Contents

09 Adoption and Statement of Adherence

with the International Integrated
Reporting Framework (IR)
11 Vision & Mission
13 Core Values
15 Culture
Vortex of 17 Ethics

Imagination 19
21
Code of Conduct
Nature of Business
To be pulled into a new 22 Group Structure
dimension and into a new way of 25 Company Information
envisioning a material. 26 Milestones
28 Awards and Recognition
From imagination to design and 29 Organizational Structure
engineering, what yesterday was
32 Geographical Presence
impossible or improbable today
34 Position within the Value Chain
can be a reality. Cement has
36 Factors Affecting the External
finally shed its utilitarian trait, it is Environment and the Organization`s
now come into its own as a Response
material that is in itself a means, 38 Significant Development & Changes
and an end. 39 Composition of Imported Material vs
Local Raw Material Mix
41 Strategic Objectives
42 Management Strategies and Resource
Allocation Plans
43 Key Performance Indicators
43 Methods and Assumptions
in Compiling Indicators
44 Liquidity and Financial Capital Structure
44 Significant Plans and Decisions
46 Risks and Opportunities
50 Notice of Annual General Meeting
52 Directors’ Profile
55 Chairman’s Review
57 Directors’ Report to the Members
61 Board Meetings Held Outside Pakistan
61 Annual Evaluation of Board Performance
63 Directors’ Orientation and Training
63 Policy on Non-Executive and 90 Statement of Value Addition and
Independent Directors’ Remuneration Distribution of Wealth
63 Matters Delegated to the Management 92 Analysis of the Financial and
64 Governance Practices Exceeding Legal Non-Financial Performance
Requirements 94 Change in Indicators and Performance
64 Female Director Measures
64 Independent Director 94 Segment Results
64 Investors’ Grievance Policy 96 Ratio Analysis
65 Related Parties 101 DuPont Analysis
65 Statement of Management’s Responsibility 103 Free Cash Flows
67 Social and Environmental Responsibility 104 Economic Value Added
Policy 105 Key Financial Information - Last Six Years
69 Conflict of Interest Policy 106 Horizontal Analysis - Last Six Years
71 Insider Trading Policy 108 Vertical Analysis - Last Six Years
73 Safety of Records Policy 112 Statement of Summary of Cash Flows -
75 IT Governance Policy Last Six Years
77 Whistle Blower Policy 113 Statement of Cash Flows - Direct Method
77 Business Continuity and Disaster 114 Quarterly Performance Analysis
Recovery Policy 115 Share Price Sensitivity Analysis
78 Human Resource Policies 116 Calendar of Notable Events
78 Diversity Policy 117 Business Rationale for Major Capital
79 Statement of Compliance with Listed Expenditure
Companies (Code of Corporate 119 Forward Looking Statement
Governance) Regulations, 2017
122 Sustainability Highlights
80 Statement of ComplianceWith the Best
Practices of Transfer Pricing 128 Corporate Social Responsibility Highlights

81 Independent Auditors’ Review Report on 132 Statement of Unreserved Compliance of

the Statement of Compliance contained in International Financial Reporting
Listed Companies (Code of Corporate Standards (IFRSs)
Governance) Regulations, 2017 134 Glossary of Terms
82 Role of Chairman and Chief Executive 135 Financial Statements
Officer 183 Pattern of Shareholding
84 Salient Features of Terms of Reference of 188 Notice of Annual General Meeting (Urdu)
the Audit Committee and the Human
Resource & Remuneration Committee 192 Directors’ Report to the Members (Urdu)
86 Report of the Audit Committee Proxy Form
88 Corporate Governance - Stakeholders’ Proxy Form (Urdu)
Engagement E-Dividend Mandate Form
 Tenacity
with a Twist
Solid, sturdy, lasting, durable and practical
are adjectives commonly associated with
cement. However, we at Cherat believe that
when used in an imaginative way cement is
so much more. It becomes a tool, a material
that can be moulded and crafted to meet the
mind’s eye. It is only limited by the extent of
the designer’s imagination.
Cherat Cement Company Limited

02
Annual Report 2018

03
 Austere, yet
Out of the
Ordinary
Jaggered, smooth, two or three dimentional,
geometric, structured or organic, indoor or
outdoor, light or shadow, floor, wall or roof,
industrial or edgy, there is nothing that limits
the multitude of applications in which
cement can be used.
Cherat Cement Company Limited

04
Annual Report 2018

05
 The Dramatic,
the Artistic,
the Play of
Chiaroscuro
Layers, textures, the play of light and
shadow, of changing hues and densities,
changing moods and tones. The options
are infinite, the opportunities boundless,
Cherat Cement Company Limited

the results timeless.

06
Annual Report 2018

07
 Cherat Cement Company Limited

08
Adoption and Statement of Adherence
with the International Integrated
Reporting Framework (IR)
Cherat Cement was founded more than 35 years The Management has laid the business foundation
ago. Since then the Company has adapted its built on the principles of ethics and corporate
structure in response to global changes and professionalism. The same is being developed by
development. It is part of our strategies, devising and disseminating procedural steps and
development and execution of our projects to policies thereby highlighting need of good
generate value creation for the organization and its governance and resource allocation in achieving the
stakeholders. In the extreme complex social and desired objectives. Its reporting is being monitored
environmental circumstances, integration of and it is ensured that the relevant information is
financial, social and environmental information, is shared in the most suited way for the stakeholders of
one of the most effective ways for an organization to the Company. Connectivity of the information is
report its performance and activities and to another aspect which needs to be addressed
demonstrate, to the market and society, the properly. Thus, the stakeholders are made aware of
importance of linking sustainability issues to the Company’s philosophy and attitude towards
business strategies. achieving the enhanced stakeholders’ value and
customer satisfaction. The stakeholders’ value is
The Company is working with a strategy for maximized through returns on investment, which
generating value creation for the organization and management believes can be achieved through
its stakeholders. Achieving sustainable corporate revenue maximization and cost control measures.
value by focusing economic, societal, technological
and environmental factors and their impacts is Adoption of International Integrated Reporting
Company’s core strengths. For users of this Framework depends on the individual
information, it is imperative to ensure, that the circumstances of an entity and is still considered to
material is presented in such a way that it enables be a practice in its early stages. We will continue to
the stakeholders to better understand these improve the information produced to make it even
activities. It also assures that the Company concisely easier to understand, while taking into account the
reports material information depicting how well it is opinion of stakeholders reading this report. Initially,
performing in non-financial dimensions that affect the Company has included following content
the quality of the Company’s formulated strategy elements for the users of this report:
and its execution. The Company has adopted the
Integrated Reporting Framework to give an overview
• Organizational overview and external
of Company’s philosophy to explain connection
environment
between its financial and non-financial information,
which would enhance the user’s understanding as to • Strategy and resource allocation
how the Company is working to improve its • Risks and opportunities
performance keeping in view the stakeholder’s
interests. The business strategy information is linked • Governance
directly to business activities and non-financial • Stakeholder’s relationship and engagement
information, and provides explanations accordingly.
• Performance and position
The framework requires a strong commitment by the • Outlook
Company management which is ultimately
responsible for the message the Company is • Sustainability and corporate social responsibility
delivering to all of its stakeholders. The Board of • Excellence in corporate reporting
Directors has a crucial role to play, since directors
are elected by shareholders, and integrated
reporting is a mechanism of ensuring long-term
value creation and increasing transparency for these
shareholders. Therefore, the adoption of integrated
Annual Report 2018

reporting requires involvement and support of the

board of directors and the CEO. Henceforth,
Management of the Company provides guidance to
achieve Company objectives by advising, assessing,
and monitoring business strategies; ensuring the
execution and modification of strategies; and Omar Faruque
evaluating their own effectiveness in these activities. Karachi: August 29, 2018 Chairman

09
 Organizational
Overview and
External
Enviornment
Cherat Cement Company Limited

10
Vision
Growth through the best value creation for
the benefit of all stakeholders.

Mission
Invest in projects that will optimize the
risk-return profile of the Company.
Achieve excellence in business.
Maintain competitiveness by leveraging
technology.
Continuously develop our human
resource.
To be regarded by investors as amongst
the best blue-chip stocks in the country.

Annual Report 2018

11
 Cherat Cement Company Limited

12
Core
Values
• Always deliver the best quality product to our
customers.
• Maintain the highest level of integrity, honesty
and ethics.
• Use technology to continuously improve our
processes.
• Develop the capability of our workforce on an
ongoing basis.
• Safeguard the interests of all our stakeholders.

Annual Report 2018

13
 Cherat Cement Company Limited

14
Culture
Organizational culture in Cherat Cement Company Limited is
a manifestation of shared values and beliefs, which we practice
every day to move towards a better and more successful
organization. These shared values have a strong influence on
the respective teams and help them in a win win outcome for
both the employees and the organization. Our values provide
the foundation of our culture and bind us into a world class
team yearning to outperform the competition.

Annual Report 2018

15
 Cherat Cement Company Limited

16
Ethics
Our Code of Conduct reflects our commitment to meet the
expectations of our stakeholders and contains the fundamental
principles and rules concerning ethical business conduct.
Cherat Cement Company Limited (CCCL) is committed to
conducting its business with honesty and integrity, and we
expect all our employees to maintain high standards in
accordance with this Code.

CCCL Code of Conduct forms an integral part of the terms of

employment of all employees. The Company insists on full
compliance and does not tolerate any misconduct. Unlawful
behaviour will not be tolerated under any circumstances.
Breach of the CCCL’s Code of Conduct can lead to disciplinary
action up to and including termination of employment.

It is the obligation of every employee to be responsible, honest,

trustworthy, conscientious, and dedicated to the highest
standards of ethical business practices. The employees have a
legal, moral and ethical responsibility to report to their Line
Managers or Compliance Committee, any known or suspected
violations of law, regulations and / or corporate policies.

Annual Report 2018

17
 Cherat Cement Company Limited

18
Code of Conduct
The Code of Conduct of the Company is based on the third party or use such information for his or her personal benefit
principles of honesty, integrity and professionalism at every while employed with the Company or thereafter, unless prior
stage. written approval is obtained from a duly authorized person, or
the disclosure of confidential information is required by law, any
Scope governmental agency, court or other quasi-judicial or regulatory
The code of conduct policy is applicable to all regular and body.
direct contract staff in the company and its locations. Protection and Information Security
Compliance Committee and Reporting of Violations Cherat Cement has a policy that sets out rules on data protection
Cherat Cement has established a Compliance Committee to and the legal conditions that must be satisfied in relation to the
provide advice concerning compliance with the code of obtaining, handling, processing, storage, transportation and
conduct. All employees are encouraged to report any destruction of personal information. We comply with all
suspected violation of this Code of Conduct to their Line applicable laws & regulations regarding the collection,
Managers (Functional Heads) or Compliance Committee or processing and use of personal data. Any illegal collection,
their respective Executive Director. processing or use of personal data of our employees, suppliers,
customers and third parties is strictly prohibited. All personal
Compliance with the Law data must be safeguarded with appropriate care and protected
The observance of the laws and regulations of the legal against unauthorized access by third parties at all time.
systems in which we operate is mandatory for all employees Handling and Safeguarding of Cherat Cement’s Property
in their dealings with customers, suppliers, competitors,
other employees, government bodies and officials. Employees must handle Cherat Cement’s property (including
both tangible & intangible) with due care and in a
Competition and Anti-trust Law responsible manner. Cherat Cement does not tolerate any
Cherat Cement obligates its employees for strict compliance unauthorized use or misappropriation of its property or
with Competition and Anti-trust Laws wherever it operates. services.

Bribery and Corruption Equal Treatment and Fair Working Conditions

Cherat Cement is committed to conducting its business in an Cherat Cement is committed to promoting equality of
open, honest and ethical manner in all the jurisdictions in opportunity for all staff and job applicants. We aim to create
which it operates and will not engage in any form of bribery a working environment in which all individuals are able to
or corruption in order to secure any kind of business make best use of their skills and abilities, free from
advantage. discrimination or harassment, and in which all decisions or
promotions are objectively based on merit. We do not
Money Laundering tolerate any form of discrimination, harassment or bullying
in the workplace.
It is Cherat Cement’s policy to refrain from conducting
business with persons or entities who are involved in Health, Safety and Environmental Protection
criminal or illegal activities. All employees have to adhere to
applicable anti-money laundering laws and regulations. We focus on all aspects of occupational health, safety and
environmental protection. We identify and manage health,
Product Quality safety and environmental risks in our activities and over the
entire value chain of our products and services.
We discover, develop and manufacture high-quality
products that meet all regulatory requirements, and pursue We make efficient use of natural resources and minimize the
quality beyond compliance in both our products and environmental impact of our activities and products over
processes. We focus on regularly updating ourselves with their life cycle.
technological advancements to produce under the highest
standards and maintain all relevant technical and Conflict of Interest
professional standards. Employees may not engage in any activities, on or off the
Books, Records and Financial Reporting job, that conflict with the Company’s business interest, nor
they may use their position with the Company for their
The accuracy and completeness of our books, records and personal gains, or for the improper benefit to others.
financial reporting is of critical importance for Cherat
Cement. We fulfill all applicable legal obligations with As a policy, conflicts of interest or the mere appearance of
regard to public filings and reporting. such a conflict must be avoided.
Annual Report 2018

Confidentiality
It is our policy that no employee entrusted with confidential
information about the Company, its suppliers, customers or
other business partners may disclose such information to any

19
 Cherat Cement Company Limited

20
Nature of
Business
Cherat Cement Company Limited is a Ghulam Faruque Group (GFG)
Company. Its main business activity is manufacturing, marketing and sale
of Ordinary Portland Cement with the brand name of ‘Cherat’. The
Company is amongst the pioneers of cement industry in Pakistan and is
the number 1 cement in its region. Quality is our business; therefore,
there are no compromises on Quality Management. The plant is located
at Village Lakrai, District Nowshera, Khyber Pakhtunkhwa (KPK) Province.

Due to plant’s geographical position, it is ideally located to export cement

to Afghanistan as well as to cater the local market needs in the KPK, FATA,
Punjab and Azad Kashmir. The Company is registered on Pakistan Stock
Exchange and is also ISO 9001 and 14001 certified. The Company’s 2nd
production line of cement became operational in January 2017. The
Company’s annual installed capacity has now reached around 2.4 million
tons of cement. The Company is in the process of installing cement line III
at the same location with an installed annual cement capacity of more
than 2.1 million tons, which is expected to be commissioned by early
2019.

Annual Report 2018

21
 Group Structure
Introduction
Since its inception, the Ghulam Faruque Group has continuously strengthened and diversified its lines
of operation and all group companies are working under common directorship / management. Faruque
(Private) Limited is the Parent Company. All companies transact among themselves on an arm length
basis. Details and brief profile of other leading group companies / ventures are as follows:

Faruque
(Private) Limited
Parent Company
Established in 1964 as a
Faruque
Parent Company of the (Private) Limited
group, it primarily serves Parent Company
as an investment arm of
the Group.

Mirpurkhas Sugar Mills Ltd

Manufacturer of Cane Sugar
Established in 1964, its principal
activity is manufacturing and
selling of sugar. It is located about
300 km from the port city of
Karachi, in Mirpurkhas and is
listed on the Pakistan Stock
Exchange Limited. The Company
has a crushing capacity of 7,500
tons per day and is one of the
most efficient sugar mills in
Pakistan.
Moreover, it is involved in
development of higher yield sugar
cane varieties on its 1,700 acre
experimental farm.

Cherat Packaging Ltd

Manufacturer of Kraft Paper, Polypropylene
Bags and Flexible Packaging Products.

Established in 1991, it is the largest producer

and supplier of paper sack and polypropylene
(“PP”) bags to the cement industry in Pakistan.
CPL also produces and provides bags to other
industries such as sugar, rice and chemical etc.
CPL is listed on Pakistan Stock Exchange. The
Company has a production capacity of 400
million paper bags and 195 million PP bags.
The Company has already installed printers and
laminator of Flexible Packaging Division (FPD)
in June 2018. It will cater to the domestic as
Cherat Cement Company Limited

well as export markets and is also a recipient of

the prestigious Pakistan Stock Exchange “Top
Companies” Award and Management
Association of Pakistan’s Best Company Award
several times.
Mirpurkhas Energy Ltd
By September 2018, the Company will also Wholly owned subsidiary of
bring into operation its remaining Flexible Mirpurkhas Sugar Mills Ltd
Packaging Division.
Mirpurkhas Energy Ltd., incorporated in
2016 as a public (unlisted) Company, is
a fully owned subsidiary of Mirpurkhas
Sugar Mills Limited. It is 26 MW
Bagasse based Cogeneration Project.
The principal activity of the company
is to generate and supply electricity.

22
 Zensoft (Pvt.) Ltd
Information Systems Services
provider specializing in business
software solutions

It was established in 1998 and is engaged in development

and sale of computer softwares. The company specializes in
providing high quality business solutions.

Greaves Pakistan (Pvt.) Ltd

Providing Specialized Engineering
Sales and Services
It was established in 1859 to provide specialized engineering
equipment sales and services. However in 1964, the Group
acquired a controlling interest in the shares of the Company and
by 1981 Greaves became a wholly owned subsidiary of Faruque
(Private) Limited. Greaves has the following divisions namely i)
Power Generation, ii) CNG Equipment, iii) Industrial Machinery,
iv) Solar Energy, v) LED, vi) Elevator, vii) Earth Moving &
Construction Machinery, viii) Air Compressor ix) Fuel Dispenser
and x) UPS.

Greaves Airconditioning (Pvt.) Ltd

Equipment Suppliers and HVAC Solution Provider
Commencing operations in 1975, this Company is the only
HVAC solution provider of its kind and is the sole distributor
of York (JCI) products in Pakistan. It is involved in providing a
wide array of services related to HVAC equipments that
includes designing, installation and maintenance of central
and packaged units. Moreover, it also launched residential
light air conditioning units under the brand name of Euro Aire.

Greaves CNG (Pvt.) Ltd

Retail Sale of CNG to end consumers
Greaves CNG was established in 2001 with a prime motive to
install CNG facilities at the retail outlets of Petroleum
Companies. It is a preferred third party investor for all major
UniEnergy Ltd petroleum companies in Pakistan.
Joint Venture for Renewable
Wind Energy
Greaves Engineering Services (Pvt.) Ltd
HVAC Contractors
Established in 2003, its principal activity is to provide services
associated with Airconditioning, installation and maintenance
of central and packaged units.

Unicol Ltd
Joint Venture Distillery
producing Ethanol and Liquid
Carbon Dioxide (CO2)

Incorporated in 2003, Unicol is a joint venture distillery

project among Mirpurkhas Sugar Mills, Faran Sugar and
Mehran Sugar. It is engaged in the production and marketing
of ethanol from molasses and CO2. Its current production
capacity is 200,000 litres per day. It is involved in producing
various varieties of ethanol.
Annual Report 2018

Madian Hydropower Ltd

Joint Venture for establishing
148 MW hydropower plant

23
Cherat Cement Company Limited

02 Cherat Cement
24
Company Limited
Company Information
Board of Directors Islamic Bankers
Mr. Omar Faruque Chairman Bank Alfalah Ltd
Mr. Azam Faruque Chief Executive Dubai Islamic Bank Pakistan Ltd
Mr. Akbarali Pesnani Director Meezan Bank Ltd
Mr. Shehryar Faruque Director
Share Registrar
Mr. Arif Faruque Director
Central Depository Company
Mr. Saquib H. Shirazi Director
of Pakistan Limited (CDC)
Mr. Shamshad Nabi (NIT) Director
CDC House, 99-B, Block 'B'
Mr. Asif Qadir Director
S.M.C.H.S., Main Shahrah-e-Faisal
Karachi-74400
Audit Committee
Tel: 0800-23275
Mr. Asif Qadir Chairman
Mr. Akbarali Pesnani Member
Contact Information
Mr. Arif Faruque Member
UAN: 111-000-009
Email: info@[Link]
Human Resource &
Web: [Link]
Remuneration Committee
Mr. Shamshad Nabi Chairman
Mr. Saquib H. Shirazi Member
Mr. Azam Faruque Member
Mr. Shehryar Faruque Member
Registered Office / Factory
Executive Director &
Village Lakrai, P.O. Box 28,
Chief Financial Officer
Nowshera
Mr. Yasir Masood
Tel: +9291 5270531-4
Fax: +9291 5270536
Executive Director &
Company Secretary
Head Office
Mr. Abid Vazir
Modern Motors House,
Beaumont Road
Head of Internal Audit
Karachi-75530
Mr. Aamir Saleem
Tel: +9221 35683566-7, 35689538
Fax: +9221 35683425
Auditors
EY Ford Rhodes
Sales Offices
Chartered Accountants
Peshawar:
1st Floor, Betani Arcade,
Legal Advisor
University Road
K.M.S. Law Associates
Tel: +9291 5842285, 5842272
Bankers Fax: +9291 5840447
Allied Bank Ltd
Bank Al Habib Ltd Lahore:
Faysal Bank Ltd 3, Sunder Das Road
Habib Bank Ltd Tel: +9242 36286249-50, 36308259
MCB Bank Ltd Fax: +9242 36286204
National Bank of Pakistan
Annual Report 2018

Samba Bank Ltd Islamabad:

Soneri Bank Ltd 1st Floor, Razia Sharif Plaza
Standard Chartered Bank (Pakistan) Ltd Jinnah Avenue, Blue Area
The Bank of Punjab Tel: +9251 2344531-33
United Bank Ltd Fax: +9251 2344534, 2344550

Annual 02
25
Report 2018
 Milestones
Doubling
capacity expansion to
2,300 t/day
Cherat Electric Merger
Installed Roller Press in Cherat Cement
at Raw Mill & Company Ltd
Cement
Cherat Cement Grinding areas Cooler E.P.
started IKN System at Multicyclones
production Caterpillar Cooler converted to Capacity
with 1,100 commissioned capacity Electrostatic Expansion
t/day 04 CAT power increased to Precipitators to 3,300 t/day
capacity generators (6 MW) 2,500 t/day

Optimization WARTSILA HMI Coal Mill LVT

capacity Diesel Manual Incorporated Cement Press
expansion commissioned operating Coal Grinding installed
Cherat Cement Company Limited

to 04 Wartsilla panels Mill which

1,400 t/day Diesel plants converted to replaced
(20 MW) HMI primary fuel
Furnace Oil

26
 Commercial
production of Line-II
with the capacity of
4,200 clinker t/day
03 Roto Packers started
Haver &
Waste Heat L/C opened for Line III
Boecker
Recovery for having clinker
commissioned
Power Refuse Derived Fuel production capacity of
with packing
Generation Processing Plant more than 6,700 t/day
capacity of 270
commissioned installed
t/hour

Installed SAP Tyre Derived Fuel Work started on L/C opened for 3
(ERP) Processing Plant Line II having dual fuel Wartsila
installed clinker generators having
production production
capacity of 4,200 capacity of 9.7
t/day MW each
Annual Report 2018

27
 Awards and Recognition

South Asian Federation of Accountants (SAFA) Award

In recognition of the Cherat Cement’s endeavour for

transparency in corporate reporting, the annual report
of the Company was nominated in the SAARC
Anniversary Awards for Corporate Governance
Disclosures Award 2014. The event was held in Lahore
in February 2016 and the Company was awarded
certificate of merit for Improvement in Transparency,
Accountability & Governance in Corporate
Governance Disclosures in the Annual Report of June
2014.

Best Corporate and Sustainability Report

Award ICAP, ICMAP

On August 25, 2017 the Company was honored

with 1st position in Best Corporate and
Sustainability Report Award jointly organized by
Institute of Chartered Accountants of Pakistan and
Institute of Cost and Management Accountants of
Pakistan in the cement and sugar sector. This is the Pakistan Stock Exchange Top Companies Award
second consecutive year that Company placed as
winner of the competition in 2017 and 2016. Cherat Cement’s outstanding performance was also
Whereas the Company secured 2nd position in recognized by the Pakistan Stock Exchange (Formerly
2015 and 2014. Karachi Stock Exchange) and the Company was
awarded the Top Companies Award for the year 2014.
These awards underscore our firm commitment on The ceremony was held in Karachi in September 2016
effectively communicating financial and and the award was presented by former Prime Minister
Cherat Cement Company Limited

non-financial information accurately, timely and of Pakistan, Mian Muhammad Nawaz Sharif.
transparently.

These achievements show that Cherat Cement is a responsible

corporate citizen and believes in transparency in the process of data
gathering and timely dissemination of factual information to our
valuable stakeholders.

28
Organizational Structure

Shareholders

Board of Directors

Board Committees

Chief Executive

Executive Director
Executive Director Sales & Marketing**
Finance

Executive Director
General Manager Corporate Affairs
Works & Projects*

General Manager
Information Technology
General Manager Audit

Senior Manager
General Manager Administration
Procurement

General Manager
Annual Report 2018

Human Resource

Administrative Reporting
Functional Reporting

29
 * Factory Site
Organizational Structure
Head Office (through respective HODs)

HSE Finance Information Human

Technology Resource Production Mechanical Electrical Instrument

Senior Senior Assistant Senior Assistant Assistant Assistant Senior

Manager Manager GM Manager GM GM GM Manager

**Sales Offices
Organizational Structure
Cherat Cement Company Limited

Peshawar Office Islamabad Office Lahore Office

General Manager General Manager Resident

Director

30
 Chief Executive Officer

General Manager

Deputy General Manager

Quality Control Quarry Power Procurement Administration Store

Generation

Senior Deputy Senior Assistant Assistant Senior

Manager GM Manager GM GM Manager

Chief Executive Officer

Executive Director Sales & Marketing

Annual Report 2018

31
 Geographical Presence
Cherat Cement Company Limited

Offices
Karachi (Head Office)
Peshawar (Sales Office)
Lahore (Sales Office)
Islamabad (Sales Office)

Factory
Nowshera

32
Main Distribution

Local

• Peshawar • Mardan
• Nowshera • Charsadda
• Swabi • Swat
• Dir • Bunair
• Malakand • FATA
• Attock • Islamabad
• Rawalpindi • Chakwal
• Jhelum • Lahore
• Sheikhupura • Kasur
• Gujrat • Sialkot
• Gujranwala • Okara Afghanistan
• Sargodha • Narowal
• Faisalabad • Kohat Main Distribution
• Kabul • Jalalabad
• Karak • Bannu
• Khost • Mazar-i-Sharif
• Tank • Parachanar
• Kunduz • Kandhar
• Sahiwal • Karachi
• Multan • Bahawalpur
• Rahim Yar Khan • Khairpur
• Dera Ghazi Khan • Larkana
• Sukkur • Mirpurkhas
Annual Report 2018

• Hyderabad • Chitral
• Shangla • Chilas
• Hunza • Muzaffarabad
• Rawalakot • Bagh India
• Mirpur • Kotli Main Distribution
• Bhimber • Indian Punjab Region

33
 Position within
the Value Chain

Limestone, Latrite
Gypsum Slate
Stone
Furnace Oil
Coal

tream
Up S

End Users

Retailer
Cherat Cement Company Limited

Dealer / Wholesaler

34
 Supplier /
Contractor

Cherat Cement

Stream
Down

Transportation
Annual Report 2018

35
 Factors Affecting the External Environment
and the Organization’s Response

P E S
FACTORS

Political Economic Social

• Political turmoil • Increasing labour •CSR responsibilities

generally impacts cost factors.
DESCRIPTION

organizations • High interest costs • Increasing attention

negatively • High inflation in health care
• low economic • Charity and
growth impacts donation
Organization • Providing education
•Exchange rates facility
• Safe and healthy
environment

• Management Strong domestic Company donates

keeps a close eye demand and generously to various
on the availability of social and charitable
development enhanced production causes including
capacity has towards health,
ORGANIZATIONAL RESPONSE

•Industry issues are increased revenue. education and social

dealt through However, devaluation sectors. The Company
APCMA of currency, inflation actively participates in
factor and increase various social work
•Sales, if made on variable costs made initiatives as part of its
Cherat Cement Company Limited

credit, strong their impact on the corporate social

credit controls are profitability of the Responsibility.
enforced. Company. Company
keeps on applying
cost effective
measures to manage
inflatory pressure.

36
 T
Technological
LLegal
E
Environmental

• Risk of technical • Companies Act 2017 • Adverse weather

obsolescence • Income Tax condition
• Introduction of Ordinance • Growing attention to
new technology by • Sales Tax Act environmental
competitors • Pakistan Stock protection
Exchange listing • Climate changes
regulations • Natural Disasters
• SECP Acts

Keeping in view the The Company The Company

technological strongly abides all complies with ISO
advancements, the acts, listing, rules and 14001 and NEQ
Company has always regulations applicable standards. The
installation of WHR
given priority to latest on it. In this
plant has also helped
developments. The connection consistent improve the
Company has hi-tech efforts are put by the environment. The
machinery at its management to fulfill plant is equipped with
production site. every legal aspect. Electrostatic
Further, the Company Precipitators and bag
is running world filter which controls
renowned SAP (ERP dust and gas
emissions. Further, to
system).
improve the
Annual Report 2018

environment, natural
tree plantation on
large scale has been
done.

Seasonality of Business: Cement demand is normally on the higher side

during summer. However, it is adversely affected during the winter.
37
 Significant Development
and Changes

The following significant developments took place during the

year:
• Production and Sales of the Company have increased
drastically because of operation of Line II for the entire
financial year i.e. 2017-18.
• Company has enhanced its market share by increasing product
reach to multiple new cities within Pakistan.
Cherat Cement Company Limited

• Number of employees has also increased as compared to

previous year due to upcoming requirement of Line III.
• Heavy capital expenditures have been made during the year
for installation of Line III, Waste Heat Recovery (WHR) and
Captive power plants. The leverage has also increased
accordingly.

38
Composition of Imported Material vs
Local Raw Material Mix
For the year ended June 30, 2018

%
30

70%

Local Raw Material Imported Material

Imported material and local raw material represent 37.53% and

16.72% of Cost of Sales respectively.
Annual Report 2018

Cost of sales of the company will increase/decrease by 3.75% and

7.51% in case of foreign currency fluctuation by 10% and 20%
respectively, hence such fluctuation is highly sensitive as it covers
the major portion of cost of sales.

39
 Strategy
and Resource
Allocation
Cherat Cement Company Limited

40
Strategic
Objectives
We strive to improve the efficiency of our operations through
continuous innovation in the short term. We intend to grow
through expansion of our core business in medium term and
through opportunities for diversification in long term. It is our
endeavour to create value for our shareholders by maximizing
the risk adjusted return on our investments. We intend to
achieve customer satisfaction by way of providing our clients a
cost effective, quality product.

We aim to develop the long-term sustainability of the

organization by grooming and training our employees and
providing a congenial work environment, where they are
motivated to perform at the highest standards. We remain
committed to the highest ethical and moral business values and
to the true spirit of the Code of Corporate Governance.

Annual Report 2018

41
 Management Strategies and
Resource Allocation Plans
The core objective of our management is to achieve Approved policies are in place. All the HR functions are
excellence in business where our venture may be regarded integrated where the employees’ performances are
as amongst the best blue-chip stocks in the country. evaluated based on SMART goals. Moreover, Training Need
Assessment (TNA) is effectively in place where in-house and
To achieve our objectives, the management strategically external trainings are arranged at all management levels.
strives to enhance stakeholders' value and customer Further, eligible employees receive Service Awards based on
satisfaction. The stakeholders’ value is maximized through their performance and length of service. The Management’s
returns on investments, which management believes can be objective is to recognize and reward employee’s
achieved through revenue maximization and cost control contribution to the business. Moreover, the Company has
measures. effective succession planning system in place. These
processes help the availability of high quality workforce
On the revenue side, we are confident that our investment which plays a vital role in achieving day-to-day targets and
on production line III will reap positive results and help in tactical and strategic objectives of the Company.
maximizing returns for all stakeholders in the same manner
as previous expansions. We take pride in being Pakistan’s first cement company
having the world’s largest ERP ‘SAP’ in place. The Company
The tone of our business is set by the marketing targets and carried out one of the fastest implementation of SAP in
budgets, which are aggressively designed by the Pakistan. The use of SAP helps management implement
management to achieve highest possible returns. The better internal controls and employ best business practices.
management is working for growth of the Company. Line II
started operations during the financial year 2017 as per plan Effectiveness of internal controls is ensured through active
while work on line III is in progress and expected to be Internal Audit Department, which independently
commissioned much earlier than our targeted timeline. recommends its suggestions to the Board’s Audit Committee.
On all constructive suggestions, the Management takes
Cost is effectively controlled by following energy corrective actions immediately.
conservation measures through use of Waste Heat Recovery
plant, alternate fuels, like Refuse Derived Fuel, Tyre Derived Cherat Cement has benefit of lease of limestone mountain
Fuel and LED lights. Moreover, the Company is installing 3 chains near plant location which has enough reserves for an
dual-fuel Wartsila Generators of 9.7 MW each which can extensive number of years.
run on gas, diesel and furnace oil. Furthermore, the
Company has obtained approval for gas connections from Another prime objective of the management is customer
Sui Northern Gas Pipelines Limited which will drastically satisfaction for which management takes every step to
reduce power generation cost. In addition, the Company ensure high quality customer care and product quality. For
uses combination of both imported and local coal in order to this purpose the Company has obtained certification of Total
keep the fuel costs low. Quality Management (TQM) system ISO 9001: 2015 and
Environment Management System ISO 14001: 2015.
In spite of volatility in cost of major inputs, the company
managed to effectively deal with it through strict controls Being a responsible corporate citizen, the Company is
and effective management. During the year, there was committed to continuous improvements in safety, health and
volatility in international coal and fuel prices which are key environment protection measures. Cherat Cement has
components of our cost. The Company successfully earned great respect and appreciation through continuous
managed to control its cost by efficient mix of imported and and generous donations to social and charitable causes
local coal. Further, power cost was also controlled by using including towards health, education and social sectors.
right mix of WHR, National Grid and self generation.
The result of these steps can be seen in our increased
Cherat Cement maintains cordial relationship with all the revenue, controlled costs and satisfied customer base with
reputable banks and financial institutions of the Country. no major complaints.
Cherat Cement Company Limited

Adequate unutilized short-term financing facilities are

available at the Company’s disposal. Moreover, the Changes from prior years
Company has also obtained a syndicated term-finance
facility of Rs. 13 billion to finance cement Line III project. There is no material change in Company’s objectives and
Above all, the profits earned in recent years have strategies from the prior years.
significantly improved the liquidity position of the Company.

Cherat Cement gives key consideration to Human Resource

Management. A full fledge HR department is established
which is supervised by HR & RC of the Board of Directors.

42
Key Performance Indicators

Sales Gross Profit Dividend Per Share

14,388 (Rs. in Million)

3,139 (Rs. in Million)
5.00 (Rs.)
Increased by 11.11 %
Increased by 49.17 % Decreased by 2.30%

Profit after Tax Earnings Per Share Fixed Cost Per Ton

2,132 (Rs. in Million)

12.07 (Rs.)
941 (Rs.)
Increased by 8.97 % Increased by 8.94% Decreased by 10.89%
Breakup Value
Per Share Total Assets Wealth Distributed

63.26 (Rs.)
30,520 (Rs. in Million)
20,471 (Rs. in Million)
Increased by 6.81% Increased by 62.28 Increased by 56.93 %
Cash Generated Financial
from Operating Market Share Leverage

2,660
Activities
(Rs. in
Million)
5.32 %
1.44 (Times)

Increased by 1200.89% Increased by 45.75% Increased by 136%

Methods and Assumptions

in Compiling Indicators
A Key Performance Indicator (KPI) should immediately inform the reader how the business is
performing which in turn should suggest what actions need to be taken. KPIs provide understanding of
a company’s performance in key areas and gauge to analyse current standing of the company and
likely path the company would follow. Comparability over time is a key principle of good corporate
reporting. It is recognized that KPIs may evolve over time as strategies change or more information
becomes available. Cherat Cement Company Limited has identified and updated following KPIs that
are critical to its business. While identifying KPIs, the Company analysed various indicators, their
Annual Report 2018

interpretations and accordingly their extent to which they may correctly and clearly communicate the
Company’s performance.

