Vision. To be a world class enterprise that is passionate about the quality of life of the general populace and giving high returns to stakeholders.

Transcription

1 2012

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3 Vision To be a world class enterprise that is passionate about the quality of life of the general populace and giving high returns to stakeholders. Mission Touch the lives of people by providing their basic needs.

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5 Contents Notice of 7th Annual General Meeting 2 Corporate Information 3 Financial Highlights 4 Chairman s Statement 5 Explanatory Statement to the Shareholders of Dangote Flour Mills Plc 7 Board of Directors 8 Report of the Directors 9 Corporate Governance Report 14 Statement of Management s Responsibilities 18 Report of the Audit Committee 19 Report of the Independent Auditors 20 Consolidated and Separate Statements of Profit and Loss 21 Consolidated and Separate Statements of Comprehensive Income 22 Consolidated and Separate Statements of Financial Position 23 Consolidated and Separate Statements of Changes in Equity 24 Consolidated and Separate Statements of Cash Flows 25 Notes to the Consolidated and Separate Statements of Cash Flows 26 Notes to the Consolidated and Separate Financial Statements 27 Consolidated Statement of Value Added 67 Five Years Financial Summary Group 68 Five Years Financial Summary Company 69 Share Capital History/Data on Unclaimed Dividends 70 Proxy Form 73 DANGOTE FLOUR MILLS PLC 1

6 Notice of 7th Annual General Meeting NOTICE IS HEREBY GIVEN that the 7th ANNUAL GENERAL MEETING OF DANGOTE FLOUR MILLS PLC will be held at Transcorp Metropolitan Hotels, 10 Murtala Mohammed Highway, Calabar, Cross River State, on Monday, 19th August, 2013 at a.m. prompt to transact the following business: ORDINARY BUSINESS 1. To lay the Audited Financial Statements of the Company for the year ended 31st December 2012 together with the reports of the Directors, Auditors and the Audit Committee thereon. 2. To elect/re-elect Directors. 3. To authorize the Directors to fix the remuneration of the Auditors. 4. To appoint members of the Audit Committee. SPECIAL BUSINESS 5. To consider and if thought fit, pass the following resolution as an Ordinary Resolution: That in accordance with Section 284 of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria, 2004, and the Directors having so recommended and subject to agreement being reached between the Company and Dangote Industries Limited (DIL), the sale to Dangote Industries Limited of the shares held by the Company in the issued share capital of Dangote Agrosacks Limited be and is hereby approved subject to the Company and Dangote Industries Limited executing a sale and purchase agreement in relation to the acquisition of the shares and obtaining all requisite regulatory approvals, and that the Directors be and are hereby authorised to apply the proceeds of the sale to the business of the Company as they may deem fit. 6. To consider and if thought fit pass the following as a Special Resolution: That the DIrectors having so recommended, the financial year of the Company be and is hereby changed from 31 December to 30 September of each year. The end of the first new financial year being September, 2013 having a nine-month period. PROXY A member of the Company entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company. A proxy for an organization may vote on a show of hands and on a poll. For the appointment to be valid, a completed Proxy Form must be deposited at the registered office of the Company or with the Registrar not later than 48 hours before the time fixed for the meeting. NOTES 1. CLOSURE OF REGISTER AND TRANSFER BOOKS NOTICE IS HEREBY GIVEN that the Register of Members and Transfer Books of the Company will be closed on Friday, 16th August, 2013 and Monday, 19th August, AUDIT COMMITTEE In accordance with Section 359(5) of the Companies and Allied Matters Act 1990, any shareholder may nominate a shareholder for appointment to the Audit Committee. Such nomination should be in writing and should reach the Company Secretary at least 21 days before the Annual General Meeting. BY ORDER OF THE BOARD AISHA LADI ISA (MRS) Company Secretary/Legal Adviser Dated this 3rd day of June, 2013 DANGOTE FLOUR MILLS PLC Terminal E Greenview Development Nigeria Ltd Building (2nd Floor) Apapa Wharf Lagos. aisha.isa@dangote.com AISHA LADI ISA (MRS) Company Secretary/Legal Adviser 2 DANGOTE FLOUR MILLS PLC

7 Corporate Information LEGAL FORM Dangote Flour Mills Plc was incorporated in Nigeria on 1 January The Company is listed on the Lagos Floor of the Nigerian Stock Exchange (NSE) with the symbol DANGFLOUR. The Group s ultimate parent company is Tiger Brands Limited listed on the Johannesburg Stock Exchange. REGISTERED OFFICES Terminal E Greenview Development Building Apapa Wharf Lagos Nigeria. TRANSFER OFFICE EDC Registrars Ltd. 154, Ikorodu Road, Onipanu, Shomolu, Lagos. COMPANY SECRETARY Aisha Ladi Isa (Mrs) AUDITORS Akintola Williams Deloitte (Chartered Accountants) 235, Ikorodu Road, Ilupeju, Lagos. BANKERS Zenith Bank Plc Mainstreet Bank Limited Sterling Bank Plc First Bank of Nigeria Plc GTBank Plc Diamond Bank Plc Access Bank Plc First City Monument Bank Plc United Bank for Africa Plc Ecobank Nigeria Plc BOARD OF DIRECTORS The names of Directors who are currently in office are as follows: Executive Directors Non-Executive Directors Mr. N. Segoale (Appointed 4th October 2012) Alh. A. Dangote, GCON Mr. S. Olarinde (Reappointed 20th February, 2013) Alh. S. Dangote (Resigned 4th October, 2012) Mr. N. K. Somani (Resigned 5th March, 2012) Mr. O. Alake Mr. E. Etim (Resigned 4th October, 2012) Mr. U. Nwankwo (Resigned 4th October, 2012) Alh. A. Dantata (Resigned 4th October, 2012) Mr. A. Ighodalo Brig-Gen. S. L.. Teidi (Resigned 4th October, 2012) Alh. A. S. Mahmoud (Resigned 4th October, 2012) Mr. P. B. Matlare (Appointed 4th October, 2012) Ms. O. Ighodaro (Appointed 4th October, 2012) Mr. T. Govender (Appointed 4th October, 2012) Mr. P. Sithole (Appointed 4th October, 2012) Mr. I. Isdale (Appointed 20th February, 2013) DANGOTE FLOUR MILLS PLC 3

