pumps, valves and service | ksb...name of engagement partner: imran farooq mian lahore, august 24,...

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Page

Company Information 2

Sales Offices 3

Directors’ Review 4

Auditors’ Report to the Members on Review of Condensed Interim Financial Information 5

Condensed Interim Balance Sheet 6

Condensed Interim Profit and Loss Account 8

Condensed Interim Statement of Comprehensive Income 9

Condensed Interim Cash Flow Statement 10

Condensed Interim Statement of Changes in Equity 11

Notes to the Condensed Interim Financial Statements 12

Contents

2 Company Information

Board of DirectorsTonjes Cerovsky ChairmanMohammad Masud Akhtar Managing DirectorWerner SpiegelR. D. AhmadSajid Mahmood AwanHasan Aziz BilgramiAizaz SarfrazWazir Ali Khoja (Nominee NIT)

Company SecretarySajid Mahmood Awan

ManagementMohammad Masud Akhtar Chief Executive OfficerSajid Mahmood Awan Finance & AdministrationNadeem Hamid Butt Production & ProjectsKamran Khan Mongol Sales, Marketing & Product Management

AuditorsA.F. Ferguson & Co. Chartered Accountants

Legal AdvisorsMandviwala & Zafar

BankersNIB Bank LimitedBank Alfalah LimitedMCB Bank LimitedDeutsche Bank AGUnited Bank LimitedNational Bank of Pakistan

Audit CommitteeHasan Aziz Bilgrami ChairmanR. D. Ahmad MemberWerner Spiegel Member

Secretary Audit CommitteeSyed Afzaal Ali DGM Admin & CA

Registered Office16/2 Sir Aga Khan Road, Lahore - 54000Ph: (042) 36304173, 36370969, 111-572-786Fax: (042) 36368878, 36366192Email: [email protected]

WorksHazara Road, HassanabdalPh: (057) 2520236Fax: (057) 2520237Email: [email protected]

Share RegistrarCentral Depository Company of Pakistan Limited.CDC House, 99-B, SMCHS, Shahra-e-Faisal,Karachi-74000Tel: (021) 111-111-500Fax: (021) 34326053

Company Information

3

Lahore

16/2 Sir Aga Khan Road, Lahore.Ph: (042) 111 572 786, 36304173Fax: (042) 36366192, 36368878Email: [email protected]

Rawalpindi

309, A3 Peshawar Road,Westridge 1, Opp. Valley Clinic, Rawalpindi.Ph: (051) 111 572 786Fax: (051) 5472612Email: [email protected]

Karachi

Office # 307 & 308, 3rd Floor, Parsa Tower, Block 6, PECHSShahrah-e-Faisal, Karachi.Ph: (021) 111 572 786Fax: (021) 34388302Email: [email protected]

Multan

Golden Heights, Nusrat Road, Multan.Ph: (061) 111 572 786 Fax: (061) 4541784 Email: [email protected] Quetta 29-B Chaman Housing Scheme,Quetta.Ph: (081) 111 572 786 Fax: (081) 2830445Email: [email protected]

Sales Offices

Sales Offices

4 Directors’ Review

I feel pleasure to present the Company’s financial statements for the half-year, ended 30th June 2011.

The post flood economic impact continued in the first half of the year 2011 resulting in low order intake and sales as compared to last year. Insignificant spending by the Government on development projects and reluctance of industries in spending on capital equipment were the two fundamental reasons. The impact continued in the earlier part of Q2 as well, however, the activity picked-up in the later half with significant orders from the public sector for completion of schemes halted since long. The industrial and building service activity, which mainly comprises of general business, remained slow as well. However, KSB managed to secure some good orders in project business from Oil & Gas distribution companies and sugar sector that compensated partly the low sundry activity.

During the period ended on 30th June 2011, we achieved Sales of Rs. 918.6 million; with a Gross Profit of Rs. 169.3 million and a Net Loss of Rs. 18.3 million. Main reason for the loss is increase in other operating expenses due to implementation of state-of-the-art ERP software SAP in the year 2011.

