interim financial information nine months period ended ... & company chartered accountants...

InterimFinancialInformationNineMonthsPeriodended

MARCH31,2016

QUARTERLYREPORT2016

COMPANYINFORMATION

AuditorsBoardofDirectors

M/s.TariqAbdulGhani

Maqbool&Company

CharteredAccountants

Bankers

NationalBankofPakistan

UnitedBankLimited

SummitBank

LegalAdvisor

SardarZul�iqarUmarKhanThahim

RegisteredOf�ice

Mr.SyedKaukabMohyuddin

(Chairman)

Mr.MairajAneesAriff

(ChiefExecutive)

Mr.ArifIbrahim

Mr.MuhammadArifHabib

Mr.RashidAliKhan

Mr.LiaqatMohammad

Mr.MuhammadIqbal

MirzaMahmoodAhmad

Mr.AnsarJaved

BoardAudit&

RiskManagementCommittee

6/7-SirGangaRamTrustBuilding,

Shahrah-e-Quaid-e-Azam,Lahore.

Phones:04237320225-7

FaxNo.:04237323108

E-Mail:[email protected]

Website:http://www.peco.com.pk

Plants:KotLakhpat,Lahore.

MirzaMahmoodAhmad

(Chairman)

Mr.LiaqatMohammad

Mr.MuhammadIqbal

Mr.AnsarJaved

BoardFinanceCommittee

Mr.RashidAliKhan

(Chairman)

Mr.ArifIbrahim

Mr.LiaqatMohammad

BoardHR&Remuneration

Committee

Mr.ArifIbrahim

(Chairman)

Mr.MuhammadIqbal

Mr.RashidAliKhan

CFO&CompanySecretary

MianAnwarAziz

SharesRegistrarCentralDepositoryCompany

ofPakistanLimited

2ndFloor,307-UpperMall

OppositeLahoreGymkhana

NearMianMirBridgeLahore.54000

DIRECTORS’REPORT

(CHIEFEXECUTIVE)MAIRAJANEESARIFF

LahoreDated:April27,2016

DearShareholders

Assalam-o-Alaikum

Onbehalfof theBoard, I feel immensepleasure topresent thereviewof theCompany’sperformanceandtheun-audited�inancialstatementsfortheninemonthsperiodendingMarch31,2016.

During the period under review operational performance, in terms of sales,production and pro�itability was much better. The Company executed itsorderswell in time due to uninterrupted supply of rawmaterial and better�inancialmanagement.PresentlyCompanyhasorders inhandworthRupees1.429billionwhichareatgoodmargins.DuringthisquarterNationalBankofPakistan has enhanced credit facilities by 150% in favor of your Company,whichwillhelpinbetter�inancialmanagementinthenextquarteroftheyear.

PerformanceOutLook

FinancialResults

ThesalesduringtheperiodendingMarch31,2016wasRupees1,460millionas againstRupees 452millionduring the correspondingperiodof last year,showinganincreaseofRupees1,007.80million(223%).TheCompanyearneda gross pro�it of Rupees 268.07million against gross pro�it of Rupees 67.75millioncomparedwithsameperiod lastyear,depictingan increaseof296%.The net pro�it before tax was Rupees 170.44 million against net pro�it ofRupees16.61millionofsameperiodlastyear,whichisaremarkableincreaseof926%.

TheManagement of your Company is striving hard tomaintain its positivetrendinsalesandpro�itabilityfortheremainingperiodoftheyear.

FutureOutlook

Thecurrentordersareongoodpricesandreasonablemargins.Furthermore,even though this year's fourth quarter has just begun, theManagement hasalreadysecuredordersworthRupees1.245billion fornextyear'sevaluationand execution. The Management of your Company is working hard tostrengthenitsorderbook,increaseproductionandminimizeproductioncosts.Keepinginviewtheordersinhandandprospectivebusinessoftransmissionlinetowersandtelecommunicationtowers,itisanticipatedthatperformanceofyourCompanyduringthenextquarterwouldbepromising.

