,690
1,243,802 1,847,600 1,748,616 4,840,018 4,840,018
11.1 The finances aggregating to Rupees 1,327 million (2010: Rupees 2,209 million) are obtained from banking companies under mark-up agreements and carry mark up ranging from KIBOR plus 1.50 to 3.00 percent (2010: KIBOR plus 1.50 to 2.90 percent) per annum. 11.2 Export refinances have been obtained from banking companies under SBPs refinance scheme on which service charges at the rate of 8.00 to 11.00 percent (2010: 7.50 to 9.00 percent) per annum are payable. These form part of aggregate borrowing limits of Rupees 2,160 million (2010: Rupees 1,856 million). 11.3 Short term foreign currency finances amounting to Rupees 2,958 million (2010: Rupees 1,748 million) are available at mark up ranging from LIBOR plus 2.00 to 5.07 percent (2010: LIBOR plus 2.75 to 5.00 percent) per annum. 11.4 The aggregate short term finances from banking companies are secured by way of joint pari passu charge over fixed and current assets of the Company. 11.5 This represents loan obtained from Crescent Model Farm which is repayable on demand. It carries mark up at the rate of one month KIBOR plus 1.50 percent per annum (2010: Nil).
Annual Report 2011
53
2011 2010 (Rupees in thousand) 12. CURRENT PORTION OF NON-CURRENT LIABILITIES Current portion of long term financing (Note 6) Current portion of liabilities against assets subject to finance lease (Note 7)
341,342 9,059 350,401
451,668 451,668
13.
CONTINGENCIES AND COMMITMENTS a) i) Contingencies Letters of guarantee of Rupees 115.918 million (2010: Rupees 115.143 million) are given by the banks of the Company to Sui Northern Gas Pipeline Limited against gas connection and Collector of Customs against import of raw material and supplies. Post dated cheques of Rupees 9.412 million (2010: Rupees 9.807 million) are issued to custom authorities in respect of duties on imported material availed on the basis of consumption and export plans. If documents of exports are not provided on due dates, cheques issued as security shall be encashable. The Company is contingently liable to the extent of Rupees 130.616 million (2010: Rupees 84.385 million) as its share of contingent liabilities of its associate. Commitments Contracts for capital expenditure amounting to Rupees 82.872 million (2010: Rupees 59.273 million). Letters of credit other than for capital expenditure amounting to Rupees 98.839 million (2010: Rupees 190.297 million). 2011 2010 (Rupees in thousand)
ii)
iii)
b) i)
ii)
14.
PROPERTY, PLANT AND EQUIPMENT Operating fixed assets (Note 14.1) -Owned -Leased Capital work-in-progress (Note 14.2)
3,971,682 26,367 36,906 4,034,955
3,948,372 32,809 3,981,181
54
Annual Report 2011
14.1 Operating fixed assets
Owned Assets Leased Assets
Factory tools Gas and Buildings on Furniture Plant and Plant and Office Land Land - Buildings on and Total electric Vehicles leasehold and Machinery machinery equipment Freehold Leasehold freehold land equipment Installations land fixtures ------------------------------------------------------------------------- (RUPEES IN THOUSAND) -------------------------------------------------------------------------------At July 01, 2009 Cost / revalued amount Accumulated depreciation Net book value Year ended June 30, 2010 Opening net book value Additions Disposals: Cost Accumulated depreciation Depreciation charge Closing net book value At June 30, 2010 Cost / revalued amount Accumulated depreciation Net book value Year ended June 30, 2011 Opening net book value Additions Disposals Cost Accumulated depreciation Write off: Cost Accumulated depreciation Depreciation charge Closing net book value At June 30, 2011 Cost / revalued amount Accumulated depreciation Net book value Annual rate of depreciation (%)
1,652,700 1,652,700
6,000 (874) 5,126
306,905 (183,218) 123,687
49,431 4,253,376 (30,578) (1,943,007) 18,853 2,310,369
65,437 (59,988) 5,449
55,385 74,699 (45,371) (29,029) 10,014 45,670
7,697 (4,333) 3,364
37,539 6,509,169 (32,644) (2,329,042) 4,895 4,180,127
1,652,700 1,652,700
5,126 (61) 5,065
123,687 (626) 489 (137) (10,505) 113,045
18,853 (1,850) 17,003
2,310,369 17,213 (1,907) 1,788 (119) (232,200) 2,095,263
5,449 1,918 (15) 13 (2) (1,350) 6,015
10,014 712
45,670 11,464
3,364 (431) 390 (41) (672) 2,651
4,895 4,180,127 1,527 32,834 (3,934) (15,757) 3,911 13,420 (23) (2,337) (2,925) (262,252) 3,474 3,948,372
(2,602) (6,242) 2,394 4,435 (208) (1,807) (2,147) (10,542) 8,371 44,785
1,652,700 1,652,700
6,000 (935) 5,065
306,279 (193,234) 113,045
49,431 4,268,682 (32,428) (2,173,419) 17,003 2,095,263
67,340 (61,325) 6,015
53,495 79,921 (45,124) (35,136) 8,371 44,785
7,266 (4,615) 2,651
35,132 6,526,246 (31,658) (2,577,874) 3,474 3,948,372
1,652,700 1,652,700 1,652,700 1,652,700 -
5,065 (72) 4,993 6,000 (1,007) 4,993 1.01
113,045 20,237 (9,832) 123,450 326,516 (203,066) 123,450 5-10
17,003 (1,667) 15,336
2,095,263 235,769 (9,110) 3,858 (5,252) (3,718) 3,187 (531) (224,310) 2,100,939
6,015 2,917 (48) 46 (2) (51,542) 50,829 (713) (1,245) 6,972 18,667 (11,695) 6,972 20
8,371 7,886 -
44,785 15,632 (9,795) 7,002 (2,793)
2,651 (1,162) 1,068 (94) (522) 2,035 6,104 (4,069) 2,035 20
3,474 3,948,372 3,818 286,259 (3,030) 3,020 (10) (21,983) 13,926 (8,057)
26,814 (447) 26,367 26,814 (447) 26,367 10
(14,551) 13,904 (647) (1,797) (10,830) 13,813 46,794 46,830 85,758 (33,017) (38,964) 13,813 46,794 20 20
(11,754) (82,727) 11,673 80,661 (81) (2,066) (2,551) (252,826) 4,650 3,971,682 24,166 6,707,795 (19,516) (2,736,113) 4,650 3,971,682 50
49,431 4,491,623 (34,095) (2,390,684) 15,336 2,100,939 5-10 10
Annual Report 2011
55
14.1.1 The land of the Company, except the land situated at Faisalabad, had been revalued as on June 30, 2007 using the present market value at Rupees 62 million. Whereas the land situated at Faisalabad granted to the Company by the Government of Punjab in 1958 under Land Acquisition Act, 1894 for the specific purpose of using it as an industrial undertaking had been revalued at Rupees 1,597 million taking into account conditions specified under various directives of the Government by an independent valuer, Messrs Hamid Mukhtar and Company (Private) Limited. The Company had revalued this land based on the advice from its legal counsel. Fixed assets of the Company with carrying amount of Rupees 3,925 million (2010: Rupees 3,904 million) are subject to first pari passu charge to secured bank borrowings. If the freehold and leasehold land were measured using the cost model, the carrying amount would be as follows: 2011 Accumulated Net book depreciation value 2010 Accumulated Net book depreciation value
14.1.2
14.1.3
Cost
Cost
(Rupees in thousand) Land - Freehold Land - Leasehold
13,403 4,719 18,122
931 931
13,403 3,788 17,191
13,403 4,719 18,122
833 833
13,403 3,836 17,239
14.1.4
Depreciation charge for the year has been allocated as follows: 2011 2010 (Rupees in thousand)
Cost of sales (Note 29) -Owned assets -Leased assets Administrative expenses (Note 31)
236,951 447 237,398 15,875 253,273
246,078 246,078 16,174 262,252
56
Annual Report 2011
14.1.5 Detail of operating fixed assets, exceeding the book value of Rupees 50,000 disposed of during the year is as follows:
Description
Qty.