43
 Liquidity and Financial Capital Structure
The Company manages its capital structure and makes adjustment to it, in light with changes in economic
conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend
paid to shareholders, return capital to shareholders or issue new shares. Long-terms debts are only utilized to
finance the capital expenditures. For working capital requirements short-term financings are availed to adequately
maintain the debt and equity ratio throughout the year. Enhanced sales have considerably supported the liquidity
position of the Company. Healthy cash flows and prudent liquidity management aids the Company to achieve a
current ratio of 1.72 which reflects its strong liquidity position.
Liquidity Strategy

The Company has prudent strategies in place to manage its liquidity. In conformity to this strategy, the Company
finances all of its capital expenditures through long-term financing facilities. During the year, the Company made
a drawdown of Rs. 10 billion from its total facility of Rs. 13 billion to finance cement line III. In addition, the
Company made a drawdown of Rs. 1.1 billion to finance fuel and cost efficient Dual-Fuel Generators from
Wartsila. Moreover, the company vigilantly monitors its liquidity and whenever excess liquidity is available, the
company uses this liquidity to settle its long-term loans to keep its capital structure at optimum level. In line with
this strategy, the company made early repayments of two long-term loans of Rs. 900 Million, completely settling
the Waste Heat Recovery Loan – Line II and Fixed Asset Refinance Loan – Line II. Besides the strong liquidity
position, the Company also has arrangements with commercial banks in form short-term financing facilities of Rs.
3.8 billion to meet its working capital requirements. Management has a practice of continuous monitoring of cash
flows on daily basis and has planned to gradually enhance its short-term financing facilities to cater its future
working capital requirements.

Financing Arrangements

Due to strong financing standing of the Company, it enjoys good business relationship with all reputable banks
and financial institutions of the Country. Ample unutilized short-term financing facilities are available at the
Company’s disposal. During the year, the Company has negotiated long-term financing of Rs. 1.1 billion to finance
dual-fuel generators and Rs. 1.2 billion to finance its Waste Heat Recovery Plant for Cement Line III at very
lucrative rates.

Significant Plans and Decisions

Cherat Cement is continuously expanding the business. The Company successfully commissioned its second
cement line along with Waste Heat Recovery Plant during the year 2017. With this expansion, the cement
production capacity of the Company has increased to around 2.4 million tons per annum. In view of encouraging
growth in the domestic demand for cement, the Company has decided to install third cement line having a
capacity of more than 2.1 million tons per annum of cement which is expected to be commissioned few months
earlier than the initial scheduled time of May 2019.
Cherat Cement Company Limited

Work on related Waste Heat Recovery (WHR) project for Line - III is also progressing as per schedule and is
expected to be commissioned coherently with Line-III. This will result in substantial energy costs saving along
with reduction of environmental impact.

Installation work for three Wartsila Dual-Fuel Generators of 9.7 MW each is also in finalization stage and is
expected to be completed by September 2018. These generators can run on gas, diesel and furnace oil. Moreover,
gas pipeline is being laid and gas will be available soon. This will significantly reduce the power cost of the
Company.

44
 Risks and
Opportunities

Annual Report 2018

45
 Risks and Opportunities
The Board of Cherat Cement Company Limited (CCCL) principally assumes the responsibility to mitigate all
possible risks and to identify and utilize potential events that may affect the Company. This principle keeps the
Company within its risk appetite and helps to achieve its corporate objectives.

RISKS

CCCL is susceptible to various risks, however, through comprehensive planning and an acute business
understanding of the management, the Company continues to identify and mitigate actual, potential and
perceived risks. The Company maintains an established control framework comprising clear structures,
authority limits and accountabilities, well implemented policies and procedures and budgeting for review
processes.

The Board of Directors of the Company establishes corporate strategy and business objectives. Moreover, the
Board’s Audit Committee is responsible for Internal Control in the Company. The Internal and External
Auditors’ reports are submitted to the Audit Committee for its review, which after detailed deliberations and
suggestions for improvements are submitted to the Board of Directors.

Following are the major risks which may affect our business operations and mitigating strategies for controlling
these risks.

Risk level Risk Area of impact Key source of Risk Mitigating strategy

High Rising Cost Financial Fuel and Power cost The Company analyses Coal
of Fuel & capital component is a substantial prices of various suppliers
Power part of the overall cost of on a regular basis to
production of the Company. compare and control its
Suppliers increase the cost purchasing cost. Moreover,
of products supplied in it has strategic relationships
view of international with key suppliers which
economic conditions benefit the company in
including rising costs of price negotiation and
international fuel prices. prompt material delivery.

High Exchange Financial It becomes challenging for The Company regularly

Rate capital the Company to compete in scrutinizes the parity
Fluctuation the market due to frequent fluctuations and whenever
fluctuation of PKR parity needed, enters into hedging
against USD. arrangements.

Moderate Availability Manufactured Any shortage of the Effective inventory

of Raw capital, material may hamper the management accounts for
Material relationship production and sales forthcoming production
capital activity of the Company. To plan to determine safety
keep competitive edge and stock level and reordering of
to gain more market share.
Cherat Cement Company Limited

raw materials.

Moderate Credit Risk Financial The Company extends The Company regularly
capital credit to its customers. analyses the credit position
There lies a risk factor that and credit worthiness of its
the customers may fail to Customers and extends credits
discharge their obligations based on minimum risk of
and cause a financial loss financial loss.
to the Company.

46
 Risk level Risk Area of impact Key source of Risk Mitigating strategy

Moderate High Financial There is pressure on The Company tries to

leverage capital leverage due to expansion. manage its leverage on a
regular basis. Leverage has
increased due to expansion
but the loans are at very
attractive rates. The
Company repays the loans
also. The leverage will
further improve after line III.

Low Employee Human capital Key employees and workers The Company values its
turnover leave the company causing employees as essential
lack of competent capital, therefore, it
workforce. provides congenial
environment and growth
opportunities. Further
Company has robust
succession plan in place.

Low Natural Manufactured Destruction of production The Company has

Catastrophe Capital facility due to natural comprehensive insurance
disaster. cover in case of any
catastrophic event. Further,
the Company has taken into
every possible aspect of
safety measures during
construction and erection of
building and plant. Further,
the Company has
well-established disaster
recovery plan and data
backup to cope-up any
unwarranted event.
Annual Report 2018

47
 Risks and Opportunities
OPPORTUNITIES

Opportunity Impact area Key source opportunity Strategy to materialize

Production Financial Higher capacity utilisation. The Company actively pursues

Capacity capital local and international markets
to fully utilize its potential
capacity and earn higher return
for its shareholders.

Modern Manufactured Most modern and Efficient machinery enables the

Equipment capital state-of-the-art machinery company to operate with the
including WHR and dual-fuel minimum cost of production,
generators. thereby offering its customers
high quality portland cement.
This in turn results not only in
customer retention but also
attracts new customers.

Efficient and Human capital Provide congenial work Provide effective environment
congenial work environment where employee without excessive work
environment feels motivated for work. pressure. Continuous training
and development of
employees. Benefit aligned
with efficient and effective
work and team management.

Growth of Relationship Expected growth in Cement Installation of Cement Line III

Cement capital, industry owing to CPEC and and WHR III is progressing to
industry Manufactured other developmental projects. materialize potential growth.
capital

Note: In connection with risk and opportunities pertaining to Cherat Cement Company Limited, Board’s efforts for
determining level of risk, Board’s statement regarding robust assessment of risks , information about default in
payment of any debt and inadequacy in capital structure have been covered in the Directors’ Report.
Cherat Cement Company Limited

48
 Annual Report 2018

49
Governance
 Notice of Annual General Meeting
Notice is hereby given that the 37th Annual General for the financial year ended June 30, 2018 as
Meeting of the Company will be held on Tuesday, recommended by the Board of Directors.
October 16, 2018 at 12:00 noon at the Registered
Office of the Company at Factory premises, Village 3. To elect eight (8) Directors of the Company as
Lakrai, Nowshera, Khyber Pakhtunkhwa to transact fixed by the Board of Directors u/s 159(1) of the
the following businesses: Companies Act, 2017. The names of retiring
Directors are (1) Mr. Omar Faruque (2) Mr. Azam
ORDINARY BUSINESS Faruque (3) Mr. Akbarali Pesnani (4) Mr. Shehryar
Faruque (5) Mr. Arif Faruque (6) Mr. Saquib H.
1. To receive and consider the Audited Accounts of
Shirazi (7) Mr. Shamshad Nabi (8) Mr. Asif Qadir.
the Company for the year ended June 30, 2018
with the Directors’ and the Auditors’ Reports
4. To appoint Auditors for the year 2018/19 and to
thereon.
fix their remuneration.
2. To consider and approve the payment of final
5. To transact any other business with the
cash dividend @ 40% (Rs. 4.00 per share) in
permission of the chair.
addition to interim cash dividend @10% (Re.
1.00 per share) already paid to the shareholders
By Order of
the Board of Directors

Abid Vazir
Executive Director &
Karachi: August 29, 2018 Company Secretary

Notes: Card along with their account number in CDS

and participant’s ID number for verification. In
1. The register of members of the Company will be
case of appointment of proxy by such account
closed from Wednesday October 10, 2018 to
holders and sub-account holders, the guidelines
Tuesday, October 16, 2018 (both days inclusive)
as contained in the SECP’s circular of 26th
and no transfers will be registered during that
January 2000 are to be followed.
time. Shares received in order at the Office of the
share Registrar of the Company, M/s. Central 4. Shareholders of the Company are requested to
Depository Company of Pakistan Limited (CDC), immediately notify any change in their addresses
CDC House, 99-B, Block ‘B’, S.M.C.H.S., Main to the Share Registrar of the Company.
Shahrah-e-Faisal, Karachi-74400 at the close of
5. Shareholders who have not yet submitted
business on Tuesday, October 9, 2018 will be
photocopy of their valid Computerized National
treated in time for the entitlement of final cash
Identity Card (CNIC) are requested to send the
dividend.
same to the Share Registrar of the Company.
2. A member of the Company eligible to attend,
6. Section 242 of the Companies Act, 2017
Cherat Cement Company Limited

speak and vote at the Annual General Meeting

provides that in case of a listed company, any
may appoint another member as his/her proxy to
cash dividend declared by the company must be
attend, speak and vote in his/her stead. Proxies to
paid electronically directly into the bank
be effective must be in writing and must be
accounts of the shareholders. In order to receive
received by the Company’s Head Office 48 hours
dividends directly into their bank account,
before the Meeting.
shareholders are requested to fill in E-Dividend
3. Shareholders of the Company whose shares are Mandate Form available on the Company's
registered in their account/sub-account with website i.e. [Link] and send it duly
Central Depository System (CDS) are requested signed along with a copy of CNIC to the Registrar
to bring original computerized National Identity of the Company M/s. Central Depository

50
 Company of Pakistan Limited (CDC), CDC House, have option to receive Annual Audited Financial
99-B, Block ‘B’, S.M.C.H.S., Main Statements and Notice of General Meeting
Shahrah-e-Faisal, Karachi-74400 in case of through email. Shareholders of the Company are
physical shares. In case shares are held in CDC, requested to give their consent to the Company’s
then E-Dividend Mandate Form must be submitted Head Office to update our record if they wish to
directly to shareholder's broker/participant/CDC receive Annual Audited Financial Statements and
account services. In-case of non-submission of Notice of General Meeting through email.
IBAN, the Company will withhold the payment of However, if shareholder, in addition, request for
dividends under the Companies (Distribution of hard copy of Audited Financial Statements the
Dividends) Regulations, 2017. Further, informed same shall be provided free of cost within seven
that the next Cash Dividend will be provided [7] days of receipt of such request.
through the Centralized Cash Dividend Register
12. Members can also avail video conference facility,
(CCDR), therefore shareholders should register
in this regard, please fill the following and submit
themselves to CDC’s eServices Portal at
to Head Office of the Company 10 days before
[Link]
holding of the Annual General Meeting. If the
7. All Shareholders are advised to check their status Company receives consent from members holding
on Active Taxpayers List (ATL) available on FBR in aggregate 10% or more shareholding residing at
Website and if required take necessary actions for a geographical location, to participate in the
inclusion of their name in ATL to avail the lower meeting through video conference at least 10 days
rate of tax deduction. prior to date of the meeting, the Company will
arrange video conference facility in the city
8. In case of joint account, please intimate
subject to availability of such facility in that city.
proportion of shareholding as each account
holder is to be treated individually as either filer or "I/We, ____________ of ___________, being a
non-filer and tax will be deducted on the basis of member of Cherat Cement Company Limited,
shareholding provided by the shareholder, holder of__________ ordinary shares(s) as per
otherwise equally. Registered Folio No.________ hereby opt for
video conference facility at _____________".
9. Withholding Tax exemption from the dividend
income shall only be allowed if copy of valid tax 13. Any person who intends to contest the election for
exemption certificate is made available to Central the office of the Directors or otherwise, shall file
Depository Company of Pakistan Limited - Share with the Company at its Head Office not later than
Registrar Department by first day of Book Closure. fourteen (14) days before the date of the Annual
General Meeting, a notice of his/her intention to
10. In compliance of Section 244 of the Companies
offer himself/herself for election as Director in
Act 2017, once the Company has completed
terms of Section 159(3) of the Companies Act,
stipulated formalities, any unclaimed dividend
2017 along with (a) consent to act as director in
and /or shares that have remained outstanding for
Form 28, duly completed and signed by the
a period of three years from the date of becoming
candidate; (b) a detailed profile along with office
due and payable or more shall be credited to the
address for placement on the Company's website
Federal Government (in case of dividend) or
seven days prior to the date of the AGM, in terms
delivered to the SECP (in case of physical shares).
of SRO 634(1) of 10 July 2014; and (c)
Shareholders who could not collect their
declarations in respect of being compliant with
dividend/physical shares are advised to contact
the requirements of the Listed Companies (Code
our Share Registrar (CDC) to collect/inquire about
of Corporate Governance) Regulations, 2017 and
their unclaimed dividend or shares, if any.
the eligibility criteria as set out in the Companies
11. With reference to S.R.O. 787(I)/2014 dated Act, 2017.
September 8, 2014 issued by SECP; shareholders

Statement Under Section 166 (3) of Companies Act 2017 in respect of Election of Directors
Independent Directors will be elected through the process of election of directors in terms of Section 159 of the
Act and they shall meet the criteria laid down under Section 166(2) of the Act.
Annual Report 2018

STATUS OF INVESTMENT IN UNIENERGY LIMITED

The Company in its Annual General Meeting held on October 16, 2015 had obtained the approval of its
shareholders for investment of up to Rs. 250 million in the equity of UniEnergy Limited. Keeping in view the status
of the project and its financial requirements, the Company has so far invested Rs. 7.69 million only. The remaining
amount will be invested by Cherat Cement Company Limited as and when required by UniEnergy Limited.

51
 Directors’ Profile
Mr. Omar Faruque, Chairman Mr. Akbarali Pesnani, Director
Mr. Omar Faruque studied from the City Mr. Akbarali Pesnani is an MBA and fellow
of London, Polytechnic London, and got a member of both the Institute of Chartered
Honours degree in B.A. Finance. Currently, Accountants and Institute of Cost and
he is the Chief Executive of Zensoft (Pvt.) Management Accountants of Pakistan. He
Ltd. He is also a director of Greaves CNG has served as Chairman Gwadar Port and
(Pvt.) Ltd. He is a 'Certified Director' from the Gwadar Port Implementation Authority
Pakistan Institute of Corporate Governance. from 2004 to 2006. Mr. Pesnani has been
associated with the Aga Khan Development
Mr. Azam Faruque, Chief Executive Network at senior levels for over 43 years.
Presently he is the Chairman of Cherat
Mr. Azam Faruque is the Chief Executive of
Packaging Ltd, Aga Khan Cultural Service
Cherat Cement Co. Ltd. He is an Electrical
Pakistan and a Director on the Board of
Engineering and Computer Science graduate
Jubilee General Insurance Co. Ltd. His
from Princeton University, USA. He
association with the Ghulam Faruque
completed his MBA with high honors from
Group dates back almost 37 years.
the University of Chicago, Booth School of
Business. Apart from the time he has spent
Mr. Shehryar Faruque, Director
in the cement industry, he has also served
as a member on the Boards of State Bank of Mr. Shehryar Faruque is a graduate from
Pakistan, National Bank of Pakistan, and Oil Davis & Elkins College, Elkins, WV, USA.
and Gas Development Corporation Ltd. He He serves on the Boards of Directors of
was a Member of the Board of Governors Cherat Packaging Ltd, Mirpurkhas Sugar
of GIK Institute, Member of the National Mills Ltd, Faruque (Pvt.) Ltd, Zensoft (Pvt.)
Commission of Science and Technology and Ltd and Mirpurkhas Energy Ltd. Mr. Shehryar
also a Member of the National Committee Faruque is also serving as Director of NBP
of the Aga Khan Foundation. Mr. Azam Fullerton Asset Management Ltd, (NAFA) and
Faruque has served on the Board of the Summit Bank Ltd.
Privatization Commission of the Government
of Pakistan, Cherat Packaging Ltd, Atlas Mr. Arif Faruque, Director
Asset Management Ltd and was Chairman
Mr. Arif Faruque is a Swiss - qualified
KPK Oil & Gas Development Company Ltd.
Attorney-at-Law and also holds Masters
At present, he is a member of the Board
degrees in both Law and Business
of Directors of Faruque (Pvt.) Ltd, Greaves
Administration from the USA. He is the Chief
Pakistan (Pvt.) Ltd, Madian Hydro Power
Executive of Faruque (Pvt.) Ltd as well as
Ltd, International Industries Ltd, Indus Motor
Madian Hydro Power Ltd. He is on the Board
Cement Company Limited

Company Ltd and Atlas Battery Ltd. He is a

of Directors of Mirpurkhas Sugar Mills Ltd,
'Certified Director' from the Pakistan Institute
Cherat Packaging Ltd and UniEnergy Ltd.
of Corporate Governance.
Besides the above, he is also a member of
the Board of Governors of Lahore University
of Management Sciences (LUMS).
CheratCement
Cherat

46
52
Mr. Saquib H. Shirazi, Director experience with the mutual fund industry in
Pakistan having served NIT from 1966 to
Mr. Saquib H. Shirazi has been the Chief
1980 with the last four years as the NITs
Executive Officer of Atlas Honda Limited
Deputy Managing Director. He worked for
for the last seventeen years. He graduated
22 years for the Islamic Development Bank
from the Wharton School of Finance, before
in Jeddah until January, 2002. He was the
completing his Masters from the Harvard
first Chief Executive Officer of the Mutual
Business School.
Funds Association of Pakistan - the Trade
Body for the mutual fund industry in Pakistan
He has previously worked with the Bank of
until July, 2012. While in the service of NIT
Tokyo and is also the former CEO of Atlas
he served on the Boards of Directors of a
BOT Investment Bank Ltd. At present, he
large number of listed companies in Pakistan
is serving as a member on the Boards of
and was on the Board of Directors of the
Pakistan Cables Ltd, Atlas Hitec (Private) Ltd,
Karachi Stock Exchange for four years until
Atlas Power Ltd, Shirazi Trading Company
January, 1980. He was also on the Board of
(Pvt.) Ltd, Shirazi Investments (Pvt.) Ltd,
Directors of companies in member countries
Atlas Engineering (Pvt.) Ltd, Atlas Autos
of IDB.
(Pvt.) Ltd, Atlas Die Casting (Pvt.) Ltd.
and Cherat Cement Company Limited in
Mr. Asif Qadir, Director
Pakistan. Previously, he has served on the
Boards of Pakistan Petroleum Ltd, National Mr. Asif Qadir holds a degree in Chemical
Refinery Ltd, Sui Southern Gas Company Ltd, Engineering from Columbia University, New
Cherat Papersack Ltd and the Privatization York. He joined Exxon Chemical Pakistan
Commission of Pakistan. He has also served Ltd. in 1978 as a Process Engineer and held
on Harvard Business School’s Global Alumni various assignments in manufacturing and
Board and was its President for the years marketing of fertilizers.
2006-2008. He is currently a member of
Harvard Business School’s Advisory Board. Mr. Qadir has served as President and
Chief Executive Officer of Engro Polymer
& Chemicals Ltd. He has also served on
Mr. Shamshad Nabi, Director (NIT)
the Board of Engro Corporation Ltd, Engro
Mr. Shamshad Nabi is a Chartered Fertilizer Ltd, Engro Polymer & Chemical
Accountant - a Fellow of the Institute of Ltd, Engro Powergen Ltd, Sindh Engro
Chartered Accountants in England & Wales. Coal Mining Company Ltd, Karachi Stock
He has also completed his MBA from the Exchange, Pakistan Poverty Alleviation Fund
University of Wales. He has 53 years and Inbox Business Technologies (Pvt.)Ltd.
professional experience in the UK, Pakistan
and Saudi Arabia mostly in asset He is currently serving as Director in Unicol
management and development banking. He Ltd and is also on the Boards of Tripack
had also worked for 4 years for The Citizens Films Ltd, Thal Ltd, Descon Oxychem Ltd.
Foundation (TCF) as a whole time volunteer and Liaquat National Hospital and Medical
Annual Report 2018
Annual Report 2016

as TCFs Financial Adviser. He has had long College.

47
53
 Cherat Cement Company Limited

54
Chairman’s Review
The year 2017/18 has been one of the most challenging both for domestic and
international markets. The last few months of the year witnessed a major devaluation of the
Pakistani Rupee and consequently an increase in input costs and overall cost of
production. Despite significant increase in costs, your company sustained its profitability
due to higher sales volume and posted an after tax profit of Rs. 2,132 million.

During the year 2017/18, the cement industry witnessed a growth of 13.8%. A 15.4%
increase in domestic sales and a 1.8% increase in exports contributed to the sales of the
industry as a whole and of Cherat Cement particularly. In its first full year after the
commissioning of Cement Line II, the local dispatches of the company increased by 65%,
whereas its aggregate dispatches increased by 63% over last year, which cumulatively set
off the increase in cost of sales.

As informed earlier, the company is in the process of setting up its third production line.
Erection works on the plant are progressing at a good pace and we are confident that Line
III will be fully operational ahead of its schedule. With this expansion, the production
capacity of the company will increase to approximately 4.5 million tons. We are confident
of completing the expansion within the estimated project costs. The expansion will allow
the company to meet additional demand for cement in the country and explore new
markets for its product. Furthermore, it will further improve the efficiency of the company
and will allow it to further enhance its market share.

Cherat remains a brand of choice for its loyal customers and is considered one of the most
efficient plants in Pakistan. It is our commitment to all our stakeholders to remain on path
to success through hard work and ensure sustainable growth.

Omar Faruque
Karachi: August 29, 2018 Chairman
Annual Report 2018

55
 Cherat Cement Company Limited

56
Directors’ Report to the Members
For the Year Ended June 30, 2018

2018 2017
The Board of Directors presents to you the
(in tons)
annual report of the Company along with the Domestic sales
audited financial statements for the year (cement and clinker) 2,208,000 1,340,226
ended June 30, 2018. Export sales 311,128 204,226
OVERVIEW Total sales 2,519,128 1,544,452
In the midst of political uncertainty, Pakistan’s economy
maintained its upward trajectory for the year 2017/18. Production
3,000
The combination of robust economic activity and low
inflation boosted investors’ confidence in the economy 2,500

(Tons in ‘000)
and led to increased consumption. However, towards
2,000
the latter half of the year, major deterioration in external
account balances and fiscal deficit was witnessed. With 1,500
CPEC projects starting to mature and extensive
infrastructural development undertaken both by the 1,000
government and the private sector, the cement industry 500
witnessed an enhanced demand. During the year
2017/18, the cement industry grew by 13.8%, which 0
2017 2018
has been its highest growth for last few years. There was Clinker Cement
a record 15.4% growth in local dispatches and 1.8%
Sales
increase in exports from last year. The increase in 90
exports is mostly attributable to Afghanistan. The private 80
sector has also played a significant role in local cement 70
consumption as the trend towards constructing housing,
(Percentage)

60
commercial and residential complexes has been rising
50
gradually and is having a positive impact on the cement
40
industry.
30
BUSINESS REVIEW 20
The year 2017/18 proved to be an outstanding year for 10
the Company in all aspects of business. Whether 0
2017 2018
internal growth in the form of expansion or external
Domestic Sales 87% Domestic Sales 88%
growth in the form of reaching new markets, the
Company performed in line with its reputation to Export Sales 13% Export Sales 12%

deliver. Even though the external market factors

created a challenging environment for the businesses Strong domestic demand and availability of enhanced
to perform, the company’s graph for growth production capacity for the entire year following the
maintained a stable upward climb. Detailed review of commissioning of Cement Line II last year resulted in
the business activities and performance during the approximately 65% increase in domestic cement sales
year are presented ahead. of the company over last year. Similarly, enhanced
capacity also allowed the company to increase its
PRODUCTION & SEGMENT WISE SALES REVIEW exports to Afghanistan, which rose by 52% from the
Comparative production and sales figures are provided corresponding period last year. During the year,
under: aggregate cement dispatches of the Company increased
2018 2017 by an impressive 63% from last year. The company also
(in tons)
sold 77,886 tons of clinker during the year.
Annual Report 2018

FINANCIAL PERFORMANCE
• Clinker production 2,234,491 1,518,520
During the year 2017/18, the Company benefited from
• Cement production 2,442,567 1,489,489
economies of scale and increased efficiency as the
production capacity from Cement Line II was fully
realized for the entire year. On the back of rise in

57
 cement dispatches, there was 49% i.e. Rs. 4.7 billion Company has worked with and contributed to the Aga
increase in the sales turnover of the company from the Khan University and The Citizens Foundation over the
corresponding period last year. However, a years and will continue to do so as it envisions a better
combination of increased variable costs especially rise environment, a better economy and a better Pakistan.
in coal prices as well as higher depreciation and
SAFETY, HEALTH AND ENVIRONMENT
finance costs reduced margins. After taking tax
adjustment on account of Cement Line II, the Your Company has a firm policy on the health and
company posted a historical after tax profit of Rs. safety of its people because it understands that people
2,132 million for the year ended June 30, 2018. are the most important asset it has. Keeping the safety
of the workers as top priority, the production plants
Summarized operating performance of the Company
have been set up and run as completely compliant and
for the current year as compared to last year is as
up to date with the prevailing standards of safety in the
follows:
2018 2017 industry. The installation of WHR plants has also
(Rs. in million) helped improve the environment in the areas
surrounding the factory. The Company has an ISO
Net sales 14,388.35 9,645.40 14001certification. Further detail of corporate social
Cost of sales 11,249.15 6,432.28 responsibility will be in the annual report.
Gross Profit 3,139.20 3,213.12
Expenses & taxes 1,007.08 1,256.56
Net Profit 2,132.12 1,956.56

EXPANSION PROJECT - CEMENT LINE III

Work on the installation of Cement Line III is
progressing on schedule. Furthermore, work on
installation of WHR plant for Cement Line III is also
progressing, which will help in reducing the energy
costs of the plant. The company is also installing
Wartsila dual fuel engines, which will be beneficial as
a gas pipeline is being laid and gas will be available
soon. Given the progress of the project so far, the CONTRIBUTION TO NATIONAL EXCHEQUER
management is confident of completing the expansion
project before the scheduled time. The Company contributed over Rs. 6.50 billion to the
government treasury in shape of taxes, excise duty,
DIVIDEND income tax and sales tax.
The Board of Directors at its meeting held on August STATEMENT ON CORPORATE AND FINANCIAL
29, 2018 has proposed an annual cash dividend @ REPORTING FRAMEWORK
40% for the year ended June 30, 2018. This is in • The financial statements prepared by the
addition to interim cash dividend @ 10% declared management of the Company present its state of
earlier in the year. The approval of members for the affairs fairly, the result of its operations, cash flows
dividend will be obtained at the Annual General and changes in equity.
Meeting to be held on October 16, 2018.
• Proper books of account of the Company have
CORPORATE SOCIAL RESPONSIBILITY
Cherat Cement Company Limited

been maintained.
Your Company has always been very aware of its • Appropriate accounting policies have been
responsibility towards the people, environment and consistently applied in preparation of financial
climate of Pakistan and has strived to ensure the statements and accounting estimates are based on
wellbeing of all. In line with its corporate social reasonable and prudent judgment.
responsibility policies, the Company has endeavored • International Financial Reporting Standards, as
to improve the overall conditions of the people living applicable in Pakistan, have been followed in
around the manufacturing plants and the surrounding preparation of financial statements and any
areas. Infrastructural development and continuous departure therefrom has been adequately
plantation has gone hand in hand to ensure that both disclosed and explained.
the people and the climate of the area benefit. Your

58
• The system of internal controls is sound in design Mr. Akbarali Pesnani 5
and has been effectively implemented and Mr. Shehryar Faruque 5
monitored.
Mr. Arif Faruque 4
• There are no significant doubts upon the
Company’s ability to continue as a going concern. Mr. Saquib H. Shirazi 3
• There has been no material departure from the Mr. Shamshad Nabi 5
best practices of corporate governance, as detailed Mr. Asif Qadir 4
in the listing regulations.
During the year, four meetings of the Audit Committee
• Key operating and financial data for last six (6)
were held. The attendance record of each director is as
years in summarized form is annexed.
follows:
• There is nothing outstanding against your
Name of Directors Meetings Attended
Company on account of taxes, duties, levies and
charges except for those which are being made in Mr. Akbarali Pesnani 4
normal course of business. Mr. Asif Qadir 3
• The Company maintains Provident and Gratuity
Mr. Arif Faruque 4
Fund accounts for its employees. Stated below are
the values of the investments of the fund as on During the year, two meetings of the Human Resource
June 30, 2018. and Remuneration Committee were held. The
attendance record of each director is as follows:
Provident Fund Rs. 853 million
Name of Directors Meetings Attended
Gratuity Fund Rs. 545 million
BOARD OF DIRECTORS Mr. Saquib H. Shirazi 1

Total number of Directors on the board is 8 and its Mr. Shehryar Faruque 2
composition is as follows: Mr. Azam Faruque 2
Name of Directors Meetings Attended Mr. Shamshad Nabi* 1
• Male Directors 8
*Following the implementation of the CCG
• Female Directors - Regulations 2017, the Board of Directors inducted Mr.
a. Independent Directors 2 Shamshad Nabi as Member of the HR&R Committee
and appointed him as its Chairman.
i. Mr. Asif Qadir
ii. Mr. Shamshad Nabi Pattern of shareholding is annexed with the report. No
trading in the shares of the Company was made by the
b. Non-Executive Directors 5 Chief Executive, Directors, Chief Financial Officer and
i. Mr. Omar Faruque Company Secretary and their spouses and minor
ii. Mr. Akbarali Pesnani children during the year except for purchase of shares
by Mr. Omar Faruque.
iii. Mr. Shehryar Faruque
Earnings per share (EPS) during the year were Rs. 12.07
iv. Mr. Arif Faruque
as against Rs. 11.08 last year.
v. Mr. Saquib H. Shirazi
DIRECTORS’ REMUNERATION
c. Executive Director 1
Through the Articles of the Company, the Board of
i. Mr. Azam Faruque
Directors is authorized to fix remuneration of
• During the year, five meetings of the Board of Non-Executive and Independent Directors from time to
Directors were held. The attendance record of time. In this regard, the Board of Directors has
each director is as follows: developed a Remuneration policy for Non-executive
and Independent Directors of the company.
Annual Report 2018

Name of Directors Meetings Attended

UNIENERGY LIMITED
Mr. Omar Faruque 5
UniEnergy – a joint venture wind power project, has
Mr. Azam Faruque 5
been granted Letter of Intent and formally allotted land

59
 for setting up the project at Jhimpir, district Thatta. The • Capital Structure
JV partners have made initial equity investment in the The Company’s current debt to equity ratio is
Company to meet the ongoing financial requirements about 3:2 and this is mainly due to the ongoing
for the project. In this regard, Cherat Cement has made expansion work on Cement line III. The Board of
an equity investment of Rs. 7.69 million following the Directors and the management are confident that
approval of the shareholders. The government has, so as soon as Cement Line III realizes its full
far, not notified the tariff for the project. production capacity by 2019, the capital structure
RISK AND OPPORTUNITIES of the company will improve considerably and a
more balanced debt to equity ratio will be
• Risk Management
maintainable.
As part of its responsibilities, the members of the
Board of Directors have always kept a close watch FUTURE PROSPECTS
on the socio-economic environment and Despite facing many challenges, the cement industry
consequential internal and external risks that has prospered and grown extensively. Domestic
might impact the safe and smooth operations and demand for cement has grown significantly due to
performance of the Company. As caretakers of the greater outlay of PSDP by the government, investment
interest of all the stakeholders, the Directors in CPEC projects and related infrastructural
remained vigilant in identifying and mitigating development. Additionally, private sector has also
risks through the year. The Board of Directors invested in a major way by constructing large malls
identified potential risks, assessed their impact on and apartment complexes. With overall outlook for the
the Company and formulated strategies to mitigate cement industry remaining positive, it is expected that
any and all foreseeable risks to the business. These demand for cement will continue to increase in the
strategies were enforced throughout the hierarchy coming years. The management is firm in its belief that
of the company through the Audit Committee to the addition of a third cement line at existing location
ensure that no gaps remained in risk mitigation. by the Company will not only enhance its domestic
• Risk Assessment market share but will also allow it to achieve greater
Businesses face numerous uncertainties that might efficiencies and better allocation of fixed costs.
pose threats to its objectives and if not addressed Following the successful conduct of the national
may cause preventable losses. The Board of elections, we are confident that macroeconomic
Directors of the company has carried out vigilant indicators will start to improve in the country, which
and thorough assessment of both internal and will benefit the company and the industry as a whole.
external risks that the company might face. Notwithstanding the above, unstable economic
Energy costs makes up around 60% of the overall situation and significant devaluation of Pakistani
cost of production. Any variation in prices of coal Rupee, which has an adverse impact on input costs
and/or electricity tariffs poses a constant risk to the remains a cause of concern and an area of business
company. To mitigate this risk, the Company uses risk for the company.
a mix of both South African and Afghan coal. In
the long term, if prices increase excessively, the APPOINTMENT OF AUDITORS
company has potential alternatives for coal, such The present auditors M/s. EY Ford Rhodes, Chartered
as Refused Derived Fuel and Tyre Derived Fuel. Accountants, retire and being eligible, offer
Moreover, the company has installed Waste Heat themselves for re-appointment.
Recovery plant to reduce its cost of power.
Another economic risk facing the company is the ACKNOWLEDGMENT
decline in exports to its main export market We would like to thank all the financial institutions
Afghanistan due to the political uncertainties and having business relationship with us, our dealers and
availability of low cost Iranian cement. However, customers for their continued support, cooperation
the strategic placement of its factory in Nowshera, and trust they have reposed in us. We would also like
which is close to the Afghanistan border and the to share our deepest appreciation for all our staff for
brand value of Cherat within Afghanistan has their dedication, loyalty and hard work.
Cherat Cement Company Limited

helped us retain our position as top exporters of

cement to Afghanistan. On behalf of the Board of Directors
• Debt Repayment
The Company regularly and efficiently paid of all
its due debts as was budgeted and planned during
the year 2017-2018. Not only were regular
payments made, the company also successfully
made early repayments of loans worth Rs. 900 Omar Faruque Azam Faruque
million. This lowered risks of default and improved Chairman Chief Executive
the financial position of the company. Karachi: August 29, 2018

60
Board Meetings Held Outside Pakistan
During the year, 5 meetings of the Board of Directors were held. As recommended by SECP
Guidelines and to keep the costs in control, the management has conducted all meetings in
Pakistan.

