The National Detergent Co. SAOG

Transcription

1 FINANCIAL STATEMENTS 31 DECEMBER 2013 Principal place of business: Detergent Powder Unit: Liquid and Soap Unit: Sulphonation Unit: National Detergent Factory Road number 2 and 13 Way number 6421 Way number 3605 Rusayl Industrial Estate Ghala Industrial Estate Al Ghubrah Sultanate of Oman Sultanate of Oman Sohar Detergent Powder Unit: Registered office: Road No. 5, Phase 1 P.O. Box 3104 Sohar Industrial Estate Ruwi, Postal Code 112 Sultanate of Oman Sultanate of Oman

2 THE NATIONAL DETERGENT CO. SAOG FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 Contents Page Report of the independent auditors 1 Statement of comprehensive income 3 Statement of financial position 4 Statement of changes in equity 5 Statement of cash flows 6 Notes to the financial statements 8-35

3 INDEPENDENT AUDITOR S REPORT TO THE SHAREHOLDERS OF THE NATIONAL DETERGENT CO. SAOG Report on the financial statements We have audited the accompanying financial statements of National Detergent Co. SAOG ( the Company ), which comprise the statement of financial position as at 31 December 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Board of Directors responsibility for the financial statements The Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the relevant disclosure requirements of the Commercial Companies Law of 1974, as amended, and the Rules and Guidelines on disclosures issued by the Capital Market Authority, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these 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 whether the financial statements are free of 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 auditor s 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 auditor considers internal control 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 management, 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.

4 4 2 INDEPENDENT AUDITOR S REPORT TO THE SHAREHOLDERS OF THE NATIONAL DETERGENT CO. SAOG (continued) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2013, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements In our opinion the financial statements comply, in all material respects, with the relevant disclosure requirements of the Commercial Companies Law of 1974, as amended and the Rules and Guidelines on disclosure issued by the Capital Market Authority. 16 February 2014 Muscat

5 STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2013 Note Revenue 5 21,703,585 21,014,583 Cost of sales 6 (16,182,558) (16,398,664) Gross profit 5,521,027 4,615,919 Selling and distribution expenses 7 (3,172,806) (2,821,484) Administrative and general expenses 8 (976,082) (859,226) Other operating income 36,531 48,836 Profit from operations 1,408, ,045 Finance costs 10 (182,193) (200,597) Finance income 10-2,938 Finance costs -net (182,193) (197,659) Directors remuneration (30,000) (18,500) Profit before tax 1,196, ,886 Taxation 11 (139,978) (88,679) Profit and total comprehensive income for the period 1,056, ,207 Basic earnings per share 12 Bzs 62 Bzs 40 The attached notes 1 to 30 form part of these financial statements. 3

6 STATEMENT OF FINANCIAL POSITION Note Assets Non-current assets Property, plant and equipment 13 13,796,858 13,501,133 Current assets Inventories 14 3,992,452 2,595,391 Trade and other receivables 16 5,005,080 5,664,847 Cash and bank balances 17 1,278, ,300 10,276,027 9,006,538 Total assets 24,072,885 22,507,671 Equity Share capital 18 1,701,250 1,701,250 Share premium , ,263 Legal reserve , ,083 Revaluation reserve 20 7,228,682 7,228,682 Proposed dividend , ,438 Retained earnings 2,588,527 2,212,528 Total equity 13,130,305 12,669,244 Liabilities Non-current liabilities Long term loans 22 2,340,281 2,223,613 Deferred tax 23 1,061,033 1,051,150 End of service benefits , ,036 3,978,335 3,777,799 Current liabilities Current maturities of term loans , ,332 Short term loans and overdrafts 22 1,500,000 1,656,796 Trade and other payables 25 4,750,818 3,754,290 Taxation ,095 66,210 6,964,245 6,060,628 Total liabilities 10,942,580 9,838,427 Total equity and liabilities 24,072,885 22,507,671 Net assets per share 26 Bzs 772 Bzs 745 The financial statements were approved by the Board of Directors on 16 February 2014 and were signed on their behalf by: Redha Baqir Al Lawati Chairman V Sundaresan Director and CEO The attached notes 1 to 30 form part of these financial statements. 4

