Get documents about "FUJAIRAH CEMENT INDUSTRIES COMPANY (PUBLIC SHAREHOLDING COMPANY
Document Sample
2009075
FUJAIRAH CEMENT INDUSTRIES COMPANY
(PUBLIC SHAREHOLDING COMPANY)
FUJAIRAH - UNITED ARAB EMIRATES
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED DECEMBER 31, 2008
Fujairah Cement Industries Company
(Public Shareholding Company)
Fujairah - United Arab Emirates
Financial Statements and
Independent Auditor’s Report
For the Year Ended December 31, 2008
Table of Contents
Page
Independent Auditor’s Report 1&2
Balance Sheet 3&4
Income Statement 5
Statement of Changes in Equity 6
Cash Flow Statement 7
Notes to the Financial Statements 8 - 34
Fujairah Cement Industries Company 5
(Public Shareholding Company)
Fujairah - United Arab Emirates
Income Statement
For the year ended December 31, 2008
(In Arab Emirates Dirhams)
Note 2008 2007
Sales 14 744,895,393 561,918,839
Cost of sales ( 534,967,601) ( 378,443,670)
Gross profit 209,927,792 183,475,169
Selling and marketing expenses ( 3,166,006) ( 2,519,682)
General and administrative expenses 15 ( 15,364,645) ( 10,694,775)
Amortization of extraction and concession rights ( 3,593,828) ( 2,493,828)
Net profit from operations 187,803,313 167,766,884
Other revenues and charges:
Interest received and other income 16 9,320,383 8,071,602
Finance costs ( 1,489,101) ( 2,613,652)
Profit for the year 195,634,595 173,224,834
========== ==========
Basic earning per share (U.A.E. Fils) 17 63 56
========== ==========
The accompanying notes form part of these financial statements.
Fujairah Cement Industries Company 6
(Public Shareholding Company)
Fujairah - United Arab Emirates
Statement of Changes in Equity
For the year ended December 31, 2008
(In Arab Emirates Dirhams)
Share Statutory Voluntary Retained
capital reserve reserve earnings Total
Balance as of December 31, 2006 281,316,458 93,486,055 134,313,582 199,649,595 708,765,690
Distribution of 2006 approved dividends - - - ( 70,329,115) ( 70,329,115)
Profit for the 2007 - - - 173,224,834 173,224,834
Transfer to statutory reserve - 17,322,483 - ( 17,322,483) -
Appropriation to voluntary reserve - - 31,180,470 ( 31,180,470) -
Board of directors remuneration paid - - - ( 2,350,000) ( 2,350,000)
Balance as of December 31, 2007 281,316,458 110,808,538 165,494,052 251,692,361 809,311,409
Issuance of bonus shares (Note 13) 28,131,646 - - ( 28,131,646) -
Profit for the year 2008 - - - 195,634,595 195,634,595
Transfer to statutory reserve - 19,563,460 - ( 19,563,460) -
Appropriation to voluntary reserve - - 35,214,227 ( 35,214,227) -
Distribution of 2007 approved dividends - - - ( 56,263,292) ( 56,263,292)
Board of directors remuneration paid - - - ( 2,800,000) ( 2,800,000)
Balance as of December 31, 2008 309,448,104 130,371,998 200,708,279 305,354,331 945,882,712
========= ========= ========= ========= ==========
The accompanying notes form part of these financial statements.
Fujairah Cement Industries Company 7
(Public Shareholding Company)
Fujairah - United Arab Emirates
Cash Flow Statement
For the year ended December 31, 2008
(In Arab Emirates Dirhams)
2008 2007
Cash flows from operating activities
Profit for the year 195,634,595 173,224,834
Adjustments to reconcile net profit to net cash
provided by operating activities:
Depreciation of property, plant and equipment 40,641,738 35,950,162
Amortization of extraction and concession rights 3,593,828 2,493,828
Allowance for old and slow-moving spare parts 1,000,000 1,000,000
Provision for employees’ end of service indemnity 4,094,858 2,118,853
Changes in working capital:
Increase in trade and other receivables ( 29,743,895) ( 39,934,361)
(Increase)/ decrease in inventories ( 85,932,818) 1,164,078
(Decrease)/ increase in accounts and other payables ( 214,883) 85,513,664
Employees’ end of service indemnity paid ( 415,168) ( 218,459)
Net adjustments ( 66,976,340) 88,087,765
Net cash from operating activities 128,658,255 261,312,599
Cash flows from investing activities
Net additions to property, plant and equipment ( 574,443,186) ( 84,265,489)
Cash used in investing activities ( 574,443,186) ( 84,265,489)
Cash flows from financing activities
Increase in bank borrowings 425,069,247 513,424
Dividends payment ( 55,072,460) ( 70,329,115)
Board of Directors remuneration paid ( 2,800,000) ( 2,350,000)
Net cash generated from / (used in) financing activities 367,196,787 ( 72,165,691)
Net (decrease)/ increase in cash and equivalents
during the year ( 78,588,144) 104,881,419
Cash and equivalents at the beginning of the year 212,641,049 107,759,630
Cash and equivalents at the end of the year 134,052,905 212,641,049
========== ==========
The accompanying notes form part of these financial statements.
