DANGOTE FLOUR MILLS PLC

Transcription

1 AUDITED CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR NINE MONTHS ENDED 30 SEPTEMBER 2013 AND THE YEAR ENDED 31 DECEMBER 2012

2 Content Page Corporate information Report of the Directors Corporate Governance report Statement of management's responsibilities i ii vii xi Report of the independent auditors 1 Consolidated and separate statements of profit or loss 2 Consolidated and separate statement of comprehensive income 3 Consolidated and separate statements of financial position 4 Consolidated and separate statements of changes in equity 5 Consolidated and separate statements of cash flows 6 Notes to the consolidated and separate statements of cash flows 7 Notes to the consolidated and separate financial statements 8 Segment report 48 Statement of value added 52 Financial summary 53

3 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 Oceanic Registrars 154, Ikorodu Road, Onipanu, Shomolu, Lagos. COMPANY SECRETARY AISHA LADI ISA (Mrs) AUDITORS Akintola Williams Deloitte (Chartered Accountants) 235, Ikorodu Road, Illupeju, Lagos BANKERS Zenith Bank Plc Mainstreet Bank Ltd 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. Nthabiseng Segoale (Appointed 4th October, 2012) Alh. Aliko Dangote (GCON) Mr. Suleiman Olarinde (Appointed 20th February, Mr. Olakunle Alake 2013 and resigned 1st August, 2013) Mr. Asue Ighodalo Mr Peter Matlare ( Appointed 4th October, 2012) Ms. Olufunke Ighodaro (Appointed 4th October, 2012) Mr Thushen Govender (Appointed 4th October, 2012 and resigned 30th June, 2013) Mr Patrick Sithole (Appointed 4th October, 2012 and resigned 30th June, 2013) Mr Ian Isdale (Appointed 20th February, 2013) i

4 STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2013 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 30 September 2013, and the results of its operations, cash flows and changes in equity for the period 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 nine-month period ended 30 September 2013, were approved by management on 16 November, 2013 Signed on behalf of management of the Group Mr Nthabisheng Segoale Group Chief Executive Officer Mr Moruf Adealu Chief Finance Officer Date: 16 November, 2013 Date 16 November, 2013 xi

5 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF 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 30 September 2013, the consolidated income statement, statement of changes in equity and cash flow statement for the nine month period ended 30 September 2013 and a summary of significant accounting policies and other explanatory information set out on pages 2 to 54. 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 30 September 2013 and the financial performance and cash flows for the nine month period ended 30 September 2013 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. Emphasis of Matters We draw attention to Note 1.3 which describes that in 2013, the Company changed its reporting period end from December 31 to September 30 to align its reporting period with that of its majority shareholder. Accordingly, in 2013, the Company has reported its performance for the 9 months period ended September 30, 2013 whereas prior year comparatives are based on 12 months reported figures to December 31, The balance sheet and related notes were reported as at September 30, 2013, whereas prior year comparatives were reported as at December 31, 2012 We also draw attention to note 1.4 which describes the effects of the decision of the shareholders to sell the company s holding in Agrosacks Limited, and the classification of the company s assets and liabilities as held for sale, and the effect of the re-classification of the profit and loss account of Agrosacks to a single line as discontinued activities, with the corresponding re-classifications in the prior year. Chartered Accountants Lagos, Nigeria 19 November 2013 FRC/2013/ICAN/