The outlook for the remaining year seems quite promising; the beginning of Q3 of the year 2011 reflects higher Order Intake than the same time of previous years, which is quite unusual. The Government is expected to continue development activity in the wake of elections expected in 2013. Industry seems to show signs of revival as well especially Oil & Gas distribution and chemical process companies. Construction will continue to be slow in the remaining half of the year. However, we should expect one or two projects in Power sector. Clean Drinking Water for All (CDWA) project signed in 2009 is also on hold and no progress is expected in 2011. Overall, we are positive on achieving our forecast and if the market remains responsive, we may even exceed it. KSB Pakistan has won “8th Environment Excellence Award” which represents our commitment for environmental friendly policies.

All processes of KSB Pakistan were audited by TÜVRheinland®, Germany, and we have successfully qualified for the re-certification for ISO 9001:2008, ISO 14001:2004 & OHSAS 18001:2007.

SAP Roll out at KSB Pakistan is on going exactly as per plan. Major milestones of Delta Analysis and Realization phases have been successfully completed. SAP Project Team, in complete harmony with external consulting partners, is upbeat on its timely completion.

In continuation of our management development program, two employees got training in Japan through Pakistan Japan Business Forum.

I acknowledge the efforts made by our dedicated team to endure difficult economic situation.

Mohammad Masud AkhtarManaging DirectorAugust 24, 2011Lahore, Pakistan

Directors’ Review

5Auditors’ Report

Introduction

We have reviewed the accompanying condensed interim balance sheet of KSB Pumps Company Limited as at June 30, 2011, and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement and condensed interim statement of changes in equity for the half year then ended (here-in-after referred to as the “interim financial information”). Management is responsible for the preparation and presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim profit and loss account for the quarters ended June 30, 2011 and 2010 have not been reviewed, as we are required to review only the cumulative figures for the half year ended June 30, 2011.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review nothing has come to our attention that causes us to believe that the accompanying interim financial information as of and for the half year ended June 30, 2011 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting.

Chartered Accountants

Name of engagement partner: Imran Farooq MianLahore, August 24, 2011

Auditors’ Report to the Members on Review of Condensed Interim Financial Information

6 Financial Statements

Condensed Interim Balance Sheet (Un-audited) As at June 30, 2011

June 30, December 31, 2011 2010 Note (Rupees in thousand)EQUITY AND LIABILITIES

CAPITAL AND RESERVES Authorised capital 15,000,000 (December 31, 2010: 15,000,000) ordinary shares of Rs 10 each 150,000 150,000 Issued, subscribed and paid up capital 13,200,000 (December 31, 2010: 13,200,000) ordinary shares of Rs 10 each 132,000 132,000 General reserve 678,000 594,000 Accumulated (loss)/ unappropriated profit (18,180) 100,600 791,820 826,600 NON-CURRENT LIABILITIES Employees’ retirement and other benefits 20,358 19,409 Deferred liabilities 22,723 44,434 43,081 63,843 CURRENT LIABILITIES Finances under mark-up arrangements - secured 99,838 164,927 Trade and other payables 5 886,066 710,812 Provision for other liabilities and charges 21,362 37,058 Accrued finance cost 3,408 5,868 1,010,674 918,665 CONTINGENCIES AND COMMITMENTS 6 1,845,575 1,809,108 The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

7Balance Sheet Profit & Loss Comprehensive Income Cash Flow Statement of Changes Notes

June 30, December 31, 2011 2010 Note (Rupees in thousand)ASSETS NON-CURRENT ASSETS Property, plant and equipment 7 307,669 292,199 Investment property 1,760 1,866 Intangible Assets 3,889 5,626 Capital work in progress 13,567 13,812 Long term loans and deposits 10,868 11,685 337,753 325,188

CURRENT ASSETS Stores, spares and loose tools 37,028 41,849 Stock-in-trade 385,700 462,600 Trade debts 8 722,422 632,844 Advances, deposits, prepayments and other receivables 205,922 183,326 Cash and bank balances 156,750 163,301 1,507,822 1,483,920 1,845,575 1,809,108

Chairman Chief Executive


Condensed Interim Profit and Loss Account (Un-audited) For the Half Year ended June 30, 2011