Cost
Accumulated Net book Sale depreciation value proceeds
Mode of disposal
Particulars of purchasers
(Rupees in thousand) Plant and Machinery Centrifugal chiller Comber, lapformer Vehicles Honda Civic Toyota Corolla Suzuki Cultus Suzuki Cultus Suzuki Cultus Master Truck Mercedes Benz
1 5
6,802 2,153 8,955
2,050 1,691 3,741 988 900 415 356 380 500 3,463 7,002
4,752 462 5,214 347 309 259 252 229 350 1,047 2,793
6,500 Negotiation 1,410 Negotiation 7,910 945 Negotiation 950 Negotiation 625 Negotiation 550 Negotiation 525 Negotiation 850 Negotiation 1,500 Negotiation 5,945
Crescent Bahuman Limited, Pindi Bhattian (Associate). Mr. Shahzad Haider Shah, 12/1 B, Peoples Colony, Faisalabad. Five Star Motors, Canal Road, Abdullahpur, Faisalabad. Mr. Nadeem Hussain, P-25, Muslim Town Block B, Faisalabad. Mr. Raees Ahmed, Factory Area, Faisalabad. Mr. Ghulam Murtaza, Sangi Meera, Abbotabad. Mr. Habib Ahmed, Company Employee. Mr. Arfan Gulzar, House No. 32, Gulistan Colony Block A, Faisalabad. Oilco Trading Company, 32K/C-2, Oilco House, Gulberg II, Lahore.
1 1 1 1 1 1 1
1,335 1,209 674 608 609 850 4,510 9,795
Aggregate of other items of property, plant and equipment with individual book values not exceeding Rupees 50,000
3,233 21,983
3,183 13,926
50 8,057
2,406 16,261
2011 2010 (Rupees in thousand) 14.2 Capital work in progress Building Plant and machinery Advances for purchase of vehicles
34,406 2,500 36,906
3,762 27,232 1,815 32,809
Annual Report 2011
57
2011 2010 (Rupees in thousand) 15. INVESTMENT IN AN ASSOCIATE Crescent Bahuman Limited - unquoted 26 926 433 (2010: 26 926 433) ordinary shares of Rupees 10 each (Note 15.1) Share of post acquisition reserve: As at July 01, For the year Share of associates items directly credited in equity Elimination of inter company adjustment As at June 30,
269,264 348,606 (150,712) 5,290 (20,898) 182,286 451,550
269,264 216,071 120,022 12,513 348,606 617,870
15.1
The Company holds 32.99% (2010: 32.99%) interest in Crescent Bahuman Limited (CBL), an unquoted public limited company involved in manufacturing of textile products. The summarized financial information of CBL is as follows: Associate's balance sheet: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Associate's revenue and profit: Revenue (Loss) / profit before taxation for the year (Loss) / profit after taxation for the year
4,726,675 4,068,192 (5,611,232) (1,002,677) 2,180,958
4,087,826 3,610,875 (4,052,726) (2,544,459) 1,101,516
7,113,823 (387,298) (456,842)
7,172,726 434,514 363,813
58
Annual Report 2011

16. LONG TERM INVESTMENTS Available for sale Related parties Quoted Crescent Jute Products Limited 2 738 637 (2010: 2 738 637) fully paid ordinary shares of Rupees 10 each. Equity held 11.52% (2010: 11.52%) Crescent Sugar Mills and Distillery Limited 975 944 (2010: 975 944) fully paid ordinary shares of Rupees 10 each. Equity held 4.56% (2010: 4.56%) Shams Textile Mills Limited 812 160 (2010: 812 160) fully paid ordinary shares of Rupees 10 each. Equity held 9.40% (2010: 9.40%) Premier Insurance Limited 169 573 (2010: 169 573) fully paid ordinary shares of Rupees 5 each. Equity held 0.28% (2010: 0.28%) Shakarganj Mills Limited 5 427 488 (2010: 5 427 488) fully paid ordinary shares of Rupees 10 each. Equity held 7.81% (2010: 7.81%) 2 746 050 (2010: 2 746 050) fully paid preference shares of Rupees 10 each. Equity held 7.94% (2010: 7.94%) Jubilee Spinning and Weaving Mills Limited Nil (2010: 182 629) fully paid ordinary shares of Rupees 10 each. Equity held Nil (2010: 0.56%) Crescent Steel and Allied Products Limited 6 209 676 (2010: 6 209 676) fully paid ordinary shares of Rupees 10 each. Equity held 11% (2010: 11%) Unquoted Crescent Bahuman Limited 197 600 000 (2010: Nil) fully paid preference shares of Rupees 10 each (Note 16.1) Cresox (Private) Limited (formerly Renfro Crescent (Private) Limited) Nil (2010: 4 317 252) fully paid ordinary shares of Rupees 10 each. Equity held Nil (2010: 11.98% ) Premier Financial Services (Private) Limited 500 (2010: Nil) fully paid ordinary shares of Rupees 1,000 each. Equity held 2.22% (2010: Nil)
2,738
4,105
5,124
5,124
4,629
4,629
35
35
20,624 8,266
27,680 27,186
546
91,625
91,625
1,976,000
43,159
500
Annual Report 2011
59

Others Quoted Jubilee Spinning and Weaving Mills Limited 182 629 (2010: Nil) fully paid ordinary shares of Rupees 10 each. Equity held 0.56% (2010: Nil) Crescent Fibres Limited 351 657 (2010: 351 657) fully paid ordinary shares of Rupees 10 each. Equity held 2.83% (2010: 2.83%)
546
2,162
2,162
Unquoted
Cresox (Private) Limited (formerly Renfro Crescent (Private) Limited) 4 199 792 (2010: Nil) fully paid ordinary shares of Rupees 10 each. Equity held 11.66% (2010: Nil) Premier Financial Services (Private) Limited Nil (2010: 500) fully paid ordinary shares of Rupees 1,000 each. Equity held Nil (2010: 2.22%) Less: Impairment loss charged to profit and loss account (Note 32.2) Add: Fair value adjustment
41,998
500
2,154,247 (2,725) 103,912 2,255,434
206,751 (27,343) 75,789 255,197
16.1
This includes 5 % unlisted, non-voting, cumulative, participatory and convertible preference shares issued by Crescent Bahuman Limited against the long term loans and advances given by the Company (Note 17.1).