8 Financial Highlights COMPANY GROUP 31-Dec 31-Dec 31-Dec 31-Dec (N= 000) ,859,976 38,679,844 Revenue 58,675,337 66,281,326 (826,464) 4,614,915 Operating (loss)/income before abnormal items 502,260 4,442,596 (1,409,450) (1,484,265) Abnormal items (1,409,450) (1,484,265) (4,264,583) 1,373,230 (Loss)/profit before taxation (4,000,351) 758,742 1,126,464 (583,078) Taxation 1,737,015 (109,668) (3,138,119) 790,152 (Loss)/profit for the year (2,263,336) 649,074 BALANCE SHEET 2,500,000 2,500,000 Share capital 2,500,000 2,500,000 22,714,473 26,352,592 Total equity 25,323,526 28,015,872 Per 50 kobo share data (kobo) Earnings per share (55.39) Dividend per share 10 4 DANGOTE FLOUR MILLS PLC

9 Chairman s Statement The most significant development during the year was the sale of 63.35% of the Company s issued share capital to Tiger Brands Limited of South Africa on the 4th of October Tiger Brands now has a controlling stake in Dangote Flour Mills Plc and has since assumed management control of the Company s operations. We are excited about our future prospects under Tiger Brands management control and look forward to the contribution of their specialised expertise in the core activities of the Company. COMPANY PERFORMANCE Dangote Flour Mills Plc recorded a turnover of N=58.68 billion in The loss before tax and after abnormal items was N=4 billion. The abnormal item represents a N=1.409 billion provision for doubtful trade debts. Recovery efforts are on-going to ensure that the amounts that are overdue will be substantially recovered. Alhaji Aliko Dangote, GCON Chairman D istinguished Shareholders, Members of the Board of Directors, Representatives of the SEC, NSE, CAC and other Regulators here present, Invited Guests, Gentlemen of the Press, Ladies and Gentlemen. I have the pleasure to welcome you to the 7th Annual General Meeting of our Company, Dangote Flour Mills Plc. I would like to present you with an overview of our operations and other events that shaped the year under review. We have had to deal with many challenges during the 2012 financial year most notably the significant increase in the cost of wheat as a result of the escalation in international prices and the introduction of an additional import tariff of 15% on imported wheat effective since July In addition, unfortunate challenges of insecurity in the northern part of the country negatively affected sales in the region and facilitated the entry of illegal imports. As a result, our sales volumes were negatively impacted by these events. The loss after tax and after exceptional items was N=2.263 billion. Although the performance of the Company for 2012 was disappointing, we remain confident that a turnaround is imminent and that we can look forward to improved performance in the future. THE BOARD Since the last Annual General Meeting, there have been a few changes on the Board s composition. Mr. Nthabisheng Segoale was appointed as the Group Managing Director/CEO to run the operational affairs of the Company. He was seconded to join the Company by Tiger Brands Limited in October of 2012 and he replaces Mr. Ekanem Etim who resigned in October of His appointment will be ratified during the course of this meeting. Mr. Asue Ighodalo, Mr. Olakunle Alake and myself will be retiring by rotation as Directors of the Company and we hereby offer ourselves for reelection in line with corporate governance guidelines. DANGOTE FLOUR MILLS PLC 5

10 Chairman s Statement OUR STAFF Our employee base in various areas of the business was further strengthened with the appointment of several ex-tiger Brands technical experts and management staff. We therefore look forward to further improvements in productivity and the level of competitiveness of our Company. We have also embarked on specific interventions to further enhance the welfare of our employees such as mentorship and training programmes to improve the overall skill level across the business. We remain confident that the realisation of these objectives should deliver significant improvements in internal controls, efficiency and performance. THE FUTURE Following the handover of management control to Tiger Brands, the Company has embarked on a turnaround plan that is aimed at reducing the cost base, improving supply chain efficiencies and the consistency of the quality of our products. This includes investments in improving our brands as well as service levels to our customers. Capital expenditure projects have also been initiated to enhance business process controls and systems as well as enable the development of additional revenue streams that will grow the turnover of our Company in the future. We are also developing various strategies to recover market share across all the key categories and to improve our market penetration via new channels in order to strengthen the presence of our products in other parts of the country. CUSTOMERS Our key partners in the business, our customers, continue to remain the cornerstone of Dangote Flour Mills Plc. Notwithstanding the challenges we faced during the 2012 financial year, we continued to receive excellent patronage from some of our key customers of many years. We are immensely grateful for this unwavering support and remain confident that under the new management, you will see new value propositions for our products as well as stronger service levels. On behalf of the Board, Management and Staff of the Company, I hereby wish to say a big thank you to all our customers. APPRECIATION On behalf of the Board of Directors, I would also like to express our heartfelt appreciation to the Management and Staff of the various businesses for their continued dedication, support and commitment during the year. I also take this opportunity to wish the new management team and all other newly appointed staff the very best in all their endeavours to reposition our Company as a leading food business in the country. I also wish to thank you, my fellow shareholders, as well as our customers, suppliers, bankers, government agencies and regulatory authorities, for the unrelenting support and continued confidence in Dangote Flour Mills Plc. Thank you and God bless. Alhaji Aliko Dangote, GCON Chairman 6 DANGOTE FLOUR MILLS PLC