Fujairah Cement Industries Company 8
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
1. Establishment and operations
Fujairah Cement Industries Company (the “Company”) is a public shareholding company
established on December 20, 1979.
The main objectives of the Company include the manufacturing of cement and erecting,
operating and managing the required stores and silos necessary for this purpose, formation
or participation in the formation of industrial companies and other similar activities.
The Company’s registered address is PO Box 600, Fujairah, United Arab Emirates.
2. Standards and Interpretations in issue but not yet effective
At the date of authorisation of these consolidated financial statements, the following
Standards and Interpretations were in issue but not yet effective:
Effective from January 1, 2009
IAS 1 (Revised) Presentation of Financial Statements
IAS 16 (Revised) Property, plant and equipment
IAS 19 (Revised) Employees Benefits
IAS 20 (Revised) Government grants and disclosure of government assistance
IAS 23 (Revised) Borrowing Costs
IAS 27 (Revised) Consolidated and Separate Financial Statements
IAS 28 (Revised) Investments in Associates
IAS 29 (Revised) Financial Reporting in Hyper Inflationary Economies
IAS 31 (Revised) Interest in Joint Ventures
IAS 32 (Revised) Financial Instruments: Presentation
IAS 36 (Revised) Impairment of Assets
IAS 38 (Revised) Intangible Assets
IAS 39 (Revised) Financial Instruments: Recognition and Measurement
IAS 40 (Revised) Investment Property
IAS 41 (Revised) Agriculture
IFRS 1 (Revised) First time adoption of International Financial Reporting Standards
IFRS 2 (Revised) Share-based Payment
Fujairah Cement Industries Company 9
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
2. Standards and Interpretations in issue but not yet effective (continued)
IFRS 8 Operating Segments
IFRIC 15 Agreements for Construction of Real Estate
Others:
IFRS 3 (Revised) Business Combinations (effective for accounting periods beginning
on or after July 1, 2009)
IFRS 5 (Revised) Non Current Assets Held for Sale and Discontinued Operations
(effective for accounting periods beginning on or after July 1,
2009)
IFRIC 13 Customer Loyalty Programmes (effective for accounting periods
beginning on or after July 1, 2008)
IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective
from annual period beginning on or after October 1, 2008)
IFRIC 17 Distributions of non-cash assets to Owners (effective for
accounting periods beginning on or after July 1, 2009)
The directors anticipate that all of the above Standards and Interpretations will be
adopted in the Company’s financial statements for the period commencing 1 January
2009 or as and when it is applicable, and the adoption of those standards and
Interpretations will have no material impact on the financial statements of the Company
in the period of initial application.
3. Significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with the International Financial
Reporting Standards (IFRS).
Basis of preparation
The financial statements have been prepared on the historical cost basis except for the
revaluation of financial instruments. The principal accounting policies adopted are set out
below.
Fujairah Cement Industries Company 10
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Revenue Recognition
Sales of goods
Sales are measured at the fair value of the consideration received or receivable against
these sales. Sales are reduced for estimated customer returns, rebates and other similar
allowances.
Sales of goods are recognized when all the following conditions are satisfied:
• The Company has transferred to the buyer the significant risks and rewards of
ownership of the goods;
• The Company retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow
to the Company; and
• The costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Interest revenue
Interest revenue on fixed deposit with banks is accrued on a time basis, by reference to
the principal outstanding and interest rates negotiated with banks.
Foreign currencies
The financial statements of the Company are presented in the currency of the primary
economic environment in which the entity operates (its functional currency). For the
purpose of the financial statements, the results and financial position of the company are
expressed in Arab Emirates Dirhams (“AED”), which is the functional currency of the
Company and the presentation currency for the financial statements.
In preparing the financial statements of the company, transactions in currencies other than
the Company’s functional currency (foreign currencies) are recorded at the rates of
exchange prevailing at the dates of the transactions. At each balance sheet date, monetary
items denominated in foreign currencies are retranslated at the rates prevailing at the balance
sheet date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
Fujairah Cement Industries Company 11
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Foreign currencies (continued)
Exchange differences are recognised as profit or loss in the income statement in the year
in which they arise except for:
Exchange differences which relate to assets under construction for future productive
use, which are included in the cost of those assets where they are regarded as an
adjustment to interest costs on foreign currency borrowings;
Exchange differences on transactions entered into in order to hedge certain foreign
currency risks; and
Exchange differences on monetary items receivable from or payable to a foreign
operation for which settlement is neither planned nor likely to occur, which form part
of the net investment in a foreign operation, and which are recognised in the foreign
currency translation reserve and recognised as profit or loss on disposal of the net
investment.