LONG TERM LOANS AND ADVANCES Considered good: Loan and advances to Crescent Bahuman Limited associate (Note 17.1) Secured: Executives (Note 17.2) Other employees
17.
450 3,685 4,135 4,135 450 958 1,408 2,727
1,927,188 2,050 1,930 3,980 1,931,168 1,800 648 2,448 1,928,720
Less: Current portion shown under current assets (Note 23) Executives Other employees
60
Annual Report 2011
17.1
This loan has been converted into preference shares of Crescent Bahuman Limited (CBL) in pursuance of resolution passed by the shareholders of the Company and approval of regulatory authority. 2011 2010 (Rupees in thousand) Reconciliation of loans and advances to CBL : Opening balance as at July 01, Mark up accrued and inter company adjustment Converted into preference shares (Note 16.1) Closing balance as at June 30,
1,927,188 48,812 (1,976,000) -
1,809,317 117,871 1,927,188
17.2
Reconciliation of carrying amount of loans to executives: Opening balance as at July 01, Less: Repayments Closing balance as at June 30,
2,050 1,600 450
3,650 1,600 2,050
17.2.1
Maximum aggregate balance due from executives at the end of any month during the year was Rupees 1.900 million (2010: Rupees 3.650 million). These represent Qarz-e-Hasna given to executives and employees and are secured against balance to the credit of employee in the provident fund trust. These are recoverable in equal monthly installments. The fair value adjustment in accordance with the requirements of IAS 39 'Financial Instruments: Recognition and Measurement' arising in respect of staff loans is not considered material and hence not recognized. LONG TERM DEPOSITS AND PREPAYMENTS Security deposits Prepayments Less: Current portion shown under current assets (Note 24)
17.2.2
17.2.3
18.
2,477 129 2,606 86 2,520
2,138 1,492 3,630 803 2,827
Annual Report 2011
61
2011 2010 (Rupees in thousand) 19. DEFERRED INCOME TAX ASSET Taxable temporary differences Tax depreciation allowance Tax on investment in associate Surplus on revaluation of operating fixed assets Deductible temporary differences Unused tax losses 20. STORES, SPARE PARTS AND LOOSE TOOLS Stores (Note 20.1) Spare parts Loose tools
(121,051) (18,229) (114) (139,394) 181,745 42,351
136,327 23,760 60 160,147
155,146 14,516 107 169,769
20.1
This includes stores in transit amounting to Rupees Nil (2010: Rupees 16.103 million). Stores and spare parts include items which may result in fixed capital expenditure but are not distinguishable at this stage. STOCK-IN-TRADE Raw materials Work in process Finished goods (Note 21.2) Waste
20.2 21.
356,554 133,539 1,160,541 7,369 1,658,003
178,672 84,732 781,145 2,601 1,047,150
21.1
Stock-in-trade of Rupees 703.979 million (2010: Rupees 2.601 million) is being carried at net realizable value. Finished goods include stock in transit of Rupees 40.541 million (2010: Rupees 13.381 million). The aggregate amount of write-down of inventories to net realizable value recognized during the year was Rupees 154.068 million (2010: Rupees Nil).
21.2
21.3
62
Annual Report 2011
2011 2010 (Rupees in thousand) 22. TRADE DEBTS Considered good: Secured (against letters of credit) Unsecured (Note 22.2) Considered doubtful: Others - unsecured Less: Provision for doubtful debts
365,938 3,025,973 3,391,911 33,747 33,747 -
189,715 2,390,186 2,579,901 33,747 33,747 -
22.1
As at June 30, 2011, trade debts of Rupees 118.856 million (2010 : Rupees 1,295.647 million) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. The ageing analysis of these trade debts is as follows: Upto 1 month 1 to 6 months More than 6 months
88,267 23,113 7,476 118,856
570,201 703,756 21,690 1,295,647
22.2
It includes amount receivable from the associate, Crescent Bahuman Limited, amounting to Rupees 238.588 million (2010: Rupees 4.610 million). As at June 30, 2011, trade debts of Rupees 33.747 million (2010: Rupees 33.747 million) were impaired and provided for. The ageing of these trade debts was more than three years. LOANS AND ADVANCES Considered good: Employees - interest free Current portion of long term loans (Note 17) Advances to suppliers (Note 23.1) Letters of credit Income tax
22.3
23.
62 1,408 61,734 987 244,871 309,062
67 2,448 38,181 1,195 182,665 224,556
Annual Report 2011
63
23.1
It includes Rupees 0.331 million (2010: Rupees 0.329 million) receivable from a related party, Crescent Sugar Mills and Distillery Limited. 2011 2010 (Rupees in thousand)
24.
