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Descon Oxychem Limited

HALF YEARLY REPORTDecember 31, 2014 (Un-Audited)

DESCON OXYCHEM LIMITED DESCON OXYCHEM LIMITED

Company Information

Company Information --------------------------------------------- 1

Directors’ Report --------------------------------------------------- 2

Auditors’ Report to the Members on Review of Interim Financial Information ------------------------------------- 3

Condensed Interim Balance Sheet ------------------------------- 4

Condensed Interim Profit and Loss Account ----------------------5

Condensed Interim Statement of Comprehensive Income -----6

Condensed Interim Statement of Changes in Equity ------------7

Condensed Interim Cash Flow Statement ------------------------8

Notes to and Forming Part of the Condensed Interim Un-Audited Financial Information -------------------------------9

CONTENTS

Board of DirectorsAbdul Razak DawoodChairman

Taimur SaeedChief Executive Officer

Asif QadirFarooq NazirTaimur DawoodAhmed Razi GhazaliFaisal Dawood

Chief Financial OfficerYasir Siddique Sheikh

Company SecretaryAbdul Sohail

AuditorsM/s A.F. Ferguson & Co.Chartered Accountants

Internal AuditorsM/s KPMG Taseer Hadi & Co.Chartered Accountants

Legal Advisors M/s Hassan & Hassan Advocates

Bankers Allied Bank LimitedBank Al Habib LimitedHabib Metropolitan Bank LimitedHabib Bank LimitedKASB Bank LimitedSummit Bank LimitedSoneri Bank LimitedAskari Bank Limited

1

Share RegistrarM/s Corplink (Pvt.) LimitedWings Arcade, 1-K Commercial AreaModel Town, Lahore - 53000Tel: 92 42 35887262, 35839182Fax: 92 42 35869037

Registered OfficeDescon Headquarters18-km Ferozepur RoadLahore - 53000, PakistanTel: 92 42 35923721-9Fax: 92 42 35923749

Plant Site18-km Lahore - Sheikhupura Road,Lahore, Pakistan.Tel: 92 42 3797 1822-243Fax: 92 42 3797 1831

Karachi OffficeBusiness Avenue, 26/A, 9th Floor, Block 6,PECHS, Shahra-e-Faisal, Karachi, PakistanTel: 92 21 34544485-6Fax: 92 21 34382674

Web PresenceUpdated Company’s Infromation together with the latest Half Yearly Report can be accessed at Descon’s website,www.descon.com

DIRECTORS’ REPORT TO THE SHAREHOLDERSFor the six months ended December 31, 2014

DESCON OXYCHEM LIMITED

Ladies and Gentlemen

The Board presents the financial statements for the six months ended December 31, 2014. During this period the management was focused on production efficiencies to set off some impact of the adverse macro-economic environment and energy shortages. Production has been enhanced much beyond name plate capacity and many initiatives were taken to bring down the variable cost of production especially of packaging material. We are confident that through increased production and substantial improvement in the input costs linked to decline in international crude oil prices, we will be able to turn around this situation very soon.

Financial Highlights

SalesGross profitOperating profitLoss for the periodLoss per share (PKR)Production (MT)

Gross profit for the six months have decreased significantly as compared to same period last year mainly due to decrease in average selling price by 8% compared to the same period last year and adverse impact of increase in electricity and gas prices being the main driver of direct cost.

Future Outlook

We are exploring new markets overseas for better selling price and risk diversification. Company’s objective remains to ensure continuous production at a cost effective energy mix. Your Company has been continuously making efforts to control its input costs and have made significant progress, which will be fully reflected in future results. Protecting the local industry from international dumping will remain a challenge for which management is evaluating different strategies to mitigate the adverse impact of imports.

We thank all stakeholders for their continuous support.

AUDITORS’ REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIAL INFORMATION

Introduction

We have reviewed the accompanying condensed interim balance sheet of Descon Oxychem Limited as at December 31, 2014 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim statement of changes in equity and condensed interim cash flow statement 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. 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 December 31, 2013 and 2014 have not been reviewed, as we are required to review only the cumulative figures for the half year ended December 31, 2014

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 December 31, 2014 is not prepared, in all material respects, in accordance with the approved accounting standards as applicable in Pakistan.