Provision for employees’ end of service benefits
Provision for employees’ end of service indemnity is made in accordance with the UAE
labour law, and is based on basic remuneration and cumulative years of service at the
balance sheet date.
Defined contribution plan
UAE national employees of the Company are members of the Government-managed
retirement pension and social security benefit scheme pursuant to U.A.E. labour law no. 7
of 1999. The Company is required to contribute 12.5% of the “contribution calculation
salary” of payroll costs to the retirement benefit scheme to fund the benefits. The
employees contribute 5% of the “contribution calculation salary” to the scheme. The only
obligation of the Company with respect to the retirement pension and social security
scheme is to make the specified contributions. The contributions are charged to the
income statement.
Statutory reserve
In accordance with United Arab Emirates Federal Companies law number 8 of 1984, the
Company has established a statutory reserve by appropriation of 10% of profit for each year.
The Shareholders’ general assembly may stop appropriations to statutory reserve once its
balance reaches 50% of the share capital. This reserve is not available for distribution
except in the circumstances stipulated by the law.
Fujairah Cement Industries Company 12
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Voluntary reserve
Appropriations to voluntary reserve account are 20% of the yearly profit after deducting
statutory reserve. This appropriation includes ten percent to voluntary reserve and the
balance to establish additional reserve as proposed by the Board of Directors and approved
by the shareholders general assembly. This reserve is distributable based on a
recommendation by the Board of Directors approved by a shareholders resolution.
Property, plant and equipment
Factory land is stated at cost.
Capital work in progress is stated at cost, less any recognized impairment loss.
Depreciation of these assets, on the same basis as other property assets, commences when
the assets are ready for their intended use.
Upon formation of the Company, the anticipated useful life of the factory’s plant and
equipment was 20 years. However, pursuant to Board of Directors’ resolution and according
to a technical report from the manufacturer of the Factory, it was decided to extend the
estimated production life of the factory plant and buildings to 35 years instead of 20 years
with effect from December 31, 1989, therefore ending on December 31, 2016.
Other property and equipment are stated at cost less accumulated depreciation and any
identified impairment losses.
Depreciation is charged so as to write off the cost of assets, other than land and capital
work in progress, over their estimated useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at each year
end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognized as profit or loss in the income statement.
Extraction and concession rights
Extraction rights
In conformity with the approval of the Government of Fujairah to extend the Company’s
extraction rights by additional 15 years to be 35 years ending December 31, 2016, it was
decided to amortize the extraction rights balance as at December 31, 1989 over the
remaining extraction rights period.
Fujairah Cement Industries Company 13
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Extraction and concession rights (continued)
Concession rights
Concession rights are measured at fair value of the consideration given against the new raw
material’s quarry site assigned to the Company by Government of Fujairah. Concession
rights will be amortized over a period of 10 years effective mid of the year 2008.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Company reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present
value using a discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have
not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to
its recoverable amount. An impairment loss is recognised immediately in the income
statement, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in the income
statement, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Fujairah Cement Industries Company 14
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand and demand deposit, and other short
term highly liquid investments that are readily convertible to a known amount of cash and
are subject to an insignificant risk of change in value.
Inventories
Inventories of raw materials are valued at the lower of FIFO cost or net realizable value.
Finished cement and clinker are valued at the lower of average production cost or net
realizable value and semi-finished inventories are valued at average production costs.
Production costs include direct costs, wages and indirect costs incurred in various
production processes to bring inventories to their present location and condition.
Inventory of spare parts are valued at the lower of average cost or net realizable value.
Net realizable value represents the estimated selling price for inventories less all
estimated costs of completion and costs necessary to make the sale.
Provisions
Provisions are recognised when the Company has a present obligation as a result of a past
event, and it is probable that the Company will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
Financial assets
Trade and other receivables
Trade and other receivables are measured at fair value. An appropriate allowance for
doubtful accounts are taken when an objective evidence indicates that the asset is
impaired.
Fujairah Cement Industries Company 15
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is an objective evidence that, as a result of one
or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the financial asset have been impacted.
For certain categories of financial asset, such as trade receivables, assets that are assessed
not to be impaired individually are subsequently assessed for impairment on a collective
basis. Objective evidence of impairment for a portfolio of receivables could include the
Company’s past experience of collecting payments, an increase in the number of delayed
payments in the portfolio past the average credit period, as well as observable changes in
national or local economic conditions that correlate with default on receivables.
The carrying amount of the financial asset is reduced by the impairment loss directly for
all financial assets with the exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognised in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through the income statement to the
extent that the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortised cost would have been had the impairment not been
recognised.
Derecognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the cash
flows from the asset expire; or it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the Company neither transfers
nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Company recognises its retained interest in the asset and an
associated liability for amounts it may have to pay.
