Directors' Report to the Shareholders

Directors' Report to the Shareholders

The Directors are pleased to present their Report together with Company`s audited
Iinancial statements Ior six months ended December 31, 2009.
Operating Results & PerIormance Overview Company achieved sales oI Rs. 5.203
billion during six months ended December 31, 2009 which were marginally lower
than corresponding period`s sales oI Rs. 5.547 billion. ProIit aIter taxation oI Rs. 161
million grew more than 16 over previous six months Iigure oI Rs. 138 million.
This perIormance is noteworthy especially in view oI prevailing non-conducive
business conditions. Comparative Iigures, although, have been reported Ior the year
ended June 30, 2009 but Ior better understanding Iigures oI corresponding six
months have also been reported wherever necessary, in this report.
In order to match the seasonal business cycle with the accounting year, Company has
adopted calendar year as its accounting year whereby the year-end will not Iall in the
peak season. As such these accounts have been prepared Ior six months ended
December 31,2009 aIter
obtaining necessary approvals Irom relevant authorities. Summary oI the results is as
under :
Financial Results (Rs. in Million)
6 months
ended
December 31,
2009
6 months
ended
December 31,
2008
Year ended
June 30, 2009
ross Sales 5,203 5,547
ross Profit 1,483 1,305
perating Profit 839 820 1,757
Profit before tax 224 204 394
Profit after tax 160 139 261
Earnings per share (Basic) - Rupees 1.31 1.17 1.97
Earnings per share (Diluted) - Rupees 1.24 1.06 1.94



Economic Analysis & Company`s Contribution
Pakistan has been Iacing both economic and political instability in parallel to the
global Iinancial crisis. Turbulent political and security situation coupled with
inIlation, trade deIicit, adverse balance oI payment, circular debt, poor perIormance
oI state enterprises and stock market have remained the key indicators oI Pakistan`s
economy. Lately, Political, Security and Economic indicators are seen taking a
positive turn and given the resilience demonstrated by this country in the past, we are
conIident that this turnaround should continue. GDP growth is likely to achieve the
target oI 3.3 per cent Ior the year and gradual recovery is underway.
During the period under review, with IMF`s program in place and support Irom
multilateral lending agencies, country`s Ioreign exchange reserves have been
strengthening aIter going through a worst period in the previous year, but the much
needed conIidence Irom domestic as well as Ioreign investors in the country`s
economy remained weak. This was probably due to instability in political as well
security situation together with internal Iinancial woes like liquidity constraints,
circular debt, unabated inIlation, negative growth oI large scale manuIacturing sector
and slow down in growth oI services sector. Robust growth oI agricultural sector
despite worries about availability oI water and healthy Ioreign remittances Irom
overseas Pakistanis are contributing in achieving the GDP growth target.
On top oI all above was internal striIe and intensiIication oI domestic security
challenge which caused an extremely high cost to the economy both in terms oI
direct cost oI war against extremism and in terms oI knock-on eIIect on investment
inIlows and market conIidence.
Continued international support through IMF`s and other programs, reduction in the
current account deIicit mainly due to lower oil prices together with growing Ioreign
remittances have caused Ioreign exchange reserves to cross US$ 14 billion mark.
Relative calm in security situation, silver lining in the agricultural sector and recent
positive developments on the political Iront have given rise to a positive sentiment.
Stock exchange is bouncing back to win conIidence oI investors. Bumper wheat,
cotton and other crops, with good price received by Iarmers has given them enough
disposable income to purchase goods and services and hence boost economy. As
such the outlook at the end oI year is encouraging Ior companies to do a good
business during the next year.
Power Division
The gap in demand and supply oI energy in the country is on the rise Ior quite a
while resulting into severe load management. This requires huge input Irom
Government and Private sector on the generation side in diIIerent Iorms such as
thermal, hydel, coal and wind. Funding aspect oI Iuel supply and the circular debt
issue also results into less than optimum capacity utilization oI the generation
Iacilities. Commensurate investment in the distribution network is also required
without which it is deteriorating day by day due to increasing load on old and worn
out electrical distribution equipment.