7 STATEMENT OF CHANGES IN EQUITY Share Share Legal Revaluation Proposed Retained Capital Premium Reserve Reserve Dividend Earnings Total At 1 January ,701, , ,083 7,228, ,500 2,128,759 12,670,537 Comprehensive income: Profit for the year , ,207 Total comprehensive income for the year , ,207 Transaction with owners: Dividend paid (680,500) - (680,500) Proposed dividend ,438 (595,438) - Total transactions with owners (85,062) (595,438) (680,500) At 31 December ,701, , ,083 7,228, ,438 2,212,528 12,669,244 At 1 January ,701, , ,083 7,228, ,438 2,212,528 12,669,244 Comprehensive income: Profit for the period ,056,499 1,056,499 Total comprehensive income for the period ,056,499 1,056,499 Transaction with owners: Dividend paid (595,438) (595,438) Proposed dividend ,500 (680,500) - Total transactions with owners ,062 (680,500) (595,438) 1,701, , ,083 7,228, ,500 2,588,527 13,130,305 The attached notes 1 to 30 form part of these financial statements. 5

8 STATEMENT OF CASH FLOWS For the year ended 31 December 2013 Operating activities Note Cash flows from operating activities 27 2,275, ,177 Interest paid (182,193) (197,705) Interest received - 46 Tax paid (66,210) (130,488) Net cash flows from operating activities 2,026, ,030 Investing activities Acquisitions of property, plant and equipment 13 (858,246) (517,046) Proceeds from disposal on property, plant and equipment (625) 7,065 Cash used in investing activities (858,871) (509,981) Financing activities Long term loan received 700, ,000 Repayment of long term loans (583,332) (337,044) Short term loans 10, ,409 Dividend paid (595,438) (680,500) Cash (used in) from financing activities (468,179) 71,865 Net increase (decrease) in cash and cash equivalents 699,582 (76,086) Cash and cash equivalents at the beginning of the year 578, ,999 Cash and cash equivalents at the end of the year 1,278, ,913 Cash and cash equivalent comprise: Cash at bank and in hand 1,278, ,300 Bank borrowings - overdraft - (167,387) 1,278, ,913 The attached notes 1 to 30 form part of these financial statements. 6

9 1 LEGAL STATUS AND PRINCIPAL ACTIVITIES The National Detergent Company SAOG, an Omani Joint Stock Company ( the Company ), was constituted in accordance with the Commercial Companies Law of Oman 1974, and Ministerial Decree number 78/1980 dated 3 November The principal activity of the company is manufacture and sale of detergents, liquid soaps and home care products. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. 2.1 Basis of preparation The company s financial statements have been prepared in accordance with International Financial Reporting Standards, and applicable requirements of the Commercial Companies Law and the Capital Market Authority of the Sultanate of Oman. These financial statements have been presented in Rial Omani which is the functional and presentational currency for these financial statements. Changes in accounting policy and disclosures a) Standards and amendments effective in 2013 and relevant for the Company s operations: For the year ended 31 December 2013, the Company has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for periods beginning on 1 January The adoption of those standards and interpretations has not resulted in changes to the Company s accounting policies and has not affected the amounts reported for the current and prior periods. 7

10 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company: The following new standards and amendments have been issued by the International Accounting Standards Board (IASB) but are not yet mandatory for the year ended 31 December 2013: IAS 32, Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32: effective for annual periods commencing 1 January 2014; IAS 39, Novation of Derivatives and Continuation of Hedge Accounting -Amendments to IAS 39: effective for annual periods commencing 1 January 2014; Investment Entities - (Amendments to IFRS 10, IFRS 12 and IAS 27): effective for annual periods commencing 1 January IFRIC Interpretation 21 Levies (IFRIC 21): effective for annual periods commencing 1 January IFRS 9, Financial Instruments : The Company has not adopted first phase of IFRS 9, which is currently not mandatory. IFRS 9, as issued, reflects the first phase of the IASB s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January At the IASB meeting held in July 2013, the IASB tentatively decided to defer the mandatory effective date of IFRS 9 and that the mandatory effective date should be left open pending the finalisation of the impairment and classification and measurement requirements. In subsequent phases, the IASB is addressing hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Company s financial assets, but will not have an impact on classification and measurements of the Company s financial liabilities. The Company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued, which is currently not mandatory. 8