Fujairah Cement Industries Company 16
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
3. Significant accounting policies (continued)
Financial liabilities and equity instruments issued by the Company
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Bank borrowings
Interest-bearing overdrafts and loans are recorded at the proceeds received, net of direct
issue costs. Finance charges are accounted for on an accrual basis and are added to the
carrying amount of the instrument or to the accrued expenses to the extent that they are
not settled in the year in which they arise.
Accounts and other payables
Accounts and other payables are measured at fair value.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s
obligations are discharged, cancelled or they expire.
4. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 3,
the directors are required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.
Fujairah Cement Industries Company 17
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements
For the year ended December 31, 2008
4. Critical accounting judgments and key sources of estimation uncertainty
(continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical judgements in applying accounting policies
In the process of applying Company’s accounting policies, the management is of the
opinion that there is no instance of application of judgements which is expected to have a
significant effect on the amounts recognised in the financial statements, apart from those
involving estimations described below.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year.
Estimated useful lives of property, plant and equipment
The cost of items of property, plant and equipment are depreciated on a systematic basis
over the estimated useful lives of the assets. Management has determined the estimated
useful lives of each asset and/ or category of assets based on the following factors:
- Expected usage of the assets;
- Expected physical wear and tear, which depends on operational and environmental
factors; and
- Legal or similar limits on the use of the assets.
Management considers the depreciation method utilized reflects the pattern in pattern in
which the assets’ future economic benefits are expected to be consumed by the Company.
Management has not made estimates of residual values for any items of property, plant
and equipment at the end of their useful lives.
Amortization of extraction rights
Extraction rights are being amortized over extraction rights period granted to the Company
and ending on December 31, 2016.
Fujairah Cement Industries Company 18
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
4. Critical accounting judgments and key sources of estimation uncertainty
(continued)
Impairment of assets values
At each balance sheet date the management reviews the assets values to determine that
their book values have not exceeded amounts recoverable from them. The management
estimates the recoverable amount of various assets individually or based on the cash
generating unit to which the individual asset belongs.
Allowance for doubtful debts
Allowance for doubtful debts is determined using a combination of factors to ensure that
the trade receivables are not overstated due to uncollectability. The allowance for
irrecoverable debts for all customers is based on a variety of factors, including the overall
quality and aging of receivables, continuing credit evaluation of the customers' financial
conditions and collateral requirements from customers in certain circumstances. Also,
specific allowances for individual accounts are recorded when the Company become
s
aware of the customer' inability to meet its financial obligations.
Allowance for slow moving inventories
Inventories are stated at the lower of cost or net realizable value. Adjustments to reduce
the cost of inventory to its realizable value, if required, are made at the product level for
estimated excess, obsolescence or impaired balance. Factors influencing these
adjustments include changes in demand, technological changes, physical deterioration
and quality issues.
5. Bank balances and cash
December 31,
2008 2007
AED AED
Bank balances:
Current accounts 15,053,332 13,317,359
Fixed deposits 188,866,394 199,264,129
Cash on hand 133,179 59,561
134,052,905 212,641,049
========= =========
All bank balances are maintained with banks working in the United Arab Emirates.
Fujairah Cement Industries Company 19
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
6. Trade and other receivables
December 31,
2008 2007
AED AED
Trade receivables 207,927,891 179,463,796
Allowance for doubtful debts ( 2,306,755) ( 2,306,755)
Net trade receivables 205,621,136 177,157,041
Advances and other receivables 4,069,568 2,789,768
Non-trade accounts receivable:
* Net Loan granted to a commercial group
in Kuwait - -
** Net notes receivable and fixed deposits due from
a financial institution in Kuwait - -
***Net investments in shares available for sale - --
209,690,704 179,946,809
========= =========
* Represents a loan granted to a commercial group in Kuwait amounted KD 3,039,531.
The loan is due from an ex-member of the Board of Directors and full allowance was
provided during previous years as per the Board of Directors'resolution.
** Represents notes receivables and fixed deposits due from a financial institution in
Kuwait amounted KD 1,210,797. The Board of Directors decided to provide full
allowance for this balance during previous years as the concerned financial institution
has declared bankruptcy.
***Investments in shares available for sale represent investments in shares of a G. C. C.
company. The extra ordinary general assembly of this Company have approved its
winding up and establishing a new company instead. Each shareholder in the wound up
company received one share in the new company with a par value of US$ 0.25 in lieu of
his shareholding in the wound up company.
Fujairah Cement Industries Company 20
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
6. Trade and other receivables (continued)
The average credit period of trade receivables is 95 days (2007: 120 days) No interest is
charged on trade receivables balances in the normal course of business. Trade receivables
outstanding for more than 180 days are provided for, partially or in full, based on
estimated irrecoverable amounts, determined by reference to past default, management
experience and prevailing economic conditions.