11 Explanatory Statement to the Shareholders of Dangote Flour Mills Plc Dear Shareholders, PROPOSED DIVESTMENT OF THE ENTIRE EQUITY INTEREST OF DANGOTE FLOUR MILLS PLC IN DANGOTE AGROSACKS LIMITED As you are aware, your Company, Dangote Flour Mills Plc ( DFM or the Group or Company ) is the second largest flour miller in Nigeria with a market share of 28.4% based on total industry installed capacity of 25,710 metric tonnes per day. The Company is positioned as a leading player with a strong brand and a strategic platform to strengthen its industry positioning. The Group currently has a diversified business portfolio; which are its 99% equity stake in Dangote Pasta Limited ( DPL ), a 90% stake in Dangote Noodles Limited ( DNL ) as well as a 99% stake in Dangote Agrosacks Limited ( DASL ). As part of its strategy going forward, the Company plans to sustain its market leadership position and thus is considering optimizing the Group s business portfolio for enhanced value to shareholders. Whilst DPL and DNL are aligned with DFM as food related businesses with significant synergistic benefits along the value chain, DASL is not a core business of the Group. In furtherance of this strategic focus, and to optimise the portfolio of businesses within the DFM group, DFM wishes to divest its entire equity interest in DASL for a cash consideration which will be retained in the Company to reduce the Group s overall debt levels. DASL is involved in the manufacture and sale of bags for the companies in the Dangote Group as well as other customers. Its products include Cement Bags, Flour Bags, Sugar Bags, Salt Bags, and Shopping Bags. DASL and its 75% subsidiary company, Obajana Agrosacks Limited, have a total of 10 Cement Bag production lines and 6 regular lines across 3 plant locations (Oba Akran and Israel Adebajo, in Lagos and Obajana in Kogi State). DASL s core product remains the manufacturing of bags, however, revenue is also generated from production and sale of Blown Film, Polypropylene Mats, Ball Twine and Sewing thread which are produced from waste from the bag production process. Notably, an average of 75% of the total bags sold over the last three years (from 2010 to 2012) was bought by Dangote Industries Limited (excluding DFM). Dangote Industries Limited ( DIL ) has indicated its interest in acquiring DFM s stake in DASL in view of the strategic fit of DASL to DIL s cement business. Given that DIL is the single major customer of DASL, accounting for over 75% of DASL s sales, your Board is considering DIL s proposal on an arm s length basis and I am pleased to inform you that preliminary discussions are on-going between the Board of DFM and DIL in this regard. Consequently, the following Ordinary Resolution, supporting the divestment/sale will be presented for your kind consideration and approval at the Annual General Meeting ( AGM ) scheduled to hold on Monday, 19th August, 2013: Special Business (5) To consider and if thought fit, pass the following resolution as an Ordinary Resolution: That in accordance with Section 284 of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria, 2004, and the Directors having so recommended and subject to agreement being reached between the Company and Dangote Industries Limited (DIL), the sale to Dangote Industries Limited of the shares held by the Company in the issued share capital of Dangote Agrosacks Limited be and is hereby approved subject to the Company and Dangote Industries Limited executing a sale and purchase agreement in relation to the acquisition of the shares and obtaining all requisite regulatory approvals, and that the Directors be and are hereby authorised to apply the proceeds of the sale to the business of the Company as they may deem fit. This Explanatory Statement is intended to provide you with further information on the proposed divestment/sale to aid your decision on the above resolution to be proposed at the AGM. Upon receiving your approval and concluding discussions with DIL, a formal application will be made to the Securities & Exchange Commission for the approval of the proposed divestment. The Nigerian Stock Exchange will also be formally notified in compliance with its rules. I look forward to welcoming you to the meeting. Yours faithfully, Alhaji (Dr.) Aliko Dangote, GCON Chairman DANGOTE FLOUR MILLS PLC 7

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13 Report of the Directors 1. ACCOUNTS The Directors are pleased to submit their report together with the audited accounts of the Company for the year ended 31 December, RESULT Group Company N= 000 N= 000 Turnover 58,675,337 29,859,976 Total comprehensive loss (2,192,346) (3,138,119) 3. PRINCIPAL ACTIVITIES The principal activities of the Company during the year were as follows: (a) Manufacturing and selling of bread and confectionery flour (b) Manufacturing and selling of wheat offal (Bran) (c) Manufacturing of semolina. The principal activities of its subsidiaries are: Dangote Pasta Limited Manufacturing and selling of spaghetti, macaroni and other pasta products. Dangote Agrosacks Limited Manufacturing and selling of packaging materials. Dangote Noodles Limited Manufacturing and selling of noodles. 4. LEGAL FORM The Company started operating as a division of Dangote Industries Limited in It was incorporated and commenced operations as a public limited liability company on 1 January, The Company was quoted on The Nigerian Stock Exchange on 4 February, Its principal activities are the milling, processing and marketing of branded flour. 5. DIRECTORS AND DIRECTORS INTEREST The names of Directors who are currently in office are as follows: Alhaji Aliko Dangote, GCON Alhaji Sani Dangote Resigned 4th October, 2012 Mr. Olakunle Alake Mr. Uzoma Nwankwo Resigned 4th October, 2012 Alhaji Abdu Dantata Resigned 4th October, 2012 Alhaji Abdullahi S. Mahmoud Resigned 4th October, 2012 Mr. Asue Ighodalo Brig-Gen. S. L.. Teidi (Rtd), OFR Resigned 4th October, 2012 Mr. Narendra Kumar Somani Resigned 5th March, 2012 Mr. Ekanem Etim Resigned 4th October, 2012 Mr. Ian Isdale Appointed 20th February, 2013 Mr. Suleiman Olarinde Resigned 4th October, 2012 and reappointed on 20th February, 2013 Mr. Peter Bambatha Matlare Appointed 4th October, 2012 Mr. Nthabisheng Segoale Appointed 4th October, 2012 Ms. Olufunke Ighodaro Appointed 4th October, 2012 Mr. Patrick Sithole Appointed 4th October, 2012 Mr. Thushen Govender Appointed 4th October, 2012 DANGOTE FLOUR MILLS PLC 9