6 STATEMENT OF PROFIT OR LOSS for nine months ended 30 September 2013 COMPANY GROUP 9 months 12 months 9 months Restated 12 months ended ended ended ended 30-Sep 31-Dec 30-Sep 31-Dec (N '000) Notes ,079,590 29,859,976 Revenue 4 29,960,419 41,472,599 (22,728,987) (28,740,533) Cost of sales (29,317,791) (39,310,274) 350,603 1,119,443 Gross profit 642,628 2,162,325 (3,642,573) (2,360,838) Distribution and administrative expenses (6,541,606) (4,810,501) 42, ,848 Other income 5 233, ,490 - (1,409,450) Impairment of trade receivables (201,584) (1,409,450) (64,618) 161,083 (Loss)/profit on significant disposal of fixed assets 6 (130,678) 161,083 (3,313,880) (2,235,914) Operating (loss) / profit (5,997,265) (3,571,053) (2,346,275) (2,059,643) Finance costs 7 (2,364,956) (2,085,169) 12,665 30,974 Interest received 7 19,927 53,250 (5,647,490) (4,264,583) Loss before taxation from continuing operations (8,342,294) (5,602,972) 1,166,842 1,126,464 Taxation 8 1,577,990 1,258,659. (4,480,648) (3,138,119) Loss for the year from continuing operations (6,764,304) (4,344,313) Discontinued operations 25 Profit after tax for the period from discontinued operations (452,697) 2,080, Loss for the period (7,217,001) (2,263,337) (4,480,648) (3,138,119) Owners of the parent (7,932,996) (2,840,714) (4,480,648) (3,138,119) Continuing operations (6,698,446) (4,261,802) - - Discontinued operations (1,234,550) 1,421, Non-controlling interests 715, , Continuing operations (65,858) (82,511) - - Discontinued operations 781, ,888 (4,480,648) (3,138,119) (7,217,001) (2,263,337) 2

7 STATEMENT OF OTHER COMPREHENSIVE INCOME for nine months ended 30 September 2013 COMPANY GROUP 9 months 12 months 9 months Restated 12 months ended ended ended ended 30-Sep 31-Dec 30-Sep 31-Dec (N '000) Notes (4,480,648) (3,138,119) Loss for the year from continuing operations (7,217,001) (2,263,337) Other comprehensive income: - - Actuarial Gains - Assumption - 2, Actuarial Gains - Experience - 68,608 (4,480,648) (3,138,119) Total comprehensive loss for the year (7,217,001) (2,192,347) Attributable to: (4,480,648) (3,138,119) Owners of the parent (7,932,996) (2,769,724) - - Non-controlling interests 715, ,377 (4,480,648) (3,138,119) (7,217,001) (2,192,347) Basic and diluted loss per share (kobo per share) 9 (158.66) (55.39) 3

8 STATEMENT OF FINANCIAL POSITION As at 30 September 2013 COMPANY GROUP 30-Sep 31-Dec 30-Sep 31-Dec (N '000) Notes Assets 21,777,704 27,302,587 Non-current assets 32,898,984 45,673,663 17,351,051 18,747,467 Property, plant and equipment 10 30,002,456 44,048,647 2,597,637 7,553,637 Interest in subsidiary companies Long-term receivables 14-3,894 1,829,016 1,001,483 Deferred taxation asset 12 2,896,528 1,621,122 33,066,395 31,889,256 Current assets 24,768,875 31,775,355 7,686,391 7,317,448 Inventories 13 9,372,457 12,946,862 3,961,715 3,732,124 Trade and other receivables 14 7,789,466 11,927,694 17,219,636 16,953,231 Amounts owed by subsidiaries ,288,629 3,025,036 Short-term loans receivable 15 6,183,288 5,083, , ,417 Cash and bank balances 16 1,423,664 1,817,266 4,956,000 - Assets classified as held for sale 25 17,813,681-59,800,099 59,191,843 Total assets 75,481,540 77,449,018 Equity and liabilities 18,233,825 22,714,473 Issued capital and reserves 16,311,182 24,244,178 2,500,000 2,500,000 Ordinary share capital 17 2,500,000 2,500,000 18,116,249 18,116,249 Share premium 17 18,116,249 18,116,249 (2,382,424) 2,098,224 Retained earnings (4,305,067) 3,627,929 Non-controlling interests 1,795,343 1,079,348 18,233,825 22,714,473 Total equity 18,106,525 25,323,526 12,039,546 14,201,759 Non-current liabilities 12,099,553 14,801,783 2,393,244 2,825,800 Deferred taxation liability 12 2,453,251 2,855, ,584 Retirement benefit obligation 18-1,254,329 9,646,302 10,524,375 Long-term borrowings 19 9,646,302 10,692,375 29,526,728 22,275,611 Current liabilities 35,671,584 37,323,709 7,677,861 5,173,729 Trade and other payables 20 11,992,772 10,433, , ,284 Taxation 238, ,155 17,757,915 15,178,614 Short-term borrowings 21 21,040,451 24,346, ,669 Shareholders for dividend - 216,669 1,547,289 1,331,717 Amounts owed to subsidiaries ,394, ,598 Bank overdrafts 16 2,399,913 1,925, Liabilities classified as held for sale 25 9,603,878-59,800,099 59,191,843 Total equity and liabilities 75,481,540 77,449,018 The consolidated and separate financial statements on pages 2 to 54 were approved by the Board of Directors on 16 November, 2013 and signed on its behalf by: Alhaji Aliko Dangote Mr Nthabisheng Segoale Mr Moruf Adealu Chairman Group Chief Executive Officer Chief Finance Officer FRC/2013/IODN/ FRC/2013/IODN/ FRC/2013/ICAN/ 4