Although Iinancial institutions like ADB and World Bank have stepped in, however,
the pace oI implementation is lower than plans envisaged. Increased pace in the
implementation would play a pivotal role in the improvement oI electrical
distribution network.
Keeping in view the challenges in this area, Iew years ago the company embarked
upon a major program oI enhancing its capabilities to design and manuIacture state
oI the art electrical distribution equipment in the country. We by the Grace oI God,
are market leaders in the Iield oI distribution transIormers and have taken a leap in
this direction by setting up a new state oI the art manuIacturing Iacility Ior
production oI new generation oI distribution transIormers. This has commenced
production during the period under review.
An estimate oI the beneIits oI replacing the existing population oI distribution
transIormers in the country by the newly designed transIormers reveals a minimum
saving oI 450 MWs oI power in addition to bringing the much needed reliability and
stability in the distribution system. Hence with a very modest investment by
electrical utility companies, not only the electrical shortage can be covered, sizeable
additional revenue to utilities can be generated. The resultant stability in the system
will also enhance the liIe and productivity oI the electrical goods in domestic and
industrial usage.
Power division manuIactures distribution & power transIormers, switchgears, energy
meters and is involved in construction oI grid stations and power networks on EPC
basis. Share oI the power division in the overall sales oI the Company during six
months ended December 31, 2009 amounted to PKR 2.226 billion.
The Company has also diversiIied its power division business by establishing an
Engineering Procurement and Construction (EPC) division which has recognized
itselI as a major player in the construction oI 132KV grid stations on EPC basis.
Recently PEL was awarded its Iirst 220KV sub-station construction contract. Over
the years, PEL electrical equipment has been used in numerous power projects oI
national importance within Pakistan.
Distribution Transformers
Setting up oI the new manuIacturing Iacility has given a technological edge to the
Company over its competitors not only within the country but also in the entire
Middle East and North AIrican region. The new site is 20 Km away Irom the present
Iactory on Ferozepur Road and has commenced production during the period under
review. The new designs, in addition to achieving more market penetration on the
basis oI lower transIormation losses, increased strength to sustain over loading,
ensure smooth power supply, enhanced liIe and low aIter sale service will also
provide reduction in variable manuIacturing costs.
Parallel to building the required hardware and the manuIacturing Iacilities,
investments have been made in acquiring and strengthening the necessary soItware
and human resource in the engineering design, manuIacturing, quality control and
marketing & sales areas. Adequately experienced proIessionals Irom local as well as
Ioreign organizations with Pakistani and European nationalities are part oI our core
teams.
As part oI our continuing R & D activities, we also have acquired technologies and
developed in-house dry type and smart transIormers Ior specialized applications.
Power Transformers
PEL established its power transIormers division in 2005 and has become the leading
manuIacturer oI power transIormers in Pakistan capable to produce 132KV power
transIormers and have started to contribute to revenues and proIitability oI the
company.
The volumetric growth in this area has been exemplary over the past Iew years. This
has been based on recognition oI electrical distribution companies that only
improved distribution networks can bring eIIiciencies in the system and availability
oI stable energy Ior the Iinal consumer.
AIter completing the Iull range 132Kva transIormers, your company is now in
process oI acquisition oI technology Ior production oI 220 KV Power TransIormers.
Educational order Ior 250 MVA, 220 KV Power TransIormer is expected Irom
WAPDA soon.
AIter setting up a solid base oI successIul perIormance in Pakistan, we have started
export oI this product to AIrican and European Markets.
Energy Meter
The cash machine oI Electric Utility Companies is in the process oI change Irom
Electro Mechanical to Digital Meters. The Ieatures oI digital metering include time
oI the day, maximum demand indication, remote access, two way communication
and a number oI other Ieatures that make this equipment a smart product. It also
enjoys the conIidence oI the consumer with respect to its reliability and accuracy.
PEL had anticipated this new trend and had timely acquired proven technology.