Annual Evaluation of Board Performance

Board Evaluation Mechanism facilitates the Board of Directors to evaluate and assess its
performance for providing strategic leadership and oversight to the management. Accordingly,
following procedures have been developed based on emerging and leading practices to assist in
the self-assessment of individual director and the full Board’s performance.
On an annual basis questionnaire is circulated to all directors which is formally filled by the
directors and is submitted anonymously to the Board. The result is compiled by an independent
Chartered Accountant firm.
The main criteria for the Board’s evaluation is as follows:
Board Composition
The Board is fully aware of its role & responsibilities, demonstrates integrity, credibility,
trustworthiness and active participation in its affairs. The Board has the right mix of skills,
knowledge and experience and all Non-Executive / Independent Directors are equally involved
in important board decisions.
Leadership and Planning
The Board gives ample time to the strategy formulation based on Company's vision and mission
and revisits the mission and vision statements from time to time. The Board provides guidance
and direction, discusses the adequacy of resources, receives management reports and has a
system in place to ensure smooth and effective succession planning.
Board Effectiveness
All Board members understand and fulfill their responsibilities and comply with all relevant laws.
Significant issues are placed in front of the Board for consideration. Board ensures a healthy
relationship with the stakeholders through adequate disclosures.
Board Accountability
The Board reviews adequacy on internal controls, potential risks and risk management
procedure. The Board is cognizant of its fiduciary responsibilities.
Strategy and Performance
The Board reviews the implementation of organization's strategic & financial plans, Board meeting
agendas and supporting documents provide sufficient information and time to explore & resolve key
issues. Board members demonstrate preparation for meetings through active participation in decision
making.
Board Committees
The Board of Directors formed adequate number of Board Committees to streamline delegation
of certain key responsibilities. Sub Committees meetings are held regularly and their decisions /
recommendations are placed before the Board. The Board has approved and implemented
Human Resource policies which imply equitable treatment to all employees irrespective of
gender, religion, ethnic background etc.
Annual Report 2018

The evaluation of the performance of the Board is essentially an assessment of how the Board has
performed on all these parameters.

61
 Cherat Cement Company Limited

62
Directors' Orientation and Training
All the Directors of the Company are well experienced and have diverse backgrounds. At the
time of induction of any new director, he or she is given proper orientation about the operations
of the Company and his or her fiduciary responsibilities. The Company had also arranged an
in-house Directors' training program to appraise the directors of their authorities and
responsibilities. Two Directors of the Company namely Mr. Azam Faruque and Mr. Omar Faruque
are also certified under the Board Development Series Program offered by Pakistan Institute of
Corporate Governance (PICG).

Policy on Non-executive & Independent Directors’

Remuneration
PREAMBLE
The Board of Directors (the “Board”) of Cherat Cement Company Limited (the “Company”) has
adopted this Policy upon the implementation of Section 170 of the Companies Act 2017 read
with Regulation No. 17 of the Code of Corporate Governance.

Amendments, from time to time, to the Policy, if any, shall be considered by the Board in lights
of changes in applicable laws and/or such external circumstances that directly apply to the scope
of this Policy.

SCOPE AND APPLICABILITY

The Policy shall apply to all Non-Executive and Independent Directors who attend Board
meetings, Audit Committee meetings, Human Resource and Remuneration Committee meetings
and any other meetings called by the Board.

TERMS OF THE POLICY

Through the Articles of the Company, the Board is authorized to fix remuneration of
Non-Executive and Independent Directors from time to time. The fee of the Non-Executive and
Independent Directors for attending the Board and Committee meetings of the Company shall be
as determined by the Board of Directors from time to time.

Matters Delegated to the Management

Management is primarily responsible for implementing the strategies as approved by the Board
of Directors. It is the responsibility of management to conduct the routine business operations of
the Company in an effective and ethical manner in accordance with the strategies and goals as
approved by the Board and to identify and administer the key risks and opportunities which
could impact the Company in the ordinary course of execution of its business. Management is
also concerned in keeping the Board members updated regarding any changes in the operating
environment. It is also the responsibility of management, with the oversight of the Board and its
Annual Report 2018

Audit Committee, to prepare financial statements that fairly present the financial position of the
Company in accordance with applicable accounting standards and legal requirements.

63
 Governance Practices Exceeding
Legal Requirements
Cherat Cement has always believed in going the extra mile and staying ahead of the game. In line
with this strategy, not only have we complied with all mandatory legal compliances under the
Code of Corporate Governance, the Companies Act 2017 and other applicable rules, regulations
and standards, we have also carried out the following activities in addition to the legal
requirements;

a. Other Information: The management reports various other essential information in this annual
report which is not required by law.

b. Implementations of HSE: the Company has developed and implemented aggressive HSE
strategies at its Plants to ensure proper safety of its people and equipment.

c. Dispersal of information: the Company has always ensured that all material information is
communicated to the PSX, the SECP and the Company’s shareholders as soon as it becomes
available. At all times we have ensured that such information is sent out much before the
deadlines set out in the laws.

Female Director
The requirement for a female director on the board of a listed company has been recently
mandated by the new Company laws. Cherat Cement shall induct a female director on its board
in the next election of directors to be held on October 16, 2018 .

Independent Director
Cherat Cement has ensured that the composition of its Board of Directors is compliant with all
prevailing legal and governance requirements. The new law requires one - third of the Board to
be independent and Cherat Cement will comply with this requirement after the upcoming
elections.

Investors’ Grievance Policy

Cherat Cement Company Limited

The Company has an Investors’ Grievance Policy in place. Any complaint or observation
received either directly by the Corporate Department or during General Meetings are addressed
by the Company Secretary. The Shareholders are given the information as desired by them as per
the law well in time. All the written complaints are replied in writing. Our share registrar is
Central Depository Company of Pakistan Limited (CDC) which is leading name in the field. The
Company has many old and loyal shareholders, which shows the trust of the shareholders in the
management of the Company.

64
Related Parties
As required under fourth schedule of the Companies Act, 2017, detailed disclosures regarding
related party transactions have been presented in note 36 to the financial statements presented
afterwards in this annual report. Such disclosure is in line with the requirements of the 4th
Schedule to the Companies Act, 2017 and applicable International Financial Reporting
Standards.

Approved Policy for Related Party Transactions

The Board of Directors has approved a policy for Related Party Transactions, which require that
the company shall carry out transactions with its related parties on an arm’s length basis in the
normal course of business. The term ‘arm’s length’ requires conducting business on the same
terms and conditions as the business between two unrelated / unconcerned persons. The policy
specifies that all transactions entered into with related parties shall require Board’s approval.

Statement of Managements Responsibility

Towards the Preparation and Presentation of
Financial Statements and Directors Compliance
Statements
Annual Report 2018

The Company, its Board of Directors and the management have always been keen to follow the
standards set down by governing institutions. In lights of the same strict compliance of all
standards set out by ICAP, the Companies Act, the international Accounting Reporting Standards
have been adhered to and otherwise good and responsible reporting has been our general
practice.

65
 Cherat Cement Company Limited

66
Social and Environmental
Responsibility Policy
Cherat Cement's Social and Environmental Responsibility Policy envisages an
active commitment and participation on the part of the Company in various
social work initiatives as part of its corporate social responsibility. Being a
conscientious member of the corporate community, the Company contributes
generously to various social and charitable causes including towards health and
education sectors. In this regard, it has worked with many reputable
organizations and NGOs in Pakistan.

The policy is prepared in accordance with SECP’s CSR voluntary guidelines 2013.
The Company also participated in flood relief activities and helped IDP’s
(Internally Displaced Persons). Cherat Cement has always stood by the people of
Pakistan in their hour of need and shall always continue to do so.

Cherat Cement is fully committed to acting in an environmentally responsible

manner. To achieve this result, we:

1. Ensure our product and operations comply with relevant environmental

legislation and regulations.

2. Maintain and continually improve our environmental management systems

to conform to the ISO-14001 Standard or more stringent requirements as
dictated by specific markets or local regulations.
3. Operate in a manner that is committed to continuous improvement in
environmental sustainability through recycling, conservation of resources,
prevention of pollution, product development, and promotion of
environmental responsibility amongst our employees.

4. There is no emission of hazardous materials from Cherat Cement Factory.

5. Inform suppliers, including contractors, of our environmental expectations

and require them to adopt environmental management practices aligned
with these expectations.
Annual Report 2018

67
 Cherat Cement Company Limited

68
Conflict of
Interest Policy

A Conflicts of Interest Policy has been developed by Cherat Cement to

provide a framework for all directors of the Company (“Directors”) to
disclose actual, potential or perceived conflicts of interest.
The policy provides guidance on what constitutes a conflict of interest
and how it will be managed and monitored by the Company.
The policy is applicable to Directors as the Company strongly believes
that a Director owes certain fiduciary duties, including the duties of
loyalty, diligence and confidentially to the Company which requires that
the Directors act in good faith on behalf of the Company and to exercise
his or her powers for stakeholders’ interests and not for their own or
others interest.
Management of Conflict of Interest
The Company stands fully committed to the transparent disclosures,
management and monitoring of actual potential or perceived conflicts of
interest. All Directors under the policy are obligated and have a duty to
avoid actual, potential or perceived conflicts of interest.
Any Director with personal interest, relationship or responsibility which
Annual Report 2018

conflicts with the interest of the Company or its shareholders shall

excuse himself or herself from any discussions on the matter that would
give rise to the conflict of interest and, if necessary, from the Board
meeting, or applicable part thereof.

69
 Cherat Cement Company Limited

70
Insider
Trading Policy
Cherat Cement has taken definitive steps in ensuring that all employees,
officers, members of the Board and all such relevant persons follow strict
guidelines while trading in the shares of the Company. The Insider
Trading Policy codifies the Company’s standards on trading and enabling
the trading of securities of the Company or other publicly-traded
companies while in possession of material non-public information.

The general guidelines within the policy state that:

i. No trading in the securities of the Company is permitted for directors

and all employees who are “Executives” as defined in the Code of
Corporate Governance, within the Closed Periods announced by the
Company.

ii. No insider may purchase or sell any Company’s security while in

possession of material non-public information about the Company, its
customers, suppliers, consultants or other companies with which the
Company has contractual relationships or may be negotiating
transactions.

iii. No insider who knows of any material non-public information about

the Company may communicate that information to any other
person, including family and friends.

iv. In addition, no insider may purchase or sell any security of any other
company, whether or not issued by the Company, while in possession
of material non-public information about that company that was
obtained in the course of his or her involvement with the Company in
the way of conducting official business. No insider who knows of any
such material non-public information may communicate that
information to any other person, including family and friends.

The Company’s Responsibility to Disclose Inside Information

The Company’s responsibility, in case of inside information made known

Annual Report 2018

to a third party, shall be to ensure that in such case the knowledge is

given full public disclosure or if such information still needs to be kept
non-public then the Company must ensure that the third party, is placed
under legal obligation to maintain confidentiality.

71
 Cherat Cement Company Limited

72
Safety of
Records Policy
Cherat Cement is effectively implementing the policy to ensure the safety
of records. All records must be retained for as long as they are required
to meet legal, administrative, operational, and other requirements of the
Company. The main purposes of the Company Policy are:

To ensure that the Company's records are created, managed,

retained, and disposed off in an effective and efficient manner;

To facilitate the efficient management of the Company's records

through the development of a coordinated Records Management
Program;

To ensure preservation of the Company's records of permanent

value to support both protection of privacy and freedom of
information services throughout the Company to promote
collegiality and knowledge sharing;

Information will be held only as long as required and disposed off in

accordance with the record retention policy and retention
schedules; and

Records and information are owned by the Company, not by the

individual or team.
Annual Report 2018

73
 Cherat Cement Company Limited

74
IT Governance Policy
Cherat Cement has a well conceived and implemented IT Governance
Policy which seeks to ensure that IT is aligned with Cherat's
organizational goals and strategies and delivers value to the
organization. The policy is designed to promote effective, efficient,
timely, and informed decision-making concerning Cherat's IT
investments and operations. Specifically the policy aims to establish the
IT governance structure and its associated procedures, roles, and
responsibilities, as a critical component of the overall IT Management
(ITM) Framework, which guides the management, implementation, and
monitoring of IT investments for Cherat.
Cherat Cement’s IT Governance Policy is mainly charged with:
Establishing a shared vision of how information technology can add
value to the organization;
Establishing information technology goals, and the strategies for
achieving those goals;
Establishing principles and guidelines for making information
technology decisions and managing initiatives;
Overseeing the management of institutional information technology
initiatives;
Establishing and communicating organizational information
technology priorities;
Determining information technology priorities in resource
allocation;
Establishing, amending and retiring, as necessary, organizational
information technology and other technology related policies, and
Determining the distribution of responsibility between the IT
Department and end users.
Annual Report 2018

75
 Cherat Cement Company Limited

76
Whistle Blower Policy
An important aspect of accountability and transparency is a mechanism to enable all
individuals to voice concerns internally in a responsible and effective manner when
they discover information which they believe shows serious malpractice.
Our whistle blowing policy is therefore fundamental to the organization's professional
integrity. In addition, it reinforces the value the organization places on staff to be
honest and respected members of their individual professions. It provides a method of
properly addressing bona fide concerns that individuals within the organization might
have, while also offering whistle blowers protection from victimization, harassment or
disciplinary proceedings.
It should be emphasized that the policy is intended to assist only those individuals
who believe they have discovered malpractice or impropriety. It is not designed to
question financial or business decisions taken by the organization nor should it be
used to reconsider any matters which have been investigated under the harassment,
grievance or disciplinary policies and procedures.
Fundamental elements of our Whistle Blower Policy are highlighted below:
All staff are protected from victimization, harassment or disciplinary action as a
result of any disclosure, where the disclosure is made in good faith and is not
made maliciously or for personal gain.
All disclosures are required to be made in writing.
Disclosures made anonymously are not entertained.
Disclosures made are investigated fully including interviews with all the
witnesses and other parties involved.
All whistle blowing disclosures made are treated as confidential and the identity
of the whistle blower is protected at all stages in any internal matter or
investigation.
Disciplinary action (up to and including dismissal) may be taken against the
wrongdoer dependant on the results of the investigation.
There are no adverse consequences for anyone who reports a whistle blowing
concern in good faith. However, any individual found responsible for making
allegations maliciously or in bad faith may be subject to disciplinary action.

During the year no whistle blowing incidence was reported under the mentioned
procedure.

Business Continuity and

Disaster Recovery Policy
The Board of Directors has approved and continuously reviews the IT Policy and
Business Continuity Plan of the Company. The management has arranged offsite data
storage facilities. All the key records are being maintained at different locations.
Annual Report 2018

Employees are aware of the steps required to be taken in case of any emergency.

77
 Human Resource Policies
The Company hires energetic, talented, and motivated pipeline for future leadership and creating backups for
human resources and provides them a congenial and critical roles.
healthy working environment to utilize their
capabilities efficiently. The Company believes that its The salient features of this policy are detailed as
core strength is its people, who strive every day to under:
meet individual challenges and help the Company Talent Assessment is conducted based on
achieve its collective targets. The Company has in
achievements, Competencies and Group Values.
place a Performance Review Process in order to
recognize employees’ contribution and reward them Gap Analysis is done to determine time period and
according to their performances. The Company also tools needed to groom/ develop them as possible
inducts apprentices in its Apprenticeship Program successors.
through which graduates from reputable institutions
are regularly inducted. A management trainee Put through an outbound Leadership Course to
program is also in place to meet the future determine areas of development viz a viz leadership.
requirements. A large number of recruitment has been
done in view of expansion in a systematic way. On-going coaching/ rotation/ training and
developmental plans are in place to bring out best in
Industrial Relations class talent for succession.
We maintain excellent relations with our employees To deep reach successors at all levels, upward
and labour. There is a formal labour union in place mobility is a pre-requisite in the hiring programme.
which represents all classes of workers and
independently takes care of all labour related issues. Other Policies
The Company takes every reasonable step for swift The Company has a complete set of other HR policies
and amicable resolution of all their issues. for recruitment, selection, training, tirdeness, overtime
and compensation. An employee Hand Book is also
Succession Planning available.
Our Succession Planning policy is aimed at building a

Diversity Policy
Cherat Cement Company Limited is committed to environment built on the premise of gender and
fostering, cultivating and preserving a culture of diversity equity that encourages and enforces:
diversity and inclusion. Our human capital is the most
valuable asset we have. The collective sum of the • Respectful communication and cooperation
individual differences, life experiences, knowledge, between all employees.
inventiveness, innovation, self-expression, unique
capabilities and talent that our employees invest in • Teamwork and employee participation, permitting
their work represents a significant part of not only our the representation of all groups and employee
culture, but our reputation and Company’s perspectives.
achievement as well.
• Employer and employee contributions to the
We embrace and encourage our employees’ communities we serve to promote a greater
differences in age, color, disability, ethnicity, family or understanding and respect for the diversity.
Cherat Cement Company Limited

marital status, gender identity or expression, language,

national origin, Physical and mental ability, political All employees of Cherat Cement Company Limited
affiliation, race, religion, socio-economic status, have a responsibility to treat others with dignity and
veteran status, and other characteristics that make our respect at all times. All employees are expected to
employees unique. Cherat Cement Company Limited’s exhibit conduct that reflects inclusion during work, at
‘diversity initiatives are applicable but not limited to work functions on or off the work site, and at all other
our practices and policies on recruitment and company-sponsored and participative events. Any
selection; compensation and benefits; professional employee found to have exhibited any inappropriate
development and training; promotions; transfers; conduct or behavior against others may be subject to
social and recreational programs; layoffs; disciplinary action.
terminations; and the ongoing development of a work

78
Statement of Compliance
with Listed Companies (Code of Corporate Governance) Regulations, 2017
The company has complied with the requirements of responsibilities under the Code. The directors of
the Regulations in the following manner: the company meet the criteria of exemption
under regulation 20(2) of the Regulations. Further
1. The total number of directors are 8 (eight) as per the board has arranged Directors' Training
the following: program for the following:

a. Male: 8 Name of Directors

b. Female: None
Mr. Omar Faruque Chairman
2. The Composition of board is as follows: Mr. Azam Faruque Chief Executive

a) Independent Directors 2 Name of Executive & Designation

b) Other Non-executive Directors 5
c) Executive Director 1 Mr. Yasir Masood Executive Director
& Chief Financial
3. The directors have confirmed that none of them is Officer
serving as a director on more than five listed Mr. Abid Vazir Executive Director
companies, including this company (excluding & Company
the listed subsidiaries of listed holding Secretary
companies where applicable).
10. The board has approved appointment of CFO,
4. The company has prepared a Code of Conduct Company Secretary and Head of Internal Audit,
and has ensured that appropriate steps have been including their remuneration and terms and
taken to disseminate it throughout the company conditions of employment and complied with
along with its supporting policies and relevant requirements of the Regulations.
procedures.
11. CFO and CEO duly endorsed the financial
5. The board has developed a vision/mission statements before approval of the board.
statement, overall corporate strategy and
significant policies of the company. A complete 12. The board has formed committees comprising of
record of particulars of significant policies along members given below:
with the dates on which they were approved or
amended has been maintained. a) Audit Committee
Mr. Asif Qadir Chairman
6. All the powers of the board have been duly Mr. Akbarali Pesnani Member
exercised and decisions on relevant matters have Mr. Arif Faruque Member
been taken by board/ shareholders as
empowered by the relevant provisions of the Act b) HR and Remuneration Committee
and these Regulations. Mr. Shamshad Nabi Chairman
Mr. Saquib H. Shirazi Member
7. The meetings of the board were presided over by Mr. Azam Faruque Member
the Chairman and, in his absence, by a director Mr. Shehryar Faruque Member
elected by the board for this purpose. The board
has complied with the requirements of Act and 13. The terms of reference of the aforesaid
the Regulations with respect to frequency, committees have been formed, documented and
recording and circulating minutes of meeting of advised to the committee for compliance.
board.
14. The frequency of meetings (quarterly/half yearly/
8. The board of directors have a formal policy and
Annual Report 2018

yearly) of the committee were as per following:

transparent procedures for remuneration of
directors in accordance with the Act and these a) Audit Committee. - Quarterly
Regulations.
b) HR and Remuneration
9. The directors are well aware of their duties and Committee. - Half Yearly

79
 15. The board has set up an effective internal audit these regulations or any other regulatory
function who is considered suitably qualified and requirement and the auditors have confirmed that
experienced for the purpose and are conversant they have observed IFAC guidelines in this
with the policies and procedures of the company. regard.

16. The statutory auditors of the company have 18. We confirm that all other requirements of the
confirmed that they have been given a Regulations have been complied with.
satisfactory rating under the quality control
review program of the ICAP and registered with
Audit Oversight Board of Pakistan, that they or
any of the partners of the firm, their spouses and
minor children do not hold shares of the
On behalf of the Board of Directors
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 ICAP.

17. The statutory auditors or the persons associated Omar Faruque Azam Faruque
with them have not been appointed to provide Chairman Chief Executive
other services except in accordance with the Act, Karachi: August 29, 2018

Statement of Compliance
With the Best Practices of Transfer Pricing
The Company has fully complied with the best practices of Transfer Pricing as contained in the Listing Regulations
of the Stock Exchanges.

On behalf of the Board of Directors

Cherat Cement Company Limited

Omar Faruque Azam Faruque

Chairman Chief Executive
Karachi: August 29, 2018

80
Independent Auditors’ Review Report
on the Statement of Compliance contained in Listed Companies
(Code of Corporate Governance) Regulations, 2017

EY Ford Rhodes UAN: +9221 111 113937 (EYFR)

Chartered Accountants Tel: +9221 3565 0007-11
Progressive Plaza, Beaumont Road Fax: +9221 3568 1965
P.O. Box 15541, Karachi 75530 [Link]@[Link]
Pakistan [Link]/pk

We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate
Governance) Regulations, 2017 (the Regulations) prepared by the Board of Directors of Cherat Cement Company
Limited (the Company) for the year ended 30 June 2018 in accordance with the requirements of regulation 40 of
the Regulations.

The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our
responsibility is to review whether the Statement of Compliance reflects the status of the Company’s compliance
with the provisions of the Regulations and report if it does not and to highlight any non-compliance with the
requirements of the Regulations. A review is limited primarily to inquiries of the Company’s personnel and review
of various documents prepared by the Company to comply with the Regulations.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting
and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not
required to consider whether the Board of Directors’ statement on internal control covers all risks and controls or
to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures
and risks.

The Regulations require the Company to place before the Audit Committee, and upon recommendation of the
Audit Committee, place before the Board of Directors for their review and approval, its related party transactions
and also ensure compliance with the requirements of section 208 of the Companies Act, 2017. We are only
required and have ensured compliance of this requirement to the extent of the approval of the related party
transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out
procedures to assess and determine the Company’s process for identification of related parties and that 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
requirements contained in the Regulations as applicable to the Company for the year ended 30 June 2018.

Chartered Accountants
Annual Report 2018

Date: 03 September 2018

Place: Karachi

81
 Role of Chairman and
Chief Executive Officer
OFFICES OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Being a corporate governance compliant company, Cherat Cement designates separate persons for the position of
the Chairman of the Board of Directors and the office of the Chief Executive with clear division of roles and
responsibility.

Pursuant to the provisions of Section 192(2) of the Companies Act 2017, the Board of Directors of Cherat Cement
Company Limited has outlined the roles and responsibilities of the Chairman as well as the Chief Executive
Officer (CEO) of the Company, which are detailed here in below;

CHAIRMAN

The principal role of the Chairman of the Board is to manage and to provide leadership to the Board of Directors
of the Company. The Chairman is accountable to the Board. The Chairman acts as the communicator for Board
decisions where appropriate.

More specifically, the duties and responsibilities of the Chairman are as follows:

• acting as a liaison between management and the Board, through the CEO;

• keeping abreast generally of the activities of the Company and its management;

• ensuring that the Directors are properly informed and that sufficient information is provided to enable the
Directors to form appropriate judgements and make informed decisions;

• preparing the review report (to be included with the annual financial statements) on the overall performance
of the Board of Directors and effectiveness of the role played by the Board of Directors in achieving the
Company’s objectives.

• developing and setting the agendas for meetings of the Board;

• acting as Chair at meetings of the Board;

• ensuring that the minutes of Board meetings are appropriately recorded and reviewing and signing minutes
of Board meetings;

• presiding over the Board meetings and ensuring that all relevant information has been made available to the Board;

• confirming the quorum of the meeting;

• ensuring that the agenda, notice of meeting alongwith all relevant material were circulated within stipulated
time;

• ensuring that the minutes of the Board meetings are kept in accordance with applicable laws;

• ensuring that the appropriate recording and circulation of the minutes of the Board meeting to the Directors
and officers entitled to attend the Board meetings;
Cherat Cement Company Limited

• safeguarding shareholders’ interest in the Company;

• issuing the letter to the directors at the commencement of each three year term of the Directors setting out
their role, obligations, powers and responsibilities;

82
• ensuring that the Board is playing an effective role in fulfilling its responsibilities;

• determining the date, time and location of the annual or extraordinary general meetings of shareholders and
to develop the agenda for the meeting;

• presiding as chairman at every General Meeting of the Company;

• recommending to the Board, after consultation with the Directors and management, the appointment of
members of the Committees of the Board;

• assessing and making recommendations to the Board annually regarding the effectiveness of the Board.

CHIEF EXECUTIVE OFFICER

The CEO is, subject to control and directions of the Board, entrusted with the powers of management of affairs of
the Company. In such capacity the CEO’s role and responsibilities include:

• planning, formulating and implementing strategic policies;

ensuring the achievement of productivity and profitability targets and efficient Company operations;

• ensuring that necessary coordination exists between various departments of the Company to achieve smooth
and effective operations;

• maintaining an ongoing dialogue with the Directors in regard to changes in and implementation of
Company’s policies and the performance and development of the Company’s business;

• ensuring that the Company’s interests and assets are properly protected and maintained and all the required
Government obligations are complied with in a timely manner;

• maintaining a close liaison with the Government, customers, suppliers and sales offices;

• chalking out human resource policies for achieving high professional standards, overall progress / betterment
of the Company as a whole;

• ensuring that proper succession planning for all levels of hierarchy exist in the Company and the same is
constantly updated;

• ensuring proper functioning of the Management Committees of the Company of which he is the chairman;

• preparing and presenting personally to the Board of Directors following reports/details:

• annual business plan, cash flow projections and long term plans.

• budgets including capital, manpower and overhead budgets along with variance analysis.

• quarterly operating results of the Company in terms of its operating divisions and segments.

• promulgation or amendment of the law, rules or regulations, accounting standards and such other matters as
may affect the Company.

• reviewing performance against budgets / targets, revenue and capital expenditure, profits, other
administration, commercial, personnel and other matters of importance to the Company.
Annual Report 2018

• ensuring that open and progressive atmosphere is created among employees giving them a sense of
participation and providing them with an opportunity to give their best.

83
 Salient Features of Terms of Reference of The Audit
Committee and the Human Resource &
Remuneration Committee
The Board is assisted by two Committees, namely the b) review annual and interim financial statements of
Audit Committee and the Human Resource & the company, prior to their approval by the Board
Remuneration Committee, to support its of Directors, focusing on:
decision-making in their respective domains:
(i) major judgmental areas;
AUDIT COMMITTEE
(ii) significant adjustments resulting from the
Mr. Asif Qadir Chairman audit;
Mr. Akbarali Pesnani Member
(iii) going concern assumption;
Mr. Arif Faruque Member
(iv) any changes in accounting policies and
The Audit Committee comprises of three practices;
Non-Executive Directors one of whom is
Independent. The Chairman of the Committee is an (v) compliance with applicable accounting
Independent Director. standards;
Meetings of the Audit Committee are held at least (vi) compliance with these regulations and other
once every quarter. The Committee reviews the annual statutory and regulatory requirements; and
financial statements in the presence of external
auditors. The recommendations of the Audit (vii) all related party transactions.
Committee are then submitted for approval of c) review preliminary announcements of results
financial results of the Company by the Board. During prior to external communication and publication;
the year 2017-18, the Audit Committee held Four [4]
meetings. The minutes of the meetings of the Audit d) facilitate the external audit and discussion with
Committee are provided to all the members, Directors external auditors of major observations arising
and the Chief Financial Officer. The Head of Internal from interim and final audits and any matter that
Auditor attends the Audit Committee meetings the auditors may wish to highlight (in the absence
regularly and meets the Audit Committee without the of management, where necessary);
presence of the Management, at least once a year, to
point out various risks, their intensity and suggestions e) review management letter issued by external
for mitigating risks and improvement areas. The auditors and management’s response thereto;
business risks identified are then referred to the f) ensure coordination between the internal and
respective departments and mitigating actions are external auditors of the company;
then implemented.
g) review the scope and extent of internal audit,
Terms of Reference of Audit Committee audit plan, reporting framework and procedures
The Code of Corporate Governance 2017 mandates and ensure that the internal audit function has
that the Board of Directors of the Company shall adequate resources and is appropriately placed
determine the Terms of Reference of the Audit within the company;
Committee via Regulation No 28.(3). h) consider major findings of internal investigations
In light of the mandate the Board of Directors of of activities characterized by fraud, corruption
Cherat Cement Company Limited has drafted and and abuse of power and management's response
Cherat Cement Company Limited

approved the following terms of Reference for its Audit thereto;

Committee. This is a non-exhaustive list and only i) ascertain that the internal control systems
outlines the most important guidelines for the including financial and operational controls,
Committee. Amendments to these shall be made from accounting systems for timely and appropriate
time to time in line with change in laws, and internal recording of purchases and sales, receipts and
and external relevant factors. payments, assets and liabilities and the reporting
structure are adequate and effective;
The Committee shall;
j) review the company’s statement on internal
a) determine appropriate measures to safeguard the control systems prior to endorsement by the board
company’s assets; of directors and internal audit reports;

84
k) institute special projects, value for money studies ii. undertake annually a formal process of evaluation
or other investigations on any matter specified by of performance of the Board as a whole and its
the board of directors, in consultation with the committees either directly or by engaging external
chief executive officer and consider remittance independent consultants and if so appointed, a
of any matter to the external auditors or to any statement to that effect shall be made in the
other external body; directors’ report disclosing name, qualifications
l) determine compliance with relevant statutory and major terms of appointment;
requirements; iii. recommend human resource management
m) monitor compliance with these regulations and policies to the Board;
identify significant violations thereof; iv. recommend to the Board the selection,
n) review arrangement for staff and management to evaluation, development, compensation
report to audit committee in c o n f i d e n c e , (including retirement benefits) of chief operating
concerns, if any, about actual or potential officer, chief financial officer, company secretary
improprieties in financial and other matters and and head of internal audit;
recommend instituting remedial and mitigating v. carry out consideration and approval on
measures; recommendations of chief executive officer on
o) recommend to the board of directors the such matters for key management positions who
appointment of external auditors, their removal, report directly to chief executive officer or chief
audit fees, the provision of any service permissible operating officer;
to be rendered to the company by the external vi. where human resource and remuneration
auditors in addition to audit of its financial consultants are appointed, their credentials shall
statements. The board of directors shall give due be known by the committee and a statement shall
consideration to the recommendations of the be made by them as to whether they have any
audit committee and where it acts otherwise it other connection with the company; and
shall record the reasons thereof.
vii. carry out all actions in addition to those stated
p) consider any other issue or matter as may be above, in order to ensure that the Company’s risks
assigned by the board of directors. are mitigated and growth in the right direction is
HUMAN RESOURCE & REMUNERATION taking place.
COMMITTEE Records: All documentation related to the holding,
The Code of Corporate Governance 2017 mandates proceedings and recommendations of the HR & RC
that the Board of Directors of the Company shall shall be ensured by and stored with the Secretary (HR
determine the Terms of Reference of the Human & RC).
Resource and Remuneration Committee via DIRECTORS' ORIENTATION AND TRAINING
Regulation No 29.(3).i. All the Directors of the Company are well experienced
In light of the mandate the Board of Directors of and have diverse backgrounds. At the time of induction
Cherat Cement Company Limited has drafted and of any new director, he or she is given proper
approved the following terms of Reference for its orientation about the operations of the Company and
HR&R Committee. This is a non-exhaustive list and his or her fiduciary responsibilities. The Company had
only outlines the most important guidelines for the also arranged an in-house Directors' training program
Committee. Amendments to these shall be made from to appraise the directors of their authorities and
time to time in line with change in laws, and internal responsibilities. Two Directors of the Company namely
and external relevant factors. Mr. Azam Faruque and Mr. Omar Faruque are also
certified under the Board Development Series Program
The Committee shall; offered by Pakistan Institute of Corporate Governance
i. recommend to the Board for consideration and (PICG).
approval a policy framework for determining Strategy and Performance
remuneration of directors (both executive and The Board reviews the implementation of organization's
non-executive directors and members of senior strategic & financial plans, Board meeting agendas and
management). The definition of senior
Annual Report 2018

supporting documents provide sufficient information

management will be determined by the Board and time to explore & resolve key issues. Board
which shall normally include the first layer of members demonstrate preparation for meetings through
management below the chief executive officer active participation in decision making.
level;

85
 Report of the Audit Committee

AUDIT COMMITTEE that they were adequate for the planned scope of the
Internal Audit function. Head of Internal Audit
Mr. Asif Qadir Chairman Department has direct access to the Audit Committee.
Mr. Arif Faruque Member
2. An Internal Audit Risk Assessment document is
Mr. Akbarali Pesnani Member
submitted to the Audit Committee and based on that an
Audit Plan is prepared to mitigate the risks involved in
The Audit Committee of the Company comprises of two
the Company’s operations. Further, on the basis of this
Non-Executive Directors and one Independent
plan, audits are conducted and reports are submitted.
Non-Executive Director who is the Chairman of the
The Committee on the basis of the said reports reviews
Committee. The Head of Internal Audit attends Audit
the adequacy of controls and compliance shortcomings
Committee meetings. The Chief Executive Officer and Chief
in areas audited and discuss corrective actions in the
Financial Officer attend Audit Committee meetings by
light of management responses. Regular follow ups of
invitation. The Audit Committee also separately meets the
these reports are also taken. This ensures the continual
external auditors at least once in a year without the presence
evaluation of controls and improved compliance.
of the Management.
Minutes of Audit Committee meetings are timely
circulated to the Board of Directors.
Meetings of the Audit Committee are held at least once every
quarter. Four meetings of the Audit Committee were held
3. For continuous improvement of internal controls, the
during the year 2017-2018. Based on reviews and
Committee also discussed the internal controls and the
discussions in these meetings, the Audit Committee reports
management letter with the external auditors.
that:
EXTERNAL AUDIT
1. The Company has issued a Statement of Compliance
with the Code of Corporate Governance which has also
1. The external auditors M/s. EY Ford Rhodes, Chartered
been reviewed and certified by the auditors of the
Accountants were allowed direct access to the Audit
Company.
Committee and necessary coordination with internal
auditors was ensured. Major findings arising from audits
2. The Audit Committee reviewed and approved the
and any matters that the external auditors wished to
quarterly, half yearly and annual financial statements of
highlight were freely discussed with them.
the Company and recommended them for approval of
the Board of Directors. Further, the financial statements
2. The Audit Committee has reviewed and discussed with
comply with the requirements of the Fourth Schedule to
the external auditors and management, all the Key Audit
the Companies Act, 2017, and applicable International
Matters and other issues identified during the external
Accounting Standards and International Financial
audit along with the methods used to address the same.
Reporting Standards notified by SECP.
3. Being eligible for reappointment as Auditors of the
3. The Annual Report of the Company is fair, balanced and
Company, the Audit Committee has recommended the
understandable. Because of meeting the aforesaid
appointment of M/s. EY Ford Rhodes, Chartered
aspects, the Company was able to secure the 1st
Accountants as External Auditors of the Company for
position in the category ‘Cement and Sugar’ for its
the year ending June 30, 2019 as it is one of the Big Four
Annual Report for the year ended June 30, 2017 in the
audit firm and has thorough knowledge of the
Best Corporate & Sustainability Report Awards 2017
Company’s business and industry due to long
jointly conducted by Institute of Chartered Accountants
association with the Company.
of Pakistan and Institute of Cost and Management
Accountants of Pakistan.
4. The Company also obtains taxation related services
from M/s. EY Ford Rhodes, Chartered Accountants as it
4. The Audit Committee has reviewed and approved all
is one of the reputed firm in provision of said services
related party transactions.
and has sound professional policies and procedure to
ensure compliance of independence.
5. The Audit Committee takes into account any feedback
Cherat Cement Company Limited

from the Board of Directors and incorporates for

By order of the
improvement.
Audit Committee
INTERNAL AUDIT AND RISK MANAGEMENT

1. For appraisal of internal controls and monitoring

compliance, the Company has in place an
appropriately staffed, Internal Audit department. The
Asif Qadir
Audit Committee reviewed the resources and
Chairman,
performance of the Internal Audit department to ensure
August 27, 2018

86
 Stakeholders’
Relationship and
Engagement

Annual Report 2018

87
 Corporate Governance -
Stakeholders’ Engagement
Our stakeholders extend valuable contribution and correspondence to resolve all queries for on time
towards our growth and existence. Procedure for deliveries. Cooperation of our suppliers gives us an
stakeholders’ engagement includes effective extra edge over our competitors.
communication, good harmony and compliance with
BANKS AND OTHER LENDERS
laws & regulations. We cannot truly execute our
purpose without input from our stakeholders. We value our relationship with our financial partners
and lenders. Financial risk management and business
SHAREHOLDERS
sustainability are few of the interests of this segment of
Safeguarding our shareholders’ interest is our prime stakeholders. Periodic briefings, Quarterly financial
responsibility. Our shareholders’ interest revolves reporting, Head Office and Site visits are the main
around good returns, profitability, growth and means for our engagement with this category of
regulatory compliances. We respond to our stakeholders. Bank and other institutes help us in
shareholders’ expectations through improvement in obtaining loans at attractive rates and advise on
business mechanics, effective governance and strategic issues whenever needed.
corporate reporting framework. Annual General
REGULATORS
Meetings and statutory reporting are the most effective
means of our engagement with our shareholders. Our commitment to compliance with laws and
Support of shareholders is critical in achieving the regulations is evident from our Corporate and Legal
Company objectives. team‘s continued efforts for efficient and effective
legal and regulatory obedience. The engagement
Minority Shareholders
includes submission of periodic reports, responding to
The management of the Company firmly believes in enquiries and meetings as and when required. Active
encouraging and ensuring the equitable treatment of all engagement with regulators improves level of
shareholders including minority shareholders to attend, compliance.
speak and vote at the Annual General Meeting and
EMPLOYEES
appoint another member as his / her proxy in his / her
instead. Our company has extensive employee engagement
schemes in place. The employees’ issues revolve
DEALERS, CUSTOMERS AND TRANSPORTERS
around work life balance, training and development
Sustaining and developing long term relationship with and rewards. We have educational loan schemes,
our dealers, customers and transporters forms the key of in-house and outside training programs and long-term
our business’ success. Their expectations are focused employment reward schemes in place to value our
on product quality, pricing and service delivery. Our employees as Human Capital. Employee meetings are
sales and marketing team remain in close contact to this on regular intervals in form of Annual get-togethers,
segment of our stakeholders to resolve issues on a celebrating sports day and team building activities.
priority basis. We continue to engage with our dealers, Employees engagement improves the level of
customers and transporters through meetings and dedication and hard work.
market visits and communications. We derive success
from the brand loyalty of Cherat and the cooperation INSTITUTIONAL INVESTORS AND ANALYSTS
from our transporters. BRIEFING
SUPPLIERS AND VENDORS Institutional investors regularly obtain general
Cherat Cement Company Limited

business briefings and financial reports from

Efficient supplier network is a key for effective working
management. Formal meetings are also arranged
capital management. To achieve this objective, we
whenever needed. Without compromising the
conduct market surveys to strengthen our bond with
confidentiality, business analysts are provided with
our suppliers and vendors.
information and briefings as and when they require.
The strong connection with institutional investors and
Our supply chain management team is in continuous
analysts facilitates in avoiding any misconception /
contact with suppliers and vendors through meetings

88
rumors in the market. Apart from regular meetings
with institutional investors and analysts, the Company
has also participated in analyst briefings to foreign
institutional investors held at Avari Tower regarding
the cement sector performance and growth. In
addition to this, the Company has also participated in
the briefing to local institutional investors regarding
the performance of the Company and the cement
sector.