9 STATEMENT OF CHANGES IN EQUITY for nine months ended 30 September 2013 (N '000) Notes Total Share attributable capital to owners Non- Total and Accumulated of the Controlling premium profit parent interests equity Group Balance at 1 January ,616,249 6,897,652 27,513, ,971 28,015,872 Loss for the period - (2,840,713) (2,840,713) 577,377 (2,263,336) Other comprehensive loss for the period - 70,990 70,990-70,990 20,616,249 4,127,929 24,744,178 1,079,348 25,823,526 Dividends on ordinary shares 9 - (500,000) (500,000) - (500,000) Balance at 31 December ,616,249 3,627,929 24,244,178 1,079,348 25,323,526 Loss for the period - (7,932,996) (7,932,996) 715,995 (7,217,001) Balance at 30 September ,616,249 (4,305,067) 16,311,182 1,795,343 18,106,525 Company Balance at 1 January ,616,249 5,736,343 26,352,592-26,352,592 Loss for the period - (3,138,119) (3,138,119) - (3,138,119) Dividends on ordinary shares - (500,000) (500,000) - (500,000) Balance at 31 December ,616,249 2,098,224 22,714,473-22,714,473 Loss for the period - (4,480,648) (4,480,648) - (4,480,648) - 20,616,249 (2,382,424) 18,233,825-18,233,825 Balance at 30 September ,616,249 (2,382,424) 18,233,825-18,233,825 5

10 STATEMENT OF CASH FLOWS for nine months ended 30 September 2013 COMPANY GROUP 9 months 12 months 9 months 12 months ended ended ended ended 30-Sep 31-Dec 30-Sep 31-Dec (N '000) Notes (1,865,103) 796,745 Cash operating profit A 6,547 4,471, ,804 (2,075,911) Working capital changes B 4,167,690 (4,270,941) (1,103,299) (1,279,166) Cash generated from operations 4,174, ,514 12,665 30,974 Interest received 19,927 53,251 (2,346,275) (2,059,643) Finance costs (2,871,893) (3,146,412) (156,328) (1,064,539) Taxation paid C (161,232) (1,136,772) (3,593,237) (4,372,374) Net cash inflow/ (outflow) from operating activities 1,161,039 (4,029,419) (332,096) (313,116) Purchase of property, plant and equipment E (851,023) (1,998,897) 60, ,083 Proceeds on disposal of property, plant and equipment 305, ,153 (271,284) (152,033) Net cash outflow from investing activities (545,657) (1,830,744) 6,003,525 14,725,606 Long-term borrowings raised 6,003,525 14,725,606 1,844,845 - Long-term borrowings (repaid)/raised (8,351,103) (2,016,000) (6,167,103) (2,103,869) Short term borrowings (repaid)/raised (1,333,012) 1,196,689 - (500,000) Dividends paid D - (500,000).. 1,681,267 12,121,737 Net cash (outflow) / inflow from financing activities (3,680,590) 13,406,295 (2,183,254) 7,597, ,819 (6,898,513) (1,484,435) 698,819 Net (decrease)/ increase in cash and cash equivalents (3,065,208) 7,546,132 Transferred to assets held for sale 25 2,196,855 - Cash and cash equivalents (329,089) - Bank overdrafts 2,525,943 - Cash and cash equivalents at beginning of the year (107,896) (7,654,028) Cash and cash equivalents at end of the year F (976,249) (107,896) 6