11 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors ( the Board ) that makes strategic decisions. 2.3 Revenue recognition Revenue from the sale of goods is stated at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. 2.4 Finance cost and income Financing costs comprise interest payable on borrowings calculated on effective interest rate method and foreign exchange losses. Finance income comprises dividend income, interest income and Government interest subsidy. Interest income and expense are recognised as they accrue using the effective interest rate method. 2.5 Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are included in selling and distribution expenses in the statement of comprehensive income on a straight-line basis over the period of the lease. 2.6 Foreign currency Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The financial statements are presented in Rials Omani, which is the company s functional and presentation currency. Foreign currency transactions are translated into Rials Omani at the exchange rate prevailing on the transaction date. Foreign currency assets and liabilities are translated into Rials Omani at the exchange rate prevailing at the statement of financial position date. Differences on exchange are dealt within the statement of comprehensive income. 9

12 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.7 Income tax Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is recognised in the statement of comprehensive income as the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used to determine deferred tax. Deferred income tax assets and liabilities are offset as there is a legally enforceable right to offset these in Oman. The principal temporary differences arise from revaluation of land, depreciation on property, plant and equipment and provisions for doubtful debts and slow moving stocks. 2.8 Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation less any identified impairment losses. Freehold land is stated at revalued amounts and is not depreciated. Revaluation of land is carried out on a regular basis, not exceeding 3 years to determine its market value at the date of revaluation. When an asset is revalued, any increase in the carrying amount arising on revaluation is credited directly to other comprehensive income or directly in equity under the revaluation reserve, except to the extent that a revaluation increase merely restores the carrying value of an asset to its original cost, whereby it is recognised as income. A decrease resulting from a revaluation is initially charged directly against any related revaluation surplus held in respect of that same asset, the remaining portion being charged as an expense. On disposal the related revaluation surplus is credited directly to retained earnings. Subsequent costs are included in the asset s carrying amount or recognised as separate assets, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance expenses are charged to the statement of comprehensive income during the financial period in which they are incurred Depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of items of property, plant and equipment. The estimated useful lives are as follows: Years Buildings Plant and machinery 4-20 Furniture, fixtures and office equipment 3-5 Motor vehicles 4 10

13 2 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.8 Property, plant and equipment (continued) Land is not depreciated as it is deemed to have an indefinite life. Capital work-in-progress is not depreciated until it is transferred into one of the above categories at the time when it is ready for use. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Where the carrying amount of an asset is greater than its estimated recoverable amount it is written down immediately to its recoverable amount. Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining operating profit. 2.9 Investment in associates Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. The financial statements include the Company s share of the total recognised gains and losses of associates on an equity accounting basis, from the date that significant influence commences until the date that significant influence ceases. When the Company s share of losses exceeds its interest in an associate, the Company s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of an associate Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on the weighted average basis and consists of the direct cost of goods and related direct expenses. The cost of finished goods includes an appropriate portion of direct labour and related production overheads. Net realisable value is the price at which stock can be sold in the normal course of business after allowing for the costs of realisation Financial assets The company classifies its financial assets into loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets. The company s loans and receivables comprise trade and other debtors and cash and cash equivalents in the statement of financial position (notes 2.12 and 2.13). 11

14 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.12 Trade and other receivables Trade debtors and other receivables are initially recognised at their fair value and subsequently stated at amortised cost using effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of any provision is recognised in the statement of comprehensive income within administrative and general expenses. Subsequent recoveries of amounts previously written off are credited against administrative and general expenses in the statement of comprehensive income Cash and cash equivalents For the purpose of the statement of cash flows, all bank balances and short term deposits with a maturity of three months or less from the date of placement are considered to be cash equivalents Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Term loans are carried on the statement of financial position at their principal amount. Instalments due within one year are shown as a current liability. Interest is charged as an expense as it accrues, with unpaid amounts included in accounts payable and accruals. Short-term loans are carried on the statement of financial position at their principal amount. Interest is charged as an expense as it accrues, with unpaid amounts included in trade and other payables Deferred Government grant Interest subsidy is recognised in the statement of financial position initially as a deferred Government grant when there is reasonable assurance that it will be received and that the Company will comply with the conditions attached to it. This deferred Government grant is amortised over the life of the loans to which it relates on a systematic basis in the same periods in which the interest expense is incurred. Amortisation of the deferred Government grant is recognised in the statement of comprehensive income End of service benefits and leave entitlements End of service benefits are accrued in accordance with the terms of employment of the Company's employees at the reporting date, having regard to the requirements of the Oman Labour Law 2003 as amended. Employee entitlements to annual leave and leave passage are recognised when they accrue to employees and an accrual is made for the estimated liability as a result of services rendered by employees up to the reporting date. These accruals are included in current liabilities, while that relating to end of service benefits is disclosed as a non-current liability. Contributions to a defined contribution retirement plan and occupational hazard insurance for Omani employees in accordance with the Omani Social Insurances Law of 1991 are recognised as an expense in the statement of comprehensive income as incurred. 12