Hence we are able to meet the demand Ior single and three phase applications by in-
house production. The business in this product is showing healthy signs in terms oI
revenue and proIitability and enhanced utilization oI production capacities.
Switchgear
Switchgear business during the current period remained constant due to moderate
demand Irom both private sector as well as Irom WAPDA. Since implementation oI
programs Iunded by World Bank and ADB are on the rise, we are expecting more
orders Irom public sector.
PEL manuIactures MV & LV switchgears Ior indoor & outdoor installations which
comply all requirements oI signiIicant international standards & regulations. PEL
share in market Ior switchgear including MV metal clad switchgear cubicles, MV
Pad Mounted TransIormers, Kiosk Type Substations, LV Power Factor improvement
plants, Motor control centers & bus tie duct remained stable due to better
management oI customer relation. Due to World Bank and ADB Iinancing to
WAPDA we are expecting more sales as compared to this period. Marketing eIIorts
to accelerate sales to private sector, WAPDA & also KESC market are well
underway.
EPC Contracting
With restructuring oI power sector in Pakistan and increase in economic, commercial
and industrial activity, more and more power utilities and other customers demanded
high value packaged solutions Ior their transmission systems and enterprise
electriIication requirements. To meet this demand PEL established an Engineering
Procurement and Construction division. PEL EPC Division consists oI human
resource with high academic qualiIications and experience oI local as well as global
markets. The EPC division delivers custom designed and built solutions in Iollowing
areas.
132kV and 220kV grid stations Ior power utility companies.
132kV and 11kV substations Ior industrial and commercial customers.
Integration oI private captive power generation plants into utility network Ior sale
oI their surplus power to utility companies.
ElectriIication oI housing projects and industrial parks
Business overview - Appliances division
The period under review has registered steady growth in Appliances division. Sales
grew to Rs.2.898 billion Irom Rs. 2.642 billion over corresponding period showing
an increase oI 10. This perIormance is noteworthy especially in view oI ongoing
power crisis.

Among other reasons, increase in sales oI home appliances can be attributed to
increase in disposable income oI Iarmers Irom agricultural products. For instance,
according to Economic survey oI Pakistan, the disposable income oI Iarmers has
grown Irom Rs. 288 billion in 2003 (Ior wheat, cotton, rice & sugarcane) to Rs. 900
billion in 2009. With availability oI this additional money, demand oI home
appliances have gained momentum and have come within reach oI Iarmers.
ReIrigerator Ior example in addition to preservation oI Iood ensures availability oI
cool water.
Demand Ior electrical goods in Pakistan, despite energy crisis and inIlationary
pressure, is on the rise again and is mainly attributable to shiIt oI majority oI home
appliances products Irom Luxury` to Necessity` cadre. We are seeing a shiIt in
demand oI ACs Irom urban to rural areas whereas similar shiIt in demand has
already been witnessed Ior last 5 to 7 years in ReIrigerators with total market
increasing Irom 200,000 to over 1 million units. Similar trend was observed in
Microwave ovens and Washing machines.
Despite shortage oI power and load shedding, surge in demand and sales oI air
conditioners is seen. This is due to the Iact that consumers have buying power Ior
this product and want to use air conditioners even Ior smaller durations when power
supply is there.
Raw material costs increased in last six months on account oI both, in Forex rates as
well as in C & F prices. Increase in other Iixed costs were also observed Iollowing
inIlationary trend while energy costs i.e. electricity & generator running costs went
up sharply due to ongoing power crisis. Consequently selling prices oI our
appliances products during current period had to be increased but increase was less
than what It was during corresponding period when Pak rupee was devalued
substantially.
Assigning oI distributorship rights oI LG products in Pakistan has started to yield
positive results. The addition oI LG brand implies that PEL will have two leading
brands in both the categories oI home appliances and air conditioners with minimal
products directly competing with each other. This synergy oI brands will bring
technologically superior products to the customer at competitive prices.