SHORT TERM DEPOSITS AND PREPAYMENTS Considered good: Margin deposit Short term prepayments Current portion of long term prepayments (Note 18)
64,297 2,721 86 67,104
5,001 152 803 5,956
25.
OTHER RECEIVABLES Considered good: Due from related parties Export rebate and claims Sales tax and special excise duty refundable Dividend receivable from related parties Miscellaneous Considered doubtful: Export rebate and sales tax refundable Less: Provision for doubtful debts As at June 30
771 23,596 74,460 80,310 2,739 181,876 12,952 12,952 181,876
330 15,239 89,645 4,232 109,446 12,952 12,952 109,446
26.
SHORT TERM INVESTMENTS Available for sale Others - quoted Samba Bank Limited 21 897 007 (2010: 21 897 007) fully paid ordinary shares of Rupees 10 each. Equity held 1.53% (2010: 2.50%) Less: Impairment loss charged to profit and loss account (Note 32.2)
49,706
65,253
(12,262) 37,444
(15,547) 49,706
27.
CASH AND BANK BALANCES With banks: On current accounts Including US$ 24,895 (2010: US$ 70,975) Cash in hand
17,782 749 18,531
15,402 1,017 16,419
64
Annual Report 2011
2011 2010 (Rupees in thousand) 28. SALES Export Local (Note 28.1) Cold storage Export rebate Duty drawback 28.1 Local Sales Waste Energy Less: Sales tax Processing income
11,062,882 3,610,889 12,981 55,038 17,467 14,759,257
7,555,046 3,241,217 11,928 51,037 4,158 10,863,386
3,292,316 267,997 3,560,313 3,560,313 50,576 3,610,889
2,946,019 166,061 102,036 3,214,116 14,074 3,200,042 41,175 3,241,217
28.2
Exchange gain due to currency rate fluctuations relating to export sales amounting to Rupees 32.874 million (2010: Rupees 115.525 million) has been included in export sales. COST OF SALES Raw material consumed (Note 29.1) Cloth and yarn purchased Stores, spare parts and loose tools consumed Packing materials consumed Processing and weaving charges Salaries, wages and other benefits (Note 29.2) Fuel and power Repair and maintenance Insurance Depreciation (Note 14.1.4) Other factory overheads
29.
4,691,600 1,558,574 630,550 371,184 544,056 606,883 1,135,443 63,903 18,877 237,398 9,551 9,868,019
2,848,255 1,204,721 564,983 369,779 376,885 623,514 976,607 50,328 15,716 246,078 9,022 7,285,888
Annual Report 2011
65
2011 2010 (Rupees in thousand) Work-in-process Opening stock Closing stock Cost of goods manufactured Finished goods Opening stock Closing stock
84,732 (133,539) (48,807) 9,819,212 783,746 (1,167,910) (384,164) 9,435,048 3,959,593 13,394,641
76,838 (84,732) (7,894) 7,277,994 684,570 (783,746) (99,176) 7,178,818 2,227,826 9,406,644
Cost of sales - purchased for resale Cost of sales 29.1 Raw material consumed Opening stock Add: Purchased during the year Less: Closing stock
178,672 4,869,482 5,048,154 (356,554) 4,691,600
179,013 2,847,914 3,026,927 (178,672) 2,848,255
29.2
Salaries, wages and other benefits include provident fund contribution of Rupees 11.817 million (2010: Rupees 11.254 million) by the Company. DISTRIBUTION COST Salaries, wages and other benefits (Note 30.1) Freight and shipment Distribution Commission to selling agents Advertisement
30.
19,161 213,803 96,420 310,921 878 641,183
16,071 182,877 70,162 201,101 202 470,413
30.1
Salaries, wages and other benefits include provident fund contribution of Rupees 0.720 million (2010: Rupees 0.577 million) by the Company.
66
Annual Report 2011
2011 2010 (Rupees in thousand) 31. ADMINISTRATIVE EXPENSES Salaries, wages and other benefits (Note 31.1) Meeting fee to non-executive directors Traveling, conveyance and entertainment Rent, rates and taxes Repair and maintenance Insurance Printing and stationery Communication Subscription Legal and professional Auditors' remuneration (Note 31.2) Software maintenance Depreciation (Note 14.1.4) Other charges
110,596 245 14,986 2,040 28,582 2,578 2,695 4,068 3,318 6,650 1,188 6,032 15,875 4,045 202,898
97,367 105 11,219 1,797 23,194 3,207 2,280 4,521 2,325 4,312 1,186 8,568 16,174 5,763 182,018
31.1
Salaries, wages and other benefits include provident fund contribution of Rupees 3.411 million (2010: Rupees 3.107 million) by the Company. Auditors' remuneration: Riaz Ahmad and Company Audit fee Half yearly review Reimbursable expenses
31.2
1,000 150 38 1,188
1,000 150 36 1,186
32.
OTHER OPERATING EXPENSES Donations (Note 32.1) Impairment loss on investments (Note 32.2) Provision for doubtful debts Property, plant and equipment written off Debit balances written off Workers' profit participation fund Workers' welfare fund
13,963 14,987 2,066 16 7,158 2,684 40,874
4,394 42,890 7,115 35 17,380 7,002 78,816
Annual Report 2011
67
2011 2010 (Rupees in thousand) 32.1 32.2 The directors and their spouses have no interest in donations made by Company during the year. Impairment loss on investments Long term investments (Note 16) Short term investments (Note 26) OTHER OPERATING INCOME Income from financial assets Dividend Income (Note 33.1) Mark-up on loans and advances (Note 33.2) Income from non-financial assets Sale of empties and scrap Rental income Gain on sale of property, plant and equipment Credit balances added back Research and development refund Sundry receipts
2,725 12,262 14,987
27,343 15,547 42,890
33.