14 Report of the Directors In accordance with the provisions of Section 259 of the Companies and Allied Matters Act 1990, one-third of the Directors of the Company shall retire from office annually. The retiring Directors shall be those who have been longest in office since their last election. In accordance with the provisions of this section, Alhaji Aliko Dangote, GCON, Mr. Asue Ighodalo and Mr. Olakunle Alake retire by rotation at the forthcoming Annual General Meeting (AGM) and being eligible, offer themselves for re-election. The following Directors resigned from the Board since the most recent Annual General Meeting: Alhaji Sani Dangote Alhaji Abdu Dantata Mr. Uzoma Nwankwo Brig.-Gen. S. L.. Teidi (Rtd) Alhaji Abdullahi S. Mahmoud Mr. Ekanem Etim and Mr. Suleiman Olarinde The following Directors were appointed by the Board since the most recent Annual General Meeting to represent the interest of the majority investor, Tiger Brands Limited of South Africa ( Tiger brands ): Mr. Peter Bambatha Matlare Ms. Olufunke Ighodaro Mr. Thushen Govender Mr. Patrick Sithole Mr. Ian Isdale Mr. Nthabisheng Segoale was appointed as Group Chief Executive Officer and Mr. Suleiman Olarinde was reappointed as Finance Director. In accordance with the provisions of Article 77 of the Company s Articles of Association and Section 249(3) of the Companies and Allied Matters Act 1990, the appointed Directors retire at this meeting and being eligible offer themselves for re-election. No Director has a service contract not terminable within five years. The Directors interest in the issued share capital of the Company as recorded in the register of members and/or as notified by them for the purpose of Section 275 of the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004 are as follows: Number of 50k Shares held Directors as at 31 December, 2012 Alhaji Aliko Dangote 38,728,948 Mr. Peter Bambatha Matlare Mr. Olakunle Alake 2,377,500 Mr. Nthabisheng Segoale Ms. Olufunke Ighodaro Mr. Patrick Sithole Mr. AsueIghodalo Mr. Thushen Govender 6. DIRECTORS RESPONSIBILITIES The Directors are responsible for the preparation of financial statements which give a true and fair reflection of the state of affairs of the Company at the end of the financial year and of the profit or loss for that period and which complies with the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria In doing so they ensure that: (a) Proper accounting records are maintained which disclose with reasonable accuracy the financial position of the Company and the Group and which ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act of Nigeria; 10 DANGOTE FLOUR MILLS PLC

15 Report of the Directors (b) (c) (d) (e) (f) (g) Applicable International Financial Reporting Standards are followed; Proper Accounting records are maintained; Suitable accounting policies are adopted and consistently applied; Judgments and estimates made are reasonable and prudent; It is appropriate for the financial statements to be prepared on a going concern basis; Adequate internal control procedures are instituted and maintained which are designed to safeguard the assets of the Company and Group and to prevent and detect fraud and other irregularities. 7. CORPORATE GOVERNANCE Management is committed to manage the Company with best practice and policies which align the strategy of the Company with the interests of all stakeholders. This, in the long run, will result in a beneficial relationship and longterm growth. Dangote Flour Mills Plc embraces good corporate governance as a key strategy in achieving business success incorporating compliance with applicable laws and regulations as a responsible corporate entity. The Board, in line with its responsibilities to shareholders, works to achieve worldwide best practice in corporate governance and endeavours to conduct the business of the Company and Group in a fair, honest and transparent manner which conforms to high ethical standards. 8. SUBSTANTIAL INTEREST IN SHARES The Registrar has advised that according to the Register of members on 31 December 2012, Tiger Brands with 3,167,716,667 and Dangote Industries Limited with 500,000,000 ordinary shares of 50k each held more than 5% of the issued share capital of the Company. 9. FIXED ASSETS Movements in fixed assets during the year are shown in Note 11 to the Accounts. In the opinion of the Directors, the market value of the Company s properties is not less than the value shown in the accounts. 10. DONATIONS AND CHARITABLE GIFTS Dangote Flour Mills Plc identifies with the aspirations of our operational environment by supporting charitable and worthy causes. During the year under review, no donation was made to any political party or religious organisation. 11. REPORTED FRAUD During the year, fraud was discovered at two of the Company s flour mills involving fraudulent trading on customers accounts. Appropriate action has been taken to strengthen internal controls and prevent recurrence of the fraud. The cases have been reported to relevant law enforcement authorities and internal recovery efforts are on-going. Full provision has been made in the financial statements for the net amount involved. 12. POST BALANCE SHEET EVENTS There were no significant developments since the balance sheet date which could have had a material effect on the state of affairs of the Company as at 31 December, 2012 and the profit for the year ended on that date which have not been adequately recognised. 13. COMPANY DISTRIBUTORS The Company s products are distributed through many distributors across the country. 14. SUPPLIERS The Company procures its materials on an arm s length basis from foreign and local suppliers. Amongst its main suppliers are Cargill International SA, Ameropa S.A, Vitachem Nigeria Limited and Biochemical Derivatives Nigeria Limited. DANGOTE FLOUR MILLS PLC 11

