siemens (pakistan) engineering company limited quarterly report...siemens (pakistan) engineering...

Siemens (Pakistan) Engineering Company LimitedCondensed Interim Balance Sheet (Unaudited)As at December 31, 2010

December 31, September 30,2010 2010

(Audited)Note (Rupees in '000)

Equity and liabilities

Share capital and reservesShare capitalAuthorised

20,000,000 (September 30, 2010: 20,000,000)

Ordinary shares of Rs 10 each 200,000 200,000

Issued, subscribed and fully paid-up 82,470 82,470

ReservesCapital 624,192 624,192

Revenue 6,170,290 6,461,763

6,794,482 7,085,955

Total equity 6,876,952 7,168,425

Non-current liabilitiesRetention money 128,717 151,582

Employees' long service bonus 13,186 13,376

Provision against record retention 6,717 6,717

148,620 171,675

Current liabilitiesTrade and other payables 5 7,913,983 8,738,208

Provisions 6 2,124,237 2,206,189

Short-term borrowings 7 4,549,981 4,297,231

Taxation - net 1,992,003 1,959,407

Dividend payable 494,822 -

17,075,026 17,201,035

Total liabilities 17,223,646 17,372,710

Contingencies and commitments 8

Total equity and liabilities 24,100,598 24,541,135

Page 1

Siemens (Pakistan) Engineering Company LimitedNotes to the Condensed Interim Financial Statements (Unaudited)For the three months period ended December 31, 2010

1. THE COMPANY AND ITS OPERATIONS

2. BASIS OF PREPARATION

2.2 Functional and presentation currency

2.3 Use of estimates and judgements

3.

4. OPERATIONS IN UNITED ARAB EMIRATES

Siemens (Pakistan) Engineering Company Limited (the Company) was incorporated in Pakistan as a public limited companywith shares quoted on the Karachi, Islamabad and Lahore Stock Exchanges. The Company is principally engaged in theexecution of projects under contracts and in the manufacture, installation and sale of electronic and electrical capital goods. TheCompany's registered office is situated at B-72, Estate Avenue, S.I.T.E., Karachi.

ACCOUNTING POLICIES

- Provision for taxation and deferred taxation

These condensed interim financial statements are presented in Pakistan Rupees which is the functional currency of theCompany and figures are rounded off to the nearest thousand of rupees unless otherwise specified.

- Cost of completion of contracts in progress and their results

These condensed interim financial statements do not include all the information and disclosures required in the annual financialstatements, and should be read in conjunction with the Company's annual financial statements for the year ended September30, 2010.

The preparation of condensed interim financial statements in conformity with approved accounting standards requiresmanagement to make judgements, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The accounting policies adopted in the preparation of these condensed interim financial statements are the same as thoseapplied in the preparation of the annual financial statements of the Company for the year ended September 30, 2010.

The Board of Directors of the Company in their meeting held on January 22, 2010 decided that the Company will cease toparticipate in further bidding in the United Arab Emirates (UAE) due to prevalent market situation. The shareholders of theCompany, in their Extra-ordinary General Meeting held on March 4, 2010, also approved the decision to cease participation infurther bidding in the UAE. However, the Company will continue to execute existing orders in hand which are valued at Rs5,327.891 million as at December 31, 2010.

2.1

- Provision against inventories and doubtful receivables - Actuarial assumptions for the gratuity scheme and provision thereagainst

- Useful lives of property, plant and equipment

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised inthe period in which the estimate is revised and in any future periods affected.

- Warranty obligations

These condensed interim financial statements are unaudited and are being submitted to the shareholders as required undersection 245 of the Companies Ordinance, 1984 and the listing regulations of the Karachi, Lahore and Islamabad StockExchanges and have been prepared in accordance with the requirements of the International Accounting Standard 34 'InterimFinancial Reporting', as applicable in Pakistan.

In preparing these condensed interim financial statements, the significant judgements made by the management in applyingaccounting policies include:

- Provision for liquidated damages

Page 7


4.1 Results of the UAE Operations

The following are the results of the UAE operations:

For the three For the threemonths period months period

ended ended December 31, December 31,

2010 2009(Rupees in '000)

Net sales and services 574,853 3,843,436 Cost of sales and services (396,908) (3,464,830) Gross profit 177,945 378,606

Marketing and selling expenses (12,406) (31,929) General administrative expenses (5,603) (17,865)

(18,009) (49,794) Operating profit 159,936 328,812

Financial income 13 - Financial expenses (23,119) (41,518) Net finance costs (23,106) (41,518) Profit before tax 136,830 287,294

Income tax expense (51,427) (99,619)Net profit for the period 85,403 187,675

4.2 Cash flows from the UAE Operations

Net cash flows from operating activities (11,322) (1,084,904) Net cash flows from investing activities (56) (1,139) Net cash flows from UAE Operations (11,378) (1,086,043)