MEDIA

Ads and campaigns are launched in media based on

marketing requirements. Interaction with media
improves the Company brand image.

INVESTORS SECTION

To keep transparency in the relation between the

Company and its shareholders, the website of Cherat
Cement ([Link] contains all the major
financial information needed for investors’ decision
making in a separate tab of “Investor Relations”.

AGM PROCEEDINGS

The last AGM was conducted at Cherat Cement Site

on Monday, October 16, 2017 at 11:30 a.m. The
meeting was properly organized and well attended by
the Shareholders. The Shareholders appreciated the
management for making tireless efforts to achieve
another noteworthy year in terms of production, sales
and profitability. Shareholders asked different
questions regarding Company’s increase in market
share and exploring new markets and avenues to
sustain. Shareholders also raised questions on the
Company’s cost saving strategy. The shareholders
were informed about our dealers’ network and how
the Company has optimized the mix of South African
and Afghan coal and efficiently use of power mix.

Shareholders inquired about the progress work on

expansion projects for which they were given a
detailed briefing that all work is going as per
schedule. Shareholders approved the Financial
Statements and also gave approval for appointment of
M/s. EY Ford Rhodes, Chartered Accountants as
Annual Report 2018

external auditors and distribution of cash dividend,

and approval of investments were also taken.

89
 Statement of Value Addition
and Distribution of Wealth
2018 2017
(Rupees in ‘000) % (Rupees in ‘000) %
Wealth Generated
Turnover (including taxes) 20,390,313 99.60 12,911,225 98.98
Other operating income 81,112 0.40 133,384 1.02
20,471,425 100.00 13,044,609 100.00
Distribution of Wealth
Cost of sales (excluding employees' remuneration) 10,144,305 49.55 5,593,044 42.87
Marketing, selling and administrative expenses 300,905 1.47 291,782 2.24
To employees as remuneration 1,512,996 7.40 1,187,273 9.10
To government as direct taxes 15,248 0.07 553,229 4.24
To government as indirect taxes 6,001,964 29.32 3,265,826 25.04
To providers of finance as financial charges 356,585 1.74 188,215 1.44
To society as donations 7,303 0.04 8,678 0.07
To Shareholders as dividend 794,843 3.88 574,054 4.40
Retained within the business 1,337,276 6.53 1,382,508 10.60
20,471,425 100.00 13,044,609 100.00

Distribution of Wealth 2018

Cost of Sales (Excluding Employees’ Remuneration) 49.55 %

Marketing, Selling and Administrative Expenses 1.47 %
To Employees as Remuneration 7.40 %

2018 To Government as Direct Taxes

To Government as Indirect Taxes
0.07 %
29.32 %
To Providers of Finances as Financial Charges 1.74 %
To Society as Donations 0.04 %
To Shareholders as Dividend 3.88 %
Retained within the Business 6.53 %

Distribution of Wealth 2017

Cost of Sales (Excluding Employees’ Remuneration) 42.88 %

Marketing, Selling and Administrative Expenses 2.24 %
Cherat Cement Company Limited

To Employees as Remuneration 9.10%

2017 To Government as Direct Taxes

To Government as Indirect Taxes
4.24 %
25.04 %
To Providers of Finances as Financial Charges 1.44 %
To Society as Donations 0.07%
To Shareholders as Dividend 4.40 %
Retained within the Business 10.60 %

90
Performance
and Position

Annual Report 2018

91
 Analysis of the Financial and
Non-Financial Performance
Financial Indicators:

Actual Results:

The year 2017/18 proved to be an exceptional period for the Company in all aspects of business. Whether internal growth in
the form of expansion or external growth in the form of reaching new markets, the Company performed in line with its
reputation to deliver. Even though the external market factors created a challenging environment for the businesses to perform.
During the year 2017/18, the Company benefited from economies of scale and increased efficiency as the production capacity
from Cement Line II was fully realized for the entire year. On the back of rise in cement dispatches, there was 49% i.e. Rs. 4.7
billion increase in the sales turnover of the company from the corresponding period last year. However, a combination of
increased variable costs especially rise in coal prices as well as higher depreciation and finance costs reduced margins. After
taking tax adjustment on account of Cement Line II, the company posted a historical after tax profit of Rs. 2,132 million for the
year ended June 30, 2018.

Summarized operating performance of the Company for the current year as compared to last year is as follows:
2018 2017
(Rs. in million)
Net sales 14,388.35 9,645.40
Cost of sales 11,249.15 6,432.28
Gross Profit 3,139.20 3,213.12
Expenses & taxes 1,007.08 1,256.56
Net Profit 2,132.12 1,956.56

Strong domestic demand and availability of enhanced production capacity for the entire year following the commissioning of
Cement Line II last year resulted in approximately 65% increase in domestic cement sales of the company over last year.
Similarly, enhanced capacity also allowed the company to increase its exports to Afghanistan, which rose by 52% from the
corresponding period last year. During the year, aggregate cement dispatches of the Company increased by an impressive 63%
from last year. The company also sold 77,886 tons of clinker during the year.
2018 2017
• Domestic sales (in tons)
(cement and clinker) 2,208,000 1,340,226
• Export sales 311,128 204,226
Total sales 2,519,128 1,544,452

Budgeted Results:
After incorporating all factors i.e. update budget assumptions, review bottlenecks, available funding, step costing points, obtain
department budgets, obtain capital budget requests, manufacturing capacities etc. the budget of 2017-18 has been made,
which is quite challenging as line II coming full-fledged in coming year. In this year company has set following sales volumes:

2018 2018
Actual Budget
(in tons)
Total sales volume 2,519,128 2,300,000
Cherat Cement Company Limited

Actual vs budget figure under respective head is as follows:

2018 2018
(Rs. in million)
Net sales 14,388.35 14,317.50
Cost of sales 11,249.15 10,256.76
Gross Profit 3,139.20 4,060.74
Expenses & taxes 1,007.08 1,607.67
Net Profit 2,132.12 2,453.07

92
Non-Financial Indicators:
Capital
Objective KPIs monitored Future relevance
forms

Product development Produce high quality and low cost

Ordinary Portland cement (OPC).

Business optimization Analyse various prospects of

investments in cement industry and
Manufactured Capital

invest in the most promising venture.

Maintain industry leadership Market share, price management and

and expand sales identification of new markets.

Enhance operational efficiency Production efficiency ratios and

and efficient inventory Activity ratios
management

Economize on costs – Optimization of available resources

eliminating redundancies and better allocation of fixed costs.

Sustainability Current Ratio, Gearing and Interest The KPIs shall

Cover remain relevant in
the future.
Health & safety of workers Provision congenial and clean
environment along with safety
Human Capital

supplies for smooth work.

Training and education Continuous training of employees

and workers. Monitor training need
analysis with special focus on health
and safety at work.

Shareholder value EPS, ROE, Asset Turnover and DPS

Stock value Analyse market price as a measure of

Relationship Capital

relationship capital

Suppliers and Customer Assess the payment stream and

relationships ensure timely payment.

Provide customer with maximum

support beyond customer-supplier
Annual Report 2018

relationship

93
 Change in Indicators and
Performance Measures
Cherat Cement Company has established key indicators which pertain to its key performing area.
Such indicators are subject to change with the Internal and external environment associated with
the organization.

Cherat Cement Company Limited has identified KPIs that are critical to its business. While
identifying KPIs, the Company analysed various indicators, their interpretations and accordingly
their extent to which they may correctly and clearly communicate the Company’s performance.
Some important indicators are as under:

Market Share:
Market share is said to be a key indicator of market competitiveness, that is, how well a
Company is doing against its competitors. Cherat is a premium brand of Ordinary Portland
Cement in Pakistan and Afghanistan. Our main markets in Pakistan are KPK, FATA, and Punjab.
As per the data available on the website of All Pakistan Cement Manufacturers Association our
market share is in excess of 5% because of our superior quality, Cherat is the first choice of
customers in most of the markets. Our market share is expected to increase further after the
commissioning of line III.

Financial Leverage:
Too much debt can be dangerous for a company and its investors. However, if a company's
operations can generate a higher rate of return than the interest rate on its loan than the debt is
helping to fuel growth in profits. Nonetheless, uncontrolled debt levels can lead to credit
downgrades or worse. On the other hand, too few debts can also raise questions. A reluctance
or inability to borrow may be a sign that operating margins are simply too tight.

The management of the Company keeps a strong watch on its leverage and consistent efforts
have been made for its curtailment. Due to ongoing company’s expansion of line III, leverage has
increased but the loans are acquired at very attractive markup rates.

Fixed Cost per unit:

Higher production capacities of an entity help in bringing down the cost per unit of the item
manufactured. In our company fixed cost per unit went down after commencement of
production activities of line II. Production units inversely proportion to the fixed cost per unit,
higher production means low per unit cost or vice versa. The Company is keen to bring its fixed
cost per unit down in order to enhance its profitability.

Segment Results
Cherat Cement Company Limited

The activities of the Company are organized into one operating segment based on its
manufacturing, marketing and sale of cement. However, the Company has been maintaining its
reporting results line wise. Analysis of local and export sales is given in Director’s Report and
analysis of line wise results have been referred in note 33 to the financial statements.

94
Annual Report 2018

95
 Ratio Analysis
For the year ended June 30, 2018

2018 2017 2016 2015 2014 2013

(Restated)

Profitability Ratios:
Gross Profit Ratio (percentage) 21.82 33.31 37.21 30.21 32.59 34.79
Net Profit Before Tax to Sales (percentage) 14.92 26.02 28.98 25.45 26.16 25.18
Net Profit After Tax to Sales (percentage) 14.82 20.28 19.85 19.62 20.40 19.50
EBITDA Margin to Sales (percentage) 24.98 35.16 33.55 30.23 30.65 30.91
Operating Leverage Ratio (0.15) 0.79 2.89 (0.25) 0.53 5.97
Return on Equity (average in percentage) 19.71 19.96 16.37 19.99 30.70 38.38
Return on Capital Employed (percentage) 8.12 12.74 10.68 15.73 25.97 31.37

Liquidity Ratios:
Current Ratio 1.72 1.78 1.11 2.74 3.30 1.96
Quick / Acid Test Ratio 1.46 1.40 0.94 2.18 2.88 1.41
Cash to Current Liabilities 0.01 0.02 0.01 0.02 0.02 0.03
Cash flow from Operations to Sales 0.18 0.02 0.33 0.25 0.27 0.31

Investment / Market Ratios:

Earnings per Share (Before Tax) 12.16 14.21 11.61 10.40 12.31 15.08
Earnings per Share (After Tax) 12.07 11.08 7.96 8.01 9.60 11.68
Price Earnings Ratio 8.05 16.14 15.03 10.86 6.82 4.99
Price to Book Ratio 1.54 3.02 2.31 1.92 1.41 1.50
Dividend Yield Ratio 0.05 0.03 0.03 0.03 0.05 0.04
Dividend Payout Ratio 0.41 0.41 0.41 0.37 0.31 0.21
Dividend Cover Ratio 2.41 2.46 2.45 2.67 3.20 4.67
Cash Dividend per Share 5.00 4.50 3.25 3.00 3.00 2.50
Stock Dividend per Share - - - - 0.10 -
Market Value per Share Closing 97.23 178.78 119.57 87.03 65.46 58.19
High 174.53 212.00 125.22 89.81 84.47 62.94
Low 88.50 118.31 80.30 50.22 44.82 29.81

Break-up Value per Share 63.26 59.23 51.75 45.44 46.27 38.80
Break-up Value per Share including
the effect of all Investments 65.51 62.43 55.77 50.73 59.33 35.93
Break-up Value per Share including
Investment in Related Party at Market Value 65.51 62.43 55.77 47.33 47.52 35.93

Capital Structure Ratios:

Financial Leverage Ratio 1.44 0.61 0.46 0.03 0.06 0.12
Weighted Average Cost of Debt 0.06 0.07 0.06 0.10 0.09 0.12
Debts to Equity Ratio 56.81 31.63 30.35 1.99 3.54 5.57
Interest Cover Ratio (Times) 7.02 14.33 47.93 45.15 59.71 15.54
Cherat Cement Company Limited

Activity / Turnover Ratios:

Total Assets Turnover Ratio 0.47 0.51 0.46 0.69 1.00 1.24
Fixed Asset Turnover Ratio 0.60 0.71 0.56 0.96 1.91 1.83
Inventory Turnover (Days) 26 33 30 33 34 33
Inventory Turnover (Times) 14 11 12 11 11 11
Debtor Turnover (Days) 31 17 - - - -
Debtor Turnover (Times) 12 21 - - - -
Creditor Turnover (Days) 12 18 18 19 19 17
Creditor Turnover (Times) 29 21 21 19 19 22
Operating Cycle (Days) 44 32 14 14 15 16

96
Comments on Ratios
Profitability Ratios:
Profitability ratios of the Company have declined due to decrease in
retention, increase in fuel power cost and finance cost. However, the
Company has managed to increase its sales in quantitative terms. Cost
of sales also increased due to increase in fuel and power cost because
of increase in international coal prices and foreign currency
fluctuations, and depreciation expense.
Fixed cost per ton has reduced due to higher quantity produced during
the year. In line with this, the Company has managed to sustain its
profitability and return of equity during the year 2018.

Liquidity Ratios:
The liquidity of the Company has shown a steady trend due to healthy
profits and better management of working capital. Since the Company
is in continuous expansion, the liquidity position has been consistent to
back up the needs of the Company.

Investment / Market Ratios:

Unforeseen political issues of the country have affected the share price
during the year, however, the investor confidence has been maintained
due to stable and improved growth in the financial position of the
Company.
Earnings per share (after tax) has improved as compared to last year due
to tax benefits availed by the Company from expansion of Line II.

Capital Structure Ratios:

During the year, the Company increased its debt to cater the financing
needs for expansion projects. Early repayments have also been made
owing to the healthy cash flows during the year. The Company also
managed its financing at competitive rates to finance expansion
projects, hence managed its gearing at desirable level.

Activity / Turnover Ratios:

The Company managed to substantiate its financial position by
enhanced inventory management and increased operating cycle due to
increase in sales.
Annual Report 2018

97
 Graphical Presentation of
Analysis of Financial Statements

Operating Profit Gross Profit Margin

35 40

30
30
(Percentage)

(Percentage)
25

20
20
15

10
10
5

0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

EBITDA Margin to Sales Return on Equity

40
12000

30 10000
(Percentage)

(Rupees in Million)

8000
20
6000

10 4000

2000
0
2013 2014 2015 2016 2017 2018 0
2013 2014 2015 2016 2017 2018
Equity Profit

Liquidity Ratios Earnings Per Share

3.5 14

3.0 12

2.5 10
(Times)

(Rupees)
Cherat Cement Company Limited

2.0 8

1.5 6

1.0 4

0.5 2

0.0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Acid Test Ratio Current Ratio

98
 Value Per Share 3,000
Interest Cover
200
180
2,500
160

(Rupees in Million)
140 2,000
(Rupees)

120
100 1,500
80
1,000
60
40 500
20
0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Market Value Book Value Interest Operating Profit

2.5 Fixed Asset Turnover Ratio 50 Operating Cycle

2.0 40
(Times)

1.5 30

(Days)
1.0 20

0.5 10

0.0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Operating Cycle Inventory Turnover

Debtor Turnover Creditor Turnover
2800 Cement Sales
2,500
Company Sales Sector Wise
2450

2100
2,000
1750
(Tons in 000)

(Tons in 000)

1400 1,500

1050
1,000
700

350 500
0
2013 2014 2015 2016 2017 2018
0
2013 2014 2015 2016 2017 2018

Local Sales Export Sales

45,000 Industry Sales
40,000
35,000
2,500 Profit After Tax
(Tons in 000)

30,000
2,000
(Rupees in Million)

25,000
20,000
1,500
15,000
Annual Report 2018

10,000 1,000
5,000
0 500
2013 2014 2015 2016 2017 2018

Local Sales Export Sales 0

2013 2014 2015 2016 2017 2018

99
 30000 Assets and Liabilities
35,000 Net Profit to Total Assets 27000
24000
30,000
(Rupees in Million)

21000

(Rupees in Million)
25,000 18000
20,000 15000
15,000 12000
9000
10,000
6000
5,000
3000
0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Profit Total Assets Assets Liabilities

Equity and Long-Term Liabilities Profitability Trend

20000 16,000
18000
14,000
16000
(Rupees in Million)

(Rupees in Million)

12,000
14000
12000 10,000
10000 8,000
8000
6,000
6000
4,000
4000
2000 2,000
0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Equity Long Term Liabilities Net Sales Gross Profit

Expenses and Taxes Net Profit

Current Assets : Current Liabilities Sales to Total Assets

7,000 35000
31500
6,000
28000
(Rupees in Million)

(Rupees in Million)

5,000 24500
21000
4,000
17500
Cherat Cement Company Limited

3,000 14000
2,000 10500
7000
1,000
3500
0 0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Current Assets Current Liabilities Net Sales Total Assets

100
DuPont Analysis
2018 2017 2016 2015 2014 2013

Operating margin 17.40% 27.97% 29.59% 26.03% 26.61% 26.91%

Asset turnover 0.47 0.51 0.46 0.69 1.00 1.24
Interest burden / efficency 85.76% 93.02% 97.91% 97.79% 98.33% 93.57%
Tax burden / efficiency 99.29% 77.96% 68.50% 77.08% 77.98% 77.45%
Leverage 2.73% 1.80% 1.69% 1.18% 1.32% 1.37%
Return on Equity 19.01% 18.70% 15.37% 16.00% 27.00% 33.10%

Comments on DuPont Analysis

The operating margins of the Company have declined due to decrease in cement retention price of cement and
increased cost of production as compared to previous years. One of the cost elements is financal cost affecting
the interest burden ratio, which is due to increased financing to cater to the requirements of expansion projects.
Leverage ratios have increased due to increase in long-term financing resulting from the expansion.

Tax efficiency has been availed by the Company due to capitalization of Line II in the previous financial year. The
overall impact has resulted in increase in Return on Equity.

Graphical Presentation of DuPont Analysis

35

30

25

20
(Percentage)

15

10

0
2013 2014 2015 2016 2017 2018

Return on Equity
Annual Report 2018

101
 DuPont Chart

Raw Material Stores & Salaries, Depreciation Finance Cost /

Fuel & Power Spare Parts Wages & Other Costs
Consumption
+ Rs. 6,162 m + Consumed Other Benefits + Amortization
& Exchange Loss
Rs. 827 m
Rs. 1,880m Rs. 418 m Rs. 1,513 m Rs. 1,090 m Rs. 366 m

Net Sales Net Cost Current Non-Current Current Non-Current

- Assets + Assets Liabilites + Liabilites
Rs. 14,388 m Rs.12,256 m + m
Rs. 6,282 Rs. 24,238 m Rs. 3,653 m Rs. 15,693 m

Total Owner’s Total

Net Profit Net Sales Total Assets
÷ ÷ - Liabilities Equity + Liabilities
Rs. 2,132 m Rs.14,388 m Rs. 30,520 m Rs. 19,346 m Rs. 19,346 m
Rs. 11,174 m

Net Profit Assets Owner’s Total

Margin x Turnover Equity ÷ Assets
14.82% 0.47 Times Rs. 11,174 m Rs. 30,520 m

Return on Ownership
Assets ÷ Ratio
6.96% 36.61%
Cherat Cement Company Limited

Return on
Equity
19.01%

102
 Free Cash Flows
2018 2017 2016 2015 2014 2013
(Rupees in 000)

Profit before taxation 2,147,367 2,509,791 2,051,397 1,671,188 1,687,739 1,585,134

Adjustment for non-cash items

Depreciation 1,086,046 689,913 277,202 273,217 258,609 248,905
Amortisation 3,804 2,987 2,711 2,610 2,465 2,465
Provision for impairment
in Joint venture - - - - - 106,705
Gain on redemption of
short-term investments - (2,186) (10,986) 7,597 (42,271) -
Gain on disposal of operating
property, plant and equipment (4,977) (19,101) (815) (1,648) (4,904) (2,338)
Finance costs 356,585 188,215 43,708 37,855 28,745 108,988
Exchange loss 9,890 1,540 1,054 322 2,405 2,455
Share of loss from joint venture 37 - - - - 50
Dividend income (20,160) (21,973) (14,578) (7,090) (5,317) (1,662)
1,431,225 839,395 298,296 312,863 239,732 465,568

Working capital changes (918,379) (3,144,694) (43,582) (313,104) (170,441) (120,126)

Net cash generated from

operating activities 2,660,213 204,492 2,306,111 1,670,947 1,757,030 1,936,576

Capital expenditure (11,171,332) (1,547,620) (6,112,136) (3,747,516) (524,022) (108,808)

Free cash flows (8,511,119) (1,343,128) (3,806,025) (2,076,569) 1,233,008 1,821,768

Comments on Free Cash Flows

The Company has improved it operating cash flows during the year reflecting its healthy operation.
However, as the Company is in the process of expansion and investing huge amounts in terms of capital
expenditure i.e. finance through long term debt, resulting in negative free cash flows.

Graphical Presentation of Free Cash Flows

4,000
2,000
0
(2,000)
(Rs. in million)

(4,000)
(6,000)
Annual Report 2018

(8,000)
(10,000)
(12,000) 2013 2014 2015 2016 2017 2018
Profit Before Taxation Adjustment for non-cash items Working capital changes Net cash generated from operating activities
Capital expenditure Free cash flows

103
 Economic Value Added

2018 2017
(Rs. in ‘000)

Net Operating Profit After Tax 2,488,704 2,144,777

Cost of Capital (3,261,660) (2,441,783)
Economic Value Added (772,956) (297,006)

Cost of Capital
Total Assets 30,519,561 18,806,750
Current Liabilities (3,652,506) (2,571,488)
Invested Capital 26,867,055 16,235,262

Weighted Average Cost of Capital 12.14% 15.04%

Cost of Capital 3,261,660 2,441,783

Comments on Economic Value Added

During the year, the Company have had higher cost of equity due to higher dividend payout ratio resulting in
increased weighted average cost of equity. Expansion projects have also been undertaken during the year through
debt financing in a very attractive rate resulting lower cost of debt and weighted average cost of capital. The
cumulative effect has resulted in increased negative economic value addition.

Graphical Presentation of
Economic Value Added
35000
30000
25000
20000
(Rs. in million)

15000
10000
5000
0
Cherat Cement Company Limited

-5000
-10000 Net Operating Profit Total Assets Current Liabilities Invested Capital EVA
After Tax

2017 2018

104
Key Financial Information - Last Six Years

2013
2018 2017 2016 2015 2014
(Restated)

(Tons in ‘000)

Clinker Production 2,234 1,519 897 937 847 958

Cement Production 2,443 1,489 1,042 971 945 994
Cement Dispatched 2,519 1,544 1,037 972 949 990

Summary of Statement of (Rupees in Million)

Financial Position
Assets
Non-Current Assets 24,238 14,238 13,457 7,197 3,526 3,531
Current Assets 6,282 4,569 2,005 2,267 2,905 1,534

Total Assets 30,520 18,807 15,462 9,464 6,431 5,065

Equity & Liabilities

Shareholders' Equity 11,174 10,462 9,140 8,026 4,864 3,709
Non-Current Liabilities 15,693 5,774 4,511 611 686 574
Current Liabilities 3,653 2,571 1,811 827 881 782

Equity & Liabilities 30,520 18,807 15,462 9,464 6,431 5,065

Summary of Statement of
Profit or Loss

Turnover & Profit

Turnover - net 14,388 9,645 7,079 6,565 6,451 6,294
Gross Profit 3,139 3,213 2,634 1,984 2,103 2,190
Operating Profit 2,504 2,698 2,095 1,709 1,716 1,694
Profit Before Taxation 2,147 2,510 2,051 1,671 1,688 1,585
Profit After Taxation 2,132 1,957 1,405 1,288 1,316 1,228
Earnings Per Share (Rs.) 12.07 11.08 7.96 8.01 9.60 11.68
Annual Report 2018

105
 Horizontal Analysis - Last Six Years
2018 2017
(Rupees 18 Vs. 17 (Rupees 17 Vs. 16
in Million) % in Million) %

Statement of Financial Position

Assets
Non Current Assets 24,238 70 14,238 6
Current Assets 6,282 37 4,569 128

Total Assets 30,520 62 18,807 22

Equity & Liabilities

Shareholders' equity 11,174 7 10,462 14
Non-Current Liabilities 15,693 172 5,774 28
Current Liabilities 3,653 42 2,571 42

Equity & Liabilities 30,520 62 18,807 22

Statement of Profit or Loss

Turnover - net 14,388 49 9,645 36

Gross Profit 3,139 (2) 3,213 22
Operating Profit 2,504 (7) 2,698 29
Profit Before Taxation 2,147 (14) 2,510 22
Profit After Taxation 2,132 9 1,957 39

Comments on Horizontal Analysis

Statement of Financial Position
Cherat Cement Company Limited

Non-current assets increased as compared to year 2017 due to increase in CWIP mainly pertaining to
Line-III amounting to Rs.9.4 billion. Increase in non-current liabilities is associated with long-term loans
pertaining to Line-III and Captive Power Plant.

106
 2016 2015 2014 2013 (Restated)
(Rupees 16 Vs. 15 (Rupees 15 Vs. 14 (Rupees 14 Vs. 13 (Rupees 13 Vs. 12
in Million) % in Million) % in Million) % in Million) %

13,457 87 7,197 104 3,526 - 3,531 3

2,005 (12) 2,267 (22) 2,905 89 1,534 19

15,462 63 9,464 47 6,431 27 5,065 8

9,140 14 8,026 65 4,864 31 3,709 35

4,511 638 611 (11) 686 20 574 (38)
1,811 119 827 (6) 881 13 782 (25)

15,462 63 9,464 47 6,431 27 5,065 8

7,079 8 6,565 2 6,451 2 6,294 15

2,634 33 1,984 (6) 2,103 (4) 2,190 90
2,095 23 1,709 - 1,716 1 1,694 92
2,051 23 1,671 (1) 1,688 7 1,585 177
1,405 9 1,288 (2) 1,316 7 1,228 180

Statement of Profit or Loss

Current year turnover significantly increased as Line-II remain operational for whole year as against the six
(6) months last [Link] profit increased from year 2013 till 2017 mainly due to increased turnover and
[Link] year gross profit decreased due to increase in coal prices and decreased retention.
Operating profit showing increasing trend from year 2013 to 2017 due to increase in profit margins and
other income. Current year operating profit decreased due to increase in operating and fixed costs mainly
Annual Report 2018

due to Line-II.

107
 Vertical Analysis - Last Six Years
2018 2017

(Rupees (Rupees
% %
in Million) in Million)

Statement of Financial Position

Assets
Non Current Assets 24,238 79 14,238 76
Current Assets 6,282 21 4,569 24

Total Assets 30,520 100 18,807 100

Equity & Liabilities

Shareholders’ equity 11,174 37 10,462 55

Non-Current Liabilities 15,693 51 5,774 31
Current Liabilities 3,653 12 2,571 14

Equity & Liabilities 30,520 100 18,807 100

Statement of Profit or Loss

Turnover - net 14,388 100 9,645 100

Gross Profit 3,139 22 3,213 33
Operating Profit 2,504 17 2,698 28
Profit Before Taxation 2,147 15 2,510 26
Profit After Taxation 2,132 15 1,957 20

Comments on Vertical Analysis

Statement of Financial Position
Cherat Cement Company Limited

Debt equity ratio showed continuous improvement from year 2013 to 2015 as the Company's
shareholders’ equity increased over the years due to issuance of right shares in year 2015. From year 2016
to 2018 debt equity ratio depicts increasing trend because the Company has taken syndicated long-term
loans to finance its Line-II and Line-III.

Current assets were 21% of total assets of the Company in the current year as compared to 24% last year
which decreased mainly due to the CWIP Line-III project.

108
 2016 2015 2014 2013 (Restated)

(Rupees (Rupees (Rupees (Rupees

% % % %
in Million) in Million) in Million) in Million)

13,457 87 7,197 76 3,526 55 3,531 70

2,005 13 2,267 24 2,905 45 1,534 30

15,462 100 9,464 100 6,431 100 5,065 100

9,140 59 8,026 85 4,864 75 3,709 73

4,511 29 611 6 686 11 574 11
1,811 12 827 9 881 14 782 16

15,462 100 9,464 100 6,431 100 5,065 100

7,079 100 6,565 100 6,451 100 6,294 100

2,634 37 1,984 30 2,103 33 2,190 35
2,095 30 1,709 26 1,716 27 1,694 27
2,051 29 1,671 25 1,688 26 1,585 25
1,405 20 1,288 20 1,316 20 1,228 20

Statement of Profit or Loss

Gross profit of the company were between 35% to 33% from year 2013 to 2017 which decreased to 22%
mainly due to increased cost of production and decreased retention during the year. Operating profit margin
decreased mainly due to decreased gross profit margin.
Annual Report 2018

109
 Graphical Presentation of Statement of
Financial Position & Statement of
Profit or Loss

Statement of Financial Position Analysis - Assets (%)

100
90
80
70
(Percentage)

60
50
40
30
20
10
0
2013 2014 2015 2016 2017 2018

Property, Plant and Equipment Non-Current Assets Current Assets

Statement of Financial Position Analysis - Equity and Liabilities (%)

120
110
100
90
80
(Percentage)

70
60
50
40
30
20
10
Cherat Cement Company Limited

0
2013 2014 2015 2016 2017 2018

Equity Non-Current Liabilities Current Liabilities

110
 Statement of Profit or Loss Analysis - Income (%)
100
90
80
70
(Percentage)

60
50
40
30
20
10
0
2013 2014 2015 2016 2017 2018

Turnover-Net Other Income

Statement of Profit or Loss Analysis - Expenses (%)

100
90
80
70
(Percentage)

60
50
40
30
20
10
0
2013 2014 2015 2016 2017 2018

Cost of Sales Operating Expenses Finance Costs Taxation

Annual Report 2018

111
 Statement of Summary of Cash Flows -
Last Six Years

2018 2017 2016 2015 2014 2013

(Restated)

(Rupees in million)

Summary of Cash Flows

Net cash generated from
operating activities 2,660 204 2,306 1,671 1,757 1,931
Net cash used in investing
activities (11,170) (1,555) (5,557) (3,102) (1,373) (426)
Net cash generated from /
(used in) financing activities 8,511 1,373 3,256 1,432 (392) (1,517)

Change in cash and cash

equivalents 1 23 5 1 (8) (12)
Cash & cash equivalents -
Year end 47 46 23 18 17 26

Comments on
Statement of Cash Flows
An outlook of operating cash flow depicts sustained increasing trend from year 2013 till 2018, while in year 2017,
it remained relatively low but remained positive due to additional working capital requirements in view of new
cement capacity Line-II installation of the Company.

Cash flow used in investing activity has been an active area which showed heavy investment made by the
Company on its new capacities. During the year 2015 and 2016, cash flow shows installation of Line-II. However,
in the year 2018, cash flow in investing activities showed installation of new Line-III.

Cash flows from financing activities significantly increased in the year 2016 and 2018 due to draw-down of
long-term loan for financing the expansion projects of new cement Line-II and III respectively. During the year
Cherat Cement Company Limited

2015, increase was due to the issuance of right shares. However, reason for decrease in cash flow in the year 2012
and 2013 was mainly due to the repayments of long-term loans and its servicing.