15 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.17 Trade and other payables Trade creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Liabilities are recognised for amounts to be paid for goods and services received, whether or not billed to the Company Earning per share The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period Directors remuneration The Directors remuneration is governed as set out by the Commercial Companies Law and the rules prescribed by the Capital Market Authority. The Annual General Meeting shall approve the remuneration and the sitting fees for the Board of Directors provided that such fees shall not exceed 5% of the annual net profit after deduction of the legal reserve and the optional reserve and the distribution of dividends to the shareholders. Such fees shall not exceed 200,000 in one year. The sitting fees for each Director shall not exceed 10,000 in one year. 3 Financial risk management 3.1 FINANCIAL RISK FACTORS The Company s activities expose it to a variety of financial risks including the effects of changes in market risk (including foreign currency exchange rates and interest rates), credit risk and liquidity risk. The Company s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the company. Risk management is carried out by the management under policies approved by the Board of Directors. (a) Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity s functional currency. The majority of foreign currency transactions are either in US Dollar or in currencies linked to US Dollars. The Company also deals in other currencies such as Euro and Great Britain Pound. The Company manages the risks through regular monitoring of the currency markets to determine appropriate action to minimise the foreign exchange risk exposure. Management believes that the impact of the fluctuations from these transactions will not be significant. 13

16 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (a) Market risk (continued) (ii) Interest rate risk The Company s interest rate risk arises from long term loan from a bank and short-term borrowings which are exposed to changes in market interest rates. The Company borrows from commercial banks at commercial rates of interest. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company s policy is to maintain majority of its borrowings in fixed rate instruments. During 2013 and 2012, the Company s borrowings were denominated only in Rial Omani. The Company analyses its interest rate exposure on a regular basis and reassesses the source of borrowings and renegotiates interest rates at terms favourable to the Company. The short term borrowing interest rates with banks are subject to change upon re-negotiation of the facilities which takes place on an annual basis in the case of overdrafts and at more frequent intervals in the case of short term loans. If the interest rate were to shift by 1% on borrowings, there would be a maximum increase or decrease in the interest expense of 10,000 (2012-5,673). The company earned interest on deposit placed with a commercial bank. The Company is exposed to interest rate fluctuations as the interest rate is at market rates. Further the management believes that the change in interest rate does not materially affect the company s performance as the interest income is not significant to the statement of comprehensive income. (b) Credit risk Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents and credit exposures to customers through outstanding debtors including outstanding amounts due from related parties. [Refer to note 15 (b) for credit quality of banks and financial institutions]. For banks and financial institutions, parties with a minimum rating of P2 are accepted. For outside customers, where there is no independent rating agency established in the country, the credit control team comprising senior management assesses the credit quality of the customers, taking into account their financial position, market reputation of the major stakeholders of the customers, past experience and other factors. On a need basis the Company also seeks security through post dated cheques, bank guarantee and letter of credit. The outstanding positions of the customers are regularly monitored by the credit control team. Credit risk on debtors is limited to their carrying values as management regularly reviews these balances to assess recoverability and makes provision for balances whose recoverability is in doubt. 14

17 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (b) Credit risk (continued) The major groups of customers categorised by the company at the reporting date are set out below: % % Local customers 1,730,561 37% 1,748,206 32% Export customers 2,984,859 63% 3,731,701 68% 4,715, % 5,479, % Trade and other receivables includes 21% receivable from two customers in GCC countries ( % receivable from two customers in the GCC countries) who individually owe the Company more than 8% of the gross receivables at the reporting date. The Company has long-term distribution relation with these customers and had no financial issues or disputes in the past and accordingly the concentration risk is mitigated. The Company has taken adequate steps to mitigate the credit risk such as insurance coverage from Export Credit Guarantee Agency (ECGA), control on dispatches within approved credit limits, customers confirmation of balances at periodic intervals and acknowledgement of receipt of goods from the customers. (c) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company s reputation. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters. In addition, the Company has access to credit facilities. 15