94,917 55,098 150,015 17,562 640 8,204 2,622 29,028 179,043
12,567 131,358 143,925 15,212 227 3,958 197 20,458 790 40,842 184,767
33.1
Dividend Income From related parties: Crescent Bahuman Limited-Preference dividend Premier Insurance Limited Crescent Steel and Allied Products Limited Shams Textile Mills Limited From others: Crescent Fibres Limited
74,100 212 18,629 1,624 94,565 352 94,917
148 12,419 12,567 12,567
33.2
Mark-up on loans and advances Associate Crescent Bahuman Limited Mark-up on principal portion of short term converted advance and long term convertible subordinated loan Mark-up on overdue receivables
29,152 25,946 55,098
117,871 13,487 131,358
68
Annual Report 2011
2011 2010 (Rupees in thousand) 34. FINANCE COST Mark up on: Long term financing Liabilities against assets subject to finance lease Short term borrowings Workers' profit participation fund (Note 9.2) Bank charges and commission
107,718 1,076 409,702 1,786 6,890 527,172
125,111 434,803 206 6,673 566,793
34.1
Net gain on fair value of derivative financial instruments amounting to Rupees 160.472 million (2010: Rupees 27.533 million) is adjusted against finance cost. Exchange loss on foreign currency loans of the Company amounting to Rupees 15.347 million (2010: 58.056 million) is included in finance cost. PROVISION FOR TAXATION Charge for the year: Current (Note 35.1) Prior year adjustment Deferred (Note 35.2)
34.2
35.
151,068 87 151,155 (51,690) 99,465
90,890 90,890 27,931 118,821
35.1
Provision for current taxation represents the tax deducted against export sales, minimum tax on local sales and tax on different heads of other operating income under the relevant provisions of the Income Tax Ordinance, 2001. Tax losses available as at June 30, 2011 are Rupees 519.272 million (2010: Rupees 412.212 million). Reconciliation of tax expenses and product of accounting profit multiplied by the applicable tax rate is not presented, being impracticable. Deferred income tax effect due to : Tax depreciation allowance Unused tax losses Tax on investment in associate Surplus on revaluation of operating fixed assets Opening balance as at July 01, Related to surplus on revaluation of operating fixed assets
35.2
121,051 (181,745) 18,229 114 (42,351) (8,813) (526) (51,690)
118,107 (144,274) 34,861 119 8,813 20,344 (1,226) 27,931
Annual Report 2011
69
2011 2010 (Rupees in thousand) 36. (LOSS) / EARNINGS PER SHARE - BASIC AND DILUTED (RUPEES) (Loss) / profit for the year
(118,645)
344,670
2011 2010 (Number of Shares) Weighted average number of ordinary shares
49 209 923
49 209 923
(Loss) / earnings per share 36.1
2011 2010 (Rupees) (2.41) 7.00
No figure for diluted earnings per share has been presented as the Company has not issued any instrument carrying options which would have an impact on earnings per share when exercised. 2011 2010 (Rupees in thousand)
37.
CASH GENERATED FROM OPERATIONS (Loss) / profit before taxation Adjustments for non-cash charges and other items: Depreciation Gain on disposal of property, plant and equipment Property, plant and equipment written off Debit balances written off Impairment loss on investments Credit balances added back Provision for workers' profit participation fund Provision of workers' welfare fund Share of loss / (profit) from associate Income from loans and advances Finance cost Working capital changes (Note 37.1)
(19,180)
463,491
253,273 (8,204) 2,066 16 14,987 (2,622) 7,158 2,684 150,712 (29,152) 527,172 (754,717) 144,193
262,252 (3,958) 35 42,890 (197) 17,380 7,002 (120,022) (117,871) 536,270 72,513 1,159,785
70
Annual Report 2011
2011 2010 (Rupees in thousand) 37.1 Working capital changes Decrease / (increase) in current assets: - Stores, spare parts and loose tools - Stock-in-trade - Trade debts - Loans and advances - Short term deposits and prepayments - Interest accrued - Other receivables Increase in trade and other payables
9,622 (610,853) (810,788) (21,139) (61,148) (2,806) (72,430) (1,569,542) 814,825 (754,717)
4,347 (106,729) (17,588) 36,185 (4,534) 22,081 (47,537) (113,775) 186,288 72,513
38.
REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTOR AND EXECUTIVES The aggregate amount charged in the financial statements for the year for remuneration including all benefits to Chief Executive Officer, Director and Executives of the Company is as follows: Chief Executive Officer 2011 2010 Director 2011 2010 Executives 2011 2010
------------------------ (RUPEES IN THOUSAND) --------------------------Managerial remuneration Allowances House rent Utilities Servant Medical Special allowance Reimbursable expenses Cost of living allowance Contribution to provident fund 4,900 2,205 490 240 976 306 9,117 1 4,800 2,160 480 240 624 300 8,604 1 1,733 780 173 210 108 3,004 1 1,980 891 198 240 124 3,433 1 47,381 10,545 4,636 444 4,036 4,309 332 211 2,705 74,599 47 39,498 8,883 3,860 444 3,272 3,505 628 165 2,343 62,598 38
Number of persons
Annual Report 2011
71
38.1
Certain Executives are provided with rent free furnished accommodation and free use of Company maintained vehicles. The Chief Executive Officer is provided with free use of the Company maintained vehicles and residential telephone. Meeting fee amounting to Rupees 245,000 (2010: Rupees 105,000) has been paid to non-executive directors. 2011 2010 (Rupees in thousand)
38.2
39.
EMPLOYEES RETIREMENT BENEFITS Contribution to Employees Provident Fund Trust Contribution to Employees Old Age Benefit Institution
15,948 21,654 37,602
14,938 18,640 33,578
40.
TRANSACTIONS WITH RELATED PARTIES The related parties comprise associated companies, staff retirement fund and key management personnel. The Company in the normal course of business carries out transactions with various related parties. Detail of transactions with related parties, other than those which have been specifically disclosed elsewhere in these financial statements are as follows: ASSOCIATED COMPANIES Purchase of goods and services Sale of goods and services Processing income Dividend income Dividend paid Insurance premium paid Interest income
213,243 369,151 2,310 94,565 25,436 26,442 55,098

2011
189,437 207,538 1,827 12,567 23,212 131,358

2010
(Numbers) Preference share received by converting long term loan Bonus shares received
197 600 000 -
22 118
2011 2010 (Rupees in thousand) Contribution to Employees Provident Fund Trust
15,948
14,938
72
Annual Report 2011
2011 2010 (Figures in thousand) 41. PLANT CAPACITY AND ACTUAL PRODUCTION Spinning 100 % plant capacity converted to 20s count based on 3 shifts per day for 1 095 shifts (2010: 1 095 shifts) (Kgs.) Actual production converted to 20s count based on 3 shifts per day for 921 shifts (2010: 1 095 shifts) Weaving 100 % plant capacity at 50 picks based on 3 shifts per day for 1 095 shifts (2010: 1 095 shifts) Actual production converted to 50 picks based on 3 shifts per day for 852 shifts (2010: 1 089 shifts) Dyeing, Finishing and Home textile The plant capacity of these divisions are indeterminable due to multi product plants involving varying processes of manufacturing. (Figures) Power Plant Generation capacity Actual generation 41.1 REASON FOR LOW PRODUCTION Under utilization of available capacity of textile facilities is mainly due to Gas shutdowns. Power plant is operated according to the requirement of electricity. (MWH) (MWH)
38 562
38 562
(Kgs.)