Analysis of trade receivables outstanding for more than 180 days is as follows:
December 31,
2008 2007
AED AED
More than 180 days and less than one year 106,069 1,232,624
More than one year 363,030 363,030
469,099 1,595,654
========= =========
There were no movements on the allowance for doubtful debt during the current or previous
year.
In determining the recoverability of a trade receivable, the Company considers any change
in the credit quality of the trade receivable from the date credit was initially granted up to
the reporting date.
Fujairah Cement Industries Company 21
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
7. Inventories
Comprised the following:
a) Raw-materials, semi-finished and finished products:
December 31,
2008 2007
AED AED
Raw materials 16,943,734 13,160,805
Semi-finished products 80,204,267 15,052,113
Finished products 4,690,328 1,287,479
101,838,329 29,500,397
b) Spare parts and other consumable materials:
Spare parts 74,778,147 65,186,747
Burning media 16,451,521 9,581,444
Bags and packing materials 582,568 453,191
Goods in transit - 2,995,968
Allowance for slow-moving spare parts ( 15,000,000) ( 14,000,000)
76,812,236 64,217,350
178,650,565 93,717,747
========= =========
Allowance for slow moving spare parts:
Movement on the allowance for slow-moving spare parts during the year was as follows:
2008 2007
AED AED
Balance at beginning of the year 14,000,000 13,000,000
Allowance for slow moving spares
charged to expenses 1,000,000 1,000,000
Balance at end of the year 15,000,000 14,000,000
========= =========
Fujairah Cement Industries Company 22
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
8. Property, plant and equipment
Property, plant and equipment consist of the following:
Cost Accumulated depreciation Carrying amount
December December December Charge for December December 31
31, 2007 Additions Disposals 31, 2008 31, 2007 the year Disposals 31, 2008 2008 2007
AED AED AED AED AED AED AED AED AED AED
Factory land 250,000 - - 250,000 - - - - 250,000 250,000
Original factory plant 293,825,615 - - 293,825,615 231,678,308 6,893,034 - 238,571,342 55,254,273 62,147,307
Additions to factory plant 410,803,216 90,403,510 (10,822,969) 490,383,757 166,192,049 30,010,398 ( 4,827,891) 191,374,556 299,009,201 244,611,167
Buildings 10,826,296 3,998,826 - 14,825,122 5,380,024 607,652 - 5,987,676 8,837,446 5,446,272
Laboratory equipment 5,793,414 206,440 - 5,999,854 5,422,109 305,916 - 5,728,025 271,829 371,305
Office and residences furniture 1,848,833 94,975 - 1,943,808 1,684,340 67,182 - 1,751,522 192,286 164,493
Vehicles and mobile plant 24,832,187 317,600 ( 331,468) 24,818,319 20,160,136 2,084,216 ( 331,464) 21,912,888 2,905,431 4,672,051
Office equipment and others 1,971,610 298,983 - 2,270,593 1,488,947 235,325 - 1,724,272 546,321 482,663
Quarry equipments 3,415,115 - ( 1,660,000) 1,755,115 328,306 437,741 - 766,047 989,068 3,086,809
Kuwait office furniture and
fixtures 61,821 - - 61,821 61,419 274 - 61,693 128 402
Capital work in progress 184,853,428 471,577,934 - 656,431,362 - - - - 656,431,362 184,853,428
Quarry development costs 15,397,828 15,200,000 - 30,597,828 15,397,828 - - 15,397,828 15,200,000 -
Total 953,879,363 582,098,268 ( 12,814,437) 1,523,163,194 447,793,466 40,641,738 ( 5,159,355) 483,275,849 1,039,887,345 506,085,897
========= ========= ======== ========== ========= ======== ======== ========= ========== =========
• Capital work in progress represents cost incurred on the new clinker production line and other projects up to December 31, 2008.
• The following useful live are used in the calculation of depreciation:- - Original factory plant 35 years
- Additions to factory plant 10-27years
- Quarry development costs 8 years
- Laboratory equipment 2 years
- Other property, plant and equipment 4 years
Fujairah Cement Industries Company 23
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
9. Extraction and concession rights
Represented as follows:
Extraction rights
2008 2007
AED AED
Total extraction rights 76,500,000 76,500,000
Accumulated amortization:
Balance at January 1, 54,055,571 51,561,743
Charge for the year 2,493,828 2,493,828
Balance at December 31, 56,549,399 54,055,571
Net extraction rights 19,950,601 22,444,429
Concession rights
Total concession rights 22,000,000 22,000,000
Less: Amortization of concession rights ( 1,100,000) ( -)
Net concession rights 20,900,000 22,000,000
Total extraction and concession rights 40,850,601 44,444,429
========= =========
Fujairah Cement Industries Company 24
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
10. Bank borrowings
December 31,
2008 2007
AED AED
Overdraft 1,069,028 -
Trust receipts 75,170,889 -
Loans 409,772,602 60,943,272
486,012,519 60,943,272
========== =========
Bank Loans shall be repaid as follows:
On demand or within one year 90,332,727 14,092,809
In the second year 82,435,605 14,092,809
In the third to fifth year inclusive 313,244,187 32,757,654
486,012,519 60,943,272
Less: Installments due within 12 months
(shown as current liabilities) ( 90,332,727) ( 14,092,809)
Non-current loan installments due after
12 months from the balance sheet date 395,679,792 46,850,463
========== =========
The principle features of bank borrowings are as follows:
♦ Banks overdrafts are repayable on demand.