18 3 FINANCIAL RISK MANAGEMENT (continued) 3.1 Financial risk factors (continued) (c) Liquidity risk (continued) The table below analyses the Company s financial liabilities into the relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying balances, as the impact of discounting is not significant. 31 December 2013 Contractual cash flows Under 1 year 1-2 years 2-5 years Total Non-derivative financial liabilities Loans from commercial banks (note 22) 682, ,067 1,811,648 3,175,656 Short term loans and overdraft 1,500, ,500,000 Trade and other payables 4,750, ,750,818 6,933, ,067 1,811,648 9,426, December 2012 Contractual cash flows Under 1 year 1-2 years 2-5 years Non-derivative financial liabilities Total Loans from commercial banks (note 22) 678, ,691 1,729,340 3,064,597 Short term loans and overdraft 1,656, ,656,796 Trade and other payables 3,754, ,754, Capital management 6,089, ,691 1,729,340 8,475,683 The capital of the Company comprises of paid-up share capital, share premium, retained earnings, legal reserves and revaluation reserves. Summary of quantitative data as to what it manages as the capital and any changes therein from the previous year are given in the statement of changes in equity. The primary objective of the Company s capital management is to ensure that it maintains appropriate capital ratios in order to support future development of the business and maximise shareholder value. 16

19 3 Financial risk management (continued) 3.2 Capital management (continued) The Company also uses gearing ratio to monitor its capital, which is calculated as debt divided by total capital plus net debt. The Company includes within debt, long-term interest bearing loans and all current borrowings. Capital includes equity attributable to the equity holders including share premium, retained earnings, revaluation and other reserves. Total borrowings 4,423,613 4,463,741 Less: Cash and cash equivalents (1,278,495) (746,300) Net debts 3,145,118 3,717,441 Total equity 13,130,305 12,669,244 Total capital employed 16,275,423 16,386,685 Gearing ratio 19% 23% 3.3 Fair value estimation The face values less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate to their fair values. The fair values of noncurrent financial liabilities other than Government soft loans are considered to approximate to their carrying amounts as these carry variable interest rates. None of the Company s financial instruments are carried in the statement of financial position at fair value as all the Company s financial assets and financial liabilities are carried in the statement of financial position at amortised cost. 4 CRITICAL ACCOUNTING ESTIMATES The company makes estimates and assumptions concerning the future. Estimates are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below: 17

20 4 CRITICAL ACCOUNTING ESTIMATES (continued) Trade debtors The management reviews the debtors ageing on a monthly basis and submits the same to the Board of Directors. In case of difficult unsecured debtors whose outstanding is in excess of the credit period allowed, regular follow up is made to collect the same. In case considered necessary legal options are also explored. Debtors impairment provision is estimated by the management in case of doubtful debtors. In the event of a debtor becoming bad, after exploring all possible options including legal, the same is written off with the Board of Directors approval as and when identified. At the reporting date, gross trade receivable were 4,715,420 (2012: 5,479,907) and provision for doubtful debts was 244,556 (2012: 200,477). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the statement of comprehensive income. Impairment of inventories Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on anticipated selling prices. At the reporting date, gross inventories were 3,353,436 (2012: 2,622,007) with provisions for old and obsolete inventories of 98,428 (2012: 86,428) respectively. Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the statement of comprehensive income. Taxes Uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and nature of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of finalisation of tax assessments. The amount of such provision is based on various factors, such as experience of previous tax assessments and differing interpretations of tax regulations by the Company and the responsible tax authority. Useful lives of property, plant and equipment The Company s management determines the estimated useful lives of its property, plant and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where the management believes the useful lives differ from previous estimates. 18