31 521
36 281
(Sq.Mt.)
97 078
97 078
(Sq.Mt.)
62 361
75 527
257 544 112 311
257 544 138 413
Annual Report 2011
73
42.
42.1
SEGMENT INFORMATION
Processing & Home Textile 2011 2010 2011 2010 2011 2010 ---------------------------- (RUPEES IN THOUSAND) ----------------------------Spinning Weaving
Sales Cost of sales Gross profit Distribution cost Administrative expenses
6,837,790 5,043,738 7,479,241 5,081,912 8,486,373 7,013,678 (6,055,882) (4,081,199) (7,250,664) (5,021,318) (8,259,261) (6,749,754) 60,594 781,908 962,539 228,577 227,112 263,924 (64,170) (64,296) (81,168) (72,254) (145,338) (136,550) (102,168) (15,934) (118,102) (41,479) (14,256) (55,735) (471,572) (363,506) (93,250) (84,331) (564,822) (447,837)
Profit / (loss) before taxation and unallocated income and expenses Unallocated income and expenses Other operating expenses Other operating income Finance cost Share of (loss) / profit from associate Provision for taxation (Loss) / profit after taxation
636,570
825,989
110,475
4,859
(337,710) (183,913)
42.2
Reconciliation of reportable segment assets and liabilities:

Spinning 2011 2010 Weaving 2011 2010 Processing & Home Textile 2011 2010
---------------------------- (RUPEES IN THOUSAND) -----------------------------
Total assets for reportable segments Unallocated assets
1,481,436 1,036,633
1,692,019 1,097,170
1,778,359 1,426,442
All segment assets are allocated to reportable segments other than those directly relating Total liabilities for reportable segments Unallocated liabilities All segment liabilities are allocated to reportable segments other than trade and other
1,371,572 1,298,593
1,003,310
909,862
798,694
855,461
74
Annual Report 2011
Elimination of InterTotal - Company segment transactions 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 ------------------------------------------------------- (RUPEES IN THOUSAND) ------------------------------------------------------------Trading Power Generation Cold Storage
4,059,133 2,336,566 (4,011,249) (2,229,209) 107,357 47,884 (1,874) (1,874) -
1,071,292 941,059 (997,378) (884,107) 56,952 73,914 (1,399) (11,870) (13,269) (1,132) (10,572) (11,704)
12,981 (7,760) 5,221 (676) (676)
11,928 (13,187,553) (9,565,495) 14,759,257 10,863,386 (6,552) 13,187,553 9,565,495 (13,394,641) (9,406,644) 5,376 - 1,364,616 1,456,742 (605) (605) (641,183) (470,413) (202,898) (182,018) (844,081) (652,431)
46,010
107,357
60,645
45,248
4,545
4,771
520,535
804,311
(40,874) (78,816) 184,767 179,043 (527,172) (566,793) (150,712) 120,022 (99,465) (118,821) (118,645) 344,670
Trading 2011 2010
Power Generation 2011 2010
Cold Storage 2011 2010
Total - Company 2011 2010
1,796,283 1,688,574
444,015
502,164
11,832
11,471
7,203,944 5,762,454 5,412,477 5,226,244 12,616,421 10,988,698
to corporate and tax assets.
277,585
321,658
827
1,183
3,451,988 3,386,757 5,011,160 3,289,095 8,463,148 6,675,852
payables, corporate borrowings and current and deferred tax liabilities.
Annual Report 2011
75
42.3 42.3.1
Geographical Information The Company's revenue from external customers by geographical location is detailed below: 2011 2010 (Rupees in thousand) Europe America Asia, Africa, Australia Pakistan
3,987,049 1,742,941 5,405,397 3,623,870 14,759,257
2,662,267 1,640,087 3,307,887 3,253,145 10,863,386
42.3.2
All non-current assets of the Company as at reporting date are located and operating in Pakistan. Revenue from major customers Revenue from major customers of Company's trading segment represent Rupees 4,001 million (2010: Rupees 2,294 million). Revenue from other segments of the Company does not include any major customer.
42.4
43. 43.1
FINANCIAL RISK MANAGEMENT Financial risk factors The Company's activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by the Company's finance department under policies approved by the Board of Directors. The Company's finance department evaluates and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas such as currency risk, other price risk, interest rate risk, credit risk, liquidity risk, use of derivative financial instruments and non derivative financial instruments and investment of excess liquidity.
76
Annual Report 2011
(a) Market risk (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies. The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD). Currently, the Company's foreign exchange risk exposure is restricted to bank balances, the amounts receivable / payable from / to the foreign entities. The Company uses forward exchange contracts to hedge its foreign currency risk, when considered appropriate. The Company's exposure to currency risk was as follows: 2011 Cash at banks - USD Trade debts - USD Trade and other payable - USD Short term borrowings - USD Derivative financial instruments - USD Net exposure - USD 2010
24,895 35,527,639 (241,850) (33,767,418) (18,399,973) (16,856,707)
70,975 28,094,676 (350,161) (20,472,955) (9,929,196) (2,586,661)
The following significant exchange rates were applied during the year: Rupees per US Dollar Average rate Reporting date rate Sensitivity analysis If the functional currency, at reporting date, had weakened / strengthened by 5% against the USD with all other variables held constant, the impact on (loss) / profit after taxation for the year would have been Rupees 72.526 million higher / lower (2010: Rupees 10.307 million lower / higher), mainly as a result of exchange losses / gains on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis.