♦ Trust receipts are bank facilities provided to the Company for the purchase of materials.
Interest on trust receipts is calculated on the repayment period and paid along with the
principal on due dates.
The Company has obtained several loans to finance the purchase of property, plant and
equipment as follows:
♦ The Company obtained a loan from an overseas bank in 2004 for AED 37,467,580 to
finance part of the expansion of the factory which increased the clinker production
capacity from 1 million metric tons to 1.5 million metric tons per annum. The interest
charges are payable on semi-annual basis. The loan is being repaid in ten equal,
consecutive, semi-annual installments of AED 3,746,758 each effective March 15, 2005,
until full settlement. The balance outstanding on this Loan as of December 31, 2008
amounted to AED 7,493,516 (2007: AED 14,987,032).
♦ During 2006, the Company obtained a loan from an overseas bank for AED 32,996,469
to partially finance the cost of a cement mill. The interest charges are payable on semi-
annual basis. The loan is repayable in ten equal, consecutive, semi-annual installments
of AED 3,299,647 each effective August 1, 2007, until full settlement. The balance
outstanding on this Loan as of December 31, 2008 amounted to AED 23,097,528
(2007: AED 29,696,822).
Fujairah Cement Industries Company 25
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
10. Bank borrowings (continued)
♦ During 2006, the Company obtained a loan facility from an overseas bank for Euro 61
million to partially finance the cost of constructing a new clinker production line with a
capacity of 7,500 metric tones per day. As of the balance sheet date, withdrawals on the
account of this loan amounted AED 329,358,453 (2007: AED 16,259,418). The loan
will be repaid in fourteen semi annual installments commencing six months after the
commercial production of this clinker production line which is expected to be in August
2009.
♦ During the current year, the Company obtained a loan facility from a bank operating in
the United Arab Emirates for AED 210 million to finance the construction of a thermal
power plant with a total capacity of 40 mega watt. The balance outstanding on this loan
as of balance sheet date amounted to AED 49,823,105. The loan will be repaid in ten
equal semi annual installments commencing after 24 months from withdrawal date.
11. Accounts and other payables
Accounts and other payables represent the outstanding amounts to suppliers against
purchases, ongoing costs and purchase of property, plant and equipments.
12. Provision for employees’ end of service indemnity
Movements during the year were as follows:
2008 2007
AED AED
Balance at the beginning of the year 9,314,915 7,414,521
Amounts charged to income 4,094,858 2,118,853
Amounts paid ( 415,168) ( 218,459)
Balance at the end of the year 12,994,605 9,314,915
========= =========
An actuarial valuation has not been performed as the impact of discount rates and future
increases in benefits are not likely to be material.
Fujairah Cement Industries Company 26
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
13. Share capital
December 31,
2008 2007
AED AED
Issued and fully paid up 309,448,104 ordinary
shares (2007: 281,316,458 ordinary shares)
of par value AED 1 each 309,448,104 281,316,458
========= =========
The Company has one class of ordinary shares which carry no right to fixed income.
In its meeting held on March 27, 2008, the Shareholders’ general assembly approved the
increase of the Company’s capital by 28,131,646 shares (from 281,316,458 shares to
309,448,104 shares) through the issuance of bonus shares at the rate of 1 share for each 10
shares outstanding.
14. Sales
Geographical distribution of sales
Year ended December 31,
2008 2007
AED AED
Local sales 729,675,486 545,654,641
Sales to other GCC countries 15,219,907 16,264,198
744,895,393 561,918,839
========= =========
Fujairah Cement Industries Company 27
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
15. General and administrative expenses
General and administrative expenses amounting to AED 15,364,645 (2007: AED
10,694,775) included the following main items:
Year ended December 31,
2008 2007
AED AED
Salaries, wages and other staff expenses 3,615,839 2,298,152
Provision for slow moving spares 1,000,000 1,000,000
Staff bonus 3,082,375 2,148,083
16. Interest received and other income
Year ended December 31,
2008 2007
AED AED
Interest on bank deposits 4,503,929 6,241,469
Profit on currency exchange 1,835,175 455,165
Transportation income 693,355 627,075
Other income 2,287,924 747,893
9,320,383 8,071,602
========= =========
17. Basic earnings per share
Year ended December 31,
2008 2007
Profit for the year (in AED) 195,634,595 173,224,834
========= =========
Weighted average number of shares (share) 309,448,104 309,448,104
========= =========
Basic earnings per share (in UAE fils) 63 56
========= =========
Basic earnings per share for the comparative period was restated to consider the effect of the
28,131,646 bonus shares issued during the current year.