Acknowledgement

I take this opportunity to thank all our valued Customers, Suppliers andBankersfortheircon�idenceandcontinuedsupportaswellasstaffmembersfor their dedication and hardwork. Iwould also like to thank our Board ofDirectors for their guidance and support for the improvement of Company’sbusinessandgoodwill.

IlookforwardtoamuchbetterfutureoftheCompany,insha'Allah.

OnbehalfoftheBoard

EQUITYANDLIABILITIESSHARECAPITALANDRESERVESSharecapital 56,902

56,902

Revenuereserve-general 10,000 10,000Accumulatedloss (1,029,521) (1,165,358)

(962,619)

(1,098,456)

Theannexednotesformanintegralpartofthiscondensedinterim�inancialinformation.

CONDENSEDINTERIMBALANCESHEET(UN-AUDITED)

ASATMARCH31,2016

Note

------(Rupeesin‘000)------

March31,2016

June30,2015

8,559,413Surplusonrevaluationof�ixedassets 8,544,447

1,859,10457,059

1,916,163

1,844,47679,611

1,924,087

NON-CURRENTLIABILITIESLongterm�inancesDeferredliabilities

984,329 526,01219,995 20,00019,503 19,5032,200 3,09930,232 9,553

1,056,259 578,167

CURRENTLIABILITIESTradeandotherpayablesShorttermborrowing-securedCurrentportionoflongtermborrowingsMark-upaccruedProvisionfortaxation

4

5

6

7

10,562,174 9,955,287

CONTINGENCIESANDCOMMITMENTS

TOTALEQUITYANDLIABILITIES

8,588,036

8,590,002

314,724

ASSETSNON-CURRENTASSETSProperty,plantandequipmentInvestmentpropertyLongterminvestmentLongtermdeposits

8,565,945618725

1,8318,569,119

642704620

Freeholdland-heldforsale 314,724

CURRENTASSETSStores,sparesandloosetoolsStock-in-tradeTradedebts

Advances

Tradedeposits,prepaymentsandotherreceivables

Advanceincometax

Cashandbankbalances

126,382543,974758,207

7,876

25,365

132,669

83,8581,678,331

131,772411,431381,153

9,196

27,377

67,132

22,5001,050,561

TOTALASSETS 10,562,174 9,955,287

MUHAMMADIQBAL(DIRECTOR)(CHIEFEXECUTIVE)

MAIRAJANEESARIFF

746,903(588,787)158,116

CONDENSEDINTERIMPROFITANDLOSSACCOUNT(UN-AUDITED)

FORTHENINEMONTHSPERIODENDEDMARCH31,2016

Sales-netCostofsales 8

CONDENSEDINTERIMSTATEMENTOFCOMPREHENSIVEINCOME(UN-AUDITED)


9

Note

Note

--------(Rupeesin‘000)--------2016 2015 2016 2015

QuarterendedMarch31, NineMonthsendedMarch31,

--------(Rupeesin‘000)--------

March31,2016 March31,2015

111,203(91,695)

1,459,977(1,191,903)

452,185(384,440)

GROSSPROFIT 19,508 268,074 67,745

SellinganddistributionexpensesFreightandforwardingexpensesAdministrativeexpensesOtheroperatingcharges

(1,487)(2,967)(11,193)(30,772)

(1,284)(1,217)

(11,930)

(790)

(4,211)

(11,010)

(39,142)(36,223)

(4,079)

(6,502)

(36,961)(3,070)

(50,612)(90,586)(15,221)(46,419)

Otheroperatingincome 2,264 3,894 4,284 16,052OPERATINGPROFIT 113,961 8,181 181,772 33,185Financecost (3,638) (5,991) (11,329) (16,571)PROFITBEFORETAXATIONFORTHEPERIOD

110,323 2,190 170,443 16,614

TAXATION-Current-Prior-Deferred

(18,755)

-

(11,724)

(1,112)- --

(28,975)(1,256)(19,341)

(4,522)

(2,971)