21 5 SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Board considers the business from a divisional perspective. Divisionally, management considers the performance of Consumer division and other division. The reportable operating segments derive their revenue primarily from the manufacture and sale of detergents, liquid soap and homecare products. The directors review monthly analysis of production and sales by volume, sales, collections, cost of sales and factory cost by value, variance with budgets, financial position, and working capital facilities with utilisation status; raw materials and debtors on an overall Company basis. The following divisional analysis has been compiled based on the major division of the Company: 2013 Consumer division Other division Total Revenue 20,182,840 1,520,745 21,703,585 Cost of sales (15,000,292) (1,182,266) (16,182,558) Total overheads (4,116,799) (32,089) (4,148,888) Other operating income 31,980 4,551 36,531 Profit from operations 1,097, ,941 1,408,670 Finance costs (161,874) (20,319) (182,193) Directors remuneration (30,000) Profit before tax 1,196,477 Taxation (139,978) Profit for the year 1,056,499 Other financial information Trade receivables 4,392, ,715 4,715,420 Plant, property and equipment addition 857, ,246 19

22 5 SEGMENT INFORMATION (continued) 2012 Consumer division Revenue Cost of sales Other division Total 19,565,865 1,448,718 21,014,583 (15,171,574) (1,227,090) (16,398,664) Total overheads (3,652,567) (28,143) (3,680,710) Other operating income 43,524 5,312 48,836 Profit from operations 785, , ,045 Finance costs (184,736) (15,861) (200,597) Finance income 2,938-2,938 Finance costs -net (181,798) (15,861) (197,659) Directors remuneration (18,500) Profit before tax 767,886 Taxation (88,679) Profit for the year 679,207 Other financial information Trade receivables 5,107, ,421 5,479,907 Plant, property and equipment addition 506,352 10, ,046 20

23 6 COST OF SALES Materials consumed 12,100,881 12,404,821 Direct labour (note 9) 1,769,113 1,711,467 Freight and handling charges 1,067,860 1,053,303 Utilities and direct expenses 806, ,427 Depreciation (see note 13) 438, ,646 16,182,558 16,398,664 7 SELLING AND DISTRIBUTION EXPENSES Sales promotion and advertisement 1,678,705 1,608,358 Selling expenses 697, ,132 Employee related expenses (note 9) 476, ,758 Distribution Expenses 319, ,236 3,172,806 2,821,484 8 ADMINISTRATIVE AND GENERAL EXPENSES Employee related costs (note 9) 535, ,688 Depreciation (see note 13) 123, ,817 Repairs expenses 98,774 92,031 Professional charges 72,326 34,646 Printing stationery and telephone expenses 49,957 52,353 Other expenses 49,546 36,657 Travelling conveyance 33,015 19,234 Directors sitting fees (see note 30) 12,800 10, , ,226 21

24 9 EMPLOYEE RELATED COSTS Employee related costs included under cost of sales, selling and distribution expenses and administrative expenses: Wages and salaries 1,927,966 1,852,221 Other benefits 653, ,969 End of service benefits (note 24) 95,983 85,770 Training and recruitment expenses 104,494 70,953 2,781,747 2,614, FINANCE COSTS AND INCOME Finance costs Interest on long term borrowings (96,065) (107,566) Interest on short term borrowings (86,068) (87,952) Government grant - (2,892) Foreign exchange difference (60) (2,187) (182,193) (200,597) Finance income Interest income on deposits - 46 Notional interest on soft loan (note 22) - 2,892-2,938 22

25 11 TAXATION (a) The tax charge for the year comprises: Current tax (130,095) (66,210) Deferred Tax (9,883) (22,469) (139,978) (88,679) (b) The reconciliation of tax on the accounting profit at the applicable rate of 12% after the basic exemption limit of 30,000 with the taxation charge in the statement of comprehensive income is as follows: Tax on accounting profit of 1,196,477 (31 December ,886) 139,978 88,546 Add tax effect of: Expenses not allowed Tax charge for the year in the statement of comprehensive income 139,978 88,679 (c) Taxation has been agreed with the Oman Taxation Authorities for all years up to Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. Net profit attributable to shareholders () 1,056, ,207 Number of shares outstanding (note 26) 17,012,500 17,012,500 Earnings per share (Bz) The diluted earnings per share is identical to the basic earnings per share. 23