112
Statement of Cash Flows -
Direct Method
2018 2017
(Rs. in ‘000)

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 14,440,203 9,568,490
Cash paid to suppliers and employees (11,323,588) (8,909,223)

Cash generated from operations 3,116,615 659,267

Income tax paid (458,267) (455,537)

Long-term loans and security deposits - net 1,865 762
Net cash generated from operating activities 2,660,213 204,492

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property, plant and equipment (11,171,332) (1,536,710)
Additions to intangible assets - (10,910)
Proceeds from disposal of operating property, plant and equipment 18,124 66,890
Investments made (36,700) (95,890)
Dividend received 20,160 21,973
Net cash used in investing activities (11,169,748) (1,554,647)

CASH FLOWS FROM FINANCING ACTIVITIES

Long-term financing - net 10,199,435 877,688
Short-term borrowings - net (536,464) 1,292,535
Dividend paid (778,452) (565,313)
Finance cost paid (373,746) (231,943)
Net cash generated from financing activities 8,510,773 1,372,967

Net increase in cash and cash equivalents 1,238 22,812

Cash and cash equivalents as at the beginning of the year 45,814 23,002

Cash and cash equivalents as at the end of the year 47,052 45,814
Annual Report 2018

113
 Quarterly Performance Analysis
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
(Rupees in ‘000)

Particulars
Turnover - net 3,891,022 3,694,899 3,562,016 3,240,412 14,388,349
Cost of sales (2,901,696) (2,823,022) (2,854,037) (2,670,398) (11,249,153)
Gross profit 989,326 871,877 707,979 570,014 3,139,196

Distribution costs (81,171) (84,049) (83,619) (88,293) (337,132)

Administrative expenses (56,579) (63,193) (61,380) (64,106) (245,258)
Other expenses (41,096) (40,672) (24,875) (27,323) (133,966)
(178,846) (187,914) (169,874) (179,722) (716,356)
Other income 20,409 16,948 18,085 25,670 81,112

Operating profit 830,889 700,911 556,190 415,962 2,503,952

Finance costs (95,425) (86,916) (84,341) (89,903) (356,585)

Profit before taxation 735,464 613,995 471,849 326,059 2,147,367

Taxation (129,355) 129,454 (26,102) 10,755 (15,248)

Net profit for the year 606,109 743,449 445,747 336,814 2,132,119

Graphical Presentation of Quarterly

Performance Analysis & Comments
100

90
22% 18% 15% 16%

80

70
22% 22% 21%
(Percentage)

60
25%
50

40
28%
Cherat Cement Company Limited

29% 35%
30 26%

20

10 27% 32% 34% 28%

0
Sales Gross profit Profit before tax Net profit for the year

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

The performances of the Company in 1st Quarter is better than other Quarters in terms of Gross Profit margin (25.43%)
and dispatches. Our Gross Profit margin has gradually decreased during the year mainly due to higher Cost of Sales in
line with the industry.

114
 Share Price Sensitivity Analysis
Following are the major factors which might affect the negatively affect the financial performance of the
share price of the Company in the stock exchange: Company and therefore, many also affect the share
price. Share price is also affected by the addition of
Fuel and Oil Prices new plant.
Due to the on-going energy crises, supply of gas and Consumer Demand
electricity is often disrupted to industrial undertakings.
Accordingly, the entire manufacturing industry is Increase in demand of cement may result in increase
facing operational difficulties. This forces the in market price of bag which will contribute towards
Company to resort to expensive alternatives to run better profitability and Earning Per Share (EPS), which
operations which directly affects the Company’s will ultimately increase the share price.
financial performance. Volatility in international oil
Variation in Variable Cost
prices especially coal also affect the share price.
Any Increase in variable cost (mainly includes Coal,
Law and Order Situation
Power and Raw Material cost) may badly effect the
Unstable law and order situation often results in gross margins and will resultantly fall in the
disruption of business activities and hindrance in profitability and fall in EPS. This may badly effect the
supply chain that negatively impacts on the market price of the share downward.
Company’s performance.
Variation in Fixed Cost
Change in Government Policies
Fixed cost which mainly consists of Financial Charges,
Any change in government policies related to cement Exchange losses, and other overheads. If SBP discount
sector may effect the share price of the Company. If rate goes up, rupee devaluation occurs and increase in
policy change is positive than share price will inflation happens than net profitability of the
increase, otherwise vice versa. Company will be effected and will have negative
effect on the EPS which results into fall in share prices.
Plant Operations If the said factors happen on the positive sides than
Stable plant operations lead of higher production and share price will improve.
better production efficiencies. Issues at production

2,500,000 Share Prices - Trend v/s Volume Traded 250

Financial Year 2017-2018

2,000,000 200
Share Price per Share
Volume Traded

1,500,000 150

1,000,000 100

500,000 50
Annual Report 2018

0 0
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18

Volume Traded Share Price per Share

Source: Pakistan Stock Exchange

115
 Calendar of Notable Events
July 2017 - June 2018

August 14 Independence Day Celebration

August 18 National Tree Plantation Day

August 23 Board of Directors Meeting - Annual 2017

August 25 Received 1st prize in Best Corporate

and sustainability Report Award 2016
organized by ICAP & ICMAP

October 16 36th AGM at Registered Office

October 30 Board of Directors Meeting - 1st Quarter 2018

February 07 Board of Directors Meeting - 2nd Quarter 2018

February 11 Inter-Group Companies Cricket

Tournament, Islamabad

February 28 Inter-Group Companies Cricket

Tournament, Lahore

March 08 Group Table Tennis Tournament

March 23 Inter-Group Companies Cricket

Tournament, Karachi

April 25 Board of Directors Meeting- 3rd Quarter 2018

May 01 Labour Day Celebration

May 05 Head Office Staff Picnic

June 01 Dinner with Dealers - Islamabad

Cherat Cement Company Limited

June 09 Employees Annual Dinner & Award

Ceremony, Lahore

June 25 Board of Directors Meeting- Budget 2019

June 28 Eid Milan Party

June 30 Year End Closing

116
Business Rationale for
Major Capital Expenditure
The Company is pursuing business expansion strategy and consequently
incurred major capital expenditure as fully explained separately under the
heading of ‘significant plans and decisions’ earlier in this report foreseeing
encouraging growth in domestic cement demand. Moreover, the Company
is seeking cost efficient and environmental friendly solutions for conducting
its operations. Therefore, capital expenditure is incurred for enhanced and
improved production and quality of our product.
Annual Report 2018

117
 Cherat Cement Company Limited

118
Outlook
Forward Looking Statement
There has been an improvement in the business climate in the country, mainly due to the
improved law and order condition, which is reflected from the performance of the industrial
sector. This has also been acknowledged by leading rating agencies and international financial
institutions. The Cement Industry benefited from stable economic outlook, low interest rates and
outlay during the year. Local cement demand grew by an impressive 15.4%. The demand for
cement got a major boost from projects under China-Pakistan Economic Corridor. Greater
spending by the private sector was also witnessed particularly in construction industry, which was
fueling the demand for cement.

After the successful conduct of elections, the newly elected Government is focusing on stability
of economic conditions in the Country in the upcoming years. However, the salient features of
this newly elected Government comprises of focusing on construction of 5 million houses
through Housing scheme, dams, energy projects etc. It is, therefore, expected that the domestic
demand of cement shall increase considerably after one year and play a vital role in higher
cement dispatches. Following the enhancement of production capacity by installing Line III, the
Company is very well positioned to take maximum benefit from additional industry demand. This
enhancement will not only increase the domestic market share but will also allow it to achieve
greater efficiencies and better allocation of fixed costs.

Cement industry exports increased by 1.8%. However we are expecting a decreasing trend in
export demand to Afghanistan in the demand of export in Southern region i.e. export through Sea
may increase in the upcoming year.

For liquidity and gearing, cash flows are monitored on a daily basis to achieve the targets. On the
other side, the Company is in process of installing another line of cement at its existing location.
All the imported components have already been arrived at Site and now in process of erection.
We expect that the new line will commence commercial production in early 2019. Given the
progress of the project so far, the management is confident of completing the expansion project
before the scheduled time. Moreover, availability of power at competitive rates is a critical factor.
We always try to manage this through alternate energy options including WHR, RDF and TDF. In
order to ensure energy conservation and cost efficiency, for new cement line, the Company is also
installing WHR III plant along with the new cement line. Moreover, to cater increaing power
requirements for much power efficiency, the Company is also installing three Wartsila
Generators.

On the human resource side, based on the last year’s Training Need Analysis (TNA) and
performance appraisal of the company personnel, adequate technical trainings were conducted
for the identified employees. The same process is followed on yearly basis. The company has
developed extensive training program for all levels of management. The company will be
conducting these trainings in future also which would equip the employees with required
technical and management skills in years to come.

We are expecting that the mark up and exchange rates will be increased further in the next year.
Overall local demand of cement for the next year will be decrease due to the above mentioned
circumstances but after a year, the conditions improve positive and the demand of cement will be
increase. We hope that the Company and the industry as a whole will play a key role in the
economic development of the Country in future.
Annual Report 2018

The Company on an annual basis sets marketing, production and other targets in the form of a
budget which is duly approved by the Board of Directors. We have met almost all the key targets
set in our last year’s budget especially pertaining to revenue and profitability. This is also in line

119
 Sources of information used for projections of future revenue:

For the preparation of budget/projections of future revenue, market survey has been carried out
for ascertaining the future demand of Cement based on the ongoing and future projects. Based on
the surveys and other research work, market growth and demand is ascertain and as per
Company`s market share, projected target is set. Based on this, internal meetings amongst Head
Office, Site and Sales office have been carried out for sharing/gathering of information and
assumptions to be used for budget/projections. Based on the information and assumptions used
by the management for the preparation of budget/forecast, detail budget exercise has been
carried out and the board of directors approved the budget/forecast.

Future revenue projections based on management’s best judgment and estimates are as follows:

Financial Projections
The company expects to enhance its revenue and profit base through expansion to fulfil the
expected increase in local cement industry demand on the back of improved economic and law
and order situation coupled with construction of various infrastructural projects initiated by the
Government. Till the commissioning of plant, the management will try to optimize the existing
resources.

Future revenue projections based on management’s best judgment and estimates are as follows:

Year 2019 2020 2021

Revenue - net (Rs. in Million) 22,124 19,722 20,932

Company Performance Against Last Year Projections

Cement industry witnessed a growth of 15.4% in local market. Export sales declined by 1.8%. The
overall cement demand increased by 13.8%. The Company witnessed a phenominal growth of
around 49%. The same trend was also anticipated in last year’s future outlook statement. Company
has actively strived to minimize its cost by using alternative fuel efficient mix of local and imported
coal, optimum mix of WHR, National Grid and self power generations. All financial and
non-financial targets established during last year were met to a greater extent.

ADDITIONAL DISCLOSURES
Fair Value of Property, Plant and Equipment
Total Assessed Present Market value of existing
plant, machinery and building is more than
Rs. 32 billion. However, the same has not
been incorporated in financial statements.
Significant Material Assets
Significant material assets of the Company
are building, complete cement line (Kiln,
Cherat Cement Company Limited

cooler, preheater, cement and raw mills etc),

WHR systems, RDF and generators.
Plant Capacity
The Company has annual production
capacity of 2.4 million ton cement, which is
determined on the basis of 300 days
operation.

120
Sustainability &
Corporate Social
Responsibility

Annual Report 2018

121
 Sustainability Highlights
We remain committed to continuous improvement in be quantified and assessed accurately through
Health, Safety and Environment (HSE) aspects as we complete audited financial statements of the
expand our business and production capacities. Your Company and the statement of value addition
Company has always been very aware of its and distribution of wealth, which are part of this
responsibility towards the people, environment and report. In addition, economic performance
climate of Pakistan and has strived to ensure the
carries implications for all other material topics
wellbeing of all. We have a dedicated HSE department
to ensure effective systems of measuring, monitoring reported upon.
and reporting of necessary compliance with HSE b. Market Presence
matters. It is adequately staffed and Head of HSE Our Company’s presence in the market has
directly reports to the Chief Executive.
significant impacts in terms of employment and
Certifications acquired and international standards business opportunities provided. The Company
adopted encourages hiring of workforce from local
community at each area of business operations
Our production facility remained fully compliant with from entry level to the senior management. The
industry standards and safety requirements. For this Company also gives business opportunities to
purpose the Company has fully adopted and has local transporters, suppliers, contractors and
obtained certification of Total Quality Management
wide scattered cement dealers all over the
(TQM) system ISO 9001:2015 and Environment Man-
agement System ISO 14001:2015. Moreover, the Pakistan and certain areas of Afghanistan and
Company fully complies with regulatory requirements India. Moreover, due to expansion projects the
of National Environmental Standards (NEQS). In addi- Company has awarded contracts to local
tion, to further ensure regulatory compliances, vendors for civil works and other key areas.
environmental testing is performed regularly from EPA
approved laboratory. c. Indirect Economic Impacts
This illustrate our Company’s economic impacts
Further highlights of the Company’s performance, on a wider socioeconomic front than if we just
policies, initiatives and plans in place relating to take our customers and suppliers into
various aspects of sustainability are as follows: consideration. Our growth and development
1. ECONOMIC means the growth and development of our
homeland Pakistan. Additionally, we consider
The economic dimension of sustainability concerns ourselves responsible corporate citizens,
the Company’s impact on the economic conditions therefore it is important we monitor and measure
of its stakeholders. our ongoing indirect economic impacts in the
wider context. The Company supports in
development of infrastructure and other facilities
of the country in general and of our factory
vicinity Nowshera in particular.
2. ENVIRONMENTAL
The Company’s aim in respect of environment is to
reduce all adverse environmental aspects arising
out of our operations. Regardless of our growth and
plant expansion and consequently energy needs
and environmental outputs, we ensure that we
Cherat Cement Company Limited

manage these impacts in line with regulatory

compliance requirements such as National
Environmental Standards (NEQS) and international
standard of environmental management system ISO
a. Economic Performance 14001:2015. Safe and healthy environment has
Economic Performance directly relates to our always been the priority of the management of the
Company’s best value creation agenda as Company. Management is fully aware of its
embodied by our vision. Cherat Cement is responsibilities in this regards and environment
committed to provide enduring growth and value protection policy is already in place.
for all stakeholders. This growth and value can

122
a. Energy address issues of environmental degradation like
Energy efficiency has proven to be a lucrative Tyre Derived Fuel (TDF) and Refused Derived
and proficient way to guarantee a sustainable Fuel (RDF). They replace conventional fossil
future. The efficient energy usage is not only vital fuels like coal and furnace oil. TDF generates
in terms of the environment, but it can also energy by burning shredded scrap tires. Tires are
provide the Company a competitive edge in mixed with coal and other fuels to be burned.
terms of cost factors. Energy is a significant RDF uses municipal solid waste to generate
component of our cement production process energy. Investment in these projects emphasizes
and further due to the national energy crisis, this Cherat Cement’s initiative for sustainable
topic has become of significant importance to operations through transforming from a
the Company. The Company has taken numerous fossil-fuel based energy to alternative-energy
initiatives to save energy which also decrease the structure.
cost of production. In order to reduce reliance on
conventional fuels, the Company continuously • Captive Power Plant
seeks to undertake significant measures to The company has recently installed three
conserve energy by creating awareness at Head dual-fuel captive power plant of 9.7 MW each
Office and Plant site on efficient energy usage which can run on gas, furnace oil and diesel. In
through regular sessions. this connection, gas pipeline from SNGPL has
been laid and the gas will be available soon.
Consequently, this will further reduce the
environmental impact on our society by
decreasing the emission of Carbon dioxide gas
generated from using furnace oil.

• Variable Frequency Drives

The Company has also installed Variable
Frequency Drives (VFD) at various parts of the
plant to conserve energy.

• Energy Conservation Drive

The Company has installed Light Emitting Diode
(LED) lights. Further, trainings and awareness on
energy conservation measures have also been
conducted. These measures have resulted in
• Waste Heat Recovery Plant considerable savings in electricity consumption.
The company has installed Waste Heat Recovery
(WHR) systems at its plant. The WHR system b. Emissions and Effluents
does not need any external fuel to operate but Emissions control relates directly to climate
encapsulates all the wasted heat (which change and the impact of gaseous emissions on
otherwise would have been released in the the ozone layer. As a manufacturing concern,
atmosphere) from the production line and power this is of vital importance. As stated above the
generators and utilizes it to generate electricity, Company is in full compliance with national and
which not only conserves energy, but also helps governmental regulations. All of our emission
in reduction of Carbon dioxide in the parameters monitored from power generation
environment. The Company has installed Waste and cement manufacturing process are well
Heat Recovery (WHR) plant on power generators below their respective limits as specified in the
and both production lines. Furthermore, WHR National Environmental Quality Standards
for line III is also in the process of installation. (NEQS)
Annual Report 2018

• Tyre Derived Fuel & Refused Derived Fuel

The Company has also invested in implementing
projects that reduce energy consumption and

123
 • Mitigating efforts to control emission and samples of limestone, shale, iron ore, sand,
effluents gypsum, raw mix, kiln feed and clinker
Our air quality measurement program identifies • Empty drums and containers
the limit of pollution parameters in the ambient
• Grinding media, and
air in and around our factory. The stack emissions
monitoring is done on monthly basis for the • Miscellaneous waste
priority parameters in compliance with the d. Products
requirements of NEQS (Self-Monitoring and Our cement does not have any harmful impact
Reporting) Rules, 2001. on environment. We use two types of packaging
• Electrostatic Precipitators material i.e. paper bags and PP bags. Paper bags
Our plant is equipped with Electrostatic are reusable and recyclable and they do not have
Precipitators which controls dust and gas any harmful environmental impact. PP bags also
emissions. have resale value and can be recycled or reused.

• Bag filters e. Quality Management

The Company has also installed bag houses (bag The Company is committed to the manufacturing
filters) which more effectively controls emission of high quality cement. At each stage in the
and increase air flow and productivity. These are cement production process controlling the
installed in entire production system and chemical composition is a priority. All our
dropping distances during material transfers are manufacturing facilities are accredited to Quality
kept minimum thereby reducing emissions of Management System ISO 9001:2015. The
particulate matters. consistency of performance of the cement is vital
for our customers so the raw materials,
Limestone is the major raw material used in intermediate and final products are regularly
cement production. Limestone has high moisture tested as part of the whole cement production
content and is hard in nature. Due to these process.
properties, emission of fine limestone during the
blasting at the quarry is very low. Additionally,
splinters generated during blasting are quite
large and resultantly they do not fly over longer
distances.
• Noise Pollution
Our plant has been designed in such a way to
minimize the noise levels and to comply with
acceptable limits of the NEQS. Moreover, noise
levels are regularly monitored. Furthermore,
periodic repair and maintenance of the plants
guarantees compliance of noise levels with the
NEQS.
c. Recycling Our Quality Management procedures include:
Cherat Cement recycles or sale all the available • Careful and accurate analysis of the chemical
waste and scrap in order to comply its composition of the raw materials.
sustainable operations agenda. Most of these
Cherat Cement Company Limited

items are subsequently recycled and include: • Fine grinding and mixing to produce a
homogenous mixture known as “Raw Meal”.
• Solid waste • High temperature (>1450°C) to ‘melt’ the raw
• Used oil, lubricants and greases materials and formation of new “Clinker
• Furnace oil sludge compounds”.
• Bursted paper bags • Quality Control testing of the clinker.
• Brick waste • Milling of the clinker with gypsum and
grinding aids.
• Waste from Quality Control i.e. cement cubes,
• Continuous sampling and testing at each
cement, pieces of cement pellets, analyzed
stage.

124
• Independent testing of the cement product by this risk the Company has adopted measures for
Regulatory Authorities. safe transportation. Firstly we work only with the
approved transporters. Further, quantity-wise
The key to comprehensive quality control is the
trucks are being used in order to avoid over or
use of an in-house laboratory. Having an
under loading. Truck`s capacity is effectively
in-house, state-of-the-art laboratory is absolutely
utilized due to which risk of accidents resulting
necessary to manufacture superior quality
from overloading is avoided. For bulk cement,
cement. Our Quality Control laboratory is a
the Company allows only ‘specialized bulk
primary component to achieve our mission of
trailers’ to dispatch cement.
maintaining strict control over every aspect of
manufacture and quality and is an integral piece
of our ISO 9001: 2015 certification.

Our in-house laboratory allows for timely,

accurate, cost-effective testing that ensures every
product, from raw material to finished goods,
meets all quality requirements. Cement is tested
before being released for sale. Such stringent
attention to quality control is extremely difficult
to accomplish without a state-of-the-art,
in-house laboratory.
Cherat Cement’s State-of-the Art Quality Control
Equipment includes:
Coal transport from supply point to the factory
• Cross Belt On-line Analyzers, Controlled and handling at the Plant are a big source of
Neutron Analyzer (CNA) of SODERN, France particulate matter emissions all along the roads
and Prompt Gamma Neutron Activation used for transport and at the plant. Imported coal
Analyzer (PGNAA) of SCANTECH, Australia from Karachi Port is transported by trucks. In
order to minimize fugitive coal dust on the way,
• X-Ray Spectrometer, ARL ADVANT’X these trucks have special covers. This drastically
(Switzerland) Thermo Scientific & OPTIM’X cuts the fugitive coal dust on the way to the plant
(Switzerland) Thermo Scientific site.
• X' Pert Powder XRD PANalytical (Netherland). g. Tree Plantation Drive and Zoo
• Thermo Gravimetric Analyzer, (TGA-701) Companywide tree plantation drives were
Leco (USA) continued through the year surrounding the
• Carbon Sulphur Analyzer CS-2000 of Eltra factory along with the Head Office and Sales
GmbH, Germany & Sulphur Carbon Analyzer Offices. The Company has planted a large
144-DR, Leco (USA) number of trees in and around the factory
premises. Moreover, the Company has
• Bomb Calorimeter 6200 of Parr Instrument maintained a large Zoo for wild life protection at
Company USA & AC-600, Leco (USA) factory location where different kinds of birds
• Heating Furnaces, Carbolite (UK) and animals redecorate the environment.
• Weighing Balances, Sartorius (Germany)
• Physical Testing Equipment, Controls (Italy),
ELE (England) & MATEST (Italy)

f. Transport
Our cement is transported to dealers and
Annual Report 2018

institutions through heavy trucks. The Company

is cognizant of the fact that these trucks could
have impact on surroundings as small mishaps
can lead to heavy accidents. In order to mitigate

125
 3. SOCIAL
c. Occupational Health and Safety
a. Employment We manage and utilize resources and operations
Cherat Cement has given tremendous in such a way that the safety and health of our
employment opportunities through expansion of people is ensured. We believe our safety and
business and production lines. With the health responsibilities extend beyond protection
introduction of line II and line III of the Company and enhancement of our own facilities. We have a
new employment opportunities have been highly trained safety team, emergency response
created especially for the locals. This trend will team, a qualified doctor and paramedical staff at
increase with the commissioning of line III in our plant. In addition, the factory is provided with
upcoming financial year. Number of employees dedicated safety van, fully equipped ambulance
during the year have increased by 136 and at and an in-house dispensary. Moreover, safety sign
year end total number of employees were 885 boards are in place at all important visible places.
including 748 factory employees.
Our workers are sufficiently trained through fire &
Cherat Cement is recognized among top safety trainings and are also adequately equipped
employers due to its excellent employee with Personal Protection Equipment which is
benefits. Following benefits are provided to monitored at regular intervals. Workers are also
full-time employees that are not provided to trained by theoretical explanations and practical
temporary or contracted employees: drills to handle unforeseen emergencies. Regular
mock drills are also carried out to familiarize
- Health care - Life insurance everyone with the steps and procedure to follow
- Education assistance - Furniture facility in emergency situations. Mock drills of chemical
- Leave fare assistance - Provident fund spillage, fire fighting, evacuation, casualty
- Gratuity - Earned leaves handling and security are also conducted.
- Company maintained Moreover, safety audits are also conducted on
vehicle, and Others regular basis.

b. Labor / Management Relations At Cherat Cement, Health and Safety is the first
The Company supports right to exercise freedom and foremost agenda topic for our each in-house
of association and collective bargaining. For this and higher management meetings. The Company
purpose, two unions are registered from which has made safety manual containing policies and
one is elected as CBA which represents all classes procedures. Moreover, contractors’ safety
of workers. Provision for consultation and measures and mechanism are also in place, which
negotiation with collective bargaining agreements are in full compliance. Furthermore, certifications
(CBA) are specified in collective agreements. have been obtained for all construction related
Sufficient time is given by the Company to equipments like cranes etc. In addition, Health
employees and their elected representatives for and Safety concerns are explicitly included in
any significant operational changes which affect SMART goals of head of departments and senior
them. Furthermore, CBA tables ‘charter of management of plant.
demand’ every second year which is amicably
negotiated. Hundred percent compliance with policy
programmes resulted in the conclusion of the year
with no reportable occupational illness. These
Cherat Cement Company Limited

programmes include the regular testing of plant

equipment and sites from a health perspective, as
well as monitoring of employee health.
Additionally, health awareness sessions on basic
lifesaving techniques, medical emergency
handling and first aid were conducted at our
factory, sales offices and head office. Basic Life
Support is a first-aid resuscitation that educates
and equips individuals to recognize various
life-threatening emergencies. In addition, we are

126
 in process of arranging Cardiopulmonary e. Diversity and Equal Opportunity
Resuscitation (CPR) equipment. CPR is an As part of our HR policy, we strive to be an equal
emergency procedure that combines chest opportunity employer. Cherat Cement is
compressions often with artificial ventilation in an committed to encourage greater diversity and
effort to manually preserve intact brain function ensuring equal opportunities for individuals based
until further measures are taken to restore on merit. Policies, objectives and progress in this
spontaneous blood circulation and breathing in a regard is elaborated in detail under the
person who is in cardiac arrest. By educating our governance policies section presented earlier in
employees basic life support and medical this report.
practices we are maintaining a safe and healthy
workplace. f. Non-discrimination
Cherat Cement is committed to ensure equal
Our production lines achieved the whole year treatment and fair working conditions for
without any major injury. Reported injury case if employees. This belief is driven by our core values
happens, is thoroughly investigated by trained ‘maintain the highest level of integrity, honesty
personnel and findings are subsequently and ethics’ and our Code of Conduct.
circulated to higher ups. Once investigations are
completed, actions and recommendations are g. Child Labour
assigned to individuals with a strict follow-up Despite of manufacturing concern near rural area
system put in place to avoid any recurrence. of KPK, the Company has strict policy over
prohibition of child labour. No child has ever
d. Training and Education been employed by the Company and the same
policy will go in future.

h. Forced or Compulsory Labor

The Company believes in free working
environment; no employed worker is a forced and
compulsory.

i. Consumer Protection Measures

The Company ensures that the cement is packed
and dispatched to its consumers in a safe manner.
It also complies with all safety standards and
industrial requirements. The Company ensures
that the customers get best value for money.

j. Business Ethics and Anti-Corruption Measures

The Company is fully committed to promoting the
The training, education and development of our highest standards of ethical behavior throughout
people is a topic of critical importance to us as its business. The management condemns corrupt
reiterated in our mission statement ‘continuously and fraudulent practices and ensures
develop our human resource’. We have the transparency, integrity and honesty in all aspects
long-standing ambition to be an employer of of work. The Company expects all its employees
choice and to be known as a “Talent factory”, to perform services with integrity and
recruiting and retaining the best and the brightest. professionalism. Fundamental to this is the
We work towards this goal on a continuous basis, adoption of a ‘zero tolerance’ approach to all
with formal training, development and growth forms of corruption and misrepresentation.
opportunities, effective and timely performance
appraisal and feedback systems, and by creating k. Local Communities
Annual Report 2018

an open culture that encourages feedback and We strive for the development of communities
discussion. An extensive program Training Need surrounding us. Investment in the communities
Assessment (TNA) in this regard is in place. we operate in, and near, is a strong focus for
Moreover, Apprenticeship and Management Cherat Cement. Further details on this topic are
Trainee Programs are also in place. presented under the next section of Corporate
Social Responsibility.

127
 Corporate Social Responsibility Highlights
The Company actively participates in various social d) Approved Religious Institutions
work initiatives as part of its corporate social The Company also takes pride in supporting
responsibility. Being a diligent member of the religious education and knowledge by
corporate community, the Company contributes supporting approved religious institutions.
generously to various social and charitable causes
including towards health, education and social 2. HEALTH
sectors. In the past, the Company has worked for the
rehabilitation of flood affectees, earthquake victims Support extended to health related initiatives
and IDPs. The Company has worked with many includes funding for hospitals and different
reputable organizations and NGOs. medical centres such as:

Here is an overview of the progress of our community

supports and CSR projects for 2017-18.
DONATIONS
1. EDUCATION
Giving back to the community in the form of
educational support is one of the major interests of
the Company. Donations have been extended to
many educational institutes which include:

a) The Kidney Centre

The Company promotes well-being of society by
becoming a part of medical and health related
initiatives. In lieu of promoting better health the
Company has made donations to The Kidney
Centre and its post graduate training institute.
b) Aga Khan Hospital
The Company has always considered promoting a
healthier society. This is depicted through
donations made to the Aga Khan Hospital.
a) School in Shaidu Village
c) Treatment Supports
In the area of educational development, the
For those people who lack facilities of medical
Company has financed a school in Shaidu
treatment or cannot afford them, the Company has
village with collaboration of The Citizens
made efforts by donating a reasonable amount. By
Foundation. This benefits the children from
providing medical facilities to the less privileged,
under developed area to fulfil their basic
the Company made it easier for them to take care
educational need.
of themselves and their families.
b) Aga Khan Medical College
d) Nowshera Dialysis Centre
Cherat Cement Company Limited

The Company believes in quality education to

Nowshera Dialysis centre is providing free dialysis
be promoted in the country. In this regard,
to needy people. The Company became a part of
donations have been made to Aga Khan
this good cause by making donations.
Medical College to support quality education.
3. SPECIAL PERSON EDUCATION AND
c) Begum Zulfara Faruque Trust
EMPLOYMENT
In order to sponsor education of 12 students a
reasonable amount is being donated to Begum The Company always cares for special people who
Zulfara Faruque Trust. are integral part of our society. In this regard the
Company has made various donations to special

128
 trusts and schools for their education and TREE PLANTATION ACTIVITY
vocational training including:
Along with education and health, environment also
• IBP School of Special Education
contributes in development of societies and
• The Society of Rehabilitation of Special Children
communities. As aiming to play a part in making a
• Karwan-e-Hayat for mental health
better community, the Company also contributed in
4. DEVELOPMENT AND COMMUNITY SUPPORT Tree Plantation Activity of WWF through donations
and funding.
Our operations are supported by our communities,
both directly and indirectly. And we know that
giving back to them and helping them develop
simply makes good sense in the long run for them
and for us. In this regard the Company has made
donations to:
a) Local government and bodies
Company supported local government and
bodies through donations for following events:
• Independence day ceremony
• First women expo 2017
• Nowshera cultural festival

b) Pakistan Hockey Federation WELFARE HOSPITAL IN LAKRAI, NOWSHERA

As sports form an integral part for development
of mental and physical health, the Company Purpose
encourages sport activities in the country. In this As the Company focuses on well-being of society and
regard donations have been given to Pakistan its people, in this regard a welfare hospital is
Hockey Federation. established in the vicinity of Nowshera in order to
provide medical facilities free of cost to the people
c) Anjuman Kashana-e-Atfal-o-Naunihal living in surrounding areas. By having this facility in
Donation for development of children means area for small villages nearby we provide basic
donation for development of future of the medical facility to those who cannot afford.
country. Upholding this faith, the Company has
donated to Anjuman Kashana e Atfal-o-Naunihal Facilities Available
for development of orphan children. All basic medical facilities are available at the hospital
including:
d) Ummah Welfare Trust •Separate male/female consultation
The Company has supported through donations •Dispensary with almost all types of medicines
to Ummah Welfare, a trust established to support
the impoverished and neglected people all •All emergency equipments
across the Pakistan, Kashmir and Afghanistan. •Basic lab tests

EDUCATIONAL AWARENESS SESSION AT ICAP Benefits

Residents of community when provided with better
As a part of educational development, Company`s health care facilities can develop and make a better
Executive Director and CFO delivered lecture at society. Free medical to those who cannot afford
ICAP`s seminar for passing out students in order to enables them to contribute in better way to the
enhance their morale and to motivate them. country. Record number of patient visit has
demonstrated its true value to the community.
Annual Report 2018

129
 Corporate Social CharityAccount
Responsibility During the year the Company made a
donation of Rs. 7.3M to the Ghulam
Faruque Welfare Trust, Aga Khan
Health University Hospital, The Kidney
Centre, Nowshera Lions Club, Ummah
• The Kidney Centre Welfare Trust, D.C. Nowshera, WWF
• The Aga Khan Pakistan, IBP School of Special
University Hospital Education and others.
• Nowshera Dialysis Centre
• Personal Treatments

Donations
Special Persons
Education & Development &
Community
Employment
• Local Governerment & Bodies
• IBP School of Special Education • Anjuman Kashan-e- Atfal-o-Naunihal
• Pakistan Hockey Federation
• The Society of Rehabilitation
• Ummah Welfare Trust
of Special Children

• Karawan-e-Hayat for
Mental Health
Cherat Cement Company Limited

National Cause Donations

The Company has always stood by the people of Pakistan
Education
in our collective hour of need. The Company has •TCF School, Ghulam Faruque
generously given for the rehabilitation of affectees of floods Campus Shaidu Village, KPK
and earthquakes and to IDPs.
• Aga Khan University Medical
College
• Begum Zulfara Trust
• Approved Religious Institutions

130
 Striving
for Excellence
in Corporate Reporting

Annual Report 2018

131
 Statement of Unreserved Compliance of International Financial
Reporting Standards (IFRSs) issued by International
Accounting Standards Board (IASB)
Cherat Cement Company Limited is preparing statutory financial statements in accordance with the IFRS issued
by IASB as notified under the Companies Act 2017 including the disclosure requirements of fourth schedule.

However, SECP has not notified adoption of following IFRS:

IASB effective date

Standards (annual periods beginning on or after)
IFRS 14 - Regulatory Deferral Accounts 01 January 2016
IFRS 17 - Insurance Contracts 01 January 2021

In addition to this, note 2.4 to the financial statement specify few standards and interpretations which are yet to
be effective in Pakistan. The Company believes that that the impact of the above standards and those referred in
note 2.4 does not have any material impact to the financial statements.

Omar Faruque
Karachi: August 29, 2018 Chairman
Cherat Cement Company Limited

132
Annual Report 2018

133
 Glossary of Terms
AGM: A mandatory, public yearly gathering of a HR & RC: Human Resource and Remuneration
publicly traded company's executives, directors and Committee.
interested shareholders.
Amortization: To charge a regular portion of an
HSE: Health, Safety and Environment. expenditure over a fixed period of time.

EBITDA: Earnings before Interest, Taxes, Depreciation Joint Venture (JV): A business arrangement in which
and Amortization. two or more parties agree to pool their resources for
the purpose of accomplishing a specific task.
Return on Equity (ROE): The value found by dividing
the company's net income by its net assets (ROE KIBOR: Karachi Inter Bank Offer Rate.
measures the amount a company earns on
investments). Spread: Rate charged by the bank over KIBOR.

Current Ratio: The current ratio indicates a ISO 1[Link] A standard for the management of
company's ability to meet short-term debt environmental matters that is widely used in various
obligations. parts of the world.

Acid Test Ratio: The ratio of liquid assets to current Security: A pledge made to secure the performance of
liabilities. a contract or the fulfillment of an obligation.

Operating Cycle: The average time between Term: The maturity or length of time until final
purchasing or acquiring inventory and receiving cash repayment on a loan, bond, sale or other contractual
proceeds from its sale. obligation.

Earnings Per Share: Earnings found by dividing the Principal: In commercial law, the principal is the
net income of the company by the number of shares amount that is received, in the case of a loan, or the
of common outstanding stock. amount from which flows the interest.

Price-Earnings Ratio (P/E): The ratio found by Borrowing Cost: Finance costs that are directly
dividing market price per share by earnings per share attributable to the construction/acquisition of a
(This ratio indicates what investors think of the firm's qualifying assets and included in the cost of such
earnings' growth and risk prospects). asset.

Dividend Payout Ratio: The ratio found by dividing Qualifying Asset: An asset that takes substantial
the annual dividends per share by the annual period of time to get ready for its intended use/sale.
earnings per share.
Consortium Financing: Is a solution usually entails
Long Term Debt-to-Equity Ratio: The ratio found by several banks or financial institutions joining hands to
dividing long-term debt by the equity (all assets minus finance large projects through a common appraisal,
debts) held in stock (This is a measure of financial common documentation and joint supervision.
risk).
Diminishing Musharakah: Refers to joint ownership
IASB: International Accounting Standards Board. of asset by financier and borrower. The share of
financier in the asset is divided into number of units
Cherat Cement Company Limited

IAS: International Accounting Standards. and borrower will purchase those units periodically,
thus increasing his own share till complete
IFRS: International Financial Reporting Standard. ownership.