PROFITAFTERTAXATIONFORTHEPERIOD

(30,479) (1,112) (49,572) (7,493)79,844

1,078 120,871 9,121

PROFITPERSHARE-BASIC&DILUTED-Rupees 14.03 0.19 21.24 1.60


--------(Rupeesin‘000)--------

NineMonthsendedMarch31,QuarterendedMarch31,

2016 2015 2016 2015

PROFITAFTERTAXATIONFORTHEPERIOD 79,844

1,078

120,871 9,121

Othercomprehensiveincome

TOTALCOMPREHENSIVEINCOME

- - - -

79,844

1,078

120,871 9,121



MAIRAJANEESARIFF

CONDENSEDINTERIMCASHFLOWSTATEMENT(UN-AUDITED)FORTHENINEMONTHSPERIODENDEDMARCH31,2016

Cashgeneratedfrom/(usedin)operationsFinancecostpaid

Workers'welfarefundpaid

GratuitypaidIncometaxpaid

165,365

(10,960)(281)

(75,089)

(36)(1,211)

(10,047)(23,137)

--

(11,555)

Netcashgeneratedfrom/(usedin)operatingactivities 77,788 (44,788)

CASHFLOWSFROMINVESTINGACTIVITIES

FixedcapitalexpenditureCapitalwork-in-progressProceedsfromdisposalofProperty,plantandequipment

(Increase)inLongtermdeposits

Netcash(usedin)/generatedfrominvestingactivities

(9,870)

2,276

5,797

(1,797)

(654)

27,458

20,000-

20,000

(124)

26,680

CASHFLOWSFROMFINANCINGACTIVITIESShorttermborrowingsLongtermborrowings-(repayments)

(5)(14,628)

Netcash(usedin)/generatedfrom�inancingactivities (14,633)

NETINCREASEINCASHANDCASHEQUIVALENTS

CASHANDCASHEQUIVALENTSATTHEBEGINNINGOFTHEPERIOD

CASHANDCASHEQUIVALENTSATTHEENDOFTHEPERIOD

61,358

1,892

22,500 7,151

83,858 9,043

Theannexednotesformanintegralpartofthese�inancialstatements.

(49)


---

-

---

-duringtheperiodonaccountof:

---

---

---

-

---

--

FORTHENINEMONTHSPERIODENDEDMARCH31,20161 THECOMPANYANDITSOPERATIONS

2 BASISOFPREPARATION2.1StatementofCompliance

Revenuereserve-General

Accumulatedloss TOTAL

----------------------------(Rupeesin‘000)-----------------------------

ShareCapital

BalanceasatJuly01,2014(Audited)-asrestated 56,902 10,000(1,238,882) (1,171,980)

Totalcomprehensivepro�itfortheperiod-Pro�itfortheperiodended31March2015-Othercomprehensiveincome

Surplusonrealizationof�ixedassetsrealized

-incrementaldepreciationchargedthereon-netoftax-disposalofrevaluedmachinery-netoftax

-9,121

9,121

11,4376,445

-9,121

9,121

11,4376,445

BalanceasatMarch31,2015(Un-audited)Totalcomprehensivepro�itfortheperiod-Pro�itfortheperiodended30June2015-Othercomprehensiveincome

Surplusonrealizationof�ixedassetsrealizedduringtheperiodonaccountof:-incrementaldepreciationchargedthereon-netoftax-disposalofrevaluedmachinery-netoftax

-36,151

36,151

6,9003,470

-36,151

36,151

6,9003,470

BalanceasatJune30,2015(Audited)Totalcomprehensivepro�itfortheperiod-Pro�itfortheperiodended31March2016-Othercomprehensiveincome

-incrementaldepreciationchargedthereon-netoftax

Surplusonrealizationof�ixedassetsrealizedduringtheperiodonaccountof:

-disposalofrevaluedmachinery-netoftax

-120,871

120,871

12,7232,243

-120,871

120,871

12,7232,243

BalanceasatMarch31,2016(Un-audited)



MAIRAJANEESARIFF

Pakistan Engineering Company Limited was incorporated Pakistan on February 15,

1950under the CompaniesAct, 1913 (NowCompaniesOrdinance,1984) as a public

limitedcompanyandlistedonPakistanStockExchangeLimited(PSXL).Thecompanyis

principallyengagedin themanufacturingandsaleofengineeringproducts.Themajor

productsoftheareelectricitytransmissionandcommunicationtowers,electricmotors,

pumpsandsteelrolledproductsetc.Theregisteredof�iceoftheCompanyissituatedat

6/7GangaRamTrustBuilding,Shahrah-e-Quaid-e-Azam,Lahore.