26 13 PPERTY, PLANT AND EQUIPMENT Cost/valuation Furniture, Land Buildings Plant & machinery fixtures & office equipment Motor vehicles Capital work in progress Total At 1 January ,900,000 3,176,610 6,960, , ,483-20,155,058 Additions - 29, ,685 17,620 5, , ,246 Disposal - - (23,929) (99) - - (24,028) At 31 December 2013 Comprising : 8,900,000 3,205,702 7,048, , , ,802 20,989,276 At cost 685,589 3,205,702 7,048, , , ,802 12,774,865 At valuation 8,214, ,214,411 Depreciation 8,900,000 3,205,702 7,048, , , ,802 20,989,276 At 1 January ,670,035 4,070, , ,362-6,653,925 Charge for the year : Cost of sales - 87, , ,527 Administrative and general expenses - 45,679-49,875 28, ,929 Disposal - - (23,929) (34) - - (23,963) At 31 December ,803,595 4,397, , ,737-7,192,418 Net Book Value At 31 December ,900,000 1,402,107 2,651, ,650 42, ,802 13,796,858 24

27 13 Property, plant and equipment (continued) Cost/valuation Furniture, Land Buildings Plant and machinery fixtures and office equipment Motor vehicles Capital work in progress Total At 1 January ,900,000 2,164,212 4,826, , ,033 2,765,608 19,655,472 Transfer - 897,450 1,866,290 1,868 - (2,765,608) - Additions - 114, ,015 89,183 43, ,046 Disposal - - (1,650) (360) (15,450) - (17,460) At 31 December ,900,000 3,176,610 6,960, , ,483-20,155,058 Comprising : At cost 685,589 3,176,610 6,960, , ,483-11,940,647 At valuation 8,214, ,214,411 Depreciation 8,900,000 3,176,610 6,960, , ,483-20,155,058 At 1 January ,546,483 3,738, , ,457-6,141,069 Charge for the year : Cost of sales - 77, , ,646 Administrative and general expenses - 46,314-42,724 29, ,817 Disposal - - (1,649) (84) (14,874) - (16,607) At 31 December ,670,035 4,070, , ,362-6,653,925 Net book value At 31 December ,900,000 1,506,575 2,889, ,970 66,121-13,501,133 (a) Land was revalued as on 9 January 2013 by an independent valuer. The valuation was made on an open market basis. There was no significant difference between the 2010 valuation and valuation as at 9 January

28 14 INVENTORIES Raw and packing materials 2,004,157 1,480,853 Finished goods 1,263,376 1,036,667 Stores and consumable spares 79,194 83,006 Work in progress 6,709 21,481 3,353,436 2,622,007 Less: Provision for slow moving stock (98,428) (86,428) 3,255,008 2,535,579 Goods in transit 737,444 59,812 3,992,452 2,595,391 The movement in provision for slow moving and obsolete stock is given below: Opening balance 86,428 74,428 Provision for the year 12,000 12,000 Closing balance 98,428 86,428 26

29 15 FINANCIAL INSTRUMENTS (a) Categories of financial instruments The accounting policies for financial instruments have been applied to the line items below: Loans and receivables Assets as per statement of financial position Trade and other receivables (excluding prepayments) 4,911,207 5,591,480 Cash and cash equivalents 1,278, ,300 Total 6,189,702 6,337,780 Liabilities as per statement of financial position Total financial liabilities Long term loan 2,923,613 2,806,945 Trade and other creditors (excluding accruals) 4,214,407 2,720,529 Short term borrowings 1,500,000 1,656,796 Total 8,638,020 7,184,270 (b) Credit quality of financial assets Cash at bank and short term bank deposits Banks with a rating of P1 609, ,899 Banks with a rating of P2 658, ,793 1,268, ,692 The rest of the statement of financial position item cash and bank balance is cash in hand. Receivables The credit quality of trade receivables is set out in 3.1 (b). 27

30 16 TRADE AND OTHER RECEIVABLES Trade receivable 4,715,420 5,479,907 Less: provision for impairment losses on receivables (244,556) (200,477) 4,470,864 5,279,430 Other receivables 439, ,315 Prepayments 93,873 73,367 Due from related parties (see note 30) 1, ,005,080 5,664,847 (a) The fair value of trade and other receivables are assumed to be the same as their carrying amounts. The company does not hold any collateral as security. Details of gross exposure of trade debtors are as follows: Not Due (90 days) 2,928,081 3,416,334 Past due not impaired 1,542,783 1,863,096 Past due and impaired 244, ,477 4,715,420 5,479,907 (b) As of 31 December 2013, trade receivables of 2,928,081 (2012-3,416,334) were fully performing. (c), trade receivables of 1,542,783 (2012-1,863,096) were past due but not impaired. The age band of these is as follows: Past due 90 to 240 days 1,542,783 1,863,096 28