16 Report of the Directors 15. ANALYSIS OF SHAREHOLDINGS Analysis of shareholdings as at 31 December, 2012: No. of Holders Holders Units Units Range Holders % Cumulative Units % Cumulative 1 1, , , ,568, ,568,131 1,001 5, , , ,874, ,442,698 5,001 10,000 12, ,853 85,780, ,223,150 10,001 50,000 6, , ,780, ,003,621 50, , ,575 54,449, ,452, , , , ,893, ,346, ,001 1,000, ,204 50,007, ,353,929 1,000,001 2,000, ,240 50,416, ,770,590 2,000,001 5,000, , ,496, ,034,267,286 5,000,001 10,000, ,281 57,878, ,092,145,306 10,000,001 50,000, , ,337, ,213,483,255 50,000, ,000, , ,800, ,332,283, ,000, ,000, , ,000, ,832,283,333 2,000,000,001 5,000,000, ,290 3,167,716, ,000,000,000 Total 337, ,000,000, HUMAN RESOURCES 1. Employment, training and employees The Company recruits without discrimination in considering applications for employment through selection of the most suitable individuals after interview and thorough scrutiny. The Company employs management professionals and technical expertise and continues to invest in developing such skills and maintaining set standards. The Company also has in-house training facilities in addition to external training for employees. This gives every employee equal opportunity for career development. 2. Employee welfare and safety at work The Company continuously strives to improve safety measures at its operations to ensure a safe working environment. It does so through implementation of the following initiatives: Maintaining a high standard of hygiene in all its premises through sanitation practices and the regular fumigation exercises have been further strengthened by the installation of pest and rodent control measures; Safety and environment workshops have been organised for all employees with a broad focus on a good house-keeping to ensure a safe working environment; Nutritionally balanced meals are provided in staff canteens at subsidized prices at the various factory sites; The use of safety shoes, goggles and aprons etc. by employees is enforced; The Company carries out safety and fire awareness drills for all employees on a regular basis; As a guide in the performance of all functions, a written safety policy for ensuring safe working practices is in place; Safety Officers and Security Supervisors are at hand to ensure the use of and implementation of safety systems and procedures; There is a clinic within each factory to provide adequate medical care in the event of accidents or any emergency in the work place; The Company allows employees and their immediate families to attend good hospitals at its expense under the Company s Hygeia Scheme; Fire prevention and fire-fighting equipment are installed in strategic positions within the premises of each factory. 12 DANGOTE FLOUR MILLS PLC

17 Report of the Directors 3. Employee Development Local and overseas training and development programmes have been organized to meet the needs of the Company s modernization and automation strategy implementation. The Company continues to place a premium on its human capital development arising from the fact that this would ensure improved efficiency of the business and maintain a strategic advantage over the competition. On the other hand, employees are fully equipped to provide quality service which ultimately will be beneficial to the organization and thus contribute to its growth. 17. AUDIT COMMITTEE In compliance with the provisions of section 359(3) of the Companies and Allied Matters Act Cap C20 (Law) of the Federation of Nigeria 2004, the Company has an Audit Committee comprising three (3) Shareholders and three (3) Directors as follows: Mr. Alex Adio Shareholder/Chairman Alhaji Kasimu Ibrahim Shareholder/Member Mr. Eric Akinnifesi Akinduro Shareholder/Member Alhaji Abdullahi S. Mahmoud Director/Member Resigned 4th October, 2012 Ms. Olufunke Ighodaro Director/Member Appointed 4th October, 2012 Mr. Asue Ighodalo Director/Member Mr. Olakunle Alake Director/Member The functions of the Audit Committee are as laid down in section 357(2) of the Companies and Allied Matters Act Cap C20 (Law) of the Federation of Nigeria, AUDITORS Messrs Akintola Williams Deloitte (Chartered Accountants) have indicated their willingness to continue in office as the Company s Auditors in accordance with Section 357(2) of the Companies and Allied Matters Act. Cap C20 (Law) of the Federation of Nigeria, A resolution will be proposed at the upcoming AGM authorizing the Directors to formalise their remuneration. BY ORDER OF THE BOARD AISHA LADI ISA (MRS) Company Secretary 2nd Floor, GDNL Building Terminal E Apapa Wharf Apapa Lagos Dated this 2nd day of May, 2013 DANGOTE FLOUR MILLS PLC 13