IFRIC: International Financial Reporting Issues Shariah-Compliant Finance / Banking: Facility which
Committee. meets all of the requirements of Shariah law and the
principles articulated for "Islamic Finance".

134
Financial
Statements
136 Auditors’ Report to the Members
141 Statement of Financial Position
142 Statement of Profit or Loss Account
143 Statement of Comprehensive Income
144 Statement of Cash Flow
Annual Report 2018

146 Statement of Changes in Equity

147 Notes to the Financial Statements

135
 Independent Auditors’ Report

EY Ford Rhodes UAN: +9221 111 113937 (EYFR)

Chartered Accountants Tel: +9221 3565 0007-11
Progressive Plaza, Beaumont Road Fax: +9221 3568 1965
[Link] 15541, Karachi 75530 [Link]@[Link]
Pakistan [Link]/pk

To the members of Cherat Cement Company Limited

Report on the Audit of the Financial Statements

Opinion
We have audited the annexed financial statements of Cherat Cement Company Limited (the Company), which
comprise the statement of financial position as at 30 June 2018, and the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies and other explanatory
information, 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 the audit.

In our opinion and to the best of our information and according to the explanations given to us, the statement of
financial position, statement of profit or loss and other comprehensive income, the statement of changes in equity
and the statement of cash flows together with the notes forming part thereof conform with the accounting and
reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of
2017), 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 2018 and of the profit and other comprehensive income, the changes in equity and its cash flows for the
year then ended.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan.
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Statements section of our report. We are independent of the Company in accordance with the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of
Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance
with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.

136
Following are the Key audit matters:

Key audit matters How the matter was addressed in our audit

1. Capital expenditure on plant capacity enhancement

As disclosed in note 4 to the financial statements, the We obtained an understanding of the Company’s
Company has incurred significant amount of capital process with respect to capital expenditure and tested
expenditure during the year for enhancement of controls relevant to such process.
production capacity.
We performed substantive audit procedures through
We focused on capital expenditure incurred during the inspection of project related contracts and documents
year as this represents a significant transaction for the supporting various components of the capitalized
year and involves certain judgemental areas, such as project costs.
capitalization of elements of eligible components of
cost as per the applicable financial reporting standards, We also considered whether the items of cost
therefore, we have identified this as a key audit matter. capitalized, including borrowing costs, meet the
recognition criteria of an asset in accordance with the
applicable financial reporting standards.

Further, we assessed the adequacy of the related

disclosures are in accordance with the applicable
financial reporting standards.

2. Long term financing for capital expenditure

As disclosed in note 17 to the financial statements, We obtained and reviewed the financing agreements
the Company has obtained additional long term loans executed during the year. We inquired from the
amounting to Rs. 11,100 million to finance the plant management with respect to the future compliance
expansion project. of the covenants and tested controls related to such
compliance.
The Company’s key operating / performance indicators
including liquidity, gearing and finance costs are We circularized confirmations to the financing banks
directly influenced by the additions to its portfolio with outstanding loan balances at the year end. We
of borrowings. Further, financing arrangements also reviewed the maturity analysis of the financing
entail financial and non-financial covenants that the to ascertain the classification of loans as per their
Company is subject to compliance. remaining maturities.

The significance of new financings obtained during Further, we assessed the adequacy of the related
the year along with the sensitivity of the compliance disclosures are in accordance with the applicable
with underlying loan covenants are considered a key financial reporting standards.
area of focus during the audit and therefore, we have
identified this as a key audit matter.

137
 Key audit matters How the matter was addressed in our audit

3. New Companies Act, 2017 (the Act) and its impact on the financial statements

As disclosed in note 1.2 to the financial statements, We assessed the procedures applied by the
the Act became applicable for the first time for the management for identification of the changes required
preparation of the Company’s financial statements for in the financial statements due the application of the
the year ended 30 June 2018. Act. We considered the adequacy and appropriateness
of the additional disclosures and changes to the
The Act forms an integral part of the statutory previous disclosures based on the new requirements.
financial reporting framework as applicable to the We also evaluated the sources of information used
Company and amongst others, prescribes the nature by the management for the preparation of the above
and content of disclosures in relation to various referred disclosures and the internal consistency of
elements of the financial statements. In the case of the such disclosures with other elements of the financial
Company, specific additional disclosures and changes statements.
to the existing disclosures have been included in the
financial statements as disclosed in note 2.3 to the
financial statements.

The above changes and enhancements in the financial

statements are considered important and a key audit
matter because of the volume and significance of the
changes in the financial statements resulting from the
transition to the new reporting requirements under the
Act.

Information Other than the Financial Statements and Auditors’ Report Thereon
Management is responsible for the other information. The other information comprises the information included
in the Annual Report, but does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.

Responsibilities of Management and Board of Directors for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance
with the accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act,
2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.

138
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions
may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.

139
 We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Based on our audit, we further report that in our opinion:

a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of
2017);

b) the statement of financial position, the statement of profit or loss and other comprehensive income, the
statement of changes in equity and the statement of cash flows together with the notes thereon have been
drawn up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of
account and returns;

c) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the
Company’s business; and

d) 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.

The engagement partner on the audit resulting in this independent auditors’ report is Khurram Jameel.

Chartered Accountants
Place: Karachi
Date: 03 September, 2018

140
Statement of Financial Position
as at June 30, 2018

Note 2018 2017

(Rupees in ‘000)
ASSETS

NON-CURRENT ASSETS
Fixed assets
Property, plant and equipment 4 23,805,845 13,632,864
Intangible assets 5 15,406 19,210
23,821,251 13,652,074

Long-term investments 6 396,794 566,275
Long-term loans 7 686 625
Long-term deposits 19,008 19,008
416,488 585,908
24,237,739 14,237,982

CURRENT ASSETS
Stores, spare parts and loose tools 8 2,778,907 2,210,312
Stock-in-trade 9 753,638 843,820
Trade debts 10 188,272 130,767
Loans and advances 11 84,081 37,323
Trade deposits and short-term prepayments 12 25,940 12,140
Other receivables 13 1,599,017 985,030
Taxation – net 804,915 303,562
Cash and bank balances 14 47,052 45,814
6,281,822 4,568,768

TOTAL ASSETS 30,519,561 18,806,750

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES
Share capital 15 1,766,318 1,766,318
Reserves 16 9,407,430 8,695,389
11,173,748 10,461,707

NON-CURRENT LIABILITIES
Long-term financings 17 14,700,000 4,840,508
Long-term security deposits 18 17,667 15,741
Deferred taxation 19 975,640 917,306
15,693,307 5,773,555
CURRENT LIABILITIES
Trade and other payables 20 1,990,431 812,964
Accrued mark-up 21 230,024 146,343
Short-term borrowings 22 963,947 1,500,411
Current maturity of long-term financing 17 400,000 60,057
Unclaimed dividend 68,104 51,713
3,652,506 2,571,488
CONTINGENCIES AND COMMITMENTS 23

TOTAL EQUITY AND LIABILITIES 30,519,561 18,806,750

The annexed notes from 1 to 42 form an integral part of these financial statements.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

141
 Statement of Prof it or Loss
for the year ended June 30, 2018

Note 2018 2017

(Rupees in ‘000)

Turnover - net 24 14,388,349 9,645,399

Cost of sales 25 (11,249,153) (6,432,281)

Gross profit 3,139,196 3,213,118

Distribution costs 26 (337,132) (279,998)
Administrative expenses 27 (245,258) (225,109)
Other expenses 28 (133,966) (143,389)
(716,356) (648,496)

Other income 29 81,112 133,384

Operating profit 2,503,952 2,698,006

Finance costs 30 (356,585) (188,215)

Profit before taxation 2,147,367 2,509,791

Taxation

Current (37,287) (187,883)

Prior 80,373 37,165
Deferred (58,334) (402,511)
31 (15,248) (553,229)

Net profit for the year 2,132,119 1,956,562


Earnings per share – basic and diluted 32 Rs. 12.07 Rs. 11.08

The annexed notes from 1 to 42 form an integral part of these financial statements.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

142
Statement of Comprehensive Income
for the year ended June 30, 2018

2018 2017
(Rupees in ‘000)

Net profit for the year 2,132,119 1,956,562

Other comprehensive income

Items that may be reclassified subsequently
to the statement of profit or loss
Unrealized loss on available-for-sale securities (206,144) (241,934)

Items that may not be reclassified subsequently
to the statement of profit or loss
Actuarial (loss) / gain on defined benefit plan (419,091) 180,945
(625,235) (60,989)

Total comprehensive income for the year 1,506,884 1,895,573

The annexed notes from 1 to 42 form an integral part of these financial statements.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

143
 Statement of Cash Flows
for the year ended June 30, 2018

Note 2018 2017

(Rupees in ‘000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 2,147,367 2,509,791

Adjustment for:
Depreciation 4.1.4 1,086,046 689,913
Amortisation 5.1 3,804 2,987
Gain on redemption of short-term investments - (2,186)
Gain on disposal of operating property, plant and equipment 4.1.5 (4,977) (19,101)
Finance costs 30 356,585 188,215
Exchange loss 28 9,890 1,540
Share of loss from joint venture 28 37 -
Dividend income 29 (20,160) (21,973)
1,431,225 839,395
3,578,592 3,349,186
(Increase) / decrease in current assets
Stores, spare parts and loose tools (568,595) (1,216,689)
Stock-in-trade 90,182 (539,290)
Trade debts (57,505) (130,767)
Loans and advances (46,758) (23,737)
Trade deposits and short-term prepayments (13,800) (4,436)
Other receivables (1,033,078) (141,708)
(1,629,554) (2,056,627)
1,949,038 1,292,559
Increase / (decrease) in current liabilities
Trade and other payables 1,167,577 (633,292)
Cash generated from operations 3,116,615 659,267

Income tax paid (458,267) (455,537)
Long-term loans and deposits – net 1,865 762
Net cash generated from operating activities 2,660,213 204,492

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (11,171,332) (1,536,710)
Additions to intangible assets - (10,910)
Proceeds from disposal of operating property, plant and equipment 4.1.5 18,124 66,890
Investments made (36,700) (95,890)
Dividend received 20,160 21,973
Net cash used in investing activities (11,169,748) (1,554,647)

CASH FLOWS FROM FINANCING ACTIVITIES
Long-term financings – net 10,199,435 877,688
Short-term borrowings – net (536,464) 1,292,535
Dividend paid (778,452) (565,313)
Finance costs paid (373,746) (231,943)
Net cash generated from financing activities 8,510,773 1,372,967

Net increase in cash and cash equivalents 1,238 22,812

Cash and cash equivalents at the beginning of the year 45,814 23,002

Cash and cash equivalents at the end of the year 14 47,052 45,814

The annexed notes from 1 to 42 form an integral part of these financial statements.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

144
Statement of Changes in Equity
for the year ended June 30, 2018

Reserves
Capital Reserves Revenue Reserves
Issued,
Subscribed Unreal-
Actuarial
and Paid-up Unappro- ised gain/ Total
Share gain / (loss) (loss) on
Capital Others General priated Sub-total
premium on available-
Reserve profit gratuity for-sale
fund securities
(Rupees in ‘000)

Balance as at July 01, 2016 1,766,318 1,047,658 50,900 420,000 5,009,489 246,517 599,306 7,373,870 9,140,188

Final cash dividend for the
year ended June 30, 2016 @
Rs. 2.25/- per share - - - - (397,422) - - (397,422) (397,422)

Interim cash dividend for the
year ended June 30, 2017 @
Re. 1.00/- per share - - - - (176,632) - - (176,632) (176,632)

Net profit for the year - - - - 1,956,562 - - 1,956,562 1,956,562
Other comprehensive income - - - - - 180,945 (241,934) (60,989) (60,989)

Total comprehensive income

for the year - - - - 1,956,562 180,945 (241,934) 1,895,573 1,895,573

Balance as at June 30, 2017 1,766,318 1,047,658 50,900 420,000 6,391,997 427,462 357,372 8,695,389 10,461,707

Balance as at July 01, 2017 1,766,318 1,047,658 50,900 420,000 6,391,997 427,462 357,372 8,695,389 10,461,707

Final cash dividend for the

year ended June 30, 2017 @
Rs. 3.50/- per share - - - - (618,211) - - (618,211) (618,211)

Interim cash dividend for the year
ended June 30, 2018
@ Re. 1.00/- per share - - - - (176,632) - - (176,632) (176,632)

Net profit for the year - - - - 2,132,119 - - 2,132,119 2,132,119
Other comprehensive income - - - - - (419,091) (206,144) (625,235) (625,235)

Total comprehensive income

for the year - - - - 2,132,119 (419,091) (206,144) 1,506,884 1,506,884

Balance as at June 30, 2018 1,766,318 1,047,658 50,900 420,000 7,729,273 8,371 151,228 9,407,430 11,173,748

The annexed notes from 1 to 42 form an integral part of these financial statements.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

145
 Notes to and Forming Part of the
Financial Statements for the year ended June 30, 2018
1. THE COMPANY AND ITS OPERATIONS
1.1 Cherat Cement Company Limited (the Company) was incorporated in Pakistan as a public company
limited by shares in the year 1981. The Company is listed on Pakistan Stock Exchange Limited. Its main
business activity is manufacturing, marketing and sale of cement. The geographical location and addresses
of the Company’s business units / immovable assets are as under:
Business Unit Address
Head Office Modern Motors House, Beaumont Road, Karachi
Registered Office / Factory (immovable assets) Village Lakrai, P.O Box 28, District Nowshera (Land
measuring area - 286.8 acres)
Sales Office Peshawar First Floor, Betani Arcade, University Road, Peshawar
Sales Office Lahore 3, Sunder Das Road, Lahore
Sales Office Islamabad First Floor, Razia Sharif Plaza, Jinnah Avenue, Blue
Area, Islamabad
1.2 Summary of significant transactions and events that have affected Company’s financial position and
performance during the year are as follows:
- As disclosed in note 4.4, the Company has incurred capital expenditure on Line – III including
Waste Heat Recovery (WHR) during the year amounting Rs. 9,427 million which will increase the
Company’s production capacity of clinker by 6,700 tons per day to 14,400 tons per day. The project
is expected to be commissioned in next financial year.
- As disclosed in note 17.3, the Company has obtained a syndicated long-term finance from Islamic
banks amounting to Rs. 13,000 million out of which Rs. 10,000 million has been drawn for the
purpose of capital expenditure incurred on Line - III.
- During the year, the Companies Act, 2017 (the Act) has been promulgated which requires additional
disclosures to be included in these financial statements.
2. BASIS OF PREPARATION
2.1 Statement of compliance

These financial statements have been prepared in accordance with the accounting and reporting standards
as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:
- International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) as notified under the Act; and
- Provisions of and directives issued under the Act.
Where provisions of and directives issued under the Act differ from the IFRS, the provisions of and
directives issued under the Act have been followed.
2.2 Accounting convention
These financial statements have been prepared on the basis of historical cost convention except for
certain investments that have been measured at fair value.
2.3 New standards and amendments
The accounting policies adopted in the preparation of these financial statements are consistent with
those of the previous financial year except that the Company has adopted the following accounting
amendments of IFRSs which became effective for the current year:

IAS 7 - Statement of Cash Flows - Disclosure Initiative - (Amendment)

IAS 12 - Income Taxes – Recognition of Deferred Tax Assets for Unrealized losses (Amendments)

146
 The adoption of the above amendments did not have any material effect on the financial statements.

Further, during the year, the Act became applicable. The Act has brought certain changes with regard to
the preparation and presentation of these financial statements. These changes, amongst others, include
changes in nomenclature of the primary statements. Further, the disclosure requirements under the Act
have been revised, resulting in elimination of duplicative disclosures with the IFRS disclosure requirements
and incorporation of additional / amended disclosures as amended in notes 1.1, 1.2, 4.1.6, 6.4, 15.4, 18,
28.2, 28.2.1, 31.2, 35, 36.1 and 37.

2.4 Standards not yet effective

The following standards, amendments and interpretations with respect to the approved accounting
standards as applicable in Pakistan would be effective from the dates mentioned below against the
respective standard or interpretation.

Effective date (annual periods

beginning on or after)

IFRS - 2 Share-based Payments – Classification and Measurement
of Share -based Payments Transactions (Amendments) 01 January 2018

IFRS - 4 Insurance Contracts: Applying IFRS 9 Financial Instruments

with IFRS 4 Insurance Contracts – (Amendments) 01 January 2018

IFRS - 9 Financial Instruments 01 January 2018

IFRS - 9 Prepayment Features with Negative Compensation – (Amendments) 01 January 2019

IFRS - 10 Consolidated Financial Statements and IAS 28 Investment in

Associates and Joint Ventures - Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture (Amendment) Not Yet Finalized

IFRS - 15 Revenue from Contracts with Customers 01 July 2018

IFRS - 16 Leases 01 January 2019

IAS - 19 Plan Amendment, Curtailment or Settlement (Amendments) 01 January 2019

IAS - 28 Long-term Interests in Associates and Joint Ventures – (Amendments) 01 January 2019

IAS - 40 Investment Property: Transfers of Investment Property (Amendments) 01 January 2018

IFRIC - 22 Foreign Currency Transactions and Advance Consideration 01 January 2018

IFRIC - 23 Uncertainty over Income Tax Treatments 01 January 2019

The above standards and interpretations are not expected to have any material impact on the Company's
financial statements in the period of initial application except for IFRS 15 – Revenue from contracts with
customers. The Company is currently evaluating the impact of the said standard.

In addition to the above standards and improvements to various accounting standards have
also been issued by the IASB in December 2016 and December 2017. Such improvements are
generally effective for accounting periods beginning on or after 01 January 2018 and 01 January
2019 respectively. The Company expects that such improvements to the standards will not have
any material impact on the Company's financial statements in the period of initial application.

147
 The IASB has also issued the revised Conceptual Framework for Financial Reporting (the Conceptual
Framework) in March 2018 which is effective for annual periods beginning on or after 1 January 2020 for
preparers of financial statements who develop accounting policies based on the Conceptual Framework.
The revised Conceptual Framework is not a standard, and none of the concepts override those in any
standard or any requirements in a standard. The purpose of the Conceptual Framework is to assist IASB in
developing standards, to help preparers develop consistent accounting policies if there is no applicable
standard in place and to assist all parties to understand and interpret the standards.
Further, following new standards have been issued by IASB which are yet to be notified by the SECP for
the purpose of applicability in Pakistan.

IASB effective date (annual

periods beginning on or after)

IFRS 14 – Regulatory Deferral Accounts 01 January 2016

IFRS 17 – Insurance Contracts 01 January 2021

2.5 Significant accounting judgments and estimates

The preparation of the Company’s financial statements requires management to make judgments and
estimates that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure
of contingent liabilities and assets, at the end of the reporting period. However, uncertainty about these
estimates and judgments could result in outcomes that require a material adjustment to the carrying
amount of the asset or liability affected in future periods. The management continually evaluates estimates
and judgments which are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under current circumstances. Revisions to accounting
estimates are recognised prospectively.
In the process of applying the accounting policies, management has made the following estimates and
judgments which are significant to the financial statements:
2.5.1 Property, plant and equipment
The Company reviews appropriateness of the rate of depreciation, useful life and residual value used
in the calculation of depreciation. Further, where applicable, an estimate of the recoverable amount
of assets is made for possible impairment on an annual basis. In making these estimates, the Company
uses the technical resources available to the Company. Any change in the estimates in future might affect
the carrying amount of respective item of operating property, plant and equipment, with corresponding
effects on the depreciation charge and impairment.
2.5.2 Taxation
Current
In applying the estimate for income tax payable, the Company takes into account the applicable tax laws
and the decision by appellate authorities on certain issues in the past. Instance where the Company’s
view differs from the view taken by the income tax department at the assessment stage and where the
Company considers that its view on items of material nature is in accordance with law, the amounts are
shown as contingency.
Deferred
Deferred tax is provided in full using the balance sheet liability method on all temporary differences
arising at the statement of financial position between the tax bases of the assets and the liabilities and their
carrying amounts. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and
unused tax credits to the extent that it is probable that sufficient future taxable profits will be available
against which these 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 statement of financial
position date. In this regard, the effects on deferred taxation of the portion of income expected to be
subject to final tax regime is adjusted. Deferred tax is charged or credited to statement of profit or loss.

148
2.5.3 Stock-in-trade, stores, spare parts and loose tools

The Company reviews the net realizable value (NRV) of stock-in-trade and stores, spare parts and loose
tools to assess any diminution in the respective carrying values. NRV is estimated with reference to the
estimated selling price in the ordinary course of business less the estimated costs of completion and
estimated costs necessary to make the sale.

2.5.4 Staff retirement benefits

Certain actuarial assumptions have been adopted for valuation of present value of defined benefit
obligations and fair value of plan assets. Any change in these assumptions in future years might affect
gains and losses in those years. The actuarial valuation involves making assumptions about discount rates,
expected rates of return on assets, future salary increases and mortality rates.

2.5.5 Contingencies

The assessment of the contingencies inherently involves the exercise of significant judgment as the
outcome of the future events cannot be predicted with certainty. The Company, based on the availability
of the latest information, estimates the value of contingent assets and liabilities which may differ on the
occurrence / non-occurrence of the uncertain future events.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Property, plant and equipment

Property, plant and equipment except for land and capital work-in-progress are stated at cost less
accumulated depreciation and impairment loss, if any. Land and capital work-in-progress are stated at
cost less impairment, if any. Depreciation is charged to statement of profit or loss applying the reducing
balance method except for computers, which are depreciated using the straight-line method at the rates
mentioned in the note 4.1.1 to the financial statements. Depreciation is charged from the month in which
an asset is available for use, while no depreciation is charged in the month in which an asset is disposed
off.

Maintenance and repairs are charged to statement of profit or loss as and when incurred. Major renewals
and improvements which increase the asset’s remaining useful economic life or the performance beyond
the current estimated levels are capitalized and the assets so replaced, if any, are retired.

Gains or losses on disposal of operating property, plant and equipment, if any, are recognised in the
statement of profit or loss.

The carrying values of operating property, plant and equipment are reviewed for impairment annually
when events or changes in circumstances indicate that the carrying values may not be recoverable. If
such indications exist and where the carrying values exceed the estimated recoverable amounts, the
assets are written down to the recoverable amounts.

3.1.1 Intangible assets

An intangible asset is recognised if it is probable that the future economic benefits that are attributable to
the asset will flow to the enterprise and the cost of such assets can also be measured reliably.

Computer software and implementation costs that are directly associated with the computer and computer
controlled machines which cannot operate without the related specific software, are included in the
cost of respective assets. Software which is not an integral part of the related hardware is classified as
intangible assets.

Intangible assets are stated at cost less accumulated amortisation and impairment loss, if any. Intangible
assets are amortised on a straight-line method when assets are available for use. Amortisation is charged
from the month of the year in which addition / capitalization occurs while no amortisation is charged in
the month in which an asset is disposed off.

149
 3.2 Investments
3.2.1 Joint Ventures
The Company has interest in joint ventures which are jointly controlled entities. The Company combines
its share and recognises its interest in the joint ventures using the equity method. Under equity method,
the investment in joint ventures is carried in the statement of financial position at cost plus post acquisition
changes in the Company’s share of net assets of the joint ventures. Statement of profit or loss reflects the
share of the results of operations of joint ventures.
After application of the equity method, the Company determines whether it is necessary to recognise
an additional impairment loss on the Company’s investment in joint ventures. The Company determines
at each reporting date whether there is any objective evidence that the investment in joint ventures is
impaired. If this is the case the Company calculates the amount of impairment loss as the difference
between the recoverable amount of joint ventures and their carrying value and recognises the amount in
the statement of profit or loss.
Financial statements of joint ventures are prepared for same reporting period as that of the Company,
using consistent accounting policies in line with that of the Company.
3.2.2 Available-for-sale securities
Available for sale investments are initially recognised at cost, being the fair value of the consideration
paid including transaction cost. Subsequent to initial recognition, these investments are re-measured at
fair value (quoted market price).
Any gain or loss from a change in the fair value of investments available for sale is recognised directly in
other comprehensive income as unrealised, unless sold, collected or otherwise disposed off, or until the
investment is determined to be impaired, at which time cumulative gain or loss previously taken to other
comprehensive income is recognised in the statement of profit or loss account of the year.
3.2.3 Designated through profit or loss
Financial assets that are acquired principally for the purpose of generating profit from short-term
fluctuation in prices are classified as ‘financial assets at fair value through profit or loss’ category.
These investments are initially recognized at fair value, relevant transaction costs are taken directly to
statement of profit or loss account and subsequently measured at fair value. Net gains and losses arising
on changes in fair value of these financial assets are taken to the statement of profit or loss account in the
period in which they arise.
3.3 Stores, spare parts and loose tools
These are valued at lower of weighted average cost and NRV except items-in-transit which are stated at
invoice values plus other charges paid thereon upto the date of statement of financial position.
Provision / write-off, if required, is made in the financial statements for slow moving, obsolete and
unusable items to bring their carrying value down to NRV.
3.4 Stock-in-trade

Raw materials and finished goods are valued at lower of average cost and NRV, except items in-transit, if
any, are valued at cost comprising invoice values plus other charges incurred thereon up to the statement
of financial position date.
Cost signifies in relation to:
Raw and packing material - Purchase cost on average basis
Finished goods and work-in-process - Cost of direct material, labour and proportion of
manufacturing overheads
Work-in-process is valued at average cost of raw-materials including a proportionate of manufacturing
overheads.
Provision, if required is made in the financial statements for slow moving, obsolete and unusable items
to bring their carrying value down to NRV.

150
3.5 Trade debts

These are recognised at invoice value less provision for uncollectible amounts. Provision for doubtful
debts is based on management’s assessment of customer’s credit worthiness. Bad debts are written-off
when there is no realistic prospect of recovery.

3.6 Cash and cash equivalents

These are stated at cost. For the purpose of statement of cash flows, cash and cash equivalents comprise
of cash in hand and bank balances.

3.7 Share capital

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

3.8 Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred and subsequently carried
at amortized cost using the effective interest method.

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

3.9 Trade and other payables

Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be
paid in future for goods and services received, whether or not billed to the Company.

3.10 Financial instruments

All financial assets and liabilities are recognised at the time when the Company becomes party to the
contractual provisions of the instrument and are de-recognised in case of assets, when the contractual
rights under the instrument are realised, expired or surrendered and in case of a liability, when the
obligation is discharged, cancelled or expired. Any gain / (loss) on the recognition and de-recognition of
the financial assets and liabilities is included in the statement of profit or loss for the period in which it
arises.

3.11 Offsetting of financial assets and liabilities

Financial assets and liabilities are offset and the net amount reported in the statement of financial position
if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis or to realize the assets and settle liabilities simultaneously. Incomes and
expenses arising from such assets and liabilities are also offset accordingly.

3.12 Foreign currency transactions

Transactions in foreign currencies are translated into Pak Rupees at the foreign exchange rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date
of statement of financial position are translated into Pak Rupees at the foreign exchange rate prevailing at
that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translations at the year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the statement of profit or loss account.

3.13 Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company
and revenue can be reliably measured. Revenue is measured at fair value of the consideration received
or receivable.

3.13.1 Sale of goods

Revenue from sales is recognised upon passage of title to the customers that generally coincides with
physical delivery. It is recorded at net of trade discounts and volume rebates.

151
 3.13.2 Other income

Profit on bank accounts is recognised on effective interest rate method.

Dividend income is recognised when the right to receive such payment is established.

Other revenues are accounted for on accrual basis.

3.14 Staff retirement benefits

3.14.1 Gratuity fund

The Company operates an approved and funded gratuity scheme for all eligible employees who have
completed the minimum qualifying period of service. The scheme is administered by the trustees nominated
under the trust deed. The contributions to the scheme are made in accordance with actuarial valuation
using Projected Unit Credit method. Actuarial gains and losses are recognized in full in the period in which
they occur in the other comprehensive income. All the past service costs are recognised at the earlier of
when the amendments or curtailment occurs and when the Company has recognised related restructuring
or terminations benefits.

3.14.2 Provident fund

The Company operates an approved defined contributory provident fund scheme for all permanent
employees who have completed the minimum qualifying period of service. Equal monthly contributions
are made by the Company and the employees to the Fund at the rate of 8.33 percent of basic salary.

3.15 Provisions

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

3.16 Taxation

3.16.1 Current

Provision for current tax is based in accordance with Income Tax Ordinance, 2001.

3.16.2 Deferred

Deferred tax is recognised using the balance sheet liability method, on all temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts appearing in the financial
statements. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets
are recognised for all deductible temporary differences to the extent that it is probable that the temporary
differences will reverse in the future and taxable income will be available against which the temporary
differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred tax assets to be utilized.

As the provision for taxation has been made partially under the normal basis and partially under the final
tax regime, therefore, the deferred tax liability has been recognised on a proportionate basis in accordance
with TR 27 issued by the Institute of Chartered Accountants of Pakistan.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially
enacted by the statement of financial position date.

152
3.17 Sales tax

Revenues, expenses and assets are recognized, net off amount of sales tax except:

- Where sales tax incurred on a purchase of asset or service is not recoverable from the taxation
authorities, in which case the sales tax is recognised as part of the cost of acquisition of the asset or
as part of the expense item as applicable; and

- Receivables or payables that are stated with the amount of sales tax included; and

- The net amount of sales tax recoverable from, or payable to, the taxation authorities is included as
part of receivables or payables in the statement of financial position.

3.18 Earnings per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS
is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined
by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
3.19 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of
the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing
costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.20 Impairment

The carrying value of the Company’s assets except for inventories and deferred tax assets are reviewed at
each statement of financial position date to determine whether there is any indication of impairment. If any
such indication exists the asset’s recoverable amount is estimated and impairment losses are recognised in
the statement of profit or loss.

3.21 Dividend and appropriation to reserves

Dividend and appropriation to reserves are recognized in the financial statements in which these are
approved. Transfer between reserves made subsequent to the statement of financial position date is
considered as a non-adjusting event and is recognized in the financial statements in the period in which
such transfers are made.

3.22 Functional and presentation currency

These financial statements are presented in Pak Rupees, which is the Company’s functional and presentation
currency.

3.23 Operating segments

For management purposes, the activities of the Company are organized into one operating segment i.e.,
manufacturing, marketing and sale of cement. The Company operates in the said reportable operating
segment based on the nature of the products, risks and returns, organizational and management structure,
and internal financial reporting systems. Accordingly, the figures reported in the financial statements are
related to the Company’s only reportable segment.
Note 2018 2017
4. PROPERTY, PLANT AND EQUIPMENT (Rupees in ‘000)

Operating property, plant and equipment 4.1 12,277,573 12,909,284

Capital work-in-progress – Line – I 4.2 1,806,317 300,594
Capital work-in-progress – Line – II 4.3 28,331 156,372
Capital work-in-progress – Line – III 4.4 9,693,624 266,614
11,528,272 723,580
23,805,845 13,632,864

153
 4.1 Operating property, plant and equipment
4.1.1 Following is a statement of operating property, plant and equipment:
CO ST DEPRECIATION
Book
Depreciation
2018 As at As at As at
value
rate % per
Additions/ As at Charge as at
Description July 01, June 30, July 01, Disposals for the June 30, annum
(disposals) June 30,
2017 2018 2017 year 2018 2018

(Rupees in ‘000)
Freehold land 1,605 - 1,605 - - - - 1,605 -

Leasehold land 7,065 - 7,065 - - - - 7,065 -

Building on
leasehold land 2,610,075 90,955 2,701,030 477,718 - 165,874 643,592 2,057,438 7.5

Plant and machinery 12,010,573 197,961 12,153,773 3,769,858 621,167 4,341,979 7,811,794 5-7.5
(54,761) (49,046)

Power and other
installations 2,254,194 40,010 2,294,105 202,319 - 214,024 416,287 1,877,818 10-20
(99) (56)

Furniture and fittings 46,648 4,040 50,587 19,613 - 2,627 22,156 28,431 10-20
(101) (84)
Quarry, factory and
laboratory equipment 666,025 46,236 712,261 399,281 - 39,624 438,905 273,356 10-20

Motor vehicles 246,834 52,338 282,458 109,098 - 28,733 128,376 154,082 20
(16,714) (9,455)
Office equipment 36,732 22,387 58,962 12,918 - 3,255 16,111 42,851 10-20
(157) (62)
Computers 82,824 13,555 96,207 62,486 - 10,742 73,074 23,133 33.33
(172) (154)
17,962,575 467,482 18,358,053 5,053,291 - 1,086,046 6,080,480 12,277,573
(72,004) (58,857)

CO ST DEPREC IATION
Book
Depreciation
2017 As at
value
rate % per
As at As at Charge As at as at
Description July 01, Additions/
June 30, July 01, Disposals for the June 30, annum
June 30,
2016 (disposals) 2016
2017 year 2017 2017

(Rupees in ‘000)
Freehold land 1,605 - 1,605 - - - - 1,605 -

Leasehold land 7,065 - 7,065 - - - - 7,065 -

Building on
leasehold land 630,166 1,979,909 2,610,075 385,814 - 91,904 477,718 2,132,357 7.5

Plant and
machinery 5,864,491 6,222,598 12,010,573 3,396,945 - 409,652 3,769,858 8,240,715 5-7.5
(76,516) (36,739)
Power and other
installations 169,225 2,085,192 2,254,194 90,960 - 111,482 202,319 2,051,875 10-20
(223) (123)
Furniture and fittings 26,507 20,177 46,648 17,874 - 1,771 19,613 27,035 10-20
(36) (32)
Quarry, factory and
laboratory
equipment 562,883 103,142 666,025 363,257 - 36,024 399,281 266,744 10-20

Motor vehicles 222,365 53,737 246,834 101,384 - 29,285 109,098 137,736 20
(29,268) (21,571)
Office equipment 19,501 17,866 36,732 11,475 - 1,870 12,918 23,814 10-20

(635) (427)
Computers 63,750 19,764 82,824 55,248 - 7,925 62,486 20,338 33.33
(690) (687)
7,567,558 10,502,385 17,962,575 4,422,957 - 689,913 5,053,291 12,909,284
(107,368) (59,579)

154
4.1.2 Significant operating fixed assets of each line, other than disclosed in note 1.1, inter alia, also includes
following:

Crusher
Raw mill / press
Coal mill
Cooler
Kiln
Cement mill / press
Packing machine
Waste heat recovery plant
Generators (Wartsila and Caterpillar)

4.1.3 Reconciliation of book value:

Note 2018 2017
(Rupees in ‘000)
Book value at the beginning of the year 12,909,284 3,144,601
Additions during the year – at cost 467,482 10,502,385
Depreciation for the year (1,086,046) (689,913)
Disposals during the year at book value (13,147) (47,789)
Book value at the end of the year 12,277,573 12,909,284

4.1.4 The depreciation for the year has been allocated as follows:

Cost of sales 25 1,058,451 669,667
Distribution costs 26 13,864 10,070
Administrative expenses 27 13,731 10,176
1,086,046 689,913
4.1.5 Disposal of operating property, plant and equipment:

Book Sale Gain / Particulars of buyers and

Description Cost value proceeds (loss) Mode of disposal relationship ([Link])
(Rupees in ‘000)
Motors Vehicles

Suzuki Mehran VXR

800cc
Reg. No. LED –14-1674 683 332 552 220 Tender Mr. Nadeem Samuel – Lahore

Suzuki Cultus VXR
1000cc
Reg. No. LE –12-4863 983 285 712 427 Tender Mr. Nadeem Samuel – Lahore

Suzuki Alto VXR

1000c
Reg. No. LEB –11-3813 731 179 183 4 Employee car scheme Mr. Fida Hussain – Employee

Suzuki Cultus VXR

1000cc
Reg. No. LED –09-9848 795 142 612 470 Tender Mr. Nadeem Samuel – Lahore

Suzuki Cultus VXR

1000cc
Reg. No. AJM –802 555 36 315 279 Tender Mr. M. Suleman – Islamabad

Honda City I-Dsi

1300cc
Reg. No. AGX – 644 841 44 410 366 Tender Mr. Nabi Gul – Peshawar

Suzuki Mehran VXR

800cc
Reg. No. BC –1658 688 233 445 212 Tender Mr. M. Zubair – Peshawar

155
 Book Sale Gain / Particulars of buyers and
Description Cost value proceeds (loss) Mode of disposal relationship ([Link])
(Rupees in ‘000)
Motors Vehicles

Suzuki Cultus VXR

1000cc
Reg. No. BD –1856 1,093 557 650 93 Tender Mr. Usman Khan – Peshawar

Honda Civic VTI

Oriel 1800cc
Reg. No. ADU - 629 2,586 2,413 2,567 154 Tender Mr. Rizwan Mazhar – Islamabad

Toyota Corolla GLI

1300cc
Reg. No. AYE-075 1,526 460 1,190 730 Tender Mr. Ahsan Shujaat Sherwani –
Karachi
Toyota Corolla GLI
1300cc
Reg. No. AYD-434 1,518 458 1,182 724 Tender Mr. Ahsan Shujaat Sherwani –
Karachi
Suzuki Mehran VXR
800cc
Reg. No. BAW –728 673 259 431 172 Tender Mr. Wajahat Ullah Qureshi -
Karachi
Toyota Vigo Champ
2400cc
Reg. No. CU-2030 2,447 709 1,739 1,030 Tender Cherat Packaging Limited -
Karachi
Honda Civic AT
1800cc
Reg. No. ACW - 710 1,529 1,145 1,150 5 Tender Mr. M. Asim – Peshawar

Honda CD – 100
Reg. No. PL - 153 66 8 26 18 Tender Mr. Shahid Nawaz – Islamabad

16,714 7,260 12,164 4,904

Plant and Machinery -

Packing Plant 54,761 5,714 5,823 109 Tender M/s. Zameer Gul – Peshawar

Power and Other

Installations 99 43 - (43) Write-off -

Furniture and Fixture 101 17 46 29 Tender M/s. Alvi Auctions - Islamabad

Office Equipment 157 95 26 (69) Tender Mr. M. Arshad – Lahore

Computer 172 18 65 47 Tender Mr. Saifullah Babar - Peshawar

2018 72,004 13,147 18,124 4,977

2017 107,368 47,789 66,890 19,101

[Link] None of the buyers had any relationship with the directors of the Company.