4.3 Assets of the UAE Operations As at December As at September

31, 2010 30, 2010(Audited)

(Rupees in '000)

Property, plant and equipment 26,203 29,456Intangible assets 1,257 1,722Long-term loans and trade receivables 676,126 740,471Inventories - 26,046Trade receivables 8,144,179 8,605,243Loans and advances 96,559 191,664Deposits, short-term prepayments and other receivables 37,249 48,104Cash and bank balances 3,474 3,344

8,985,047 9,646,050

4.4 Liabilities of the UAE Operations

Long term retention money payable 126,945 149,959Employees' long service bonus 613 566Trade and other payables 2,480,937 3,225,596Provisions 1,299,181 1,316,737Short-term running finances 4,178,149 4,281,123

8,085,825 8,973,981

4.5 For segment reporting, the results of the UAE Operations have been reported as part of 'Energy Segment' (note 17).

Page 8


5. TRADE AND OTHER PAYABLES As at December As at September 31, 2010 30, 2010


Trade creditors [including retention money of Rs 1,242.686 million (September 30, 2010: Rs 1,397.591 million)] 5.1 3,712,275 4,680,953Accrued liabilities 1,617,552 1,528,797Advances from customers - For goods 473,060 554,331 - For services including projects 1,570,036 1,320,101Staff retirement benefit - gratuity 44,312 21,108Accrued mark-up on short-term running finances - 8,990Unearned portion of revenue and maintenance contracts 61,097 102,220Workers' Profits Participation Fund 20,804 88,991Workers' Welfare Fund 53,555 71,307Unclaimed dividend 13,454 12,717Derivative financial instruments 2,467 1,270Withholding tax payable 15,663 18,089Other liabilities 329,708 329,334

7,913,983 8,738,208

5.1

6. PROVISIONSWarranties Liquidated Losses on sales Total

damages contracts----------------------------------------(Rupees in '000)----------------------------------------

Balance as at October 1, 2010 524,381 1,665,850 15,958 2,206,189 Additional provision 37,877 8,859 - 46,736 Reversal of utilised and unutilised amounts (59,915) (63,103) (5,670) (128,688)

502,343 1,611,606 10,288 2,124,237

7. SHORT-TERM BORROWINGS As at December As at September 31, 2010 30, 2010


Short-term loansFrom others 7.1 302,239 -

302,239 -

Short-term running financesFrom an associate - unsecured 7.2 4,136,901 4,281,123From others - secured 7.3 110,841 16,108

4,247,742 4,297,231 4,549,981 4,297,231

7.1

7.2

7.3

This facility is available from Siemens Financial Services (SFS) amounting to Rs 4,137 million (September 30, 2010: Rs 4,281 million), tobe utilised in respect of the projects in the UAE. The mark-up on this facility ranges between 0.64% and 0.77% per annum (September 30,2010: 0.64% and 1.50% per annum).

These facilities available from various banks aggregated to Rs 2,235 million (September 30, 2010: Rs 2,799 million). The mark-up on thesefacilities ranges between 5.39% and 15.34% per annum (September 30, 2010: 2.36% and 16.00% per annum), and are secured againstthe joint hypothecation of inventories of finished goods, work-in-process, raw materials and components and present and future tradereceivables. These include facilities, aggregating Rs 465 million (September 30, 2010: Rs 1,191 million), obtained in the UAE at mark-uprates ranging between 5.39% and 5.54% per annum (September 30, 2010: 2.36% and 5.56% per annum).

This represents export refinance facility obtained from the State Bank of Pakistan to facilitate the Company's export financing requirementsfor a period of 180 days. The rate of mark-up on this facility is 10%.

These include a sum of Rs 431.286 million (September 30, 2010: Rs 373.581 million) due to related parties.

Page 9


8. CONTINGENCIES AND COMMITMENTS

Contingencies:

Commitments:8.2

8.3

As at December As at September 31, 2010 30, 2010

(Audited)(Rupees in '000)

Forward exchange contracts- Purchase value 970,798 2,950,314- Fair value 979,208 3,005,732

9. PROPERTY, PLANT AND EQUIPMENT

Operating assets - at net book value 1,627,887 1,616,513 Capital work in progress - at cost 25,151 62,009

1,653,038 1,678,522

9.1 Following is the cost of operating assets that have been added / disposed off:

For the three For the three For the three For the threemonths period months period months period months period

ended ended ended ended December 31, December 31, December 31, December 31,

2010 2009 2010 2009(Rupees in '000) (Rupees in '000)

Land and building 1,302 - - - Plant and machinery 52,964 7,886 - 966 Tools and patterns 2,601 890 41 51 Furniture and equipment 4,273 15,834 847 1,690 Vehicles 7,006 10,417 1,911 7,101

68,146 35,027 2,799 9,808

10. INVENTORIES As at December As at September

31, 2010 30, 2010


Raw materials and components 1,240,902 1,259,337 Work-in-process 1,412,680 1,478,625 Finished goods 10.1 825,710 955,618

3,479,292 3,693,580 Provision for slow moving and obsolete items (644,300) (626,805)

2,834,992 3,066,775 Goods-in-transit 722,731 667,522

3,557,723 3,734,297

10.1

8.1 There has been no change in the status of contingencies as stated in notes 11.1 and 11.2 to the annual financial statements of the Company for the yearended September 30, 2010.