LahoreFebruary 19, 2015

For and on behalf of the Board

_______________

LahoreFebruary 19, 2015

Taimur SaeedChief Executive Officer

2 3

_______________Chartered Accountants

Engagement partner: Asad Aleem Mirza

December 31,2014

December 31,2013

Half year ended

679,56866,946

919(104,855)

(1.03)15549

725,930 131,05570,780

(60,731)(0.60)15540

December 31,2014

December 31,2013

------------ Rupees '000' ------------

Quarter ended

339,99640,1554,717

(41,289)(0.40)7571

387,94388,77859,723 (9,085)(0.09)8522


4 5

CONDENSED INTERIM PROFIT AND LOSS ACCOUNTFOR THE QUARTER AND HALF YEAR ENDED DECEMBER 31, 2014 (UNAUDITED)

_______________________CHIEF EXECUTIVE

_______________________DIRECTOR

Sales 11 339,996 387,943 679,568 725,930

Cost of sales 12 (299,841) (299,165) (612,622) (594,875)

Gross profit 40,155 88,778 66,946 131,055

Administrative expenses 13 (21,381) (16,372) (34,876) (31,697)

Distribution and selling cost (17,252) (17,253) (35,183) (31,214)

Other operating income 3,195 4,570 4,032 5,279

Other expenses - - - (2,643)

Profit from operations 4,717 59,723 919 70,780

Finance cost (59,016) (54,755) (115,287) (113,997)

(Loss) / profit before taxation (54,299) 4,968 (114,368) (43,217)

Taxation 13,010 (14,053) 9,513 (17,514)

Loss for the period (41,289) (9,085) (104,855) (60,731)

Loss per share Rupees 14 (0.40) (0.09) (1.03) (0.60)

The annexed notes 1 to 19 form an integral part of this condensed interim financial information.

December 31,2014

December 31,2013

Half year endedDecember 31,

2014December 31,

2013

Quarter ended

------------ Rupees '000' ------------Note

CONDENSED INTERIM BALANCE SHEETAS AT DECEMBER 31, 2014 (UNAUDITED)

_______________________CHIEF EXECUTIVE

_______________________DIRECTOR

EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES

Authorized capital 110,000,000 (June 2014: 110,000,000) ordinary shares of Rs 10 each 1,100,000 1,100,000 110,000,000 (June 2014: Nil) preference shares of Rs 10 each 1,100,000 -

Issued, subscribed and paid up capital 102,000,000 (June 2014: 102,000,000) ordinary shares of Rs 10 each 1,020,000 1,020,000

Reserves - 720 Accumulated loss (628,593) (523,738)

391,407 496,982 NON-CURRENT LIABILITIES

Long term finances - secured 5 1,188,536 1,250,000 - unsecured 6 408,785 408,785

Accrued finance cost 361,400 288,105 1,958,721 1,946,890

CURRENT LIABILITIES

Current portion of long term liabilities 71,464 20,000 Finances under markup arrangement- secured 52,980 59,536 Trade and other payables 129,393 111,510 Accrued finance cost 28,662 30,781

282,499 221,827 CONTINGENCIES AND COMMITMENTS 7 - -

2,632,627 2,665,699


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 1,827,491 1,900,009 Long term deposits 16,554 16,554 Deferred taxation 263,860 247,319

2,107,905 2,163,882 CURRENT ASSETS

Stock-in-tradeStores and spares

9 84,413 70,459196,321 191,739

Trade debts - unsecured 81,058 82,185 Investments - available for sale 10 - 16,225 Advances, deposits, prepayments and other receivables 108,513 87,243 Current income tax recoverable 52,769 48,424 Cash and bank balances 1,648 5,542

524,722 501,817

2,632,627 2,665,699

December 31,2014

Unaudited

Note

June 30,2014

Audited

------------ Rupees '000' ------------


6 7

CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOMEFOR THE QUARTER AND HALF YEAR ENDED DECEMBER 31, 2014 (UNAUDITED)

_______________________CHIEF EXECUTIVE

_______________________DIRECTOR

December 31,2014

December 31,2013


2014December 31,

2013

Quarter ended

------------ Rupees '000' ------------

Loss for the period (41,289) (9,085) (104,855) (60,731)

Other comprehensive income

Fair value gain on 'Available for sale' investments -

952

172 952

Gain during the period transferred to profit and loss on account of derecognition of investment -

(545)

(892)