Fujairah Cement Industries Company 28
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
18. Proposed dividends
2008 2007
AED AED
Cash dividends - 10 fils for each share
(2007: 20 fils for each share) 30,944,810 56,263,292
Bonus shares – 15 shares for each 100 shares
outstanding (2007: 10 shares for each 100
shares outstanding) 46,417,216 28,131,646
77,362,026 84,394,938
========= =========
Dividends per share 0.25 0.30
========= =========
Board of Directors remuneration 3,400,000 2,800,000
========= =========
The proposed distributions are subject to the approval of the Shareholders at their ordinary
general assembly meeting, accordingly they are not included in the liabilities in the financial
statements.
19. Commitments and contingent liabilities
Commitments and contingent liabilities as of the balance sheet date are as follows:
December 31,
2008 2007
AED AED
Commitments
Commitments for the purchase of property,
plant and equipment 154,692,000 307,224,000
========= =========
Contingent liabilities
Letters of credit 31,314,000 43,398,000
========= =========
Fujairah Cement Industries Company 29
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
20. Related party transactions
Due from/to related parties as of the balance sheet date are as follows:
December 31,
2008 2007
AED AED
Due from related parties 16,187,252 18,132,945
========= =========
Due to related parties 4,803,372 2,248,608
========= =========
Due from related parties included balances covered with bank guarantees amounted to
AED 14,960,532 as at the balance sheet date (2007: AED 11,761,000).
No bank guarantees are provided to related parties against balances due to them.
No expense has been recognised in the year for bad or doubtful debts in respect of the
amounts owed by related parties.
Transactions:
During the year, the Company entered into the following transactions with related parties:
Year ended December 31,
2008 2007
AED AED
Sales 123,203,000 102,533,000
Purchases – Construction work 30,824,000 19,963,000
Transactions with related parties were entered into on terms agreed with the management.
Compensation of directors / key management personnel:
Year ended December 31,
2008 2007
AED AED
Board of Directors remuneration 2,800,000 2,350,000
Key management remuneration 2,370,000 1,781,000
Fujairah Cement Industries Company 30
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
21. Financial instruments
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going
concern while maximizing the return to stakeholders through the optimization of the debt
and equity capital. The Company’s overall strategy remains unchanged from 2007.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria
for recognition, the basis of measurement and the basis on which income and expenses
are recognized, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 3 to the financial statements.
Financial risk management objectives
The Company’s management observes domestic and international financial markets,
monitors and manages the financial risks relating to the operations of the Company
through analyzing risk exposures by degree and magnitude of risks. These risks include
market risk (including currency risk, fair value interest rate risk and price risk), credit
risk, liquidity risk and cash flow interest rate risk.
The Company seeks to minimize the effects of risks related to financial instruments. The
Company’s policies in this regards are set and approved by the Board of Directors who
draws the overall guidelines on foreign exchange risk, interest rate risk, credit risk, and
the investment of excess liquidity. Compliance with policies and exposure limits is
reviewed by the Board of Directors on regular basis.
Market risk
The Company’s activities expose it primarily to the financial risks of changes in foreign
currency exchange rates and interest rates. The Company enters into limited derivative
financial instruments to manage its exposure to interest rate and foreign currency risk,
including forward foreign exchange contracts to hedge the exchange rate risk arising on
the import of property, plant and equipment and spare parts from the Euro zone countries.
There has been no change to the Company’s exposure to market risks or the manner in
which it manages and measures the risk.
Fujairah Cement Industries Company 31
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
21. Financial instruments (continued)
Interest rate risk management
The Company is exposed to interest rate risk as the Company borrows funds at both fixed
and floating interest rates. The risk is managed by the Company by maintaining an
appropriate mix between fixed and floating rate borrowings and by the use of forward
interest rate contracts. Interest on bank borrowings ranged from 0.25% to 0.425% above
LIBOR (2007: 0.3% to 0.5% above LIBOR).
The Company is also exposed to interest rate price risk with reference to its fixed rate
time deposits with banks. During the current year, interest on fixed deposits ranged from
4.5% to 6% (2007: 3.75 % to 5.2%)
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Company. The Company has adopted a policy of dealing
with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as
a means of mitigating the risk of financial loss from defaults. The Company obtains
information about the credit worthiness of its customers from publicly available financial
information and its own trading records. The Company’s exposure and the credit ratings
of its counterparties are continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties. Credit exposure is controlled by
counterparty limits that are reviewed and approved periodically by management and,
where appropriate, letters of guarantee are obtained form customers.
Most of the activities of the Company are carried out in the United Arab Emirates and other
GCC countries.