85.41 86.05
83.84 85.60
Annual Report 2011
77
Currency risk management
The Company manages its exposure to currency risk through continuous monitoring of expected / forecast committed and non-committed foreign currency payments and receipts. Reports on forecast foreign currency transactions, receipts and payments are prepared on monthly bases, exposure to currency risk is measured and appropriate steps are taken to ensure that such exposure is minimized while optimizing return. This includes matching of foreign currency liabilities / payments to assets / receipts, using source inputs in foreign currency and arranging cross currency swaps. The Company maintains foreign currency working capital lines in order to finance production of exportable goods. Proceeds from exports are used to repay / settle / rollover the Company's obligations under these working capital lines which substantially reduces exposure to currency risk in respect of such liabilities. Balances in foreign currency are also maintained in current accounts with banking companies.
(ii) Other price risk
Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to commodity price risk.
Sensitivity analysis
The table below summarises the impact of increase / decrease in the Karachi Stock Exchange (KSE) Index on the Company's (loss) / profit after taxation for the year and on equity (fair value reserve). The analysis is based on the assumption that the equity index had increased / decreased by 5% with all other variables held constant and all the Company's equity instruments moved according to the historical correlation with the index.
Index Impact on statement of other Impact on (loss) / profit after taxation comprehensive income (fair value reserve) 2011 2010 2011 2010 ----------------------- (Rupees in thousand) -------------------
KSE 100 (5% increase) KSE 100 (5% decrease)
2,291 (2,291)
3,659 (3,738)
11,428 (11,428)
9,132 (9,047)
Fair value reserve would increase / decrease as a result of gains / losses on equity investments classified as available for sale.
78
Annual Report 2011
(iii) Interest rate risk
This represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no significant interest bearing assets except for preference shares obtained from Crescent Bahuman Limited (CBL). The Company's interest rate risk arises from long term financing, liabilities against assets subject to finance lease and short term borrowings. Financial instruments obtained at variable rates expose the Company to cash flow interest rate risk. Financial instruments obtained at fixed rate expose the Company to fair value Interest rate risk. At the balance sheet date the interest rate profile of the Companys interest bearing financial instruments was: 2011 2010 (Rupees in thousand) Fixed rate instruments Financial assets Preference shares-CBL Long term loans and advances Financial liabilities Long term financing Short term borrowings Floating rate instruments Financial liabilities Long term financing Liabilities against assets subject to finance lease Short term borrowings
1,976,000 -
770,400
573,032 2,158,620
758,079 1,847,600
280,396 63,680 3,777,070
349,940 2,992,418
Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of the Company.
Annual Report 2011
79
Cash flow sensitivity analysis for variable rate instruments
If interest rates, at the year end date, fluctuates by 1% higher / lower with all other variables held constant, (loss) / profit after taxation for the year would have been Rupees 38.368 million higher / lower (2010: Rupees 31.117 million lower / higher), as a result of higher / lower interest expense on floating rate borrowings. This analysis is prepared assuming that amounts of liabilities outstanding at balance sheet dates were outstanding for the whole year.
Interest rate risk management
The Company manages interest rate risk by analyzing its interest rate exposure on dynamic basis. Cash flow interest rate risk is managed by simulating various scenarios taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Company calculates impact on profit after taxation and equity of defined interest rate shift, mostly 100 basis points. Cross currency swaps are also arranged to transfer exposure to more stable markets. (b) Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: 2011 2010 (Rupees in thousand) Investments Loans and advances Deposits Trade debts Interest accrued Other receivables Bank balances
2,292,878 4,197 66,774 3,391,911 2,806 83,820 17,782 5,860,168
304,903 1,931,235 7,139 2,579,901 4,562 15,402 4,843,142
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (If available) or to historical information about counterparty default rate:
80
Annual Report 2011
Short term
Rating Long term
2011 Agency
2010
Banks National Bank of Pakistan Allied Bank Limited Bank Alfalah Limited Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited MCB Bank Limited NIB Bank Limited Samba Bank Limited Silkbank Limited Standard Chartered Bank (Pakistan) Limited United Bank Limited Al-Baraka Bank (Pakistan) Limited Meezan Bank Limited
A-1+ A1+ A1+ A1+ A-1+ A1+ A1+ A1+ A-1 A-2 A1+ A-1+ A2 A-1+
AAA AA AA AA AA+ AA+ AA+ AA A AAAA AA+ A AA-
JCR-VIS PACRA PACRA PACRA JCR-VIS PACRA PACRA PACRA JCR-VIS JCR-VIS PACRA JCR-VIS PACRA JCR-VIS
11,935 654 15 131 77 38 422 14 11 1,662 165 174 2,484 17,782
884 2,797 15 100 273 1,601 7,755 646 11 104 240 794 36 146 15,402
The Company's exposure to credit risk and impairment losses related to trade debts is disclosed in Note 22.
Credit risk management
The Company's financial assets do not carry significant credit risk, with the exception of trade debts, which are exposed to losses arising from any nonperformance by counterparties. In respect of trade debts, the Company manages credit risk by limiting significant exposure to any single customer. Formal policies and procedures of credit management and administration of receivables are established and executed. In monitoring customer credit risk, the ageing profile of total receivables and individually significant balances, along with collection activities are reviewed on a regular basis. High risk customers are identified and restrictions are placed on future trading, including suspending future shipments and administering dispatches on a prepayment basis or confirmed letters of credit. Due to the Company's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counterparties on their obligations to the Company. Accordingly the credit risk is minimal.
Annual Report 2011
81
(c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Contractual maturities of financial liabilities including interest payments as at June 30, 2011:
Carrying Amount Contractual 6 month or Cash Flows less 6-12 month 1-2 Year More than 2 Years
--------------------------------- (Rupees in thousand) ---------------------------------
Long term financing Liabilities against assets subject to finance lease Trade and other payables Accrued mark-up Short term borrowings
853,428 63,680 1,238,976 140,717 5,935,690 8,232,491
997,363 93,377 1,238,976 140,717 6,276,559 8,746,992
256,258 9,430 1,238,976 140,717 4,339,940 5,985,321
142,671 9,430 1,936,619 2,088,720
258,151 18,859 277,010
340,283 55,658 395,941
The following are the contractual maturities of financial liabilities as at June 30, 2010: Long term financing Trade and other payables Accrued mark-up Short term borrowings
1,108,019 465,898 106,719 4,840,018 6,520,654
1,289,789 465,898 106,719 5,070,692 6,933,098
274,894 465,898 106,719 3,419,791 4,267,302
268,151 1,650,901 1,919,052
317,910 317,910
428,834 428,834
The amounts disclosed in the table are undiscounted cash flows. The contractual cash flows relating to the above financial liabilities have been determined on the basis of interest rates / mark up rates effective as at June 30. The rates of interest / mark up have been disclosed in Note 6, 7 and 11 to these financial statements. Carrying amount of long term financing as at June 30, 2011 includes overdue installment of principal amounting to Rupees 49.993 million (2010: Rupees Nil).