11 NOTES TO THE STATEMENT OF CASH FLOWS for nine months ended 30 September 2013 COMPANY GROUP 9 months 12 months 9 months 12 months ended ended ended ended 30-Sep 31-Dec 30-Sep 31-Dec (N '000) Notes A Cash operating profit (3,313,880) (2,235,914) Operating loss after impairment allowance - continuing operations (5,997,264) (3,571,053) Operating loss after impairment allowance - discontinued operations (343,860) 2,734,853 Add back: - 1,490,453 Non-cash flow impairment allowance - 1,316,968 - (281,287) Gratuity: Provision for the year - (307,879) (206,887) (144,365) Gratuity: Payments during the year (444,596) (168,239) Fair value re-measurement on assets held for sale - DAS 2,627,873 (64,618) (161,083) (Profit) / Loss on disposal of fixed assets 378,241 (161,083) 117,200 18,939 Loss on obsolete assets written off to profit and loss 237,703 28,757 1,603,082 2,180,284 Depreciation (Note 10) 3,548,450 4,669,413 - (70,282) Exchange gain - (70,282) (1,865,103) 796,745 Cash operating profit / (loss) 6,547 4,471,455 B Working capital changes (416,217) (2,418,315) Increase in inventories (577,858) (1,036,492) (805,229) 469,705 Increase in trade and other receivables (1,900,640) (2,032,017) 1,983,250 (127,301) Increase / (decrease) in trade and other payables 6,646,188 (1,202,432) 761,804 (2,075,911) Working capital changes 4,167,690 (4,270,941) C Taxation paid (212,284) (1,114,176) Amounts payable at beginning of year (401,155) (1,333,931) (93,248) (162,647) Income statement charge - continuing operations (134,034) (203,996) Income statement charge - discontinued operations (23,786) - Classified as held for sale 159, , ,284 Amounts payable at the end of year 238, ,155 (156,328) (1,064,539) Total taxation paid (161,232) (1,136,772) D Dividends paid (216,669) (216,669) Amounts accrued and payable at beginning of year (216,669) (216,669) - (500,000) Declared per statement of changes in equity - (500,000) 216,669 - Reclassified to other payables 216, ,669 Amounts accrued and payable at end of year - 216,669 - (500,000) Total dividends paid - (500,000) E Purchase of property, plant and equipment (332,096) (3,830,276) Expansion (601,774) (1,998,897) - - Replacement (249,249) - (332,096) (3,830,276) (851,023) (1,998,897) F Cash and cash equivalents at end of the year Continuing operations 910, ,417 Cash and cash equivalents 1,423,664 1,817,266 (2,394,459) (162,598) Bank overdrafts (2,399,913) (1,925,162) (1,484,435) 698,819 (976,249) (107,896) 7