Credit risk is primarily related to the trade and other receivable balances which were
presented in the balance sheet net of any applicable allowances for losses that were
estimated by the Company’s management based on prior experience and prevailing
economic conditions. Current year sales include AED 492,375,000, being sales to seven
main customers (2007: AED 408,167,000 being sales to seven main customers). Total
trade receivables due from the above main customers amounted to AED 126,393,000 as
at December 31, 2008 (2007: AED 137,742,000). Trade receivable balances secured by
letters of guarantee, as at December 31, 2008, amounted to AED 137,769,000 , out of
which AED 97,806,000 belongs to the above mentioned seven main customers (2007:
AED 138,932,000 out of which AED 94,700,000 belongs to the seven main customers).
Credit risk related to liquid funds is limited as the counterparties are banks with sound
reputation.
The carrying amount of financial assets recorded in the financial statements, which is net
of impairment losses, represents the Company’s maximum exposure to credit risk.
Fujairah Cement Industries Company 32
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
21. Financial instruments (continued)
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors,
which has built an appropriate liquidity risk management framework for the management
of the Company’s short, medium and long-term funding and liquidity management
requirements. The Company manages liquidity risk by maintaining adequate reserves by
continuously monitoring forecast and actual cash flows, dealing with financial
institutions of good standing and matching the maturity profiles of financial assets and
liabilities.
Maturity of the Company’s financial assets and liabilities as at the balance sheet date was
as follows:-
As at December 31, 2008
More
1 to 90 91 to 180 181 to 365 than one
Total days days days year
AED’000 AED’000 AED’000 AED’000 AED’000
Financial assets:
Bank balances and cash 134,053 134,053 - - -
Trade and other
receivables 209,691 135,482 71,756 2,453 -
Total 343,744 269,535 71,756 2,453 -
Financial liabilities:
Bank borrowings 486,013 45,167 - 45,166 395,680
Trade and other payables 152,461 95,152 37,688 19,621 -
Dividends payable 5,781 - 5,781 - -
Employees indemnity 12,995 - - - 12,995
Total 657,250 140,319 43,469 64,787 408,675
Excess /(shortage) of
financial assets over
financial liabilities ( 313,506) 129,216 28,287 ( 62,334) ( 408,675)
Fujairah Cement Industries Company 33
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
21. Financial instruments (continued)
Liquidity risk management (continued)
As at December 31, 2007
More
1 to 90 91 to 180 181 to 365 than one
Total days days days year
AED’000 AED’000 AED’000 AED’000 AED’000
Financial assets:
Bank balances and cash 212,641 212,641 - - -
Trade and other receivables 179,947 116,292 61,576 2,079 -
Total 392,588 328,933 61,576 2,079 -
Financial liabilities:
Bank borrowings 60,943 7,046 7,046 46,851
Trade and other payables 152,676 95,294 37,732 19,650
Dividends payable 4,590 - 4,590 -
Employees indemnity 9,315 - - - 9,315
Total 227,524 102,340 42,322 26,696 56,166
Excess /(shortage) of
financial assets over
financial liabilities 165,064 226,593 19,254 ( 24,617) ( 56,166)
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• The fair value of financial assets and financial liabilities with standard terms and
conditions and traded on active liquid markets is determined with reference to quoted
market prices;
• The fair value of other financial assets and financial liabilities is determined in
accordance with generally accepted pricing models based on discounted cash flow
analysis using prices from observable current market transactions and dealer quotes for
similar instruments.
Fujairah Cement Industries Company 34
(Public Shareholding Company)
Fujairah - United Arab Emirates
Notes to the Financial Statements (continued)
For the year ended December 31, 2008
21. Financial instruments (continued)
Foreign currency risk management
The Company undertakes certain transactions denominated in foreign currencies. Hence,
exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within
approved policy parameters utilising forward foreign exchange contracts.
Currently the Company is mainly exposed to the currency exchange risk related to
transactions denominated in the currencies of the Euro zone countries and currencies fixed
with Euro. There is no currency exchange risk related to transactions denominated in the US
dollars or currencies linked with it as the AED rate is fixed to the US dollar. The
management undertakes suitable procedures to minimize risks associated with
transactions denominated in currencies other than AED and US$.
Foreign currency sensitivity analysis
The Company has conducted a sensitivity test for foreign currency exchange rates to foresee
the effects on the assets and liabilities denominated in foreign currencies.
The test included measuring the Company’s sensitivity to a 10% increase and decrease in
the AED against the relevant foreign currencies. 10% is the sensitivity rate used represents
management’s assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items
and adjusts their translation at the period end for a 10% change in foreign currency rates.
The foreign currency sensitivity test did not reveal any extra ordinary results that might
s
materially affect the Company' financial position or results of its operations as of and for
the year ended December 31, 2008.
22. Approval of financial statements
The financial statements were approved by the Board of Directors and authorized for issue
on February 4, 2009.
23. Comparative amounts
Certain amounts for the prior year were reclassified to conform to current year presentation.