(545)

Other comprehesive income / (loss) for the period -

407 (720)

(720)

407

Total comprehensive lossfor the period (41,289) (8,678) (105,575) (60,324)


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8 9

_______________________CHIEF EXECUTIVE

_______________________DIRECTOR

NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE QUARTER AND HALF YEAR ENDED DECEMBER 31, 2014 (UN-AUDITED)

The Company and its Operations

The Company was incorporated in Pakistan as a private limited company on November 12, 2004 under the Companies Ordinance, 1984 and was converted into a public limited company with effect from February 28, 2008. Subsequently, on September 15, 2008, it was listed on Karachi Stock Exchange. The registered office of the company is situated at 18-KM Ferozepur Road, Lahore and the factory is situated at 18-KM Lahore -Sheikhupura Road, Lahore. It is principally engaged in the manufacture, procurement and sale of hydrogen peroxide and allied products. The Company commenced its commercial production on March 1, 2009.

Basis of Preparation

This condensed interim financial information is un-audited and is being submitted to the members in accordance with section 245 of the Companies Ordinance, 1984. It has been prepared in accordance with the requirements of the International Accounting Standard (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 December 31, 2014 have, however, been subjected to limited scope review by the auditors as required by the Code of Corporate Governance. 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 June 30, 2014.

Significant Accounting Policies

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 financial statements of the Company for the year ended June 30, 2014.

Initial application of standards, amendments or an interpretation to existing standards

The following amendments to existing standards have been published that are applicable to the Company's financial statements covering annual periods, beginning on or after the following dates:

Amendments to published standards effective in current period

There were certain new standards, amendments to the approved accounting standards and new interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). Interpretations which became effective during the year but are considered not to be relevant or have any significant effect on the Company's operations and are, therefore, not disclosed in the financial statements except for the amendments as explained below:

- Annual improvements 2012 applicable for annual periods beginning on or after July 01, 2014. These amendments include changes from the 2010-12 cycle of the annual improvements project, that affect 7 standards: IFRS 2, ‘Share-based payment’, IFRS 3, ‘Business Combinations’, IFRS 8, ‘Operating segments’, IFRS 13, ‘Fair value measurement’, IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’, Consequential amendments to IFRS 9, ‘Financial instruments’, IAS 37, ‘Provisions, contingent liabilities and contingent assets’, and IAS 39, Financial instruments – Recognition and measurement'. The application of these amendments have no material impact on the Company's financial statements.

- Annual improvements 2013 applicable for annual periods beginning on or after July 01, 2014. The amendments include changes from the 2011-12-13 cycle of the annual improvements project that affect 4 standards: IFRS 1, ‘First time adoption’, IFRS 3, ‘Business combinations’, IFRS 13, ‘Fair value measurement’ and IAS 40, ‘Investment property'. The application of these amendments have no material impact on the Company's financial statements.

- IAS 19 (Amendments), ‘Employee benefits’ is applicable on accounting periods beginning on or after July 01, 2014.These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The application of these amendments have no material impact on the Company's financial statements.

1.

2.

3.

3.1

3.2

3.2.1

December 31,2014

December 31,2013

Half year ended

---------- Rupees '000' ----------

CONDENSED INTERIM CASH FLOW STATEMENTFOR THE HALF YEAR ENDED DECEMBER 31, 2014 (UNAUDITED)

Cash flow from operating activities

Cash generated from operations 16 61,506 181,859 Finance cost paid (44,111) (58,004) Profit on deposits received 396 292 Income tax paid (11,373) (8,390)

Net cash generated from operating activities 6,418 115,757

Cash flows from investing activities

Fixed capital expenditure (10,153) (19,022) Investments purchased during the period - (94,005) Proceeds from sale of available for sale investments 16,397 74,514 Net cash generated from / (used in) investing activities 6,244 (38,513)

Cash flows from financing activities

Repayment of long term loan (10,000) (10,000) Finance lease liabilities - net - (19,329) Net cash used in financing activities (10,000) (29,329)

Net increase in cash and cash equivalents 2,662 47,915 Cash and cash equivalents at beginning of the period (53,994) (148,920) Cash and cash equivalents at the end of the period 17 (51,332) (101,005)


Note


10 11


December 31,2014

Unaudited

June 30,2014

Audited------------ Rupees '000' ------------

- IAS 32 (Amendments), ‘Financial instruments: Presentation’, on offsetting financial assets and financial liabilities is applicable on accounting periods beginning on or after January 01, 2014. These amendments update the application guidance in IAS 32, ‘Financial instruments: Presentation’, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The application of this standard has no material impact on the Company's financial statements.