The following amounts of forward exchange contracts relating to the Company's operations have been taken to hedge the foreign currency liabilities:

As at December 31, 2010 capital expenditure contracted for but not incurred amounted to Rs 108.964 million (September 30, 2010: Rs 120.999 million).

These include items, costing Rs 3.623 million (September 30, 2010: Rs 3.586 million), valued at their net realisable value of Rs 2.688 million(September 30, 2010: Rs 3.046 million).

Additions Disposals

Page 10


11. TRADE RECEIVABLES As at December As at September 31, 2010 30, 2010


Considered goodDue from related parties 11.1 211,711 702,147 Due from others [including retention money of Rs 4,400.763 million (September 30, 2010: Rs 6,481.868 million)] 9,026,188 9,616,219

9,237,899 10,318,366 Due against construction work in progress - others 4,455,248 4,346,973

13,693,147 14,665,339 Considered doubtful - others 945,427 908,512

14,638,574 15,573,851 Provision for doubtful receivables (945,427) (908,512)

13,693,147 14,665,339

11.1 These represent amounts due from the associates of the Company.

12. CASH AND BANK BALANCES

With banks in - Current accounts 845,770 980,436 - Deposit accounts 12.1 1,301,471 205,693 Cheques in hand 163,129 202,234 Cash in hand 14,092 7,903

2,324,462 1,396,266

12.1

13. BASIC AND DILUTED EARNINGS PER SHARE For the three For the three months period months period


2010 2009(Rupees in '000)

There is no dilutive effect on the basic earnings per share of the Company, which is based on:Net profit for the period 203,349 368,986

(Number of shares)

Weighted average number of Ordinary shares 8,247,037 8,247,037

(Rupees)

Basic and diluted Earnings Per Share 24.66 44.74

These include Term Deposit Receipts of Rs 575 million (September 30, 2010: Nil). The rate of mark-up on these accounts rangesbetween 10.75% and 11.45% per annum (September 30, 2010: 9.00% and 10.50% per annum).

Page 11


14. CASH GENERATED FROM / (UTILISED IN) OPERATIONS For the three For the three months period months period


2010 2009Note (Rupees in '000)

Profit before tax 325,800 564,847 Adjustment for non-cash expenses and other items:Depreciation and amortisation 55,783 59,336 Provision for slow moving and obsolete inventories 17,495 (6,527) Provision for doubtful trade receivables 36,915 9,534 Provision for Workers' Profit Participation Fund 17,753 31,106 Profit on sale of property, plant and equipment (415) (4,439) Long-term receivables, deposits and prepayments 66,159 (45,296) Retention money payable (22,865) 29,995 Employees' long service bonus (190) 334 Financial expenses 76,634 90,447 Financial income (15,213) (16,351) Working capital changes 14.1 391,123 (2,124,206)

948,979 (1,411,220)

14.1 Working capital changes

(Increase) / decrease in current assetsInventories 159,079 562,439 Trade receivables 935,277 (2,614,118) Loans and advances 109,326 65,701 Deposits, short-term prepayments and other receivables 16,441 (140,801)

1,220,123 (2,126,779) Increase / (decrease) in current liabilitiesTrade and other payables (747,048) (17,710) Provisions (81,952) 20,283

(829,000) 2,573 391,123 (2,124,206)

15. CASH AND CASH EQUIVALENTS As at December As at December31, 2010 31, 2009

(Rupees in '000)

Cash and bank balances 2,324,462 856,572 Short-term running finances (4,247,742) (2,028,737)

(1,923,280) (1,172,165)

Page 12


16. TRANSACTIONS WITH RELATED PARTIES

For the three For the three months period months period


2010 2009Note (Rupees in '000)

Parent company (Siemens AG)Sales of goods and rendering of services 8,325 25,628Purchases of goods and receipt of services 508,506 1,019,793Commission and allowances earned 5,932 7,031Dividends 327,067 327,067

Associated companiesSales of goods and rendering of services 47,284 1,708Purchases of goods and receipt of services 315,088 190,711Commission and allowances earned 6,576 6,257Financial expenses 7,204 4,212 Financial income 13 -