18 Corporate Governance Report DANGOTE FLOUR MILLS PLC is committed to best practice and procedures in corporate governance. It recognises that corporate governance is fundamental to earning the confidence and trust of the shareholders. It provides the structure through which the objectives of the Company are set and the means of attaining such objectives. Overseen by the Board of Directors, corporate governance practices are constantly under review in line with the dynamics of the business environment. The corporate governance policies adopted by the Board of Directors are designed to ensure that the Company s business is conducted in a fair, honest and transparent manner which conforms to high ethical standards. The code of corporate governance for public companies provides the basis for promoting sound corporate governance in the Company. The governance framework helps the Board to discharge its duties of providing oversight and strategic counsel in balance with its responsibility to ensure conformity with regulatory requirements and acceptable risk. The Board was reconstituted on 4th October, 2012 after the acquisition of 63.35% of the equity of the Company by Tiger Brands. The Board Appointment to the Board is made by Shareholders at the Annual General Meeting on the recommendation of the Board of Directors. The Board consists of ten (10) members comprising the Chairman, Group Chief Executive Officer, one (1) Executive Director and seven (7) non-executive Directors. The Board delegates the day-to-day running of the Company s affairs to the Group Chief Executive Officer, who is supported in this task by the Executive Director and Executive Management Committee. The Board governs and supervises the overall activities of the Company through the Group Chief Executive Officer. Responsibilities of the Board of Directors It is the responsibility of the Board of Dangote Flour Mills Plc to: Ensure that the Company s operations are conducted in a fair and transparent manner that conforms to high ethical standards; Ensure integrity of the Company s financial and internal control policies; Ensure the accuracy, adequacy and timely rendition of the statutory returns and financial reporting to the regulatory authorities (NSE, CAC, SEC) and Shareholders; Ensure value creation for the Shareholders, employees and other stakeholders; Review and approve corporate policies, strategy, annual budget and business plans; Monitor implementation of policies and the strategic direction of the Company; Set performance objectives, monitor implementation and corporate performance; Review and approve all major and capital expenditure of the Company; Ensure that the statutory rights of all Shareholders are protected at all times; Provide the Company with entrepreneurial leadership within a framework of prudent and effective controls which enables risk to be assessed and managed; Deploy the Company s resources to profitable use; Outline the Company s strategic and corporate aims; Ensure that the necessary financial and human resources are in place for the Company to meet its objectives; Review management performance on a continuous basis; Set the Company s values and standards; Take decisions objectively in the interest of the Company; Ensure that its obligations to its Shareholders and other stakeholders are understood and met; Constructively challenge and help develop proposals on strategies developed by Management. The Board carries out some of the above responsibilities through the Board Committees whose terms of reference set out clearly their roles, responsibilities, scope of authority and procedure for reporting to the Board. Each committee is presided 14 DANGOTE FLOUR MILLS PLC

19 Corporate Governance Report over by a non-executive Director to ensure strict compliance with the principles of good corporate governance, while the Audit Committee has a representative of the shareholders as its Chairman. The Chairman of the Board is not a member of any of the Committees. Members of the Board of Directors hold quarterly meetings to decide on policy matters and direct the affairs of the Company and Group, review its performance, its operations, finances and formulate growth strategies. Attendance at Directors meetings was impressive. In line with provisions of section 258(2) of the Companies and Allied Matters Act, C20 (Law) of the Federation of Nigeria 2004, the records of Directors attendance at Board meetings is available for inspection at the Annual General Meeting. The remuneration of Executive Directors is fixed and reviewed by a committee of non-executive Directors. Frequency of Meetings The Board of Directors holds at least four (4) meetings a year, to consider important corporate events and actions such as approval of Corporate Strategy, Annual Corporate Plan, review of internal risk management and control systems, review performance and direct the affairs of the Company, its operations, finances and formulate growth strategies. It may however, convene a meeting whenever the need arises. During the year under review, the Board had a total of six (6) meetings. Standing Committees of the Board The Board carries out some of the above responsibilities through the Board Committees whose terms of reference clearly set out their roles, responsibilities, scope of authority and procedure for reporting to the Board. 1. Governance/Remuneration Committee Composition: Mr. Asue Ighodalo Alhaji Abdu Dantata (Resigned 4th October, 2012) Mr. Uzoma Nwankwo (Resigned 4th October, 2012) Mr. Peter Bambatha Matlare (Appointed 20th February 2013) Mr. Olakunle Alake (Appointed 20th February 2013) Functions: (i) To review and make recommendations to the Board for approval of the Company s human resources policy and organizational structure and any proposed amendments when necessary. (ii) Review and advise on governance and compliance issues. (iii) To make recommendations on the remuneration structure for non-executive Directors and variable compensation for executive and senior management. (iv) Such other matters as the Board may delegate to the Committee. 2. Finance and Investment Committee Composition: Ms. Olufunke Ighodaro Chairman Mr. Asue Ighodalo Member Mr. Olakunle Alake Member Alhaji Abdullahi S. Mahmoud (Resigned 4th October, 2012) Brig-Gen. S. L. Teidi (Rtd), OFR (Resigned 4th October, 2012) Functions: (i) (ii) (iii) (iv) (v) (vi) To consider periodic financial statements. To review Company activities, make projections and forecast for its growth. To identify variances in the market. To review developments in the Company. To identify and discuss new products and processes. To ensure that the Company is up to date with significant changes in accounting policies. DANGOTE FLOUR MILLS PLC 15

20 Corporate Governance Report (vii) (viii) (ix) Overseeing the management and conduct of the business. Ensuring the integrity of financial reports. Overseeing the effectiveness and adequacy of internal control measures. 3. The Audit Committee The Audit Committee is made up of six (6) members, consisting of three (3) representatives of the shareholders and three (3) members of the Board of Directors. Members of the Audit Committee are elected at the general meetings. The Committee, in compliance with the requirements of corporate governance practice is chaired by a shareholder. The Committee met four times during the year under review. Composition: Mr. Alex Adio Shareholder/Chairman Mr. Eric Akinnifesi Akinduro Shareholder Alhaji Kasumu Ibrahim Shareholder Mr. Asue Ighodalo Director Mr. Olakunle Alake Director Ms. Olufunke Ighodaro Director Alhaji Abdullahi S. Mahmoud Director (Resigned 4th October, 2012) In addition to its responsibility to review the scope, independence and objectivity of the external audit, the Audit Committee carries out all such matters as are reserved to the Audit Committee by the Companies and Allied Matters Act, Cap C20 (Law) of the Federation of Nigeria, 2004, listed below: Ensuring the independence and objectivity of the Audit (Statutory and Internal) Review adequacy and effectiveness of Dangote Flour Mills Plc internal control policies prior to endorsement by the Board. Direct and supervise investigations on matters within the scope, such as evaluations of the effectiveness of the Company s internal control system, cases of employee, business partner and client misconduct or conflict of interest. COMPLIANCE STATEMENT The Company filed its 2011 audited accounts with The Exchange in default of 21 days for which the sum of N=400, was paid as a penalty. The Board will ensure maximum compliance in the coming year. However, The Nigerian Stock Exchange had earlier extended the time for submission to 30 April, ATTENDANCE OF MEETINGS BY MEMBERS OF THE BOARD/BOARD COMMITTEES FROM 1ST JANUARY TO 31 DECEMBER 2012 BOARD OF DIRECTORS MEETINGS Attendance 16th May 28th May, 5th July, 10th September, 2nd October, 4th October, Alhaji Aliko Dangote, GCON A Alhaji Sani Dangote A Mr. Olakunle Alake Alhaji Abdullahi S. Mahmoud Mr. Uzoma Nwankwo Alhaji Abdu Dantata A Mr. Asue Ighodalo Brig-Gen. S. L. Teidi (Rtd), OFR Mr. Ekanem Etim Mr. Suleiman Olarinde 16 DANGOTE FLOUR MILLS PLC