12 1. General Information 1.1 Company Information Dangote Flour Mills Plc (the Company) is a public limited company incorporated in Nigeria. Its parent and ultimate holding company is Tiger Brands Limited, a company listed on the Johannesburg Stock Exchange. The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report. 1.2 Nature of operations The principal activities of Dangote Flour Mills PLC and subsidiaries ( the Group ) are the milling of wheat and production of wheat products. Dangote Pasta Limited, Dangote Noodles Limited and Dangote Agro Sacks Limited are fully owned subsidiaries of the Dangote Flour Group. Dangote Flour produces bread flour, confectionary flour, bread flour, pasta semolina and alkama. 1.3 Accounting period In 2013, the Company changed its reporting period end from 31 December to 30 September, so as to align its reporting period with that of its owner. Accordingly, in 2013, the Company has reported its performance for the 9 months period ended 30 September, 2013, whereas the prior year comparatives are based on the 12 months reported figures to 31 December, The balance sheet and related notes were reported as at 30 September, 2013 whereas the prior year comparatives were reported as at 31 December, Accordingly, the amounts presented in the financial statements are not entirely comparable with those reported as prior year comparatives 1.4 Assets held for sale At the Annual general meeting held on 19 August, 2013 the shareholders approved the resolution to dispose of the shares in Dangote Agrosacks Limited and as a result Agrosacks assets and liabilities have been classified as Held for sale to give visibility of the impact of the disposal. As a result, the amount relating to Agrosacks Limited have been re-classified and included as a separate line item relating to discontinued operations and the comparative amounts in the profit and loss account have been re-stated for comparability. 1.5 Performance The group s performance for the nine months ended September 2013 continues to reflect the effects of significant challenges faced during the latter half of 2012 financial year. The group continues to pursue recoveries in supply chain efficiencies as well as market share across its core categories. Management changes, process improvement, customer engagements, enhancement of the internal control environment as well as a review of the products positioning were amongst the key focus areas of management s attention. Satisfactory progress has been achieved in implementing these interventions which have been designed to turn the group s performance around. 1.6 Going Concern The group has experienced a loss for the period of N7,932,996,000 (year ended 31 December 2012: N2,840,713,000) which has resulted in accumulated losses of N4,305,067,000 at 30 September, 2013 (31 December 2012: retained earnings of N3,627,929,000). Group current liabilities exceeded current assets at 30 September 2013 by N10,902,709,000 (31 December 2012: N5,548,354,000). However there was a net cash inflow from operations for the period ended 30 September 2013 of N1,161,039,000 (year ended 31 December 2012 net cash outflow N4,029,419,000). 8

13 1.6.1 Going Concern Management considers that, in light of the changes implemented as noted in Note 1.4, and considering the improved performance indicated in the group s budgets for the coming year, and expected cash flows in the next twelve months, that the company will be able to continue to meet its obligations as they fall due, and hence the preparation of the group financial statements on a going concern basis, is appropriate. 2. General information and statement of compliance with IFRS 2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements In the current year, the Group has applied a number of new and revised IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities The Group has applied the amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments have been applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the amendments has had no material impact on the disclosures or on the amounts recognised in the consolidated financial statements. New and revised Standards on consolidation, joint arrangements, associates and disclosures In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011) Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the first-time application of the standards. In the current year, the Group has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) together with the amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance. IAS 27 (as revised in 2011) is not applicable to the Group as it deals only with separate financial statements. The impact of the application of these standards is set out below. Impact of the application of IFRS 10 IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee. Some guidance included in IFRS 10 that deals with whether or not an investor that owns less than 50% of the voting rights in an investee has control over the investee is relevant to the Group. The application of IFRS 10 has had no material impact on the disclosure or the amounts recognized in the consolidated financial statement. 9

14 2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements (continued) Impact of the application of IFRS 11 IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (as revised in 2011). IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under IFRS 11, there are only two types of joint arrangements - joint operations and joint ventures. The classification of joint arrangements under IFRS 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, IAS 31 contemplated three types of joint arrangements - jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under IAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity). As the group does not have any interests in JVs, the application of IFRS 11 has had no material impact on the disclosure or the amount recognised in the consolidated financial statement. Impact of the application of IFRS 12 IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of IFRS 12 has resulted in more extensive disclosures in the consolidated financial statements (please see note 3). Amendments to IAS 1 Presentation of Financial Statements (as part of the Annual Improvements to IFRSs Cycle issued in May 2012) The Annual Improvements to IFRSs have made a number of amendments to IFRSs. The amendments that are relevant to the Group are the amendments to IAS 1 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financialstatements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position. In the current year, the application of the new accounting standards have not resulted in material effects on the information in the consolidated statement of financial position as at 1 January No third statement of financial position as at 01 January, 2012 has therefore been presented. Changes in Accounting Estimates and Errors as detailed below. The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective: IFRS 9 Financial Instruments 2 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures 2 Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities 1 Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities 1 1 Effective for annual periods beginning on or after 1 January 2014, with earlier application permitted. 2 Effective for annual periods beginning on or after 1 January 2015, with earlier application permitted. 10

