+88 02 9858734 info@farchemicalbd.com

About company

DIRECTOR'S REPORT

Bismillahir Rahmnir Rahim,
Dear Shareholders,
Assalamu Alykum,

On behalf of the members of the Board of Directors of your company and on my own behalf, I welcome you all to the 7th Annual General Meeting of FAR Chemical Industries Limited. We members of the Board are pleased to present Directors’ Report, Auditors’ Report and Audited Financial Statements for the year ended 30th June, 2015 before you for your consideration and approval.

(i) Industry outlook and possible future developments in the industry:

You know that your company’s products are the raw materials of garments and textile sector. So our production and sales are depends on uninterrupted production of textile and garment industries. The garments and textile sectors has gone through lot of obstacles in the last one year. But this has not affected the growth of the sector, regardless of rising energy and raw material costs and ever growing labor unrest.

The ongoing global economic crisis is having an impact on all export dependent economies. Even high performing countries like China and India have recorded slowdowns. Other high performing economies like those of Malaysia, Thailand, Philippines and Indonesia are also suffering badly because of the ongoing crisis.

In contrast, export of textile products from Bangladesh surprisingly remains quite buoyant. Readymade Garments exports have increased by significant percent, during the year 2012-2013 over the corresponding period of last year.

The industry has set a target of USD 35 billion exports by 2015, which would create an additional 1.20 million job opportunities within the sector and subsequently open up opportunities across different occupations. Many challenges have remained unresolved, but the overall outlook for this nation’s industry remains bright.

(ii) Segment-wise or product –wise performance:

The following table indicates revenue of major products and its contribution percentage for the last two comparative periods:

Products Year ended 30-6-2015 Year ended 30-6-2014
Taka Percentage Taka Percentage
Softening Agent 412,487,593 32% 348,043,022 29%
Retarding Agent 178,632,048 14% 166,593,935 14%
Leveling Agent 115,428,761 9% 100,947,795 8%
Anti-Foaming Agent 84,102,364 6% 111,475,669 9%
Stabilizer 165,214,873 13% 160,091,611 13%
Scouring Agent 135,215,483 10% 110,539,245 9%
Fixing Agent 85,421,687 7% 90,129,407 8%
Bleaching Agent 44,320,658 3% 90,236,729 8%
Others 87,541,563 7% 20,136,626 2%
Total 1,308,365,030 100% 1,198,194,039 100%

(iii) Risks and concerns:

You know that your company’s products selling is directly depends on the production of garments and textile sector. All sectors of the garments and textile industries face many of the same challenges. The main problems are lack of power and problem with labor unrest causing disruption of production. Price of grid electricity for industries is likely to increase as well. Gas price has not yet been increased for the industries but the government has hinted the raise as well. Hence, coming year could be a year when the industries may need to be prepared to pay more for energy and fuel. So, this forcing the sector to be more cost effective in the ever challenging international market.

(iv) Analysis of Cost of Goods sold, Gross Profit Margin and Net Profit Margin:

(a) Cost of Goods Sold:

This year’s cost of goods sold was Tk.998.74 million as compared to last year’s cost of goods sold of Tk.915.21 million. This is due to the fact that there has been an increase of raw materials, manufacturing overhead and average production quantity. Production capacity utilized during the year was 76.40%. There was an increase in wages and salaries to the tune of Tk. 0.09 million as compared to last year.

(b) Gross Profit:

The company has achieved an export turnover of Tk. 1,308.37 million during the year ended 30th June, 2015. Last year’s turnover was Tk. 1,198.19 million. The increase in turnover is 9.19% over the last year. Gross profit earned during the year was Tk. 309.62 million as compared to last year’s gross profit of Tk 282.98 million.

(c) Net Profit:

Net profit (after tax) earned during the year was Tk. 298.46 million as compared to last year’s Net profit (after tax) of Tk. 281.71 million. During the year net profit after tax has increased by Tk. 16.75 million compared to last year.

(v) Extra-Ordinary gain or loss:

During the year there have accrued profit as interest from share money deposit offered by Initial Public Offer (IPO) made by the company.

(vi) Utilization of proceeds from public issue:

Company has expended Tk 106,790,553 from the proceeds of Initial Public Offer (IPO) which consisted of as below:

Building & Other Civil Construction : 12,576,000
Imported Machinery : 87,234,500
Spare Parts & Cleaning, Erection, Loading/ Unloading, Transportation, Installation cost : 6,980,053

(vii) Related party transactions:

During the year the company has carried out transactions with related parties besides the normal course of business, details are given below:

Name of related party Relationship Nature of transaction Transaction value during the year Outstanding balance as on June 30, 2015
M.L Dyeing Ltd Common Director Sale of Goods 145,396,876 75,396,876

(viii) Variance between Quarterly Financial performance and Annual Financial Statements:

There is no significant variance between the Quarterly Financial performance and Annual Financial Statements.

(ix) Remuneration to directors including independent directors:

The remunerations of Directors are as follows:

Name Position Amount in Taka
Mr. Abid Mustafizur Rahman Chairman Nil
Mr. Kim Jong Suk Managing Director 6,00,000
Mr. Rezaur Rahman Rajon Director Nil
Mr. Faiaz Kader Sadman Director Nil
Mr. Akik Habibuzzaman Independent director Nil
Total 6,00,000

(x) Statement of Directors on Financial Reports:

The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

a) Proper books of account of the issuer company have been maintained.
b) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment.
c) International Accounting Standard (IAS)/ Bangladesh Accounting Standard (BAS)/International Financial Reporting Standard (IFRS)/ Bangladesh Financial Reporting Standard (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there- from has been adequately disclosed
d) The system of internal control is sound in design and has been effectively implemented and monitored.
e) There are no significant doubts upon the issuer company’s ability to continue as a going concern.