Quarter ended Half year ended June 30, June 30, June 30, June 30, 2011 2010 2011 2010 Note (Rupees in thousand) Sales 515,822 570,130 918,630 1,093,141 Cost of sales 9 (407,463) (426,947) (749,357) (835,942) Gross profit 108,359 143,183 169,273 257,199 Distribution & Marketing expenses (48,928) (56,738) (96,403) (108,283) Administrative expenses (34,500) (32,198) (66,671) (65,404) Other operating expenses 10 (29,598) (3,584) (50,120) (7,233) Other operating income 17,961 7,776 22,634 27,306 Profit from operations 13,294 58,439 (21,287) 103,585 Finance cost (4,626) (3,431) (9,602) (6,120) Profit/ (loss) before tax 8,668 55,008 (30,889) 97,465 Taxation 12,609 (17,603) 12,609 (31,189) Profit/ (loss) for the period 21,277 37,405 (18,280) 66,276 Earnings/ (loss) per share - basic and diluted Rupees 1.61 2.83 (1.38) 5.02 Appropriations have been reflected in the statement of changes in equity.

The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

9Balance Sheet Cash Flow Statement of Changes NotesComprehensive IncomeProfit & Loss

Condensed Interim Statement of Comprehensive Income (Un-audited)For the Half Year ended June 30, 2011


Quarter ended Half year ended June 30, June 30, June 30, June 30, 2011 2010 2011 2010 (Rupees in thousand) Profit/ (loss) for the period 21,277 37,405 (18,280) 66,276 Other comprehensive income - - - - Total comprehensive income/ (loss) for the period 21,277 37,405 (18,280) 66,276 The annexed notes 1 to 15 form an integral part of this condensed interim financial information.


Half year ended

June 30, June 30,

2011 2010 Note (Rupees in thousand)

Cash flows from operating activities Cash generated from operations 12 145,734 (45,008)Finance cost paid (12,062) (5,315)Taxes paid (19,420) (30,366)Employees’ retirement benefits paid (6,317) (5,739)Net (increase)/decrease in long term loans and deposits 817 (2,817) Net cash from/ (used in) operating activities 108,752 (89,245) Cash flows from investing activities Fixed capital expenditure (37,087) (42,739)Proceeds from sale of property, plant and equipment 3,238 4,530 Net cash used in investing activities (33,849) (38,209) Cash flows from financing activities Dividend paid (16,365) (45,841) Net cash used in financing activities (16,365) (45,841) Net increase/ (decrease) in cash and cash equivalents 58,538 (173,295)Cash and cash equivalents at beginning of the period (1,626) 231,951 Cash and cash equivalents at the end of the period 13 56,912 58,656 The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

Condensed Interim Cash Flow Statement (Un-audited)For the Half Year ended June 30, 2011



Share General Unappropriated capital reserves profit Total

(Rupees in thousand) Balance as at January 1, 2010 132,000 493,000 148,021 773,021 Final dividend for the year ended December 31, 2009 @ Rs. 3.50 per share - - (46,200) (46,200) Total comprehensive income for the period - - 37,405 37,405 Transfer to general reserve 101,000 (101,000) - Balance as at June 30, 2010 132,000 594,000 38,226 764,226 Total comprehensive income for the period - - 62,374 62,374 Balance as at December 31, 2010 132,000 594,000 100,600 826,600 Total comprehensive (loss) for the period - - (18,280) (18,280) Final dividend for the year ended December 31, 2010 @ Rs. 1.25 per share (16,500) (16,500) Transfer to general reserve 84,000 (84,000) - Balance as at June 30, 2011 132,000 678,000 (18,180) 791,820 The annexed notes 1 to 15 form an integral part of this condensed interim financial information.

Condensed Interim Statement of Changes in Equity (Un-audited)For the Half Year ended June 30, 2011



1. Legal status and nature of business KSB Pumps Company Limited (a KSB group company) was incorporated in Pakistan on July 18, 1959 under the

Companies Act, 1913 (now the Companies Ordinance, 1984) and is listed on the Karachi and Lahore Stock Exchanges. The Company is principally engaged in the manufacture and sale of industrial pumps, valves, castings and related parts. The registered office of the Company is situated at KSB Building, Sir Aga Khan Road, Lahore.

2. Basis of preparation This condensed interim financial information is unaudited and has been prepared and is being submitted to the

shareholders in accordance with section 245 of the Companies Ordinance, 1984 and International Accounting Standards (IAS) 34 - “Interim Financial Reporting” and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. The figures for the half year ended June 30, 2011 have been subjected to limited scope review as required by above-mentioned section of the Companies Ordinance, 1984. This condensed interim financial information does not include all the information required for annual financial statements and therefore should be read in conjunction with the annual financial statements for the year ended December 31, 2010.