Refrigerators:
Consumer demand Ior ReIrigerators remained steady despite unIavorable economic
conditions during last six months and we are pleased to report that we achieved our
six monthly targets oI this product. In view oI increase in raw material prices and
energy crisis, much against our will, we had to increase selling prices oI
ReIrigerators and we are satisIied to note that these increases were absorbed by the
market.
Economical models introduced last year were continued to be well received by the
market and have become a permanent part oI our ReIrigerator range. By oIIering
single price strategy, we have gained huge conIidence oI our customers which has
brought uniIormity oI pricing across the country.
We are planning to introduce new range in ReIrigerators oIIering new Ieatures in
attractive designs and colors. We have also strengthened our R & D team to upgrade
the existing line up and play a vital role in bringing new series to the market.
Forecast Ior Iorthcoming season appears to be conducive Ior our business and with
the onset summer and , increased consumer demand, we are conIident in achieving
our annual targets.
Air Conditioners:
Air conditioners sold well in the last six months and we are pleased to inIorm that
Company achieved its budgeted sales Iigures oI the period. With the induction oI
new models, we now oIIer wide range oI choice to our customers at competitive
prices. The launch oI LG products, especially, air conditioner, will give us an edge
and will also compliment PEL brand with the same group oI dealers used Ior primary
sales.
The outlook Ior the next six months appears to be promising as demand Ior the next
six months is anticipated to grow due to increasing temperature in Pakistan.
Aggressive advertising and in-store branding has added to enhance consumer
perception oI PEL brand.

Deep Freezers:
The ability to produce tailor made B2B projects has helped in securing orders Irom
corporate sector. This segment has become permanent Ieature to our deep Ireezer
business with repeat orders. Proven quality oI our products and our prompt aIter
sales service has also helped us to maintain and develop stronger relation with our
valuable corporate customers.
Meanwhile, we also intend to increase our dealer network in this category by
oIIering new models to customers at competitive prices.
ther Domestic Appliances
This category includes Microwave ovens, Water dispensers and Washing machines
which compliment the home appliances range oI the Company. PEL emphasizes on
each product category through product campaigns, in-time availability & Iocusing on
shop share. Microwave was the most highlighted in this category which is oIIered
with new & attractive designs Ior the consumers. PEL has increased Microwave
product range by oIIering diIIerent sizes and models meeting varying requirement oI
our customers. New art Ilower designs in Microwave range will be shortly added to
our Microwave range. In addition, we have launched economical models in water
dispenser category to meet the growing customer needs.
L Electronics
LG Electronics is one oI the world`s top companies in Home Appliances, and as
mentioned in our last annual review, company has acquired distribution rights Ior its
domestic appliances and air conditioners.
Sales Ior Split ACs constitutes more than 70 oI total LG business and majority oI
split ACs sale takes place in summer. For the Iorthcoming season, we have planned
to introduce innovative and attractive models which includes Art Cool, Jet Cool &
Exceed. Combined with contemporary technological characteristics, modern designs,
the split air conditioner series is a must Ior luxury and healthy living. The new series
includes MF (multi-Ilow) condenser which is 30 lighter, with longer liIe & energy
eIIiciency due to the new multi-Ilow technology.
LG ReIrigerator is known across the globe Ior its technologically advanced Ieatures
like green ion door cooling system, vitamin plus, bio shield. LG reIrigerator series
promises to store things with healthy preservation to keep Iood Iresh and in good
health so that you can be healthy.
The Ilagship model oI LG reIrigerators, the side-by-side Iridge Ieatures premium
styling, a soIt-touch LED control panel, and easy access to the Ioods you reach Ior
most. Inside are plenty oI adjustable shelves, bins and drawers, a 'Moisture Balance
Crisper Ior longer lasting veggies, even digital controls which react instantly to
Iluctuations in temperature.
LG is always at the IoreIront oI advanced technology with special emphasis on
healthcare. New and attractive models were also introduced in other products oI LG
like Solar Dom in Mircowave category which uses light wave cooking instead oI
conventional microwaves and is 40 energy eIIicient. LG Washing Machine has
unique Ieature oI Inverter Direct Drive motor which oIIers energy eIIiciency &
comes with a ten year warranty.