21 Corporate Governance Report FINANCE AND INVESTMENT COMMITTEE MEETINGS Attendance 15th May, th May, th September, 2012 Alhaji Abdullahi S. Mahmoud Mr. Olakunle Alake Brig-Gen. S. L. Teidi (Rtd), OFR Mr. Ekanem Etim Mr. Suleiman Olarinde GOVERNANCE/REMUNERATION COMMITTEE MEETINGS Mr. Uzoma Nwankwo Mr. Asue Ighodalo Alhaji Abdu Dantata Mr. Narendra Kumar Somani 7th February, 2012 AUDIT COMMITTEE MEETINGS Attendance 14th March, th May, th June, th October, 2012 Mr. Olakunle Alake Mr. Adio Alex Mr. Akinduro Eric Akin Mr. Kasimu Ibrahim Mr. Asue Ighodalo Alhaji Abdullahi S. Mahmoud A DANGOTE FLOUR MILLS PLC 17

22 Statement of Management s Responsibilities FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS The Directors of Dangote Flour Mills Plc are responsible for the preparation of the consolidated financial statements that present fairly the financial position of the Group as at 31 December 2012, and the results of its operations, cash flows and changes in equity for the year then ended, in compliance with International Financial Reporting Standards ( IFRS ). In preparing the financial statements, the Directors are responsible for: Properly selecting and applying accounting policies; Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company s financial position and financial performance; Making an assessment of the Group s ability to continue as a going concern; Maintaining adequate accounting records that are sufficient to disclose and explain the financial position of the Group and its transactions and results accurately in accordance with IFRS; Designing, implementing and maintaining an effective and sound system of internal controls throughout the Group; Maintaining statutory accounting records in compliance with legislation in force in Nigeria and in accordance with IFRS; Taking such steps as are reasonably available to them to safeguard the assets of the Group; and Preventing and detecting fraud and other irregularities by implementing a sound system of internal controls. The financial statements of the Group for the year ended 31 December 2012, were approved by management on 1st May, Signed on behalf of management of the Group. Mr. Nthabisheng Segoale Group Chief Executive Officer FRC/2013/IODN/ Mr. Suleiman Olarinde Finance Director FRC/2013/ICAN/ May, May, DANGOTE FLOUR MILLS PLC

23 Report of the Audit Committee TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, 2004, we have examined the Auditors report for the year ended 31st December, We have obtained all the information and explanations we required. In our opinion, the Auditors report is consistent with our review of the scope and planning of the audit. We are also satisfied that the accounting policies of the Company are in accordance with the legal requirements and agreed ethical practice. Having reviewed the Auditors findings and recommendations on Management matters, we are satisfied with Management s response therein. Mr. Alex Adio Chairman, Audit Committee Dated this 2nd day of May, 2013 Members of the Committee Alhaji Kasimu Ibrahim Mr. Eric Akinnifesi Akinduro Mr. Asue Ighodalo Ms. Olufunke Ighodaro Mr. Olakunle Alake DANGOTE FLOUR MILLS PLC 19

24 Report of the Independent Auditors REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC Akintola Williams Deloitte 235 Ikorodu Road, Ilupeju P.O. Box 965, Marina Lagos, Nigeria Tel: +234 (1) Fax: +234 (1) Report on the Financial Statements We have audited the accompanying consolidated and separate financial statements of Dangote Flour Mills Plc and its subsidiaries which comprise the consolidated and separate statements of financial position as at 31 December 2012, 31 December, 2011 and 1 January, 2011, the consolidated income statement, statement of changes in equity and cash flow statement for the years ended 31 December 2012 and 31 December 2011 and a summary of significant accounting policies and other explanatory information set out on pages 21 to 69. Directors Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No. 6, 2011, International Financial Reporting Standards and for such internal controls as the Directors determine necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the financial position of Dangote Flour Mills Plc and its subsidiaries as at 31 December 2012, 31 December 2011 and 1 January, 2011 and the financial performance and cash flows for the years ended 31 December 2012 and 31 December 2011 in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No. 6, 2011 and International Financial Reporting Standards. Chartered Accountants Lagos, Nigeria 29 May 2013 FRC number: FRC/2013/ICAN/ DANGOTE FLOUR MILLS PLC