4.1.6 The market value of property, plant and equipment assessed by an independent valuer as of May 2017 amounts
to Rs. 32.132 billion (2017: Rs. 21.327 billion) however, the same has not been incorporated in these financial
statements.

156
4.2 Capital work-in-progress – Line – I

Building Quarry,
Plant and Power Furniture
on Motor factory
Description machinery Computers and other and Total
leasehold vehicles and lab
(4.2.1) installations fittings
land (4.2.1) equipment

(Rupees in ‘000)
Balance as at
June 30, 2016 16,212 24,699 - 600 - 30,091 2,121 73,723

Capital expenditure
incurred / advances made
during the year 42,125 433,202 16,485 21,309 62,127 73,326 5,707 654,281

Transferred to operating
property, plant and
equipment (21,871) (214,629) (14,914) (19,002) (51,247) (98,005) (7,742) (427,410)

Balance as at June 30, 2017 36,466 243,272 1,571 2,907 10,880 5,412 86 300,594

Capital expenditure
incurred / advances
made during the year 73,076 1,623,034 12,276 1,303 58,819 43,184 24,563 1,836,255

Transferred to
operating property,
plant and equipment (72,874) (118,179) (13,505) (4,210) (52,338) (44,984) (24,442) (330,532)

Balance as at
June 30, 2018 36,668 1,748,127 342 - 17,361 3,612 207 1,806,317

4.2.1 Represent costs incurred on the installation of the Captive Power Plant Generators and include borrowing
costs capitalized during the year amounting to Rs. 18.66 million in respect of conventional banking (2017:
Nil) by using a capitalization rate of 6.71% (2017: Nil).

4.3 Capital work-in-progress – Line – II

Balance as at
June 30, 2016 1,938,939 7,486,291 1,001 68,843 874 - 2,683 9,498,631

Capital expenditure
incurred / advances
made during the year
- Line - II (4.3.1) 43,881 - 3,849 640,372 1,616 11,760 30,629 732,107
- WHR - II - - - 54 - - 555 609
43,881 - 3,849 640,426 1,616 11,760 31,184 732,716

Transfers during the year - (1,398,610) - 1,398,610 - - - -

Capitalized during
the year
- Line - II (4.3.1) (1,873,421) (5,226,397) (4,850) (2,066,137) (2,490) (5,137) (29,747) (9,208,179)
- WHR - II (84,617) (781,572) - (53) - - (554) (866,796)
(1,958,038) (6,007,969) (4,850) (2,066,190) (2,490) (5,137) (30,301) (10,074,975)

Balance as at
June 30, 2017 24,782 79,712 - 41,689 - 6,623 3,566 156,372

Capital expenditure
incurred / advances
made during the year
- Line - II (4.3.1) 2,526 1,089 50 - 800 953 3,491 8,909
- WHR - II - - - - - - - -
2,526 1,089 50 - 800 953 3,491 8,909
Capitalized during
the year
- Line – II (4.3.1) (18,081) (79,782) (50) (35,800) - (1,252) (1,985) (136,950)
- WHR - II - - - - - - - -
(18,081) (79,782) (50) (35,800) - (1,252) (1,985) (136,950)
Balance as at
June 30, 2018 9,227 1,019 - 5,889 800 6,324 5,072 28,331

157
 4.3.1 Represent costs incurred on the installation of Line – II at the existing location in Nowshera, Khyber
Pakhtunkhwa Province and include borrowing costs capitalized during the year amounting to Nil in
respect of Islamic banking (2017: Rs. 119.21 million) and Nil in respect of conventional banking (2017:
Rs. 19.10 million) by using a capitalization rate of Nil (2017: 6.93%).

4.4 Capital work-in-progress – Line – III

Building Quarry,
Power Furniture
on Plant and Motor factory
Description leasehold machinery
Computers and other
vehicles and lab
and Total
installations fittings
land equipment

(Rupees in ‘000)
Balance as at June 30, 2016 - - - - - - - -
Capital expenditure incurred /
advances made during
the year (4.4.1) 18,543 248,071 - - - - - 266,614
Balance as at June 30, 2017 18,543 248,071 - - - - - 266,614

Capital expenditure incurred /

advances made during
the year
- Line – III (4.4.1) 2,015,573 6,967,353 155 117,122 2,761 1,557 8,161 9,112,682
- WHR – III 34,334 279,994 - - - - - 314,328
2,049,907 7,247,347 155 117,122 2,761 1,557 8,161 9,427,010
Balance as at June 30, 2018 2,068,450 7,495,418 155 117,122 2,761 1,557 8,161 9,693,624

4.4.1 Represent costs incurred on the installation of Line – III at the existing location in Nowshera, Khyber
Pakhtunkhwa Province and include borrowing costs capitalized during the year amounting to Rs. 215.75
million in respect of Islamic banking (2017: Nil) by using a capitalization rate of 7.38% (2017: Nil).

5. INTANGIBLE ASSETS

C OST AMORTIZATION
Book
value Amortization
Additions Charge
Description As at As at As at
for the
As at as at Rate %
during the per annum
July 01, June 30 July 01 June 30 June 30,
year year
(Rupees in ‘000)

Computer software
2018 38,042 - 38,042 18,832 3,804 22,636 15,406 10

2017 27,132 10,910 38,042 15,845 2,987 18,832 19,210 10

5.1 The amortisation for the year has been allocated as follows:
Note 2018 2017
(Rupees in ‘000)

Cost of sales 25 3,353 2,344

Distribution costs 26 28 345
Administrative expenses 27 423 298
3,804 2,987

6. LONG-TERM INVESTMENTS

Investment in related parties

Available-for-sale securities 6.1 389,141 558,585
Interest in a joint venture 6.2 - -
Interest in a joint venture 6.3 7,653 7,690
396,794 566,275

158
6.1 Available-for-sale securities 2018 2017
(Rupees in ‘000)
Cherat Packaging Limited
2,468,406 (2017: 2,174,808) fully paid ordinary shares of Rs. 10/- each. 354,685 517,126
Mirpurkhas Sugar Mills Limited
262,500 (2017: 262,500) fully paid ordinary shares of Rs. 10/- each. 34,456 41,459
389,141 558,585
6.2 Interest in a joint venture - Madian Hydro Power Limited (MHPL)

Company’s share in net assets 106,705 106,705
Less: Impairment loss (106,705) (106,705)
- -

6.2.1 Represents 10,744,997 shares (2017: 10,744,997 shares) representing 50% (2017: 50%) interest in MHPL
a public unlisted company, which is a joint venture of the Company and Shirazi Investments (Private)
Limited. MHPL is formed to build, operate and maintain hydro power generation plant at Madian over
River Swat for the generation and supply of electric power. Technical feasibility of MHPL was completed
in 2009, which was approved by Private Power and Infrastructure Board (PPIB). Due to deteriorated law
and order situation in Swat and adjoining areas the project delayed. During last year, Private Power and
Infrastructure Board (PPIB) has terminated the Letter of Intent (LOI) issued to the Company. In view of the
aforesaid uncertain situation, the management decided to write-off the investment completely.

Unaudited Audited
Note 2018 2017
Investment in a joint venture – UniEnergy Limited
6.3 (Rupees in ‘000)

Cost of investment 6.3.1 7,690 7,690
Share of losses (37) -
7,653 7,690

6.3.1 Represents 768,999 (2017: 768,999) shares of Rs. 10 each representing 7.69% interest in UniEnergy
Limited (UEL), a public unlisted company. UEL is formed for the generation and transmission of wind
power, however, the company has not yet commenced its commercial operations.

6.4 Investments in associated companies and undertakings have been made in accordance with the
requirements of the Act.
Note 2018 2017
7. LONG-TERM LOANS – secured, considered good (Rupees in ‘000)

Employees 7.1 2,740 2,879
Less: Current maturity 11 (2,054) (2,254)
686 625

7.1 Represent loans given to employees as per the Company’s policy. These loans carry mark-up 10% per
annum (2017: 10% per annum) and are repayable within 3 to 6 years. These loans are secured against
the provident fund balances of the respective employees. These loans do not exceed Rs. 1 million to any
employee.
2018 2017
8. STORES, SPARE PARTS AND LOOSE TOOLS (Rupees in ‘000)

Stores 1,508,276 1,097,348
Spare parts 941,147 888,195
Loose tools 1,468 719
2,450,891 1,986,262
Stores and spare parts in transit 328,016 224,050
2,778,907 2,210,312

159
 9. STOCK-IN-TRADE
Note 2018 2017
(Rupees in ‘000)
Raw and packing material 146,179 120,557
Work-in-process 422,652 556,621
Finished goods 184,807 166,642
753,638 843,820

10. TRADE DEBTS – secured, considered good

Neither past due nor impaired 10.1 188,272 130,767

10.1 These are secured by way of postdated cheques and promissory notes and do not include any receivables
in respect of export sales.
Note 2018 2017
11. LOANS AND ADVANCES – considered good (Rupees in ‘000)

Advances to suppliers 11.1 & 11.2 82,027 35,069
Current portion of long-term loans 7 2,054 2,254
84,081 37,323
11.1 Sector wise analysis is as follows:

Government sector – secured 49,533 -
Other sectors – unsecured 32,494 35,069
82,027 35,069
11.2 These advances do not carry any interest.

12. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS

Short-term prepayments 25,393 11,593
Trade deposits 12.1 547 547
25,940 12,140
12.1 These deposits do not carry any interest.
 
13. OTHER RECEIVABLES

Gratuity fund 13.1 5,726 416,946
Provident fund 13.2 - -
Sales tax and federal excise duty - adjustable 1,552,300 541,244
Insurance claims receivable 19,184 6,818
Duty drawback receivable 19,153 16,610
Others 2,654 3,412
1,599,017 985,030
13.1 Gratuity fund

The Company operates an approved funded gratuity scheme for all eligible employees. Actuarial valuation
of the scheme is carried out every year and the latest actuarial valuation was carried out as at June 30,
2018.
2018 2017
(Rupees in ‘000)
Gratuity fund asset:

Present value of defined benefit obligations 540,225 470,716

Fair value of plan assets (545,951) (887,662)
Asset recognised in the statement of financial position (5,726) (416,946)

160
 2018 2017
(Rupees in ‘000)
Current service cost 35,885 33,116
Interest cost 36,800 27,907
Expected return on plan assets (70,556) (45,592)
Expense recognized 2,129 15,431

Experience adjustment arising on plan liabilities losses 18,268 39,229
Return on plan assets excluding interest income gains 400,823 (220,174)
419,091 (180,945)

Movement in net asset recognised in the statement of financial position:

Balance as at July 01 (416,946) (236,432)
Net charge for the year 2,129 15,431
Re-measurements chargeable in other comprehensive income 419,091 (180,945)
Contribution to the fund (10,000) (15,000)
Balance as at June 30 (5,726) (416,946)

Movement in the present value of defined benefit obligation:

Balance as at July 01 470,716 399,375
Current service cost 35,885 33,116
Interest cost 36,800 27,907
Benefits paid during the year (21,444) (28,911)
Actuarial loss 18,268 39,229
Balance as at June 30 540,225 470,716

Movement in the fair value of plan assets:

Balance as at July 01 887,662 635,807
Expected return 70,556 45,592
Contributions 10,000 15,000
Benefits paid during the year (21,444) (28,911)
Actuarial (loss) / gain (400,823) 220,174
Balance as at June 30 545,951 887,662

Principal actuarial assumptions used are as follows: 2018 2017
(Percentage)

Expected rate of increase in salary level – long term 8.50 7.75

Valuation discount rate 9.00 8.00
Rate of return on plan assets 9.00 8.00

Comparisons for past years:

2018 2017 2016 2015 2014
As at June 30
(Rupees in ‘000)
Present value of defined benefit
obligations 540,225 470,716 399,375 353,290 264,832
Fair value of plan assets (545,951) (887,662) (635,807) (476,842) (268,940)
(Surplus) / deficit (5,726) (416,946) (236,432) (123,552) (4,108)

Experience adjustment on
plan liabilities (18,268) (39,229) (3,956) (50,666) (12,286)
Experience adjustment on
plan assets (400,823) 220,174 120,243 169,177 26,944
(419,091) 180,945 116,287 118,511 14,658

161
 Sensitivity analysis 2018
Discount rate Salary increase
+100 bps -100 bps +100 bps -100 bps
(Rupees in ‘000)
Present value of obligations 519,099 564,207 565,713 517,401

2018 2017
Composition of plan assets is as follows: (Rupees in ‘000)

Defence Savings Certificates / PIBs / T-bills 40,757 52,903
Special Savings Certificates - 26,388
Mutual funds / Shares 490,673 787,231
Bank balances 14,521 21,140
545,951 887,662

The expected return on plan assets is based on the market expectations and depends upon the asset
portfolio of the Company, at the beginning of the period, for returns over the entire life of related obligation.
The return on plan assets was assumed to equal the discount rate. Actual loss on plan assets during the
year amounts to Rs. 330.268 million (2017: Actual return on plan assets Rs. 265.767 million).
2018 2017
13.2 Provident fund
(Unaudited)

(Rupees in ‘000)

Size of the trust 796,576 707,477

Cost of investments 784,918 696,912
Fair value of investments 853,494 953,231
(Percentage)
Percentage of investments made 98.54 98.51

Major categories of investment of provident fund are as follows:

2018 2017
Investment Investment as size Investment Investment as size
of the fund of the fund
(Rupees in ‘000) % (Rupees in ‘000) %

Government securities 466,295 59 460,533 66

Mutual funds 107,345 14 98,816 14
Listed shares 210,908 27 128,479 19
Bank balances 370 00 9,084 01
784,918 100 696,912 100

13.2.1 Investments out of provident fund have been made in accordance with the provisions of section 218 of
the Act and the regulations formulated for this purpose.
Note 2018 2017
14. CASH AND BANK BALANCES
(Rupees in ‘000)
Cash in hand
Foreign currency 14 67
Local currency 3,755 7,997
3,769 8,064
Bank balances

Islamic banks
Current accounts 576 2,649
Conventional banks
Current accounts 18,627 29,356
Saving accounts 14.1 24,080 5,745
42,707 35,101
47,052 45,814
14.1 These carry effective profit rate of 4% (2017: 3.75%) per annum.

162
15. SHARE CAPITAL

15.1 Authorised capital

2018 2017 2018 2017
Number of shares (Rupees in ‘000)

225,000,000 225,000,000 Ordinary shares of Rs. 10/- each 2,250,000 2,250,000

15.2 Issued, subscribed and paid-up capital

Fully paid ordinary shares of
Rs. 10/- each
91,335,845 91,335,845 - Issued for cash 913,358 913,358
80,236,008 80,236,008 - Issued as fully paid bonus shares 802,360 802,360
- Issued for consideration other
5,060,000 5,060,000 than cash on amalgamation 50,600 50,600
176,631,853 176,631,853 1,766,318 1,766,318

2018 2017
15.3 Following is the detail of shares held by the related parties: Number of shares

Faruque (Private) Limited 38,266,685 37,073,485
Cherat Packaging Limited 4,843,362 4,843,362
Mirpurkhas Sugar Mills Limited 5,770,252 5,770,252
Greaves Pakistan (Private) Limited 2,199,093 2,199,093
Zensoft (Private) Limited 20,000 20,000
51,099,392 49,906,192

15.4 Voting rights, Board selection, right of first refusal and block voting are in proportion to the
shareholding.
Note 2018 2017
16. RESERVES (Rupees in ‘000)
Capital reserves
Share premium 1,047,658 1,047,658
Others 16.1 50,900 50,900
1,098,558 1,098,558
Revenue reserves
General reserves 420,000 420,000
Unappropriated profit 7,729,273 6,391,997
Actuarial gain on gratuity fund 8,371 427,462
Unrealized gain on available-for-sale securities 151,228 357,372
8,308,872 7,596,831
9,407,430 8,695,389

16.1 This reserve was created due to amalgamation of Cherat Electric Limited with the Company.

17. LONG-TERM FINANCING – secured Note 2018 2017
(Rupees in ‘000)
Islamic banks
Syndicated Long-Term Finance Loan – Line - II 17.1 3,284,211 3,284,211
Waste Heat Recovery Loan – Line - II 17.2 - 600,565
Fixed Assets Refinance Loan – Line – II 17.2 - 300,000
Syndicated Long-Term Finance Loan – Line - III 17.3 10,000,000 -
13,284,211 4,184,776
Conventional banks
Syndicated Long-Term Finance Loan – Line - II 17.1 715,789 715,789
Captive Power Plant Loan 17.4 1,100,000 -
15,100,000 4,900,565

Less: Current maturity 17.1 (400,000) (60,057)
14,700,000 4,840,508

163
 17.1 Represents long-term financing obtained from Islamic banks under Diminishing Musharika Scheme and a
term loan from a conventional bank. It carries mark-up at the rate of 6 months KIBOR + 0.7% per annum.
The financing is repayable in 10 equal semi-annual installments commencing after a grace period of 36
months from the date of first draw down i.e. March 2019. The financing is secured against first pari-passu
hypothecation charge of Rs. 12,670 million on plant and machinery and immovable fixed assets of the
Company.

17.2 During the year, early repayments have been made.

17.3 Represents a syndicated loan obtained from Islamic banks under Diminishing Musharika Scheme
amounting to Rs. 13,000 million. The loan carries a profit rate of 6 months KIBOR + 0.45% per annum.
The financing is repayable in 10 equal semi-annual installments commencing after a grace period of 36
months from the date of first drawdown i.e. April 2021. It is secured against first pari-passu hypothecation
charge of Rs. 17,334 million on plant and machinery and immovable fixed assets of the Company.

17.4 Represents a long-term financing obtained from a conventional bank amounting to Rs. 1,100 million
which carries mark-up at the rate of 6 months KIBOR+ 0.15% per annum. The financing is repayable in
10 equal semi-annual installments commencing after a grace period of 24 months from the date of first
draw down i.e. September, 2020. The financing is secured against first pari-passu hypothecation charge
of Rs. 1,467 million on plant and machinery of the Company.

18. LONG-TERM SECURITY DEPOSITS

Represent amount received from the dealers and contractors of the Company, which is utilised for the
purpose of the business in accordance with the related agreements.
Note 2018 2017
(Rupees in ‘000)
19. DEFERRED TAXATION

Accelerated tax depreciation 1,564,873 1,337,320
Unused tax loss / credit (589,233) (420,014)
975,640 917,306
20. TRADE AND OTHER PAYABLES

Creditors 388,149 142,276
Bills payable 517,708 254,942
Accrued liabilities 164,988 133,852
Advances from customers 72,300 100,559
Retention money 719,318 40,315
Workers’ Profits Participation Fund 20.1 113,019 130,250
Others 14,949 10,770
1,990,431 812,964
20.1 Workers’ Profits Participation Fund

Opening balance 130,250 109,812
Interest thereon 30 1,622 801
131,872 110,613
Less: Payment made during the year (131,872) (110,613)
- -
Charge for the year 28 113,019 130,250
Closing balance 113,019 130,250

164
 Note 2018 2017
21. ACCRUED MARK-UP (Rupees in ‘000)

Islamic banks
Long-term financings 183,394 124,431

Conventional banks
Long-term financings 33,584 12,825
Short-term borrowings 13,046 9,087
46,630 21,912
230,024 146,343
22. SHORT-TERM BORROWINGS – secured

Short-term running finance – Conventional banks 22.1 963,947 1,500,411

22.1 Represents facilities obtained from various conventional banks amounting to Rs.3,300 million (2017:
Rs. 2,265 million) out of which Rs. 2,327 million (2017: Rs. 764.589 million) remains unutilized at the
year end. These facilities carry mark-up ranging from 3 months KIBOR + 0.50% per annum to 3 months
KIBOR + 0.75% per annum and 1 month KIBOR + 0.20% per annum to 1 month KIBOR + 0.75% per
annum. These facilities are secured against registered joint pari-passu hypothecation charge over stocks
and book debts for Rs. 4,400 million (2017: Rs. 3,003 million). Further, the Company has obtained credit
facilities from various Islamic banks amounting to Rs. 550 million (2017: Rs. 550 million) which remained
unutilized at the year end. These facilities are secured against registered pari-passu hypothecation charge
over stocks and book debts for Rs. 734 million (2017: Rs. 734 million).
 
23. CONTINGENCIES AND COMMITMENTS

23.1 Contingencies

- During the period from 1994 to 1999, excise duty was wrongly collected from the Company by the
Federal Board of Revenue (FBR) based on retail price inclusive of excise duty which has resulted in a
refund claim of Rs. 882 million. The Company challenged this matter in the Peshawar High Court (PHC).
The PHC and subsequently the Supreme Court of Pakistan (SCP) have agreed with the Company’s point
of view that excise duty shall not be included as component for determining the value i.e. retail price for
levying excise duty. While verifying the refund claim, the Collector of Excise and Sales Tax - Peshawar
issued a show cause notice to the Company raising certain objections against the release of said refund
including an objection that the burden of this levy has been passed on to the end customers. The Company
challenged this objection in the PHC which directed to appoint an independent firm of Chartered
Accountants for verification of this refund claim. However, based on an out of court settlement, the
Regional Tax Office (RTO) Peshawar carried out the verification of this refund claim based on the terms
of reference advised by the Federal Tax Ombudsman (FTO). RTO Peshawar finalized the report which
was not in line with the parameters given by the FTO, therefore, the FTO made a ruling for verification of
the adverse observations of the RTO Peshawar through an independent firm of Chartered Accountants.
This ruling of FTO was challenged by the FBR to the President of Pakistan who rejected representation
of the FBR and approved the recommendations of FTO with modification that the verification be carried
out by two reputed audit firms. The FBR filed writ petition in the PHC against the authority of FTO to
pass such an order. During the current year, the PHC has dismissed the above petition and directed FBR
to appoint two independent firms of Chartered Accountants to get the single point audit for verification
of the refund claim. The FBR filed review petition before the PHC and has also filed appeal before SCP.

- During the year ended June 30, 2013, the Company won apetition in the High Court of Sind (HCS)
against special excise duty levied by the FBR for the period from July 2007 to June 2011 which
resulted in a refund claim of Rs. 100.08 million. However, the FBR has challenged this decision in the
SCP where it is pending for adjudication.

- The Company has also filed various refund cases of Rs. 57 million (2017: Rs. 57 million) at different
appellate forums which are pending adjudication.

165
 Keeping in view the inherent uncertainties involved in the above matters, the management as a m a t t e r
of prudence, has not recognized these refunds in the financial statements.

- The Competition Commission of Pakistan (CCP) passed an order in 2009 imposing a penalty of Rs.
6,312 million on the cement industry including a penalty of Rs. 226 million on the Company on
the alleged grounds of increase in prices of cement across the country. The Company challenging
the vires of law in the Lahore High Court for which appeal is pending adjudication. The Company
also filed a writ petition in the SCP challenging the aforesaid order which referred the matter to
the Appellate Tribunal (the Tribunal). However, the Company challenged the constitution of the
Tribunal on various legal grounds before the HCS, which has granted stay in the favour of Company.

- Government of Sindh imposed an infrastructure fee on the goods entering or leaving the province
through the Sindh Finance (Amendment) Ordinance, 2007 which was challenged in the HCS
which granted an interim relief in May 2011, whereby the goods of petitioners will be cleared by
the Excise and Taxation Department on payment of 50% of the disputed amount and on furnishing
bank guarantee for the balance 50% amount till the final outcome of the case. The Company
became a party to the arrangement in February 2014 and issued bank guarantees in favour of the
Department. During the year a new law was enacted in this regard with change in rates which
was challenged through a fresh petition in the HCS and similar type of stay was again obtained.
The amount of guarantee issued up to June 30, 2018 is Rs. 120 million (2017: Rs. 54 million).

- During the current year, the Mines and Mineral Department (the department) of Khyber
Pakhtunkhwa (KPK raised a demand order of Rs. 252 million on account of under reporting
of production by the Company. The Company filed an appeal against the demand order
before the Secretary of the department who rejected the appeal without addressing the
issue. The Company being aggrieved challenged the said decision and filed a writ petition
before the PHC which granted stay on this matter and the case is pending adjudication.

Based on the legal advices, the management believes that there are strong legal grounds for a favourable
outcome, accordingly, no provision for the above matters have been made in these financial statements.

23.2 Commitments 2018 2017

(Rupees in ‘000)

- Letters of credit – conventional banks 278,484 5,472,608

- Letters of guarantee – conventional bank 359,060 129,000

24. TURNOVER – NET

Local sales – gross 19,618,655 12,192,155
Rebate and commission (784,432) (369,855)
18,834,223 11,822,300
Sales tax (3,198,685) (1,925,600)
Federal excise duty (2,803,279) (1,340,226)
(6,001,964) (3,265,826)
Local sales – net 12,832,259 8,556,474
Export sales – gross 1,703,562 1,173,632
Rebate and commission (147,472) (84,707)
Export sales– net 1,556,090 1,088,925
14,388,349 9,645,399

166
25. COST OF SALES Note 2018 2017
(Rupees in ‘000)
Raw and packing material consumed
Opening stock 120,557 58,633
Purchases 1,906,115 1,157,641
2,026,672 1,216,274
Closing stock 9 (146,179) (120,557)
1,880,493 1,095,717
Duty drawback on exports (9,296) (7,120)
1,871,197 1,088,597
Manufacturing overheads
Salaries, wages and benefits 25.1 1,104,848 839,237
Stores and spare parts consumed 418,204 261,519
Fuel and power 6,161,587 3,698,323
Rent, rates and taxes 228,405 156,652
Insurance 112,061 54,546
Vehicle running expenses 71,811 52,966
Travelling and conveyance 15,789 11,389
Printing and stationery 3,167 1,260
Legal and professional charges 19,692 8,028
Laboratory expenses 206 210
Depreciation 4.1.4 1,058,451 669,667
Amortisation 5.1 3,353 2,344
Repairs and maintenance 46,152 45,812
Communication 2,749 5,378
Stores written-off 285 115
Others 15,392 13,604
11,133,349 6,909,647
Work-in-process
Opening 556,621 171,321
Closing 9 (422,652) (556,621)
Cost of goods manufactured 11,267,318 6,524,347
Finished goods
Opening 166,642 74,576
Closing 9 (184,807) (166,642)
11,249,153 6,432,281

25.1 Include expenditure in respect of provident fund and gratuity fund amounting to Rs. 25.15 million and
Rs. 1.51 million, respectively (2017: Rs. 17.60 million and Rs. 9.10 million, respectively).

26. DISTRIBUTION COSTS Note 2018 2017

(Rupees in ‘000)
Salaries, wages and benefits 26.1 248,259 202,118
Export expenses 1,165 690
Travelling and conveyance 6,944 4,583
Staff training expenses 416 421
Vehicle running expenses 12,962 11,100
Communication 4,698 5,715
Printing and stationery 2,585 1,758
Rent, rates and taxes 11,851 9,198
Utilities 5,314 8,389
Repairs and maintenance 6,016 7,554
Insurance 3,131 2,795
Advertisement 12,860 10,033
Entertainment 2,675 2,201
Depreciation 4.1.4 13,864 10,070
Amortisation 5.1 28 345
License and subscription 1,809 1,264
Others 2,555 1,764
337,132 279,998

26.1 Include expenditure in respect of provident fund and gratuity fund amounting to Rs. 6.85 million and Rs.
0.41 million, respectively (2017: Rs. 5.81 million and Rs. 2.91 million, respectively).

167
 27. ADMINISTRATIVE EXPENSES Note 2018 2017

(Rupees in ‘000)

Salaries, wages and benefits 27.1 159,889 145,918
Travelling and conveyance 5,592 6,898
Staff training expenses 446 306
Vehicle running expenses 6,865 5,648
Communication 5,978 5,842
Printing and stationery 3,478 4,333
Rent, rates and taxes 3,822 3,703
Utilities 1,732 1,597
Repairs and maintenance 4,209 10,884
Legal and professional charges 26,221 15,736
Insurance 3,180 3,751
License and subscription 3,923 4,465
Advertisement 1,638 1,054
Depreciation 4.1.4 13,731 10,176
Amortisation 5.1 423 298
Entertainment 1,655 2,030
Others 2,476 2,470
245,258 225,109

27.1 Include expenditure in respect of provident fund and gratuity fund amounting to Rs.5.63 million and
Rs. 0.21 million, respectively (2017: Rs. 4.98 million and Rs. 1.85 million, respectively).

28. OTHER EXPENSES Note 2018 2017

(Rupees in ‘000)

Workers’ Profits Participation Fund 20.1 113,019 130,250

Auditors’ remuneration 28.1 3,717 2,921
Donations 28.2 7,303 8,678
Share of loss from joint venture 37 -
Exchange loss 9,890 1,540
133,966 143,389

28.1 Auditors’ remuneration

Audit fee 1,100 1,050
Half yearly review and CCG certification 470 425
Tax and other corporate services 1,872 1,197
Out of pocket expenses 275 249
3,717 2,921

28.2 Donations

Ghulam Faruque Welfare Trust 1,500 -

Aga Khan Hospital & Medical College Foundation - 2,200
Nowshera Lion Club 700 600
The Citizens Foundation - 2,000
The Indus Hospital - 1,000
Others 5,103 2,878
7,303 8,678

28.2.1 Recipients of donations do not include any donee in which any director or his spouse had any interest
except for donation paid to Ghulam Faruque Trust. Following directors of the Company are also trustees
of the said trust: 

- Mr. Omar Faruque

- Mr. Azam Faruque
- Mr. Shehryar Faruque

168
29. OTHER INCOME Note 2018 2017

(Rupees in ‘000)
Income from financial assets
Profit on bank accounts – conventional banks 826 1,138
Gain on redemption of short-term investments
– conventional mode - 2,186
Dividend income from a related party 20,160 21,973
20,986 25,297
Income from non-financial assets
Gain on disposal of operating property, plant and equipment 4.1.5 4,977 19,101
Reversal of Workers’ Welfare Fund (WWF) - 35,040
Scrap sales 51,854 53,858
Miscellaneous income 3,295 88
60,126 108,087
81,112 133,384
30. FINANCE COSTS

Islamic banks
Mark-up on long-term financings 250,647 132,887
Mark-up on short-term borrowings - 433
Bank charges and commission 1,285 317
251,932 133,637
Conventional banks
Mark-up on long-term financings 49,722 21,540
Mark-up on short-term borrowings 38,094 22,586
Bank charges and commission 15,215 9,651
103,031 53,777
Interest on workers’ profits participation fund 20.1 1,622 801
356,585 188,215
31. TAXATION

31.1 In view of the tax exemption on investment in Khyber Pakhtunkhwa and Baluchistan provinces under
clause 126L of Part I of the Second Schedule to the Income Tax Ordinance, 2001, profits and gains
are exempted on line – II. For this purpose, separate books of accounts have been maintained for both
lines (i.e., Line-I and Line-II). However, provision for Minimum Tax at the rate of 1.25% under section
113 of the Income Tax Ordinance, 2001 has been charged on local turnover of Line-I in these financial
statements.

31.2 The Company computes tax based on the generally accepted interpretations of the tax laws to ensure that
the sufficient provision for the purpose of taxation is available which can be analysed as follows:

Tax year Provision for taxation Tax assessed Excess / (under)

as per accounts (note 31.3) as per return (note 31.4)
(Rupees in ‘000)

2017 107,510 (798,255) 905,765

2016 562,871 562,871 -
2015 431,358 431,358 -

31.3 Provision for taxation as per accounts is the aggregate of current tax expense and prior tax expense
recorded in subsequent period.

169
 31.4 The Company has filed its return of income up to tax year 2017. However, the tax department has issued
a notice in respect of the following:

During the year ended June 30, 2017, the Company made investment in plant and machinery of Line -
II amounting to Rs. 9,057.65 million which was eligible for a tax credit amounting Rs. 905.77 million
under section 65B of the Income Tax Ordinance, 2001 (the tax credit). The tax credit is in addition to tax
exemption on profit and gains derived from Line - II under clause 126L of Part I of the Second Schedule
of the Income Tax Ordinance, 2001. The management believes that the Company is eligible for both the
above benefits for Line-II, and therefore, has taken both the benefits in the income tax return filed for
the tax year 2017. However, the tax department is of the opinion that any one of the two benefits will be
available to the Company i.e. tax exemption under clause 126L or the tax credit u/s 65B for Line – II. In
this connection, the department has issued notice under the Income Tax Ordinance, 2001 questioning
availing both the benefits hence the assessment is not deemed final. Accordingly, as a matter of prudence,
the management has recognised the benefit under clause 126L but has not recognised the tax credit u/s
65B of the Income Tax Ordinance, 2001 in these financial statement.