Future utlook
PEL is geared towards addressing and meeting the expectation oI our customer Ior
quality products in both domestic appliances and electrical equipments. With
achievement oI higher deletion levels, a source oI import substitution, the Company
is eIIectively contributing towards saving oI valuable Ioreign exchange oI the
country. PEL Iuture perIormance will be based on cost savings, increased sales and
high operating eIIiciencies. Various steps have already been introduced with the
objective oI generating sustainable earnings by Iocusing on diIIerent operational
areas and business diversiIications.
As a successIul business enterprise, PEL continues to attract great numbers oI
diverse and talented people in every discipline. As a corporation, we are committed
to greater diversity in our workIorce and the competitive edge.
Pakistan`s economy is also expected to grow largely on account oI population,
utilization oI natural resources, potential oI agricultural products and competitive
edge it has towards manuIacturing oI goods at lesser costs. We are conIident that
PEL is well positioned to realize its potential by taking advantage Irom the expected
growth in the economy as our capabilities are alligned with the priority oI our
customers both in power as well as in appliances division.
Dividend and equity
Stock dividend 10 has been declared out oI capital reserves Ior the period ended
December 31, 2009.
Transactions with Related Parties
Transactions with related parties were made at arm`s length prices determined in
accordance with the comparable uncontrolled price method. The Company has Iully
complied with the best practices on TransIer Pricing as contained in the relevant
rules and regulations.
Material Changes
The annexed Iinancial statements have been prepared Ior six months ended
December 31, 2009 as the Company changed its accounting year Irom June 30th to
December 31st . The said change was made aIter obtaining necessary approvals Irom
relevant authorities.
There have been no other material change since June 30, 2009 and the Company has
not entered into any commitment which would aIIect its Iinancial position at the
date.
Statement of Ethics and Business Practices
The Board has adopted the statement oI Ethics and Business Practices. All
employees have been inIormed oI this statement and are required to observe these
rules oI conduct in relation to customers, suppliers and regulations.
Earnings per Share
Basic Earnings per Share works out to Rs. 1.28 (June 2009 : 1.97).
perating and Financial Data:
The key operating and Iinancial data Ior six years is annexed.
Corporate overnance - Statement of Directors' Responsibilities
In compliance oI the Code oI Corporate Governance, we give below the statements
on Corporate and Financial Reporting Framework:
O The Iinancial statements, prepared by the management oI the Company,
present Iairly its state oI aIIairs, the result oI its operations, cash Ilows and
changes in equity
O Proper books oI account oI the Company have been maintained
O Appropriate accounting policies have been consistently applied in the
preparation oI Iinancial statements and accounting estimates are based on
reasonable and prudent judgment.
O International Accounting Standards, as applicable in Pakistan, have been
Iollowed in preparation oI Iinancial statements and any departure there Irom
has been adequately disclosed.
O The system oI internal control is sound in design and has been eIIectively
implemented and monitored.
O There are no signiIicant doubts upon the Company`s ability to continue as a
going concern.
O There has been no material departure Irom the best practices oI corporate
governance, as detailed in the listing regulations.
O Value oI investments oI Provident Fund as on December 31, 2009 is Rs. 305
million.
O The Board oI Directors presently comprises 10 individuals, out oI which Five
are independent non executive directors while Iour are working executive
directors and one executive director as Managing Director oI the company.
O Board Meetings
Meetings oI the board oI directors are held regularly to take notice oI the
results oI corporate operations and their management and to make decisions
concerning company`s business activities.Meetings also take place to
consider business trends and operational plans oI the company.