- IAS 36 (Amendment), ‘Impairment of assets’ on recoverable amount disclosures is applicable on accounting period beginning on or after January 01, 2014. This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The application of this standard has no material impact on the Company's financial statements.

- IAS 39 (Amendment), ‘Financial Instruments: Recognition and Measurement’ on novation of derivatives is applicable on accounting period beginning on or after January 01, 2014. This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria. The application of this standard has no material impact on the Company's financial statements.

- IFRIC 21, ‘Levies’ sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when should a liability be recognised. The Company is not currently subjected to significant levies so the impact on the Company's financial statements is not material.

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

TaxationThe provision for taxation for the half year ended December 31, 2014 has been made using the tax rate that would be applicable to expected total annual earnings.

3.2.2

4.

Annual improvements 2014IAS 16 - Property, plant and equipmentIAS 38 - Intangible assetsIFRS 9 - Financial instrumentsIFRS 12 - Disclosure of interests in other entitiesIFRS 13 - Fair value measurementIFRS 15 - Revenue from contracts with customers

January 01, 2016

Standards or Interpretations Effective date (accounting periods beginning on or after)

January 01, 2016January 01, 2016



5. Long term loans - securedFrom Financial Institutions - note 5.1 550,000 560,000

From Associated Companies - note 5.2 710,000 710,000

1,260,000 1,270,000 Less: Current portion shown under current liabilities (71,464) (20,000)

1,188,536 1,250,000 5.1 From Financial Institutions

Loan - 1 - note 5.1.1 500,000 500,000 Loan - 2 - note 5.1.2 50,000 60,000

550,000 560,000 Less: Current portion shown under current liabilities (71,464) (20,000)

478,536 540,000


December 31,2014

UnauditedNote

June 30,2014

Audited------------ Rupees '000' ------------

This loan has been obtained from a consortium of financial institutions led by Allied Bank Limited to finance the capital expenditure in relation to the hydrogen peroxide plant installation, construction and fabrication project. It is secured by way of hypothecation charge over all present and future fixed assets, wherever situated other than the immovable property and first pari passu mortgage charge over immovable property. It carries markup at six month KIBOR plus 2.75% per annum and is payable semi annually. The markup charged during the period ranges from Re 0.3542 to Re 0.3526 (June 2014: Re 0.2773 to Re 0.2526) per diem per thousand. The loan was initially repayable in 12 six monthly installments commencing on February 24, 2012. However, after payment of 3 installments, two early repayments were made on April 15, 2013 and May 16, 2014 respectively . As on December 31, 2014, 5 unequal installments are outstanding, beginning on August 24, 2015 and ending on August 24, 2017.

This represents the loan obtained from KASB Bank Limited and is secured by a way of pari passu charge over present and future fixed assets (including land, building, plant and machinery) of the company for Rs 134 million. It carries markup at six month KIBOR plus 2.50% per annum and is payable semi annually. The markup charged during the period ranges from Re 0.3474 to Re 0.3332 (June 2014: Re 0.2789 to Re 0.2625) per diem per thousand. As on December 31, 2014, 5 equal semi-annual installments are outstanding ending on December 01, 2017.

This loan has been extended by Descon Engineering Limited, an associated company on April 15, 2013. Markup is accruable at six months KIBOR plus 4.00%. Markup accrued is repayable in unequal installments beginning in April 2016 whereas Principal amount is repayable in unequal installments beginning in October 2017. Effective rate charged during the period was Re 0.3393 (June 2014: 0.3391) per diem per thousand. As per the terms of the borrowing agreement, the loan is secured against a ranking charge on all present and future assets and fixed assets of the Company. The above encumbrance, however, till the date of authorization of these financial statements, has not been registered with the Securities and Exchange Commission of Pakistan through the instrument evidencing the charge.