15 2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements(continued) IFRS 9 Financial Instruments IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Key requirements of IFRS 9: All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured attheir fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss. The directors of the Company anticipate that the application of IFRS 9 in the future may have a significant impact on amounts reported in respect of the Group s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been completed. Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. To qualify as an investment entity, a reporting entity is required to: Obtain funds from one or more investors for the purpose of providing them with professional investment management services. Commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both. Measure and evaluate performance of substantially all of its investments on a fair value basis. Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. The directors of the Company do not anticipate that the investment entities amendments will have any effect on the Group s consolidated financial statements as the Company is not an investment entity. Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of currently has a legally enforceable right of set-off and simultaneous realisation and settlement. The directors of the Company do not anticipate that the application of these amendments to IAS 32 will have a significant impact on the Group s consolidated financial statements as the Group does not have any financial assets and financial liabilities that qualify for offset. 11

16 3. Summary of accounting policies 3.1 Statement of Compliance with IFRS The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. 3.2 Basis of preparation The consolidated financial statements have been prepared on the historical cost basis, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability Presentation of financial statements in accordance with IAS 1 (revised 2007) The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (revised 2007). The Group has elected to present the 'Statement of comprehensive income' in a separate statement from the Income statement Basis of consolidation The Group financial statements consolidate those of the parent company and all of its subsidiary undertaking(s) drawn up to 30 September Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The company obtains and exercises control through more than half of the voting rights for all its subsidiaries. All subsidiaries have a reporting date of 30 September except Dangote Agrosacks Nigeria Limited which was classified as discontinued operation.. The results of subsidiaries acquired are included in the consolidated financial statements from the date of acquisition, being the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. Subsidiaries acquired with the intention of disposal within 12 months are consolidated in line with the principles of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and disclosed as held for sale. All intragroup transactions, balances, income and expenses are eliminated on consolidation. 12

17 3.4 Basis of consolidation (continued) Non-controlling interests represent the portion of profit or loss, or net assets not held by the group. It is presented separately in the consolidated income statement, and in the consolidated statement of financial position, separately from own shareholder s equity. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non-controlling interest even if that results in a deficit balance. If the group loses control over a subsidiary, it: Derecognises the assets (including goodwill) and liabilities of the subsidiary; Derecognises the carrying amount of any non-controlling interest; Derecognises the cumulative translation differences, recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; and Reclassifies the parent s share of components previously recognised in other comprehensive income to profit or loss Foreign currencies Foreign currency transactions The consolidated financial statements are presented in Nigerian Naira, which is the company s functional and presentation currency. Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange ruling at the date of the transaction. Translation of foreign currency transactions Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Exchange differences are taken to profit or loss, except for differences arising on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to other comprehensive income, in the consolidated annual financial statements, until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to such exchange differences are also accounted for in other comprehensive income. If non-monetary items measured in a foreign currency are carried at historical cost, the exchange rate used is the rate applicable at the initial transaction date. If they are carried at fair value, the rate used is the rate at the date when the fair value was determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively). 13

18 3.6. Interest in group companies Business combinations are accounted for using the acquisition method. The value of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed. When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit and loss. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, is recognised in accordance with IAS 39 either in profit or loss or as charge to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. The company carries its investments in subsidiaries and associate companies at cost less accumulated impairment losses Segment reporting Reporting segments The group has reportable segments that comprise the structure used by the chief operating decision-maker ( CODM ) to make key operating decisions and assess performance. The group s reportable segments are operating segments that are differentiated by the activities that each undertakes and the products they manufacture and market (referred to as business segments). The group evaluates the performance of its reportable segments based on operating profit. The group accounts for intersegment sales and transfers as if the sales and transfers were entered into under the same terms and conditions as would have been entered into in a market related transaction. The financial information of the group s reportable segments is reported to the CODM for purposes of making decisions about allocating resources to the segment and assessing its performance Property, plant and equipment Property, plant and equipment are stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment losses. Assets subject to finance lease agreements are capitalised at the lower of the fair value of the asset and the present value of the minimum lease payments. Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate assets. Expenditure incurred on major inspection and overhaul, or to replace an item, is also accounted for separately if the recognition criteria are met. Depreciation is calculated on a straight-line basis, on the difference between the cost and residual value of an asset, over its useful life. Depreciation starts when the asset is available for use. An asset s residual value, useful life and depreciation method is reviewed at least at each financial year-end. Any adjustments are accounted for prospectively. Depreciation is not calculated in respect of freehold land and assets under construction. 14