Thiscondensedinterim�inancialinformationisunauditedandisbeingsubmittedtothe

membersinaccordancewithsection245oftheCompaniesOrdinance,1984.Ithasbeen

preparedinaccordancewiththerequirementsoftheInternationalAccountingStandard

(IAS)34-’InterimFinancialReporting’andprovisionsofanddirectivesissuedunderthe

companies Ordinance, 1984. In case where requirements differ, the provisions of or

directivesissuedundertheCompaniesOrdinance,1984hasbeenfollowed.

Thesecondensedinterim�inancialinformationispresentedinPakistanRupeewhichis

alsotheCompany'sfunctionalcurrencyandall�inancialinformationpresentedhasbeen

roundedofftothenearestthousand.

2.2Estimates,judgmentsand�inancialriskmanagement

The preparation of interim interim information requires management to makejudgments, estimatesandassumption thataffect theapplicationofaccountingpoliciesand the reportedamountof assets, liabilities, incomeandexpenses.Actual resultmaydifferfromtheseestimates.

In preparing these condensed interim �inancial information, the signi�icant judgmentsmadebythemanagementisapplyingtheCompany'saccountingpoliciesandkeysourcesofestimationuncertaintywerethesameasthoseappliedtothe�inancialstatementsasatandfortheyearendedJune30,2015.

CONDENSEDINTERIMSTATEMENTOFCHANGESINEQUITY(UN-AUDITED)

(1,144,977)(1,211,879)10,00056,902

(1,098,456)(1,165,358)10,00056,902

(962,619)(1,029,521)10,00056,902

NOTESTOANDFORMINGPARTOFTHECONDENSEDINTERIMFINANCIALINFORMATION(UN-AUDITED)

3 ACCOUNTINGPOLICIES

4.1

5.1


--------(Rupeesin‘000)--------

(Un-audited)

March31,2016

(Audited)

June30,2015

--------(Rupeesin‘000)--------

(Un-audited)

March31,2016

(Audited)

June30,2015

Theaccountingpoliciesandmethodsofcomputationappliedinthepreparationofthiscondensed interim �inancial information are the same as those applied in thepreparationofannual�inancialstatementsoftheCompanyfortheprecedingyearJune30,2015.

Thiscondensedinterim�inancial informationdoesnot includeall the informationanddisclosuresrequiredforfull�inancialstatements,andshouldbereadinconjunctionwiththecompany'sauditedannual�inancialStatementsfortheyearendedJune30,2015.

4 LONGTERMFINANCES

Loanfrombankingcompanies-SecuredGovernmentofPakistan-unsecured

53,62868,2561,790,8481,790,8481,844,4761,859,104

4.1 Movementoflongterm�inances-fromBankingCompaniesOpeningbalance

Financeavailedduringtheperiod

87,75987,759

--

-

87,75987,759

(14,628)Less:repaymentduringtheperiod

73,13187,759(19,503)(19,503)Less:Currentmaturityshownundercurrentliabilities

53,62868,256

The �inancing forms of total credit facility available to the extent of Rupees 108.351

million.The [email protected]%.Thecredit facilityof

theCompanywillbeexpiredonDecmber31,2019.Thisissecuredagainst�irstchargeof

Rupees138.140overmovable�ixedassets[excludinglandandbuilding]ofthecompany.

5

6

SHORTTERMBORROWING-SECURED

FromNBPBankundermarkarrangements-Secured:Cash�inance 19,99520,000

5.1 This running �inance facility was availed from National Bank of Pakistan to meet

workingcapitalrequirementofCompany.Thisissecuredagainst�irstchargeofRupees

66.67millionovercurrentandmovable�ixedassets(excludinglandandbuilding)ofthe

company. The facility is renewed on April 04, 2016 and total facility is enhanced to

rupess 50.00 million from rupess 20 million. The loan carries markup @ 3 months

KIBORplus2.50%.ThisfacilityhasbeenexpiredonDecember31,2016.