25 Consolidated and Separate Statements of Profit and Loss COMPANY GROUP 31-Dec 31-Dec 31-Dec 31-Dec (N= 000) Notes ,859,976 38,679,844 Revenue 5 58,675,337 66,281,326 (28,740,533) (31,372,618) Cost of sales (53,399,701) (56,196,075) 1,119,443 7,307,226 Gross profit 5,275,636 10,085,251 (2,360,838) (2,951,783) Distribution and administrative expenses (5,438,503) (6,024,182) 414, ,472 Other income 6 665, ,527 Operating (loss)/income before (826,464) 4,614,915 abnormal items 6 502,260 4,442,596 (1,409,450) (1,484,265) Abnormal items 7 (1,409,450) (1,484,265) Operating (loss)/income after (2,235,914) 3,130,650 abnormal items (907,190) 2,958,331 (2,059,643) (1,761,187) Finance costs 8 (3,146,412) (2,208,313) 30,974 3,767 Interest received 8 53,251 8,724 (4,264,583) 1,373,230 (Loss)/profit before taxation (4,000,351) 758,742 1,126,464 (583,078) Taxation 9 1,737,015 (109,668) (3,138,119) 790,152 (Loss)/profit for the year (2,263,336) 649,074 Attributable to: (3,138,119) 790,152 Owners of the parent (2,840,713) 346,752 Non-controlling interests 577, ,322 (3,138,119) 790,152 (2,263,336) 649,074 DANGOTE FLOUR MILLS PLC 21

26 Consolidated and Separate Statements of Comprehensive Income COMPANY GROUP 31-Dec 31-Dec 31-Dec 31-Dec (N= 000) Notes (3,138,119) 790,152 (Loss)/profit for the year (2,263,336) 649,074 Other comprehensive income: 130,231 Actuarial Gains Assumption 2, ,820 Actuarial Gains Experience 68,608 80,050 Total comprehensive (loss)/ (3,138,119) 920,383 profit for the year (2,192,346) 925,944 Attributable to: (3,138,119) 920,383 Owners of the parent (2,769,723) 623,622 Non-controlling interests 577, ,322 (3,138,119) 920,383 (2,192,346) 925,944 Basic (loss)/earnings per share (kobo) 10 (55.39) The accompanying notes on pages 26 to 66 form an integral part of these consolidated and separate financial statements. 22 DANGOTE FLOUR MILLS PLC

27 Consolidated and Separate Statements of Financial Position As at 31 December, 2012 COMPANY GROUP 31-Dec 31-Dec 1-Jan 31-Dec 31-Dec 1-Jan (N= 000) Notes Assets 27,302,587 28,726,626 28,421,024 Non-current assets 45,673,663 47,785,357 42,917,033 18,747,467 20,633,574 20,458,482 Property, plant and equipment 11 44,048,647 46,754,990 42,490,498 7,553,637 7,553,637 7,553,637 Interest in subsidiary companies 12 83,502 10,765 Long-term receivables 15 3,894 90,836 28,395 1,001, , ,140 Deferred taxation asset 13 1,621, , ,140 31,889,255 41,652,612 32,276,278 Current assets 31,775,355 38,857,325 28,820,545 7,317,448 4,899,135 2,926,685 Inventories 14 12,946,862 11,671,814 8,257,459 3,732,123 5,608,778 9,115,070 Trade and other receivables 15 11,927,694 11,363,897 13,259,241 16,953,231 16,123,486 13,493,230 Amounts owed by subsidiaries 12 3,025,036 13,734,353 5,252,555 Short-term loans receivable 16 5,083,533 13,390,095 5,113, ,417 1,286,860 1,488,738 Cash and bank balances 17 1,817,266 2,431,519 2,190,071 59,191,842 70,379,238 60,697,302 Total assets 77,449,018 86,642,682 71,737,578 Equity and liabilities 22,714,473 26,352,592 26,432,209 Issued capital and reserves 24,244,178 27,513,901 27,890,279 2,500,000 2,500,000 2,500,000 Ordinary share capital 18 2,500,000 2,500,000 2,500,000 18,116,249 18,116,249 18,116,249 Share premium 18 18,116,249 18,116,249 18,116,249 2,098,224 5,736,343 5,815,960 Retained earnings 3,627,929 6,897,652 7,274,030 Non-controlling interests 1,079, , ,649 22,714,473 26,352,592 26,432,209 Total equity 25,323,526 28,015,872 28,089,928 14,201,759 4,846,577 4,565,424 Non-current liabilities 14,801,783 8,028,585 5,595,727 2,825,800 3,569,341 3,481,939 Deferred taxation liability 13 2,855,079 4,114,138 4,075, ,584 1,277,236 1,083,485 Retirement benefit obligation 19 1,254,329 1,730,447 1,520,331 10,524,375 Long-term borrowings 20 10,692,375 2,184,000 22,275,610 39,180,069 29,699,669 Current liabilities 37,323,709 50,598,225 38,051,923 5,173,728 5,301,029 3,819,144 Trade and other payables 21 10,433,756 11,636,188 8,672, ,284 1,114, ,372 Taxation 9 401,155 1,333,931 1,001,464 15,178,614 23,206,774 20,504,053 Short-term borrowings 22 24,346,967 27,325,891 22,046, , ,669 1,900,472 Shareholders for dividend 216, ,669 1,900,472 1,331,717 1,156, ,005 Amounts owed to subsidiaries ,598 8,185,372 1,868,623 Bank overdrafts 1,925,162 10,085,546 4,431,208 59,191,842 70,379,238 60,697,302 Total equity and liabilities 77,449,018 86,642,682 71,737,578 The consolidated and separate financial statements on pages 21 to 69 were approved by the Board of Directors on 1 May, 2013 and signed on its behalf by: Alhaji Aliko Dangote, GCON Mr. Nthabisheng Segoale Mr. Suleiman Olarinde Chairman Group Chief Executive Officer Finance Director FRC/2013/IODN/ FRC/2013/IODN/ FRC/2013/ICAN/ DANGOTE FLOUR MILLS PLC 23