31 16 TRADE AND OTHER RECEIVABLES (continued) (d) As of 31 December 2013, trade receivables of 244,556 ( ,477) were impaired in respect of local and export parties which were fully provided. The individually impaired trade receivables mainly related to a number of independent customers. (e) Movement in the provision for impairment is as follows: Opening balance 200, ,063 Provision for the year 45,950 46,570 Write off during the year (1,871) (5,156) Closing balance 244, ,477 (f) The carrying amounts of the Company s trade and other debtors are denominated in the following currencies: Currency Saudi Rial 1,912,038 2,114,831 Rial Omani 1,730,561 1,760,992 US Dollar 398, ,283 UAE Dirhams 535, ,728 Bahrain Dinar 107, ,452 Qatari Rial 19,856 72,391 Kuwaiti Dinar 12,343 11,230 4,715,420 5,479,907 (g) The other classes within trade debtors and other receivables do not contain any impaired assets. 29

32 17 CASH AND BANK BALANCES Cash at bank 1,268, ,692 Cash in hand 9,673 3,608 1,278, ,300 Cash and bank balances includes call deposit of 15,010 ( NIL) placed with a commercial bank at a fixed interest rate 0.30% per annum ( % per annum) and have maturities of less than one month. 18 SHARE CAPITAL (a) The company s authorised, issued and subscribed share capital comprises 17,012,500 ordinary shares of baizas 100 each. At 31 December, the following shareholders held 10% or more of the shares of the Company: (%) (%) Oman International Development and Investment Company SAOG , ,170 Dr. Omar Bin Abdul Muniem Al Zawawi , ,082 Bhacker Suleiman Jaffer Company , ,822 Mohammed Abdul Hussain Bhacker Al Lawati , ,882 (b) Share premium of 364,263 ( ,263) represents amounts that arose through a business combination model when former Bausher Chemicals SAOG was merged with the company. 19 LEGAL RESERVE In accordance with the Commercial Companies Law of Oman 1974, this reserve is equal to one third of the value of the company s paid up share capital and is not available for distribution. 20 REVALUATION RESERVE The revaluation reserve represents the surplus on revaluation of freehold land. Based on open market valuation, revaluation gain net of tax 7,228,682 was recognised under equity. This reserve is not available for distribution. 21 PPOSED DIVIDEND The Board of Directors, at their meeting held on 16 February 2014 proposed a 40% cash dividend of per share ( cash dividend of per share) totalling to 680,500 ( ,438), which is subject to the approval of shareholders at the forthcoming Annual General Meeting. The proposed dividend for 2012 amounting to 595,438 was approved by the shareholders in the annual general meeting and was paid during

33 22 BORWINGS Non-current Loans from commercial banks Loan (Oman Arab Bank SAOC) 2,223,613 2,806,945 Loan II (Oman Arab Bank SAOC) 700,000 - Less: Current portion included under current liabilities (583,332) (583,332) Total non-current portion of the borrowings 2,340,281 2,223,613 Current Loans against trust receipts - 189,409 Bills discounting 500, ,000 Bank overdrafts - 167,387 Short term loan 1,000, ,000 Total current borrowings 1,500,000 1,656,796 a) Loan I It was obtained by the Company during the previous year as term loan of 3,050,000 (sanctioned amount is 3,500,000) from Oman Arab Bank SAOC at a rate of 3.75% per annum. The principal is to be paid in equal monthly instalments of 48,611, which commenced in August b) Loan II - The company has also obtained another term loan of 700,000 (sanctioned 1,200,000) from Oman Arab Bank SAOC at a rate of 3.75% per annum for the liquid plant under construction at Sohar industrial estate. The principal to be paid in 60 equal monthly instalments, which will commence on 19 December (b) The Company had obtained credit facilities comprising overdrafts, loans against trust receipts, letters of credit, short term loan and bill discounting facilities from commercial banks during the period. Interest is charged at rates ranging between 3.5% and 7% (2012-6% and 8%) per annum. (f) The maturity profile of the non-current borrowings is as follows: Amount Due From 2 to 3 years 583, ,223 From 3 to 5 years 1,277,058 1,640,390 Above 5 years 480,000-2,340,281 2,223,613 31