2018 2017
31.5 Reconciliation between tax expense and accounting profit (Rupees in ‘000)

Accounting profit before taxation 2,147,367 2,509,791

Tax at applicable rate of 30% (2017: 31%) 644,210 778,035

Effect of Alternative Corporate Tax (17,278) (172,622)
626,932 605,413
Tax effects of:
- income taxed at reduced rates 3,024 4,065
- income taxed under final tax regime 12,534 11,434
- income exempt from tax (576,778) (398,568)
- tax credit (28,425) (33,164)
- prior year (80,373) (37,165)
- expenses that are admissible / inadmissible in
determining taxable income 58,334 401,214
15,248 553,229

32. EARNINGS PER SHARE 2018 2017

Net profit for the year (Rupees in ‘000) 2,132,119 1,956,562
2014

Weighted average number of ordinary shares in issue 176,631,853 176,631,853

Earnings per share – basic Rs. 12.07 Rs. 11.08

32.1 There is no dilutive effect on basic earnings per share of the Company.

170
33. LINE - WISE RESULTS Note 2018
Line - I Line - II Total
(Rupees in ‘000)

Turnover – net 33.1 5,262,559 9,125,790 14,388,349

Cost of sales 33.2 (4,819,761) (6,429,392) (11,249,153)

Gross profit 442,798 2,696,398 3,139,196

Distribution costs 33.3 (124,782) (212,350) (337,132)
Administrative expenses 33.4 (90,745) (154,513) (245,258)
Other expenses 33.5 (20,036) (113,930) 2014
(133,966)
(235,563) (480,793) (716,356)

Other income 33.6 29,954 51,158 81,112

Operating profit 237,189 2,266,763 2,503,952

Finance costs 33.7 (56,216) (300,369) (356,585)

Profit before taxation 180,973 1,966,394 2,147,367

Taxation
Current (37,287) - (37,287)
Prior year 80,373 - 80,373
Deferred 405,595 (463,929) (58,334)
33.8 448,681 (463,929) (15,248)

Net profit for the year 629,654 1,502,465 2,132,119

33.1 TURNOVER – net

Local sales – net 4,009,144 8,823,115 12,832,259
Export sales – net 1,253,415 302,675 1,556,090

5,262,559 9,125,790 14,388,349

171
 33.2 COST OF SALES
2018
Line - I Line - II Total
(Rupees in ‘000)
Raw and packing material consumed
Opening stock - 120,557 120,557
Purchases 677,966 1,228,149 1,906,115
677,966 1,348,706 2,026,672
Closing stock (466) (145,713) (146,179)
677,500 1,202,993 1,880,493
Duty drawback on exports (4,866) (4,430) (9,296)
672,634 1,198,563 1,871,197
Manufacturing overheads
Salaries, wages and benefits 604,391 500,457 1,104,848
Stores and spare parts consumed 305,916 112,288 418,204
Fuel and power 2,901,311 3,260,276 6,161,587
Rent, rates and taxes 94,776 133,629 228,405
Insurance 64,908 47,153 112,061
Vehicle running expenses 30,307 41,504 71,811
Travelling and conveyance 12,053 3,736 15,789
Printing and stationery 1,332 1,835 3,167
Legal and professional charges 12,318 7,374 19,692
Laboratory expenses 70 136 206
Depreciation 270,504 787,947 1,058,451
Amortisation 1,478 1,875 3,353
Repairs and maintenance 30,888 15,264 46,152
Communication 1,185 1,564 2,749
Stores written-off 285 - 285
Others 7,185 8,207 15,392
5,011,541 6,121,808 11,133,349
Work-in-process 2014
Opening 130,711 425,910 556,621
Closing (310,551) (112,101) (422,652)
Cost of goods manufactured 4,831,701 6,435,617 11,267,318
Finished goods
Opening 62,604 104,038 166,642
Closing (74,544) (110,263) (184,807)
4,819,761 6,429,392 11,249,153

33.3 DISTRIBUTION COSTS

Salaries, wages and benefits 91,856 156,403 248,259
Export expenses 431 734 1,165
Travelling and conveyance 2,570 4,374 6,944
Staff training expenses 154 262 416
Vehicle running expenses 4,842 8,120 12,962
Communication 1,738 2,960 4,698
Printing and stationery 956 1,629 2,585
Rent, rates and taxes 4,385 7,466 11,851
Utilities 1,965 3,349 5,314
Repairs and maintenance 2,226 3,790 6,016
Insurance 1,158 1,973 3,131
Advertisement 4,758 8,102 12,860
Entertainment 990 1,685 2,675
Depreciation 5,128 8,736 13,864
Amortisation 11 17 28
License and subscription 669 1,140 1,809
Others 945 1,610 2,555
124,782 212,350 337,132

172
33.4 ADMINISTRATIVE EXPENSES 2018
Line - I Line - II Total
(Rupees in ‘000)
Salaries, wages and benefits 59,159 100,730 159,889
Travelling and conveyance 2,069 3,523 5,592
Staff training expenses 165 281 446
Vehicle running expenses 2,561 4,304 6,865
Communication 2,212 3,766 5,978
Printing and stationery 1,287 2,191 3,478
Rent, rates and taxes 1,414 2,408 3,822
Utilities 641 1,091 1,732
Repairs and maintenance 1,536 2,673 4,209
Legal and professional charges 9,702 16,519 26,221
Insurance 1,176 2,004 3,180
License and subscription 1,451 2,472 3,923
Advertisement 606 1,032 1,638
Depreciation 5,082 8,649 13,731
Amortisation 155 268 423
Entertainment 612 1,043 1,655
Others 917 1,559 2,476
90,745 154,513 245,258
33.5 OTHER EXPENSES

Workers’ Profits Participation Fund 9,527 103,492 113,019
Auditors’ remuneration 3,629 88 3,717
Donations 6,843 460 7,303
Share of loss from associate 37 - 37
Exchange loss - 9,890 9,890
20,036 113,930 133,966
33.6 OTHER INCOME

Income from financial assets
Profit on bank accounts – conventional banks 826 - 826
Dividend income from a related party
- Cherat Packaging Limited 20,160 - 20,160
20,986 - 20,986
Income from non-financial assets
Gain on disposal of operating property, plant and
equipment 4,977 - 4,977
Scrap sales 2,780 49,074 51,854
Miscellaneous income 1,211 2,084 3,295
8,968 51,158 60,126

29,954 51,158 81,112

33.7 FINANCE COSTS

Islamic banks
Mark-up on long-term financings - 250,647 250,647
Bank charges and commission 1,285 - 1,285
1,285 250,647 251,932
Conventional banks
Mark-up on long-term financings - 49,722 49,722
Mark-up on short-term borrowings 38,094 - 38,094
Bank charges and commission 15,215 - 15,215
53,309 49,722 103,031
Interest on workers’ profits participation fund 1,622 - 1,622

56,216 300,369 356,585

173
 33.8 TAXATION

2018
Line - I Line - II Total
(Rupees in ‘000)

Current (37,287) - (37,287)

Prior 80,373 - 80,373
Deferred 405,595 (463,929) (58,334)
448,681 (463,929) (15,248)

33.9 Operating property, plant and equipment

33.9.1 Operating property, plant and equipment – Line - I

CO ST DEPRICIATION Book Depreciation

2018 Value rate %
As at As at As at Charge As at as at
Description Additions/ for the per
July 01, June 30, July 01, Disposals June 30, June 30,
(disposals) year annum
2017 2018 2017 2018 2018
(Rupees in ‘000)

Freehold land 1,605 - 1,605 - - - - 1,605 -

Leasehold land 7,065 - 7,065 - - - - 7,065 -

Building on leasehold
land 652,037 72,874 724,911 404,292 - 32,116 436,408 288,503 7.5

Plant and machinery 6,002,604 118,179 6,066,022 3,545,797 165,819 3,662,570 2,403,452 5-7.5
(54,761) (49,046)
Power and other
installations 188,004 4,210 192,115 98,988 8,147 107,079 85,036 10-20
(99) (56)

Furniture and fittings 27,200 4,040 31,139 18,637 2,182 20,735 10,404 10-20
(101) (84)
Quarry, factory and
laboratory equipment 646,145 44,984 691,129 394,446 - 32,125 426,571 264,558 10-20

Motor vehicles 240,427 52,338 276,051 107,721 27,573 125,839 150,212 20
(16,714) (9,455)

Office equipment 23,023 20,402 43,268 11,881 2,866 14,685 28,583 10-20
(157) (62)

Computers 77,029 13,505 90,362 61,084 9,886 70,816 19,546 33.33
(172) (154)
7,865,139 330,532 8,123,667 4,642,846 280,714 4,864,703 3,258,964
(72,004) (58,857)

174
33.9.2 Operating property, plant and equipment – Line - II

CO ST DEPRICIATION Book
Depreciation
2018 Value
As at As at As at Charge As at rate %
as at
Description July 01, Additions June 30, July 01, Disposals for the June 30, June 30,
per
2017 2018 2017 year 2018 annum
2018
(Rupees in ‘000)
Building on leasehold land 1,958,038 18,081 1,976,119 73,426 - 133,758 207,184 1,768,935 7.5

Plant and machinery 6,007,969 79,782 6,087,751 224,061 - 455,348 679,409 5,408,342 5-7.5

Power and other
installations 2,066,190 35,800 2,101,990 103,331 - 205,877 309,208 1,792,782 10-20

Furniture and fittings 19,448 - 19,448 976 - 445 1,421 18,027 10-20

Quarry, factory and
laboratory equipment 19,880 1,252 21,132 4,835 - 7,499 12,334 8,798 10-20

Motor vehicles 6,407 - 6,407 1,377 - 1,160 2,537 3,870 20

Office equipment 13,709 1,985 15,694 1,037 - 389 1,426 14,268 10-20

Computers 5,795 50 5,845 1,402 - 856 2,258 3,587 33.33

10,097,436 136,950 10,234,386 410,445 - 805,332 1,215,777 9,018,609

33.10 STORES, SPARE PARTS AND LOOSE TOOLS 2018

Line - I Line - II Total

(Rupees in ‘000)

Stores 478,643 1,029,633 1,508,276

Spare parts 643,642 297,505 941,147
Loose tools 798 670 1,468
1,123,083 1,327,808 2,450,891
Stores and spare parts in transit 30,040 297,976 328,016
1,153,123 1,625,784 2,778,907

33.11 STOCK-IN-TRADE

Raw and packing material 466 145,713 146,179
Work-in-process 310,551 112,101 422,652
Finished goods 74,544 110,263 184,807
385,561 368,077 753,638

34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

175
 The Company’s senior management oversees the management of these risks. The Company’s senior
management provides policies for overall risk management, as well as policies covering specific areas
such as foreign exchange risk, interest rate risk and credit risk, use of financial derivatives, financial
instruments and investment of excess liquidity. It is the Company’s policy that no trading in derivatives
for speculative purposes shall be undertaken. The Board of Directors review and agree policies for
managing each of these risks which are summarized below: 

34.1 Market risk

Market risk is the risk that fair value of future cash flows will fluctuate because of changes in market
prices. Market prices comprise three types of risk: interest rate risk, currency risk and equity price risk
such as equity risk.

34.1.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate
because of changes in the market interest rates. The Company’s interest rate risk arises from long-term
and short-term borrowings obtained with floating rates. All the borrowings of the Company are obtained
in the functional currency. The following figures demonstrate the sensitivity to a reasonably possible
change in interest rate, with all other variables held constant, of the Company’s profit before tax:

(Increase) /decrease Effect on profit

in basis points before tax
2018
(Rupees in ‘000)

KIBOR +100 (49,639)

KIBOR -100 49,639

2017

KIBOR +100 (64,010)

KIBOR -100 64,010

34.1.2 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of the changes in foreign exchange rates. The Company’s exposure to the risk of
changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue
or expenses are denominated in a different currency from the Company’s functional currency).
2018 2017
(‘000)

Bills payable – US Dollar 3,119 1,889

The following exchange rates have been applied at reporting dates:
2018 2017
(Rupees)

Exchange rate – US Dollar 121.60 105.00

The management keeps on evaluating different options available for hedging purposes. The following
table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all
other variables held constant, of the Company’s equity.

176
 Change in rate (%) (Rupees in ‘000)
30 June 2018 - US Dollar +10 (39,927)
- 10 39,927
30 June 2017 – US Dollar +10 (19,835)
- 10 19,835

34.1.3 Equity price risk

The Company’s listed equity securities are susceptible to market price risk arising from uncertainties
about future values of the investment securities.

At the date of statement of financial position, the exposure to listed equity securities was Rs. 389.141
million. A decrease of 10% in the share price of these securities would have an impact of approximately
Rs. 38.91 million on the statement of other comprehensive income or statement of profit or loss account
depending whether or not the decline is below the cost of investment. An increase of 10% in the share
price of the listed security would impact statement of other comprehensive income with the similar
amount.

34.2 Credit risk

Credit risk is the risk which arises with the possibility that one party to a financial instrument will fail to
discharge its obligation and cause the other party to incur a financial loss. Concentrations of credit risk
arise when a number of counterparties are engaged in similar business activities or have similar economic
features that would cause their ability to meet contractual obligations to be similarly affected by changes
in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of
the Company’s performance to developments affecting a particular industry.

The Company seeks to minimize the credit risk exposure through having exposures only to customers
considered credit worthy and obtaining securities where applicable. The maximum exposure to credit risk
at the reporting date is:

Note 2018 2017

(Rupees in ‘000)
Trade debts 10 188,272 130,767

34.2.1 Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference
to external credit ratings or to historical information about counterparty default rates:
2018 2017
(Rupees in ‘000)
Long-term investments
Counter parties without credit rating 389,141 558,585

Bank balances
A1+ 43,156 37,259
A1 127 491
43,283 37,750
34.3 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company applies prudent liquidity risk management by maintaining sufficient cash and the
availability of funding through an adequate amount of committed credit facilities.

177
 The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual
undiscounted payments:
2018 2017
INTEREST / MARKUP / PROFIT BEARING NON- INTEREST / MARKUP / PROFIT BEARING NON-
Less than One to INTEREST Total Less than One to INTEREST Total
one year five years Total BEARING one year five years Total BEARING

(Rupees in ‘000)

Long-term financing 400,000 14,700,000 15,100,000 - 15,100,000 60,057 4,840,508 4,900,565 - 4,900,565

Long-term security-deposits - - - 17,667 17,667 - - - 15,741 15,741

Trade and other payables - - - 1,877,412 1,877,412 - - - 682,714 682,714

Accrued mark-up - - - 230,024 230,024 - - - 146,343 146,343

Short-term borrowings 963,947 - 963,947 - 963,947 1,500,411 - 1,500,411 - 1,500,411

Unclaimed dividend - - - 68,104 68,104 - - - 51,713 51,713

1,363,947 14,700,000 16,063,947 2,193,207

18,257,154 1,560,468 4,840,508 6,400,976 896,511 7,297,487

Effective interest / yield rates for the financial liabilities are mentioned in the respective notes to the
financial statements.

34.4 Capital risk management

The primary objective of the Company's capital management is to maintain healthy capital ratios, strong
credit rating and optimal capital structures in order to ensure ample availability of finance for its existing
and potential investment projects, to maximize shareholders value and reduce the cost of capital.

The Company manages its capital structure and makes adjustment to it, in light of changes in economic
conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of
dividend paid to shareholders, return capital to shareholders or issue new shares.

The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net
debt. Net debt is calculated as total loans and borrowings including any finance cost thereon, less cash
and cash equivalents.

The gearing ratios as at June 30, 2018 and 2017 are as follows:
2018 2017
(Rupees in ‘000)

Long-term financing 15,100,000 4,900,565

Accrued mark-up 230,024 146,343
Short-term borrowings 963,947 1,500,411
Total debt 16,293,971 6,547,319

Cash and cash equivalents (47,052) (45,814)
Net debt 16,246,919 6,501,505
Share capital 1,766,318 1,766,318
Reserves 9,407,430 8,695,389
Total capital 11,173,748 10,461,707

Capital and net debt 27,420,667 16,963,212

Gearing ratio 59.25% 38.33%

178
 The Company finances its expansion projects through equity, borrowings and management of its working
capital with a view to maintain an appropriate mix between various sources of finance to minimize risk.

34.5 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.

The carrying values of all financial assets and liabilities reflected in the financial statements approximate
fair values.

The following table shows assets recognised at fair value, analysed between those whose fair value is
based on:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Those involving inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices); and

Level 3: Those whose inputs for the asset or liability that are not based on observable market data
(unobservable inputs).

The table below categorized fair value measurement of financial instruments and property , plant and
equipment by the level in the fair value hierarchy into which the fair value measurement is categorised:

Note 2018
Level 1 Level 2 Level 3 Total
(Rupees in ‘000)
Available-for-sale securities 34.5.1 389,141 - - 389,141
Property, plant and equipment 34.5.2 - 32,131,856 - 32,131,856
389,141 32,131,856 - 32,520,997

2017
Level 1 Level 2 Level 3 Total
(Rupees in ‘000)

Available-for-sale securities 34.5.1 558,585 - - 558,585

Property, plant and equipment 34.5.2 - 21,327,164 - 21,327,164
558,585 21,327,164 - 21,885,749

During the year, there were no transfers between level 1 and level 2 fair value measurements, and no
transfers into and out of level 3 fair value measurement.

34.5.1 Financial instruments which are tradable in an open market are revalued at the market prices prevailing
on the statement of financial position date.

34.5.2 Fair value of property, plant and equipment is based upon the present market values for similar plant,
machinery, equipment and building including land, which is based upon similar sized plots in the vicinity
of land and replacement values of similar type of assets based upon present cost. However, the Company
is following cost model for valuation of its property, plant and equipment.

179
 35. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
2018 2017

Chief Chief Executives
Executives
Executive Executive Restated
(Rupees in ‘000)
Managerial remuneration 25,684 198,244 22,556 172,218
Bonus 12,592 100,661 11,028 95,092
Housing allowance 1,452 75,302 1,452 64,362

Retirement benefits 4,197 25,807 3,676 21,216
Utilities 1,041 16,541 895 14,150
Leave fare assistance 2,099 16,777 1,838 15,849
47,065 433,332 41,445 382,887

Number 1 61 1 52

35.1 The Chief Executive and an executive have been provided with furnished accommodation. Further, the
Chief Executive and certain executives are provided with the use of company maintained cars, telephone
facility, utilities and some other facilities, which are reimbursed at actual to the extent of their entitlements.

35.2 The aggregate amount charged in the financial statements for meeting fee to 7 non – executive directors
amounted to Rs. 1.84 million (2017: 7 directors - Rs. 2.08 million).

35.3 No remuneration was paid to any of the directors other than the Chief Executive.

36. TRANSACTIONS WITH RELATED PARTIES

Related parties comprise of associates, directors, executives and retirement funds. Transactions with
related parties, other than those disclosed elsewhere in the financial statements, are as follows:
2018 2017
Relationship Nature of transactions
(Rupees in ‘000)

Associate Purchases 1,350,186 874,005
Sale of goods 67,013 11,029
Sale of fixed assets 1,739 -
IT support charges 17,784 13,518
Dividend received 20,160 21,973
Dividend paid 225,771 159,865
Investments made 36,700 98,076

In addition, certain actual administrative expenses are being shared amongst the group companies.

36.1 Following are the related parties with whom the Company had entered into transactions or have
arrangement / agreement in place.

Name Basis of association Aggregate % of Shareholding

Cherat Packaging Ltd. Common directorship 2.74
Faruque (Private) Ltd. Common directorship 21.66
Greaves Pakistan (Private) Ltd. Common directorship 1.25
Mirpurkhas Sugar Mills Ltd. Common directorship 3.27
Zensoft (Private) Limited Common directorship 0.01
Madian Hydro Power Ltd. Common directorship -
UniEnergy Ltd. Common directorship -
Greaves Airconditioning (Private) Ltd. Common directorship -
Jubilee General Insurance Company Ltd. Common directorship -

180
 Name Basis of association Aggregate % of Shareholding

International Industries Limited Common directorship -

Indus Motors Company Limited Common directorship -
Cherat Cement Company Limited –
Employees’ Provident Fund Retirement benefit fund 0.72
Cherat Cement Company Limited –
Employees’ Gratuity Fund Retirement benefit fund 2.01

36.1.1 None of the key management personnel had any arrangements with the Company other than the
employment contract.

37. NUMBER OF EMPLOYEES

The total number of employees and average number of employees at year end and during the year
respectively are as follows:
2018 2017
(Number)
Total Factory Total Factory

Total number of employees 885 748 749 621

Average number of employees
during the year 817 685 665 548

2018 2017
38. PRODUCTION CAPACITY Tons

Annual installed capacity – Clinker 2,310,000 2,310,000
Annual installed capacity – Cement 2,425,500 2,425,500
Actual production – Clinker 2,234,491 1,518,520
Actual production – Cement 2,442,567 1,489,489

Actual production of Clinker is slightly less than the installed capacity due to planned maintenance shut
down and in line with the industry demand.

39. OPERATING SEGMENTS

These financial statements have been prepared on the basis of a single reportable segment.

All sales of the Company comprise of cement and clinker.

Total sales of the Company relating to customers in Pakistan were 89% during the year ended June 30,
2018 (2017: 89%).

All non-current assets of the Company at the end of the current and preceding year were located in
Pakistan .

Sales to twenty major customers of the Company are around 42% of the Company’s total sales during the
year (2017: 51%).

40. DATE OF AUTHORISATION

These financial statements were authorised for issue on August 29, 2018 by the Board of Directors of the
Company.

181
 41. DIVIDEND AND APPROPRIATIONS

Subsequent to year ended June 30, 2018, the Board of Directors in its meeting held on August 29, 2018
has proposed final cash dividend @ Rs. 4/- per share amounting to Rs. 706.52 million (2017: Rs. 3.50/-
per share amounting to Rs. 618.21 million) for approval of the members at the Annual General Meeting.
This is in addition to the interim cash dividend @ Re. 1/- per share amounting to Rs. 176.63 million
(2017: Re. 1/- per share amounting to Rs. 176.63 million) approved by the Board of Directors for the year
ended June 30, 2018.

42. GENERAL

42.1 Corresponding figures have been changed wherever necessary in line with changes enacted through
the Act.

42.2 Figures have been rounded off to the nearest thousand of Rupees unless otherwise stated.

Omar Faruque Azam Faruque Yasir Masood

Chairman Chief Executive Chief Financial Officer

182
 Pattern of Shareholding
as at June 30, 2018

No. of Shareholding
Shares Held
Shareholders From To
732 1 100 31,312
1197 101 500 423,552
623 501 1000 525,535
1111 1001 5000 2,998,804
392 5001 10000 3,057,228
154 10001 15000 1,916,852
104 15001 20000 1,876,431
85 20001 25000 1,973,118
34 25001 30000 961,516
30 30001 35000 976,525
21 35001 40000 799,274
21 40001 45000 867,419
25 45001 50000 1,206,433
14 50001 55000 725,230
7 55001 60000 404,734
7 60001 65000 436,249
8 65001 70000 536,401
8 70001 75000 582,576
2 75001 80000 152,660
15 80001 85000 1,238,953
2 85001 90000 174,581
5 90001 95000 462,305
18 95001 100000 1,788,465
5 105001 110000 538,864
1 110001 115000 114,374
6 115001 120000 715,039
3 120001 125000 372,500
4 125001 130000 512,290
1 130001 135000 135,000
1 135001 140000 138,600
2 145001 150000 295,800
1 150001 155000 154,884
1 160001 165000 161,091
2 175001 180000 356,956
1 180001 185000 181,900
2 185001 190000 371,854
1 190001 195000 193,065
1 195001 200000 200,000
2 200001 205000 402,986
1 230001 235000 231,500
2 235001 240000 475,727
1 240001 245000 241,631
1 245001 250000 245,723
2 250001 255000 505,898
2 255001 260000 515,100
1 265001 270000 266,000
2 270001 275000 548,000
1 275001 280000 275,160
1 285001 290000 289,100
2 295001 300000 600,000
1 330001 335000 334,784
1 345001 350000 350,000
1 350001 355000 351,000
1 355001 360000 360,000
1 365001 370000 367,600
1 375001 380000 377,000
1 395001 400000 400,000
1 410001 415000 414,400
1 435001 440000 439,500
1 450001 455000 451,391
1 465001 470000 470,000
1 485001 490000 488,500

183
 No. of Shareholding
Shares Held
Shareholders From To

1 495001 500000 500,000

2 520001 525000 1,043,860
1 595001 600000 600,000
1 600001 605000 603,600
1 615001 620000 617,234
1 620001 625000 624,800
2 675001 680000 1,354,850
1 695001 700000 695,076
1 710001 715000 710,900
1 715001 720000 719,192
1 725001 730000 725,784
1 735001 740000 736,143
1 740001 745000 741,000
1 745001 750000 750,000
1 765001 770000 769,000
1 780001 785000 780,300
1 785001 790000 787,500
1 805001 810000 805,343
1 825001 830000 829,200
1 865001 870000 867,000
1 885001 890000 890,000
1 890001 895000 891,200
1 910001 915000 914,300
1 950001 955000 954,700
1 970001 975000 975,000
1 995001 1000000 995,109
1 1075001 1080000 1,075,689
1 1120001 1125000 1,121,250
2 1205001 1210000 2,417,154
1 1230001 1235000 1,230,900
2 1240001 1245000 2,484,255
1 1280001 1285000 1,282,802
1 1360001 1365000 1,360,940
1 1405001 1410000 1,406,633
1 1590001 1595000 1,591,626
1 1715001 1720000 1,716,597
1 1735001 1740000 1,739,578
1 1795001 1800000 1,798,000
1 1945001 1950000 1,948,979
1 2125001 2130000 2,127,358
1 2195001 2200000 2,199,093
1 2540001 2545000 2,544,200
1 2860001 2865000 2,861,361
1 3135001 3140000 3,139,803
1 3210001 3215000 3,214,164
1 4005001 4010000 4,007,500
1 4090001 4095000 4,093,533
1 4240001 4245000 4,243,362
1 4740001 4745000 4,743,600
1 5445001 5450000 5,445,508
1 5770001 5775000 5,770,252
1 6435001 6440000 6,437,212
1 7520001 7525000 7,523,358
1 38265001 38270000 38,266,685

4735 176,631,853

184
Categories of Shareholding
as at June 30, 2018
No. of
Shareholders’ Category Shareholders Shares Held Percentage

Directors, Chief Executive and their spouse(s) and minor children

MR. OMAR FARUQUE 1 2,171,485 1.23
MRS. SHAMAIN AKBAR FARUQUE W/O MR. OMAR FARUQUE 1 360,000 0.20
MR. AZAM FARUQUE 1 2,505,401 1.42
MRS. SAMIA FARUQUE W/O MR. AZAM FARUQUE 1 52,710 0.03
MR. AKBARALI PESNANI 1 83,013 0.05
MRS. SAKINA PESNANI W/O MR. AKBARALI PESNANI 1 65,893 0.04
MR. ARIF DINO FARUQUE 1 3,024,668 1.71
MR. SHEHRYAR FARUQUE 1 1,205,094 0.68
MR. SAQUIB [Link] 1 59,001 0.03
MR. ASIF QADIR 1 500 0.00

Associated Companies, undertakings and related parties
FARUQUE (PRIVATE) LIMITED 1 38,266,685 21.66
CHERAT PACKAGING LIMITED 2 4,843,362 2.74
MIRPURKHAS SUGAR MILLS LIMITED 1 5,770,252 3.27
ZENSOFT (PRIVATE) LIMITED 1 20,000 0.01
GREAVES PAKISTAN (PRIVATE) LIMITED 1 2,199,093 1.25

Executive 1,437,433 0.81

Public Sector Companies and Corporations 7 1,326,564 0.75

Banks, development finance institutions, non-banking finance companies,
insurance companies, takaful, modarabas and pension funds 41 17,603,358 9.97

Mutual Funds
CDC - TRUSTEE ALHAMRA ISLAMIC STOCK FUND 1 414,400 0.23
CDC - TRUSTEE MEEZAN BALANCED FUND 1 769,000 0.44
CDC - TRUSTEE AKD INDEX TRACKER FUND 1 23,096 0.01
CDC - TRUSTEE AL MEEZAN MUTUAL FUND 1 1,360,940 0.77
CDC - TRUSTEE MEEZAN ISLAMIC FUND 1 6,437,212 3.64
CDC - TRUSTEE UBL STOCK ADVANTAGE FUND 1 954,700 0.54
CDC - TRUSTEE AL-AMEEN SHARIAH STOCK FUND 1 1,208,900 0.68
CDC - TRUSTEE ALFALAH GHP ISLAMIC STOCK FUND 1 47,000 0.03
CDC - TRUSTEE NIT-EQUITY MARKET OPPORTUNITY FUND 1 695,076 0.39
MCFSL-TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND 1 20,000 0.01
CDC - TRUSTEE ASKARI EQUITY FUND 1 22,000 0.01
CDC - TRUSTEE NATIONAL INVESTMENT (UNIT) TRUST 1 7,523,358 4.26
CDC - TRUSTEE NIT ISLAMIC EQUITY FUND 1 710,900 0.40
CDC - TRUSTEE AL AMEEN ISLAMIC DEDICATED EQUITY FUND 1 2,127,358 1.20
CDC - TRUSTEE MEEZAN ASSET ALLOCATION FUND 1 256,000 0.14
CDC - TRUSTEE UBL CAPITAL PROTECTED FUND-III 1 33,500 0.02
CDC - TRUSTEE FAYSAL STOCK FUND 1 13,500 0.01
CDC - TRUSTEE ALFALAH GHP VALUE FUND 1 27,200 0.02
CDC - TRUSTEE NAFA STOCK FUND 1 1,242,700 0.70
CDC - TRUSTEE NAFA ISLAMIC ASSET ALLOCATION FUND 1 829,200 0.47
CDC - TRUSTEE ALFALAH GHP STOCK FUND 1 30,500 0.02
CDC - TRUSTEE ALFALAH GHP ALPHA FUND 1 11,000 0.01
CDC- TRUSTEE NAFA ASSET ALLOCATION FUND 1 181,900 0.10
MCBFSL - TRUSTEE PAK OMAN ADVANTAGE ASSET ALLOCATION FUND 1 12,500 0.01
MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET ALLOCATION FUND 1 31,500 0.02
CDC - TRUSTEE UBL ASSET ALLOCATION FUND 1 266,000 0.15
CDC - TRUSTEE AL-AMEEN ISLAMIC ASSET ALLOCATION FUND 1 603,600 0.34
CDC - TRUSTEE UBL RETIREMENT SAVINGS FUND - EQUITY SUB FUND 1 145,800 0.08
CDC - TRUSTEE ABL PENSION FUND - EQUITY SUB FUND 1 12,500 0.01
CDC - TRUSTEE NAFA ISLAMIC STOCK FUND 1 780,300 0.44
CDC - TRUSTEE NITIPF EQUITY SUB-FUND 1 7,500 0.00

185
 No. of
Shareholders’ Category Shareholders Shares Held Percentage

CDC- TRUSTEE NITPF EQUITY SUB-FUND 1 7,500 0.00

CDC - TRUSTEE NAFA ISLAMIC ACTIVE ALLOCATION EQUITY FUND 1 289,100 0.16
CDC - TRUSTEE UNIT TRUST OF PAKISTAN 1 1,500 0.00
CDC- TRUSTEE ALHAMRA ISLAMIC ASSET ALLOCATION FUND 1 50,000 0.03
CDC - TRUSTEE FAYSAL ASSET ALLOCATION FUND 1 20,000 0.01
CDC - TRUSTEE NAFA MULTI ASSET FUND 1 82,800 0.05
CDC - TRUSTEE MCB DCF INCOME FUND 1 2,500 0.00
CDC - TRUSTEE FIRST CAPITAL MUTUAL FUND 1 15,000 0.01
CDC - TRUSTEE FAYSAL SAVINGS GROWTH FUND - MT 1 50,000 0.03
CDC - TRUSTEE FAYSAL ISLAMIC ASSET ALLOCATION FUND 1 50,000 0.03
CDC - TRUSTEE FAYSAL MTS FUND - MT 1 13,500 0.01
CDC - TRUSTEE UBL INCOME OPPORTUNITY FUND - MT 1 5,000 0.00
CDC - TRUSTEE ALFALAH GHP ISLAMIC DEDICATED EQUITY FUND 1 14,500 0.01
CDC - TRUSTEE - MEEZAN DEDICATED EQUITY FUND 1 96,500 0.05
CDC - TRUSTEE ALFALAH GHP ISLAMIC VALUE FUND 1 21,000 0.01


General Public
a. Local 4380 36,155,567 20.47
b. Foreign 57 765,819 0.43
Foreign Companies 27 8,963,298 5.07
OTHERS 158 22,234,617 12.59
Totals 4735 176,631,853 100.00

Shares Held Percentage

Shareholders holding 5% or more
FARUQUE (PRIVATE) LIMITED 38,266,685 21.66

186
187
 [Link]

188
189
190
191
192
193
Proxy Form
37th Annual
General Meeting

Registered folio / participant’s

ID No. and A/c. No.
Important
Instruments of Proxy will not be considered as valid unless
deposited or received at the Company’s Head Office at
Number of shares held:
Modern Motors House, Beaumont Road, Karachi-75530 not
later than 48 hours before the time of holding the meeting.

I / We

of

being a member of CHERAT CEMENT COMPANY LIMITED, hereby appoint

of another member of the Company as my / our

proxy to attend, speak & vote for me / us and on my / our behalf at the 37th Annual General meeting of the

Company to be held Tuesday, October 16, 2018 at 12:00 noon at the Registered Office of the Company

at Factory premises, Village Lakrai, Nowshera, Khyber Pakhtunkhwa and at any adjournment thereof.

WITNESSES

1. Signature:
Name:
Address:
Signature of Revenue
Shareholder Stamp
CNIC or
Passport No.

2. Signature:
Name:
Address:

CNIC or (Signature should agree with the

specimen signature registered
Passport No. with the Company)

Note: SECP’ circular of January 26, 2000 is on the reverse side of this form.
 37

12 16
Circular

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

STATE LIFE BUILDING, 7- BLUE AREA

Islamabad, January 26, 2000

Circular No. 1 of 2000

Sub: Guidelines for Attending General Meeting and Appointment of Proxies

The shares of a number of listed companies are now being maintained as “book entry security” on the Central
Depository System (CDS) of the Central Depository Company of Pakistan Limited (CDC). It has come to the notice
of the Commission that there is some confusion about the authenticity of relevant documents in the matter of
beneficial owners of the shares registered in the name of CDC for purposes of attending the general meetings and
for verification of instruments of proxies. The issue has been examined and pending the further instructions to be
issued in this regard, the following guideline for the convenience of the listed companies and the beneficial owners
are laid down:

A. Attending of meeting in person by account holders and/or sub-account holders and persons whose securities
are in group account and their registration details are uploaded to CDS:

(1) The company shall obtain list of beneficial owners from the CDC as per Regulation # 12.3.5 of the CDC
Regulations.
(2) 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 up-loaded as per the Regulations, shall authenticate his
identity by showing his original National Identity Card (NIC) or original passport at the time of attending
the meeting.
(3) In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature
of the nominee shall be produced at the time of the meeting.

B. Appointment of Proxies

(1) In case of individual, 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 requirement notified by the company.
(2) The proxy form shall be witnessed by the two persons whose names, addresses and NIC numbers shall be
mentioned on the form.
(3) Attested copies of NIC or the passport of the beneficial owners and the proxy shall be furnished with the
proxy form.
(4) The proxy shall produce his original NIC or original passport at the time of the meeting.
(5) In case of corporate entity, the Board of Directors resolution/power of attorney with specimen signature
shall be submitted along with proxy form to the company.
E-Dividend Mandate Form

To: Date: ____________

I hereby communicate to receive my future dividends directly in my bank account as detailed below:

Shareholder’s Detail

Name of Company Cherat Cement Company Limited

Name of shareholder

Folio No./CDC Participants ID A/c No.

CNIC No

Passport No. (in case of foreign shareholder)

Cell Number & Land Line Number

Email Address (Mandatory)

Shareholder’s Bank Detail

Title of Bank Account (Mandatory)

International Bank Account Number (IBAN) ‐ Mandatory (24 Digits)

P K
Bank’s Name
Branch Name and Address

It is stated that the above mentioned information is correct and in case of any change therein, I will immedi-
ately intimate Participant / Share Registrar accordingly.

Yours sincerely

___________________
Signature of Shareholder
(Please affix company stamp in case of corporate entity)
Notes:
COMPANY WITHHOLD THE PAYMENT OF DIVIDEND OF A MEMBER WHERE THE MEMBER HAS NOT PROVIDED THE COM-
PLETE INFORMATION OR DOCUMENTS AS SPECIFIED.
The shareholders who hold shares in Central Depository Company are requested to submit the above- mentioned Dividend Mandate
Form, duly filled‐in, to the relevant Broker/Participants/Investor Account Services of the Central Depository Company of Pakistan
Limited where Member’s CDC account is being [Link] shareholders who hold shares in physical form are requested to submit the
above‐mentioned Dividend Mandate Form, duly filled‐in, to the share Registrar of the Company, as mentioned below:

M/s Central Depository Company of Pakistan Limited

CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahra-e-Faisal, Karachi-74400, Pakistan
Tel: 0800-23275, 111-111-500, Fax: 021-34326053