3. Accounting Policies 3.1 The accounting policies adopted for the preparation of this condensed interim financial information are the same as

those applied in the preparation of preceding annual published financial statements of the company for the year ended December 31, 2010.

3.1.1 Standards, amendments to published standards and interpretations effective in current year

- IAS 34 (amendment), ‘Interim financial reporting’. The amendment provides guidance to illustrate how to apply

disclosure principles in IAS 34 and add disclosure requirements around the circumstances likely to affect fair values of financial instruments and their classification, transfers of financial instruments between different levels of the fair value hierarchy, changes in classification of financial assets and changes in contingent liabilities and assets. Its adoption did not have any impact on the Company’s financial statements.

- IFRS 7 (amendment), ‘Financial instruments: Disclosures’. The amendment emphasises the interaction between

quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments. The amendment is not expected to have a material impact on the company’s financial statements.

3.1.2 Standards, amendments to published standards and interpretations that are effective in current year but not

applicable/relevant to the Company Standards or Interpretation Effective date (accounting periods beginning on or after) IAS 24 (Revised), ‘Related party disclosures’ January 1, 2011 IAS 27 (amendment), ‘Consolidated and separate financial statements’ July 1, 2010 IAS 32 (Amendment), Financial instruments: presentation on classification of right issues February 1, 2010 IFRS 1 (amendment), ‘First-time adoption of International Financial Reporting Standards July 1, 2010 IFRS 3 (amendments), ‘Business combinations’ July 1, 2010 IFRIC 13 (amendment), ‘Customer loyalty programmes’ January 1, 2011 IFRIC 14 (Amendment), ‘Prepayment of a minimum funding requirement’ January 1, 2011 IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’ July 1, 2010

Notes to and Forming Part of the Condensed Interim Financial Information For the Half Year ended June 30, 2011


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

Standards or Interpretation Effective date (accounting periods beginning on or after) IFRS 1 (amendment), ‘First-time adoption of International Financial Reporting Standards — Severe hyperinflation and removal of fixed dates for first-time adopters’, July 1, 2011 IFRS 7 (amendment), ‘Financial instruments: Disclosures’ July 1, 2011 IFRS 9, ‘Financial instruments’ January 1, 2013 IFRS 10, ‘Consolidated financial statements’ January 1, 2013 IFRS 11, ‘Joint arrangements’ January 1, 2013 IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2013 IFRS 13, ‘Fair value measurement’ January 1, 2013 4. Income tax expense is recognised based on management’s best estimate of the weighted average annual income tax

rate expected for the full financial year. 5. Trade and other payables Trade creditors include amount due to holding company of Rs 33.745 million (December 2010: Rs 27.513 million) and

associated undertakings of Rs 9.106 million (December 2010: Rs 11.052). 6. Contingencies and commitments 6.1 Contingencies The company has obtained bank guarantees of Rs 259.818 million (December 2010: Rs 611.127 million) against the

performance of various contracts. 6.2 Commitments Letters of credit other than for capital expenditure Rs 11.343 million (December 2010: Rs 51.499 million).

June 30, December 31, 2011 2010 (Rupees in thousand)7. Property, plant and equipment Opening book value 292,199 243,000 Add: Additions/transfers during the period - note 7.1 37,332 88,710

329,531 331,710

Less: Disposals during the period (at book value) 2,372 7,621 Depreciation charged during the period 19,490 31,890

21,862 39,511

307,669 292,199


June 30, December 31, 2011 2010 (Rupees in thousand)7.1 Following is the detail of additions/transfers during the period Buildings on freehold land 8,356 11,166 Plant and machinery - 6,369 Tools, jigs and attachments 288 2,149 Patterns 15 7,442 Other equipments 8,780 28,295 Furniture and fixtures 2,262 3,797 Office machine & appliances 1,813 5,617 Vehicles 15,818 23,875

37,332 88,710

8. Trade debts Trade debts 776,245 682,449 Less: Provision for doubtful debts (53,823) (49,605) 722,422 632,844

Quarter ended Half year ended

June 30, June 30, June 30, June 30, 2011 2010 2011 2010 (Rupees in thousand) 9. Cost of sales