This loan has been extended by Presson Descon International (Private) Limited, an associated company on April 15, 2013. Markup is accruable at six months KIBOR. Markup accrued is repayable in unequal installments beginning in April 2016 where as Principal amount is repayable in unequal installments beginning in April 2017. Effective rate charged during the period was Re 0.2528 (June 2014: Re 0.2527) per diem per thousand. As per the terms of the borrowing agreement, the loan is secured against a ranking charge on all present and future assets and fixed assets of the Company. The above encumbrance, however, till the date of authorization of these financial statements, has not been registered with the Securities and Exchange Commission of Pakistan through the instrument evidencing the charge.

The Company signed the 'Subordination Agreement' with Descon Engineering Limited, Interworld Travels (Private) Limited and Allied Bank Limited dated November 15, 2010, through which the repayment of both the principal and interest of loans 1 to 3 has been subordinated to the repayment of the syndicate loan as referred to in note 5.1.1. As per the terms of the 'Subordination Agreements', the Company may repay atleast 50% of loan 2 and 3 aggregating to Rs 132 million and markup accrued on the entire balance of subordinated loans only after the principal of the syndicate loan has been repaid and is further subject to compliance with covenants contained in the agreement for loan referred to in note 5.1.1. Loan 1 of Rs 276.785 million may be repaid only after entire syndicate loan and related markup has been settled by the Company.

5.2

5.1.1

5.1.2

5.2.1

5.2.2

From Associated Companies

- Descon Engineering Limited - note 5.2.1 400,000 400,000 - Presson Descon International (Private) Limited - note 5.2.2 310,000 310,000

6.

6.1

Subordinated loans from associated companies - unsecured - Descon Engineering Limited - Loan 1 - note 6.2 276,785 276,785 - Descon Engineering Limited - Loan 2 - note 6.3 112,000 112,000 - Interworld Travels (Private) Limited - Loan 3 - note 6.4 20,000 20,000

408,785 408,785

710,000 710,000


12 13

December 31,2014

Unaudited

June 30,2014

Audited

------------ Rupees '000' ------------

This loan was extended by Descon Engineering Limited, an associated company on June 30, 2010 by converting its short term non-interest bearing receivables of Rs 276.78 million into an un-secured interest bearing long term loan. The principal is repayable only after the repayment of the entire facility referred to in note 5.1.1. The markup is payable only after 50% of the facility under note 5.1.1 has been repaid and is further subject to compliance with covenants contained in the agreement for loan referred to in note 5.1.1. Mark-up is accruable for the period at six months Kibor plus 2.75%. Effective rate charged during the period was Re 0.2533 (June 2014: Re 0.2601) per diem per thousand for Rs 242 million loan and Re 0.2846 (June 2014: Re 0.2935) per diem per thousand for Rs 34.4 million loan.

The loan was extended by Descon Engineering Limited, an associated company on May 19, 2010. The principal and markup accrued thereon are repayable only after the repayment of 50% of the facility referred to in note 5.1.1 and is further subject to compliance with covenants contained in the agreement for loan referred to in note 5.1.1. Mark-up is accruable for the period at six months Kibor plus 2%. Effective rate charged during the period was Re 0.2619 (June 2014: 0.2676) per diem per thousand.

This loan was extended by Interworld Travels (Private) Limited, an associated company on June 30, 2010. The principal and markup accrued thereon are repayable only after the repayment of 50% of the facility referred to in note 5.1.1 and is further subject to compliance with covenants contained in the agreement for loan referred to in note 5.1.1. Mark-up is accruable for the period at six months Kibor plus 1 %. Effective rate charged during the period was Re 0.2452 (June 2014: 0.2510) per diem per thousand.

Contingencies and Commitments

Contingencies

Guarantee issued to Sui Northern Gas Pipeline Limited against the performance of a contract amounting to Rs 48.64 million (June 2014: Rs 48.64 million).

Commitments

The company has commitments in respect of letters of credit other than capital expenditure amounting to Rs. 39.510 million (June 2014: Rs. 115.559 million) and in respect of agreement with Descon Power Solutions (Private) Limited amounting to Rs. 11.175 million (June 2014: Rs. 15.645 million) for installation of power anxiliary equipment at Descon Oxychem Limited site for a period of 3 years commencing from April 2013.

6.2

6.3

6.4

7.