Liquidity risk management
The Company manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. At June 30, 2011, the Company had Rupees 1,193 million (2010: Rupees 2,069 million) available borrowing limits from financial institutions and Rupees 18.531 million (2010: Rupees 16.419 million) cash and bank balances. Management believes the liquidity risk to be low.
82
Annual Report 2011
43.2
Fair values of financial assets and liabilities
The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped in to levels 1 to 3 based on the degree to which fair value is observable:
Level 1
Level 2
Level 3
Total
--------------------------- (Rupees in thousand) ---------------------------
As at June 30, 2011 Assets Available for sale financial assets
274,380
274,380
As at June 30, 2010 Assets Available for sale financial assets
261,244
261,244
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial instruments held by the Company is the current bid price. These financial instruments are classified under level 1 in above referred table. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value a financial instrument are observable, those financial instruments are classified under level 2 in above referred table. The Company has no such type of financial instruments as on June 30, 2011. If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3. The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. The Company has no such type of financial instruments as on June 30, 2011.
Annual Report 2011
83
43.3
Financial instruments by categories Loans and receivables Available for sale
Total
As at June 30, 2011 Assets as per balance sheet Investments Loans and advances Deposits Trade debts Interest accrued Other receivables Cash and bank balances
4,197 66,774 3,391,911 2,806 83,820 18,531 3,568,039
2,292,878 2,292,878
2,292,878 4,197 66,774 3,391,911 2,806 83,820 18,531 5,860,917
Financial liabilities at amortized cost (Rupees in thousand)
Liabilities as per balance sheet Long term financing Liabilities against assets subject to finance lease Accrued mark-up Short term borrowings Trade and other payables
853,428 63,680 140,717 5,935,690 1,238,976 8,232,491

Loans and receivables Available for sale
Total
As at June 30, 2010 Assets as per balance sheet Investments Loans and advances Deposits Trade debts Other receivables Cash and bank balances
1,931,235 7,139 2,579,901 4,562 16,419 4,539,256
304,903 304,903
304,903 1,931,235 7,139 2,579,901 4,562 16,419 4,844,159
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Annual Report 2011
Financial liabilities at amortized cost (Rupees in thousand)
Liabilities as per balance sheet Long term financing Accrued mark-up Short term borrowings Trade and other payables
1,108,019 106,719 4,840,018 465,898 6,520,654
43.4
Capital risk management The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry and the requirements of the lenders, the Company monitors the capital structure on the basis of gearing ratio. This ratio is calculated as borrowings divided by total capital employed. Borrowings represent long term financing, liabilities against assets subject to finance lease and short term borrowings obtained by the Company as referred to in Note 6, 7 and 11 respectively. Total capital employed includes 'total equity' as shown in the balance sheet plus 'borrowings'. The Company's strategy, which was unchanged from last year, was to maintain a gearing ratio of 60% debt and 40% equity. 2011 2010 (Rupees in thousand) Borrowings Total equity Total capital employed Gearing ratio Percentage
6,852,798 2,512,885 9,365,683 73.17
5,948,037 2,672,439 8,620,476 69.00
The increase in the gearing ratio resulted primarily from increase in borrowings from the banks and current year losses.
Annual Report 2011
85
44.
DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on October 05, 2011 by the Board of Directors of the company.
45.
CORRESPONDING FIGURES Corresponding figures have been re-arranged, wherever necessary for the purpose of comparison. However, no significant re-arrangements have been made during the year except for the following: Net gain on fair value of derivative financial instruments is adjusted against finance cost instead of showing separately in other operating income. Exchange loss on foreign currency loans is merged in finance cost instead of showing separately in other operating expenses.
46.
GENERAL Figures have been rounded off to the nearest thousand of Rupees unless otherwise stated.
86
Annual Report 2011
62nd Annual General Meeting

The Corporate Secretary, The Crescent Textile Mills Limited, 40-A, Off: Zafar Ali Road, Gulberg-V , Lahore.
PROXY FORM
I/We The as of of # Crescent per Textile Mills Registered of Limited Faisalabad and holder a of member/members of shares
Folio # / CDC Participant ID # / Sub A/C # / Investor A/C # do hereby appoint or failing him who is also member of the Company vide Registered Folio as my/our Proxy to attend, speak and vote for me/us and on my/our
behalf at the 62th Annual General Meeting of the Company to be held on Monday the October 31, 2011 at 9:30 a.m. at Registered Office 40-A, Off: Zafar Ali Road, Guliberg V, Lahore and at any adjournment thereof. As witness my hand this day of 2011.
Witnesss Signature Name: CNIC: Address:
Affix Revenue Stamp of Rs. 5/-
Witnesss Signature Name: CNIC: Address:
Members Signature
Date: Place: Lahore Note: 1. 2.
Cdc A/C # Nic #
The Form of Proxy should be deposited at the Registered Office of the Company not later than 48 hours before the time for holding the meeting. CDC Shareholders, entitled to attend and vote at this meeting, must bring with them their national Identity Cards/Passport in original to provide his/her identity, and in case of Proxy, must enclosed an attested copy of his/her NIC or Passport. Representatives of corporate members should bring the usual documents for such purpose.
Annual Report 2011
87
Annual Report 2011
Mills & Head Office Sargodha Road, Faisalabad, Pakistan T: +92-041-111-105-105 F: +92-041-111-103-104 E: crestex@ctm.com.pk
Registered Office 40-A, Off: Zafar Ali Road, Gulberg-V, Lahore, Pakistan T: +92-042-111-245-245 F: +92-042-111-222-245 E: mailho@crescentbahuman.com Share Registrar Crescent Group Services (Pvt) Ltd., 306, 3rd Flr, Siddiq Trade Centre, 72-Main Boulevard, Gulberg, Lahore, Pakistan T: +92-042-35787592 F: +92-042-35787594 E: corpsecry@cresjute.com www.ctm.com.pk

Annual Report 2011

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Annual Report 2011

The Crescent Textile Mills Limited