Raw material consumed 217,557 317,081 419,672 554,946 Salaries, wages, amenities and staff welfare 39,063 36,364 79,428 74,536 Staff training 186 58 209 169 Electricity and power 13,425 15,535 27,432 29,189 Stores and spares consumed 20,720 21,852 39,120 39,441 Insurance 816 489 1,220 880 Travelling and conveyance 6,437 6,449 13,419 11,644 Postage and telephone 989 947 1,861 1,781 Rent, rates and taxes 646 1,355 1,168 2,650 Repairs and maintenance 1,093 5,585 1,980 11,393 Legal & Professional charges 1,587 1,773 2,640 5,104 Packing expenses 4,069 6,221 6,816 10,979 Outside services 68,112 60,927 100,238 120,939 Depreciation on Property, plant and equipment 6,643 2,571 15,247 12,384 Amortization of Intangible assets 854 780 1,300 1,374 Provision for obsolete stores & stocks 1,500 4,615 3,000 6,115 Royalty 343 1,347 1,062 3,370 Other expenses 829 1,052 1,921 2,276 384,869 485,001 717,733 889,170 Opening work-in-process 129,196 78,330 139,419 77,183 Less: Closing work-in-process 127,851 128,602 127,851 128,602 (Increase)/ decrease in work in process 1,345 (50,272) 11,568 (51,419) Cost of goods manufactured Opening stock of finished goods 93,733 68,164 92,540 74,137 Less: Closing stock of finished goods 72,484 75,946 72,484 75,946 Decrease/ (increase) in finished goods 21,249 (7,782) 20,056 (1,809)

407,463 426,947 749,357 835,942


10. Other operating expenses

Included in the other operating expenses are expenses amounting to Rs 47.959 million (June 30, 2010: Nil) in respect of user training and related travelling for implementation of new ERP system - SAP.

Half year ended

June 30, June 30,

2011 2010 (Rupees in thousand)

11. Transactions with related parties Relationship with the Company Nature of transaction i. Associated undertakings Purchase of goods and services 40,988 70,279 Sale of goods and services 86,473 124,610 Commission income 5,230 11,711 Commission expense 10,464 13,884 Royalty 1,062 3,370 ii. Post retirement benefit plans Expense charged 11,634 8,949 iii. Key management personnel Compensation 75,565 46,011 All transactions with related parties have been carried out on commercial terms and conditions.

June 30, Decmber 31,

2011 2010 (Rupees in thousand)

Period end balances Receivable from related parties 116,222 68,063 Payable to related parties 82,002 68,681 These are in the normal course of business and are interest free.


Half year ended

June 30, June 30,

2011 2010 (Rupees in thousand)12. Cash generated from operations (Loss)/ profit before tax (30,889) 97,465 Adjustments for: Depreciation on - Property, plant and equipment 19,490 14,996 - Investment property 106 105 - Intangible assets 1,737 1,374 Profit on sale of property, plant and equipment (866) (1,401) Accumulating compensated absences 1,693 1,260 Employee’s retirement and other benefits 6,181 5,512 Provision no longer considered necessary written back (7,162) - Exchange loss 2,161 - Finance cost 9,602 6,120 Provision for doubtful debts and receivables 4,218 13,022 Provision for obsolete stocks and stores 3,000 6,115 Profit before working capital changes 9,271 144,568 Effect on cash flow due to working capital changes (Increase)/ decrease in current assets Stores and spares 3,621 33 Stock-in-trade 75,100 (51,980) Trade debts (93,796) (88,365) Loans, advances, deposits, prepayments and other receivables (12,886) (70,202) Increase/ (decrease) in current liabilities Trade and other payables 180,120 35,500 Provision for other liabilities and charges (15,696) (14,562) 136,463 (189,576) 145,734 (45,008) 13. Cash and cash equivalents Cash and bank balances 156,750 109,987 Finances under mark up arrangements - secured (99,838) (51,331)

56,912 58,656 14. Date of authorisation for issue This condensed interim financial information was authorised for issue on August 24, 2011 by the Board of Directors of

the Company. 15. Corresponding figures In order to comply with the requirements of International Accounting Standard 34 - ‘Interim Financial Reporting’, the

condensed interim balance sheet and condensed interim statement of changes in equity have been compared with the balances of annual audited financial statements of preceding financial year, whereas, the condensed interim profit and loss account, condensed interim statement of comprehensive income and condensed interim cash flow statement have been compared with the balances of comparable period of immediately preceding financial year.

Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However, no significant re-arrangements have been made.


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