7.1

7.2

8. Property, plant and equipment

Operating assets - note 8.1 1,827,458 1,899,701

Capital work-in-progress 33 308

1,827,491 1,900,009

8.1 Operating assets - at net book value

Opening book value 1,899,701 2,024,098

Add: Additions during the period/year - note 8.1.1 10,428 39,878

1,910,129 2,063,976

Less:Depreciation charged during the period/year 82,671 164,275

Closing book value 1,827,458 1,899,701


December 31,2014

Unaudited

June 30,2014

Audited

------------ Rupees '000' ------------

8.1.1 Additions during the period

Buildings on freehold land - 103

Plant, machinery and equipment 9,602 34,968

Material Handling - 2,346

Tools and Equipment - 169

Computer equipment 392 504

Electrical equipment - 15

Office equipment 273 65

Furniture and fixture 161 128

Vehicles - 1,580

10,428 39,878

9. Stock in trade

Raw materials [including in transit of Rs 44.214 million (June 2014: Rs 22.168 million)] 70,334 58,840

Packing material 7,638 530

Work-in-process - 259

Finished goods 6,441 10,830

84,413 70,459

10. Investments - available for sale

Available for sale - at cost

Investment in Nil units (June 2014: 63,785 units) of

MCB Cash Optimizer Fund - 6,089

Investment in Nil units (June 2014: 515,492 units) of

ABL Cash Fund - 4,921

Investment in Nil units (June 2014: 46,697 units) of HBL

Money Market Fund - 4,495

- 15,505

Add: Cumulative fair value gain - note 10.2 - 720

- 16,225

10.1 The investments have been made in open ended money market mutual funds which makes investments in fixed income instruments with a maximum maturity of 180 days and weighted average maturity up to 90 days. The return on the fund is in form of bonus units and cash dividend.


This includes Rs 20.394 million in respect of Gas Infrastructure Development Cess levied during the period under Gas Infrastructure Development Cess Act, 2011 (Act XXI of 2011) (the Act) and Gas Infrastructure Development Cess Ordinance, 2014 (Ordinance No. VI of 2014) (the Ordinance). As per the order of Peshawar High Court dated June 12, 2013 which was upheld by the Honorable Supreme Court through its order dated August 22, 2014, the provisions of the Act were declared ultra vires and void ab-initio and the court further directed that such amount be returned to the payers in a manner to be determined by the Government and that in case of any impracticality, atleast a handsome amount out of the total collected be adjusted in subsequent Sui Gas bills within a period of six months at the most. However, subsequent to the decision of the Honorable Supreme Court of Pakistan, on September 25, 2014, the Government of Pakistan issued Gas Infrastructure Development Cess Ordinance, 2014 (Ordinance No. VI of 2014) (the Ordinance). Under Section 8 of the Ordinance, any cess levied, charged, collected or realized under the Act shall be deemed to have been validly levied, charged, collected or realized under this Ordinance notwithstanding anything to the contrary contained in the Act, any decree, judgment or order of the Court. Consequently, being prudent, the Company has not reversed GIDC levied under the Act during the period and previous years aggregating to Rs 59.448 million.Administrative expenses include legal and professional charges amounting to Rs 8,193 thousand and Rs 2,801 thousand for the half year ended December 31, 2014 and the quarter ended December 31, 2014 respectively (2013: Rs 9,161 thousand and Rs 4,928 thousand respectively).

Diluted loss per share has not been presented as the company does not have any convertible instrument in issue as at December 31, 2014 and December 31, 2013 which would have any effect on the loss per share if the option to convert is exercised.

12.1

13.


December 31,2014

December 31,2013


2014December 31,

2013

Quarter ended

------------ Rupees '000' ------------14. Loss per share

14.1 Basic loss per share Loss for the period Rupees in thousand (41,289) (9,085) (104,855) (60,731) Weighted average number of ordinary shares Number 102,000 102,000 102,000 102,000 Loss per share Rupees (0.40) (0.09) (1.03) (0.60)

14.2 Diluted loss per share

15. Transactions with related parties

Relationship with Nature of transactionthe company

i. Associated Purchase of goods and services 9,324 10,058 undertakings Purchases in respect of

capital expenditures - 57 Sale of goods 140 275 Share of common expenses charged

from associated companies 19,817 17,989 Share of common expenses charged

to associated companies 4,961 7,582 Mark-up expense 73,295 63,089

ii. Post employment Expense charged in respect of benefit plans retirement benefit plans 1,055 958

iii. Key management personnel

Salaries and other employee benefits 12,698 9,856

December 31,2014

December 31,2013

Half year ended

---------- Rupees '000' ----------

December 31,2014

Unaudited

June 30,2014

Audited---------- Rupees '000' ----------

Relationship with the company Nature of transactionPeriod-end balancesAssociated undertakings Payable to related parties 6,245 5,332