(xi) Deviation from the last year’s operating results:

There are significant improvement from the last year’s operating results. The growth in the business is very positive and management’s continuous endeavor to grow and sustain the pressure of international competitive market.

(xii) Key operating and financial data of last preceding 5 (five) years:

Operational Data:

Particulars Year ended as on
30.06.2015 30.06.2014 30.06.2013 30.06.2012 30.06.2011
Turnover (Tk) 1,308,365,030 1,198,194,039 1,097,422,650 689,265,894 397,275,647
Gross Profit (Tk) 309,624,377 282,983,442 404,456,039 220,567,157 70,617,944
Operating Profit (Tk) 293,728,345 237,638,491 397,323,834 215,261,682 65,201,787
Net Profit before tax (Tk) 298,461,130 281,711,185 395,582,363 213,153,602 64,355,771
Net Profit after tax (Tk) 298,461,130 281,711,185 395,582,363 213,153,602 64,355,771
Basic EPS (Tk) 2.73 3.45 5.01 4.05 64.42
Dividend per share (%) 91.57% 57.97% 50% Nil Nil

(xiii) Key operating and financial data of last preceding 5 (five) years:

Financial Data:

Particulars Year ended as on
30.06.2015 30.06.2014 30.06.2013 30.06.2012 30.06.2011
Authorized Capital (Tk) 1,310,000,000 1,310,000,000 1,010,000,000 1,010,000,000 1,010,000,000
Paid up Capital (Tk) 1,092,378,780 910,315,650 790,315,650 526,877,100 99,900,000
Face value per share (Tk) 10 10 10 10 100
Retained Earnings (Tk) 836,390,809 719,992,809 438,281,624 306,137,811 92,984,209
Current Assets (Tk) 1,113,378,741 918,381,573 605,954,364 449,690,120 206,299,838
Current Liabilities (Tk) 45,687,406 89,205,183 83,881,290 81,575,814 73,459,179
Current Ratio 24.37 10.30 7.22 5.51 2.81
Quick Ratio 16.17 6.40 4.53 2.92 1.65
Debt-Equity Ratio N/A N/A N/A N/A N/A
Time Interest Earned Ratio 1,618.12 361.06 197.07 90.23 65.933
Return on Assets 34.72% 35.23% 56.11% 46.00% 13.26%
Return on Equity 15.47% 17.28% 32.20% 25.59% 10.38%
Earnings per share 2.73 3.45 5.01 4.05 64.42
Dividend Payout Ratio 91.50% 57.97% 99.80% Nil Nil
Number of Shareholders 6909 3654 22 12 12

(xiv) Number of Board Meetings:

The Board met 9 times during the year. Following table shows the attendance of Directors in the meeting:

Name of the Director Position No of Meeting held during the year No of Meeting attended
Mr. Abid Mustafizur Rahman Chairman 9 4
Mr. Kim Jong Suk Managing Director 9 5
Mr. Rezaur Rahman Rajon Director 9 4
Mr. Lee Jung Kook Director 9 1
Mr. Faiaz Kader Sadman Director 9 6
Mr. Akik Habibuzzaman Independent Director 9 6

The members who could not attend the meeting were granted leave and outside of the country.

(xv) The pattern of shareholding:

a) Parent/ Subsidiary/ Associated Companies and other related parities
Number of shares held: Nil
b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit:

Name Position Number of share held
Mr. Abid Mustafizur Rahman Chairman 5,025,000
Mr. Kim Jong Suk Managing Director 22,005,000
Mr. Rezaur Rahman Rajon Director 5,225,000
Mr. Faiaz Kader Sadman Director 10,416,615
Mr. ABM Golam Mostafa,FCMA Company Secretary Nil
Mr. A.K.M Atiqur Rahman CFO Nil
Mr. Gopal Chandra Basak Head of Internal Audit Nil

c) Senior Corporate Executives :
Number of shares held : Nil
d) Shareholders holding ten percent (10%) or more voting interest in the company
Mr. Kim Jong Suk : 22,005,000 Shares

(xvi)Appointment/ re-appointment of directors of the company:

Mr. Abid Mustafizur Rahman will resign and be reappointed.

(xvii) Auditors:

Present Auditors AHMAD & AKHTAR, Chartered Accounts (Affiliated with Russell Bedford International, UK) will retire in the 8th AGM and being eligible to audit for the year ended 30th June 2016 as per order of Bangladesh Securities and Exchange Commission (BSEC) No BSEC/CMRRCD/2009-193/104/Admin dated July 27, 2011 they have conveyed their willingness to accept for reappointment.

(xviii) Corporate Governance Compliance Report:

In accordance with the requirement of the Bangladesh Securities and Exchange Commission, Corporate Governance Report is annexed.
The board of directors wishes to place on record their appreciation of thanks to shareholders, customers and suppliers for their continued support. Your Directors also wish to place on record their appreciation for the contribution made by the employees at all levels to the continued growth and prosperity of the company.
The Board would also like to thank all stakeholders including banks, Insurance Companies, BEPZA, BSEC, DSE, CSE, CDBL, RJSC and various government authorities, trade bodies for their extended cooperation.

(xix) Company’s Expansion Program:

It’s a great pleasure to inform all valued shareholders and other concern individuals that your company has been decided to expand and diversified its product categories as well as increase production capacity. In this regard the company has purchased 47.12 decimal of factory land out of 200 decimal of land at Rupgonj,Narayangonj. We hope that within next year we may complete purchase of total land and start of construction civil work as well as within next 1 ½ years commencement of production will be taken place.

On behalf of the Board

Abid Mustafizur Rahman
Chairman