During the period under review, Board oI Directors held two meetings on
October 8, 2009 and October 30, 2009. Attendance by each director during
these meetings was as Iollows:
ame of Director umber of Meetings Attended
Mr. M. Naseem Saigol 1
Mr. M. Azam Saigol 1
Mr. Murad Saigol 2
Mr. Zeid YousaI Saigol 2
Mr. Haroon Ahmad Khan 2
Mr. Muhammad RaIi Khan -
Ms. NeeloIar Hameed (NIT Nominee) 1
Mr. Wajahat A.Baqai (NBP Nominee) 1 (Resigned)
Mr. Tajammal H. Bokhari (NBP Nominee) 1
Mr. Rizwan Hameed (NBP Nominee) 1
Pattern of shareholding
The inIormation under this head along with inIormation under clause XIX (i) and (j)
oI the Code oI Corporate Governance is annexed.
Auditors and their Report
M/s YousaI Adil Saleem & Company, Chartered Accountants, Lahore, retires and
being eligible, has oIIered them Ior re-appointment. As suggested by the Audit
Committee, the Board oI Directors has recommended their re-appointment as
auditors oI the Company Ior the year ending December 31, 2010, at a Iee to be
mutually agreed.
Acknowledgement
We take this opportunity to thank all our customers, shareholders, bankers,
employees, CBA and workers Ior their continued help, support and guidance.
On behalI oI the Board
Lahore.
57 , 20
M. ASEEM SAIL
Chairman / ChieI Executive OIIicer


el soclal responlslblllLy
ell granL 3330 dollar par year for colleges
PEL Awarded 7th Annual Environment Excellence Award, 2010

Mr. Mehdi Hasan (Sr. Manager Marketing) Receiving the Environment Excellence Award
From Mr. Hameed Ullah Jan AIridi (Federal Minister Ior Environment)
Pak Elektron Limited (PEL) has been awarded third time in a row with 7th Annual Environment
Excellence Award, 2010 Ior best Health, SaIety and Environmental perIormance. The Award
was presented to Pak Elektron Limited in a graceIul ceremony; held on August 2, 2010 at Pearl
Continental Hotel, Karachi. Mr. Hameed Ullah Jan AIridi (Federal Minister Ior Environment,
Govt oI Pakistan) honored the ceremony as chieI guest whereas guest oI Honor was Mr. Shaikh
Muhammad AIzal (Minister For Environment, Govt oI Sindh).
Mr. Mehdi Hasan (Sr. Manager Marketing) along with Mr. Shaikh Muhammad HaniI (Manager
Marketing Karachi) received the Environment Excellence Award on behalI oI PEL.
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PEL Awarded 4th CSR ational Excellence Award 2009

Mr. Yaqub Tabasum (Project Manager Unit-II)
Receiving the Special Award Ior Best
InIormation Material On CSR` Irom Mr. Sheikh
Muhammad AIzal Alias (Provincial Minister
Ior Environment & Alternate Energy Sindh)
Mr. Yaqub Tabasum (Project Manager Unit-II)
Receiving the CSR Award` Irom Mr. Khawaja
Izhar Ul Hassan (Advisor to ChieI Minister
Sindh)
These awards are instituted jointly by Help International WelIare Trust and CSR Association oI
Pakistan, and means to recognize and appreciate the eIIorts made by corporations within scope
oI Corporate Social Responsibility.
Pak Elektron Limited (PEL) has been awarded Ior the second time with 4th CSR National
Excellence Award 2009` Ior best eIIorts within the multi-dimensional scope oI CSR and a
special award Ior Best InIormation Material On CSR`. The Award was presented to Pak
Elektron Limited in a ceremony; held in Karachi on 21st January, 2010 at Avari Hotel & Towers,
Karachi. Mr. Pir Mazhar-ul-Haq (Provincial Minister Education and Literacy), Mr. Sheikh
Muhammad AIzal Alias (Provincial Minister Ior Environment & Alternate Energy Government
oI Sindh) and Mr. Khawaja Izhar Ul Hassan (Advisor to ChieI Minister Sindh) honored the
ceremony as chieI guest. Mr. Yaqub Tabasum (Project Manager TransIormer Unit-II) received
the CSR National Excellence Award on behalI oI PEL.