OthersDividends 30 30Contribution to employees retirement benefit funds 31,476 27,864Compensation to key management personnel 16.1 74,977 63,397



Receivables from associates 211,711 702,147

Payables to - associates (including short-term running finances) 4,568,187 4,654,704 - others 4,519 -

4,572,706 4,654,704

For the three For the three months period months period


2010 2009(Rupees in '000)

16.1 The details of compensation to key management personnel are as follows:

Short-term employee benefits 63,052 66,367 Post employment benefits 4,174 2,269 Other long-term benefits 214 195 Accrual / (reversal of accrual) for share based payments 7,537 (5,434)

74,977 63,397

Related parties comprise Siemens Aktiengesellscaft (Siemens AG), its subsidiaries and associates and other companieswith common directorship with significant influence on other companies, employees retirement benefit funds and keymanagement employees. Transactions with related parties are summarised as follows:

Page 13


17. INFORMATION ABOUT BUSINESS SEGMENTS(All rupees in '000)

Energy Industry Healthcare Eliminations Company as a whole

REVENUE

Sales to external customers 2,961,685 1,363,375 63,580 - 4,388,640Inter-segment sales 192,911 89,696 6,227 (288,834) -

Total revenue 3,154,596 1,453,071 69,807 (288,834) 4,388,640

RESULT

Segment result 276,585 97,075 (22,975) - 350,685Unallocated expenses (24,402)

326,283Interest expense (16,139) Interest income 15,213 Other operating income 443 Income tax expense (122,451) Net profit for the period 203,349

OTHER INFORMATION

Capital expenditure 19,113 7,411 170 -

Depreciation and amortisation 25,604 15,057 2,070 - Non-cash expenses other than depreciation and amortisation 238 76 (343) -

------------------------------------As at December 31, 2010----------------------------------ASSETS AND LIABILITIES

Segment assets 15,049,038 3,456,707 475,871 - 18,981,616

Segment liabilities 11,550,676 2,001,982 203,189 - 13,755,847

REVENUE

Sales to external customers 5,641,082 2,155,815 211,115 - 8,008,012Inter-segment sales 217,860 57,128 - (274,988) -

Total revenue 5,858,942 2,212,943 211,115 (274,988) 8,008,012

RESULTSegment result 454,594 159,190 3,510 - 617,294Unallocated expenses (45,815)

571,479Interest expense (21,787) Interest income 15,155 Income tax expense (195,861) Net profit for the period 368,986

OTHER INFORMATION

Capital expenditure 5,578 13,510 13,891 -

Depreciation and amortisation 26,258 14,092 2,000 - Non-cash expenses other than depreciation and amortisation 176 81 (25) -

ASSETS AND LIABILITIES

Segment assets 15,579,948 3,815,814 501,253 - 19,897,015

Segment liabilities 12,530,215 1,983,480 232,474 - 14,746,169

--------------For the three months period ended December 31, 2010----------------

----------------For the three months period ended December 31, 2009-----------------

------------------------------As at September 30, 2010 (Audited)-----------------------------

Page 14


17.1

17.2 Geographical information

Sales to external customers For the three For the three months period months period


2010 2009(Rupees in '000)

Pakistan 2,916,027 3,819,711 United Arab Emirates 615,989 3,846,953 Afghanistan 441,097 232,098 Germany 26,045 42,016 Others 389,482 67,234

4,388,640 8,008,012

Non-current assets As at December As at September 31, 2010 30, 2010


Pakistan 1,736,840 1,753,598 United Arab Emirates 703,583 771,649 Afghanistan 8,103 15,607

2,448,526 2,540,854

17.3 Segment assets and liabilities



Segment assets for reportable segments 18,981,616 19,897,015 Corporate assets 992,086 1,002,822 UnallocatedDeferred tax asset 1,256,726 1,253,518 Cash and bank balances 2,324,462 1,396,266 Others 545,708 991,514

Total assets as per balance sheet 24,100,598 24,541,135

Reportable segments' assets are reconciled to total assets as follows:

Revenues of Nil (December 31, 2009: Rs 2,031.238 million and Rs 1,111.476 million) are derived from none (December 31,2009: two) external customers. These revenues are attributable to the Energy segment of the Company.

For management purposes, the activities of the Company are organised into business units based on their products andservices and the Company has three reportable operating segments. The energy segment mainly relates to supply andinstallation of transformers, switchboards, and other related power generation, transmission, and distribution equipment andrelated services. Industry segment includes designing, engineering and construction services in electrical field, mechanicalfield, information technologyservices, diesel generatingsets, motors, alternatorsand drives etc. Healthcaresegment includessupply and services of health care and related equipment.

The revenue information above is based on the location of customers.

Non-current assets for this purpose consist of property, plant and equipment, intangible assets and long-term loans,receivables, deposits and prepayments.

Page 15

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