CONTINGENCIESANDCOMMITMENTS

Claimsnotacknowledgedasdebtsinrespectofvarioussubjudicecases�iledagainstthecompany for which the maximum possible liabilities could be approximately Rupees2.517million(June30,2015:Rupees2.517million).

6.1

GuaranteesofRupees468.69million(June30,2015:Rupees292.17million)issuedbythebanksandinsurancecompaniestodifferentpartiesonbehalfofthecompany.

6.2


MAIRAJANEESARIFF

ThePrivatizationCommissionhasclaimedadditionalloanliabilityamountingtoRupees131.454millionandmarkupamountingtoRupees1,295.45million.Themanagementof the company in theminutes of themeetingheld onOctober7, 2010 atMinistry ofFinancetoreconciletheprincipalandmarkupamountswithrespecttoGovt.ofPakistanloansdoesnotagreewiththestanceofPrivatizationCommissioninrespectofadditionalloanandmarkupclaimed.PrivatizationCommissionhasbeeninstructedbytheMinistryof Finance to reviewthe calculation / treatmentof a loanamountingRupees131.454million and has been asked to come up with �irm stance on the foregoing loanamounting to Rupees 131.454 million. Further, Privatization Commission has beeninstructed to sort out the issue of charging interest on VSS loan and PrivatizationCommission has been asked to come up with sound reason and logic for charginginterestontheaboveloan.Thelegaladvisorofthecompanyisalsoofthe�irmopinionthatsincethereisnomentionofanymarkuptobechargedonthisloannoristhereanymarkupagreement,therefore,nomarkup ispayableby thecompanyinrespectof thisloan.Themanagementiscon�identthattheultimateoutcomeofthematterwillresultinfavor of the company and hence no provision has been made in these �inancialstatementsinrespectoftheadditionalloanandmarkupclaimed.

6.3

8 COSTOFSALES

Rawmaterialconsumed

Storesandsparesconsumed

Salariesandwagesandotherbene�its

Fuelandpower

Travelingandconveyance

Postage,telegramandtelephone

Printingandstationery

InspectionfeeProcessingandfabricationcharges

Servicecharges

Rent,ratesandtaxes

384,325

51,589

46,882

20,838

277

363

469

2,369

167,486

11,992

15,577

7,386

68

139

204

445

365,017

50,964

20,490

9,724

363

164

224

2,600

984,788

129,032

59,806

27,292

773

504

429

5,78313,724

816

464

-

1,300

453

20,234

2,992

1,464

-

3,803

1,316


6.4 TheFinanceDivisionvideits letterdatedAugust11,2015,fortheyearendedJune30,2015hasclaimedanamountofRupees2,801.41millioninrespectofmarkuppayableonremainingGovernmentofPakistanLoans.However,themanagementofthecompanyisoftheopinionthatnomarkupispayableintheabsenceofanyagreementformarkup.ThematterwastakenupbytheMinistryofFinance,inmeetingheldonOctober7,2010,toreconciletheprincipalandmarkupamountswithrespecttoGovt.ofPakistanloans,which has instructed the FinanceDivision to re-examine the issue relating to Rupees100.00millionloanandinterestthereof,tocon�irmthecontentionofPECO.Decisiononthis account would be conveyed to company at the earliest. Till the issue of annualaccounts no such decisionhasbeen receivedby company.Furthermore, the companyhas also obtained the opinion from the legal advisor,who is also of opinion that nomarkup is payable. The management is con�ident that the ultimate outcome of thematterwill result in favorof the company and hence no provisionhas beenmade inthese�inancialstatementsinrespectoftheamarkupclaimed.

TheSuiGasauthoritieshaveclaimedanamountofRupees19.21million(June30,2015:

Rupees19.21million).TheCompanyhas�iledanappealagainsttheclaimandthecaseis

pendinginthecivilcourt.Theoutcomeofthemattercannotpresentlybedetermined.