Receivable from related parties 119 377 Accrued finance cost 361,400 288,105 Long term loan 1,118,785 1,118,785

10.2 Cumulative fair value gain

As at July 1 720 172

Fair value gain during the period 172 3,557

Transferred to profit and loss account on derecognition of investments (892) (3,009)

- 720

11. Sales

Gross sales:- Local 297,420 292,404 576,456 557,744 - Export 54,806 103,201 125,505 184,017

352,226 395,605 701,961 741,761

Less: Commission on sales (12,230) (7,662) (22,393) (15,831) 339,996 387,943 679,568 725,930

12. Cost of goods sold

Raw and packing materials consumed note 12.1 122,877 127,887 265,821 236,587 Salaries, wages and other benefits 17,545 13,171 34,153 31,620 Repairs and maintenance 10,224 7,450 17,983 14,022 Fuel and power 78,991 81,103 171,763 167,300 Printing and stationery 156 233 156 233 Services through contractors 9,721 11,306 17,882 16,501 Traveling 1,296 598 1,296 598 Annual shutdown expenses - 1,479 - 14,207 Communication 191 113 191 113 Rent & rates 7,632 11,047 18,250 19,891 Depreciation on property, plant and equipment 39,743 41,922 82,465 81,885 Amortization of intangible assets - 4,464 - 8,928 Insurance 1,995 2,055 3,990 4,106 Safety items consumed 423 296 423 296 Miscellaneous 450 (389) 709 296

291,244 302,735 615,082 596,583 Add: Opening work in process 4,685 - 259 225 Less: Closing work in process - (277) - (277)

4,685 (277) 259 (52) Cost of goods produced 295,929 302,458 615,341 596,531 Add: Opening finished goods 17,991 11,360 10,970 Less: Closing finished goods (14,079) (18,669)

9,333 (14,079) (18,669)

3,912 (9,336) (2,719) (7,699) Cost of goods sold - own manufactured 299,841 293,122 612,622 588,832 Cost of goods sold - purchased for resale - 6,043 - 6,043

299,841 299,165 612,622 594,875

December 31,2014

December 31,2013


2014December 31,

2013

Quarter ended

------------ Rupees '000' ------------


December 31,2014

Unaudited

June 30,2014

Audited------------ Rupees '000' ------------


14 15

_______________________CHIEF EXECUTIVE

_______________________DIRECTOR


16. Cash generated from operationsLoss before taxation (114,368) (43,217) Adjustments for:- Depreciation on property, plant and equipment 82,671 82,237 - Amortization of intangible assets - 8,928 - Finance cost 115,287 113,997 - Interest from bank deposits (396) (292) - Reversal of provision for accumulating leave balances (720) (2,202) - Reversal of Provision for bad debts - (535) - Net exchange (gain)/loss (313) 2,643 - Gain on sale of investment (892) (545) Profit before working capital changes 81,269 161,014

Effect on cash flow due to working capital changesEffect on cash flow due to working capital changes- Increase in stores and spares (4,582) (27,482) - Increase in stock-in-trade (13,954) (7,919) - Decrease in trade debts 1,440 11,975 - (Increase)/decrease in advances, deposits, prepayments

and other receivables (21,270) 37,005 - Increase in trade and other payables 18,603 7,266

(19,763) 20,845 Cash generated from operations 61,506 181,859

17. Cash and cash equivalents

Cash and bank balances 1,648 5,542

Finances under markup arrangement - secured (52,980) (59,536)

(51,332) (53,994)

18.

19.

Date of authorization for issue

December 31,2014

December 31,2013

Half year ended

---------- Rupees '000' ----------

December 31,2014

Unaudited

June 30,2014

Audited---------- Rupees '000' ----------

This condensed interim financial information was authorised for issue on February 19, 2015 by the Board of Directors of the Company.

Corresponding figures

Corresponding figures have been re-arranged and reclassified, wherever necessary, for the purposes of comparison and better presentation as per reporting framework.

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.

DESCON OXYCHEM LIMITED

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