19 3.8 Property, plant and equipment (continued) The following useful lives have been estimated: Freehold land Leasehold land and buildings Plant and machinery Motor vehicles Tools and equipment Furniture and fittings Computer equipment - Not depreciated - 50 years - 15 years - 4 years - 5 years - 5 years - 3 years An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Unless internally generated costs meet the criteria for development costs eligible for capitalisation in terms of IAS 38 (refer to research and development costs accounting policy below), all internally generated intangible assets are expensed as incurred. Research and development costs Research costs, being the investigation undertaken with the prospect of gaining new knowledge and understanding, are recognised in profit or loss as they are incurred. Development costs arise on the application of research findings to plan or design for the production of new or substantially improved materials, products or services, before the start of commercial production. Development costs are only capitalised when the group can demonstrate the technical feasibility of completing the project, its intention and ability to complete the project and use or sell the materials, products or services flowing from the project, how the project will generate future economic benefits, the availability of sufficient resources and the ability to measure reliably the expenditure during development. Otherwise development costs are recognised in profit or loss. During the period of development, the asset is tested annually for impairment. Following the initial recognition of the development costs, the asset is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when development is complete. The development costs are amortised over the period of expected future sales. Impairment The group assesses tangible and intangible assets, excluding goodwill, development assets not yet available for use and indefinite life intangible assets, at each reporting date for an indication that an asset may be impaired. If such an indication exists, the recoverable amount is estimated as the higher of the fair value less costs to sell and the value in use. If the carrying value exceeds the recoverable amount, the asset is impaired and is written down to the recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the hierarchy is firstly a binding arm s length sale, then the market price if the asset is traded in an active market, and lastly recent transactions for similar assets. Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset. 15

20 3.9 Intangible assets (continued) For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the group estimates the asset s or cash-generating unit s recoverable amount. A previously recognised impairment loss is reversed only if there is a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to the revised recoverable amount, but not in excess of what the carrying amount would have been had there been no impairment. A reversal of an impairment loss is recognised directly in profit or loss. Derecognition of intangible assets An intangible asset is derecognised on disposal; or when no future economic benefits are expected from its use. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised Financial instruments Financial instruments are initially recognised when the group becomes a party to the contract. The group has adopted trade date accounting for regular way purchases or sales of financial assets. The trade date is the date that the group commits to purchase or sell an asset. Financial instruments are initially measured at fair value plus transaction costs, except that transaction costs in respect of financial instruments classified at fair value through profit or loss are expensed immediately. Transaction costs are the incremental costs that are directly attributable to the acquisition of a financial instrument, i.e. those costs that would not have been incurred had the instrument not been acquired. A contract is assessed for embedded derivatives when the entity first becomes a party to the contract. When the economic characteristics and risks of the embedded derivative are not closely related to the host contract, the embedded derivative is separated out, unless the host contract is measured at fair value through profit or loss. The group determines the classification of its financial instruments at initial recognition. Classification The group s classification of financial assets and financial liabilities are as follows: Description of asset/liability Investments Derivatives Loans and advances receivable Loans to subsidiaries Trade and other receivables Cash and cash equivalents Loans payable and borrowings Trade and other payables Loans from subsidiaries Classification Available-for-sale Financial Instruments at Fair value through profit or loss Loans and receivables Loans and receivables Loans and receivables Loans and receivables Financial liabilities at amortised cost Financial liabilities at amortised cost Financial liabilities at amortised cost Available-for-sale financial assets These are non-derivative financial assets that are designated as available-for-sale or are not classified as loans and receivables or held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are subsequently measured at fair value with unrealised gains or losses recognised directly in other comprehensive income. When such a financial asset is disposed of, the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss. Interest earned on the financial asset is recognised in profit or loss using the effective interest method. Dividends earned are recognised in profit or loss when the right of receipt has been established. 16