6.5

--------(Rupeesin‘000)--------

(Un-audited)

March31,2016

(Audited)

June30,2015

7 PROPERTY,PLANTANDEQUIPMENT

Operating�ixedassets

Capitalwork-in-progress

8,551,0458,570,86014,90017,1768,565,9458,588,036

7.1

7.1.1

7.1 Operating�ixedassets

Openingwrittendownvalue

Add:Additionsduringtheperiod/year

Less:Disposalsduringtheperiod/year(atbookvalue)

Less:Depreciationchargedduringtheperiod/year

8,570,860

9,870

8,580,730

(2,870)

8,577,860

(26,815)

8,551,045

8,627,764

7,537

8,635,301

(27,360)

8,607,941

(37,081)

8,570,860

7.1.1 Followingisthedetailofadditionsduringtheperiod/year

FactoryBuilding

PlantandMachinery

Of�iceEquipment

Computers

Vehicles

ElectricEquipment

Tools

-

-

571

2,2625,663

35125

128229

6,8521,095

22425

9,8707,537

-


MAIRAJANEESARIFF

--------(Rupeesin‘000)--------

(Un-audited)(Un-audited)

2016 2015 2016 2015

QuarterEndedMarch31, NineMonthsEndedMarch31,


--------(Rupeesin‘000)--------

(Un-audited)

March31,2016

(Audited)

March31,2015

10 TRANSACTIONWITHRELATEDPARTIES

StateEngineeringCorporation(SEC)

OutstandingSECServiceChargespaidReimbursementofExpensespayableReimbursementofExpenses

1,500151192

1,571

1,500151-

1,571PakistanMachineToolFactory

Receivableattheendoftheperiod

11 DATEOFAUTHORIZATIONThiscondensedinterim�inancialinformationhavebeenauthorizedforissuebyBoardofDirectorsonApril27,2016.

12 GENERALFigureshavebeenroundedofftothenearestthousandrupee


MAIRAJANEESARIFF

--------(Rupeesin‘000)--------

(Un-audited)(Un-audited)

2016 2015 2016 2015

QuarterEndedMarch31, NineMonthsEndedMarch31,

Researchanddevelopment

Vehiclerunningexpenses

Otherexpenses

Depreciation

(Increase)/decreaseinworkinprocessinventory

Costofgoodsmanufactured(Increase)/decreasein�inishedgoodsinventory

CostofSales

Repairandmaintenance

Insurance

-

688

871

8,277

-

630

699

8,001

-

1,836

1,791

24,815

41,836

1,802

25,906

475,006214,9691,263,589543,29415,174(17,671)(74,790)(60,940)490,180197,2981,188,799482,35498,607(105,603)3,104(97,914)588,78791,6951,191,903384,440

367

253

348

241

1,278

772

773

742

17,561

27,29612,4664,105(20)10--

(6,153)

37,704

2,702

(133,508)

(29,070)

(2,761)

(2,368)

99,693

(65,312)

(10,047)

55,265

9 CASHGENERATEDFROM/(USEDIN)OPERATIONSPro�itbeforetaxationAdjustmentsfornoncashchargesandotheritems:

DepreciationFinancialchargesInterestonworkers'pro�itparticipationfundInterestonbankdepositProvisionforgratuityProvisionforWPPFProvisionforWWFGainonsaleofproperty,plantandequipment

170,443

26,84010,0611,268(21)3,49210,2983,913(2,928)

52,923

Effectoncash�lowduetoworkingcapitalchanges:

-Stockintrade

-Tradedebts

-Advances

-Tradedeposits,prepaymentsandotherreceivables

Increase/(decrease)incurrentliabilities

-Increaseintradeandotherpayables

5,390

(132,543)

(377,054)

1,320

2,012

442,874

(58,001)

165,365

223,366Pro�itbeforeworkingcapitalchanges

(Increase)/decreaseincurrentassets:

-Stores,sparesandloosetools

--------(Rupeesin‘000)--------

(Un-audited)

March31,2016

(Audited)

June30,2015

interim financial information nine months period ended ... & company chartered accountants...

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