BOARD OF DIRECTORS REPORT 2013 For the 55 th Ordinary General Assembly Meeting Held on March 71, 2014, (16 th Jumada I, 1435)

Transcription

1 SAUDI CEMENT COMPANY BOARD OF DIRECTORS REPORT 2013 For the 55 th Ordinary General Assembly Meeting Held on March 71, 2014, (16 th Jumada I, 1435) = 1 =

2 SAUDI CEMENT COMPANY HEAD OFFICE Saudi Cement Company 3964-King Saud Alamamra Unit No. 1 Dammam Telephone : (03) Fax website : (03) : scc@saudicement.com.sa : HOFUF PLANT Telephone Fax (03) : (03) : scc@saudicement.com.sa AIN DAR PLANT Telephone Fax (03) : (03) : scc@saudicement.com.sa RIYADH OFFICE Telephone Fax (01) : (01) : scc@saudicement.com.sa BANKS Riyad Bank National Commercial Bank Arab National Bank Saudi Hollandi Bank Samba Financial Group Al Bank Al Saudi Al Fransi Saudi British Bank (SABB) Al Rajhi Bank Al Bilad Bank AUDITORS Dr. Mohamed Al-Amri & Co. = 2 =

3 2013 BOARD OF DIRECTORS REPORT FOR THE 55 th ORDINARY GENERAL ASSEMBLY MEETING HELD ON MARCH 17, JUMADA I 16, SAUDI CEMENT COMPANY (A Saudi Joint Stock Company) 1434/ = 3 =

4 Chairman Sheikh Khaled Abdulrahman Al-Rajhi BOARD OF DIRECTORS Managing Director Dr. Walid Ahmed Juffali Members: Sheikh Mohammed S. Balghonaim Sheikh Khaled Abdulrahman Al-Abdulkarim Mr. Fahad Abdullah Al Saleh Sheikh Sami Ali Juffali Mr. Hamad Abdulla Olayan Dr. Abdulrahman Suleiman Al-Rajhi Mr. Mohammed Ali Al Garni Mr. Ahmed Mohmmed Al Omran Mr. Mohammed Abdulkarim A. El-Khereiji = 4 =

5 Board of Directors Statement Respected Shareholders, The Board of Directors welcomes you to the 55 th Ordinary General Assembly Meeting of Saudi Cement Company (SCC) and thanks you for attending this meeting. The Board is pleased to present to you the Annual Report for the year ended December 31, 2013 together with the Financial Statements and the Auditors Report related to that year. = 5 =

6 Principal Activity: Saudi Cement Company s (SCC s) principal and sole activity is confined to the manufacture and trade of cement and cement related products. Hence, the company does not carry out any other activity, and it does not produce any other products. Following below are comments on the company s operations and results related to that activity: Production: Clinker Production: Total quantity of clinker produced during 2013 amounted to 8,905,685 tons compared to a quantity of 7,403,565 tons for 2012 i.e. an increase of 1,502,120 tons or approximately 20.3%. The production was from operation of newer lines 7 and 8, whose production efficiency has exceeded their designed capacity. In addition, there was production from other Kilns, which were re-operated during the second half year of Cement Production: Cement production for 2013 totaled 8,794,258 tons compared to 8,753,000 tons for 2012, i.e. an increase of 41,258 tons or approximately 0.5%. Cement grinding and dispatch were mainly conducted from Hofuf Plant. Also, Ain Dar cement grinding and dispatch facilities were partially utilized for meeting cement sales by rail and additional requirements of the local market. Import of Clinker: In compliance with Royal Order No dated 02/06/1434 concering importation of cement /clinker to avoid cement shortage crisis in the market, the company imported its share quota designated by Ministry of Trade & Industry and the actual quantity imported was 1,029,350 million tons of clinker. Clinker Stock: The clinker inventory as of December 31, 2013 amounted to 2,182,062 tons, compared to a quantity of 506,528 tons as of December 31, 2012, i.e. an increase of 1,675,534 tons or approximately 330.8%. The increase in clinker inventory was due to improved kilns efficiency and the importation clinker in compliance with orders of His Majesty the Custodian of the Two Holy Mosques King Abdulla Ibn Abdulaziz Al-Saud and the directions of the Ministry of Trade and Industry. = 6 =

7 Operation and Maintenance: SCC continued highly efficient operation and maintenance by improving the time available for operation and increasing the daily production volume, which contributed positively to reduction of cost per ton. SCC has maintained its supremacy in producing its high quality types of cement products, and has the capability and flexibility to produce other types of cement, if that proves to be economically viable. MARKETING: Introduction: The local demand for cement in Saudi Arabia has improved during 2013 and reached to around 54.9 million tons, compared to a total demand of 52.7 million tons for 2012 i.e. an increase of 2.2 million tons or approximately 4.2%. Total cement sales (local & export) for the year 2013 reached to 55.3 Million tons. On the other hand, the total production of Saudi cement sector for the year 2013 was approximately 54.2 million tons of clinker, compared to 48.3 million tons for 2012, i.e. an increase of approximately 12.2%. As a result of the increase in local production coupled with the importation of clinker /cement, the total clinker inventory for all cement companies has reached approximately 14.7 million tons at the end 2013 compared to 6.4 million tons at the end of 2012 i.e. a increase of about 8.3 million tons or approximately 129.6%. Total Sales: SCC s sales volume of all cement types for 2013, reached to 8,757,763 tons compared to 8,725,722 tons for 2012, i.e. an increase of 32,041 tons or approximately 0.4%. The percentage growth in SCC s local sales for 2013 amounted to approximately 3%, compared to growth in total demand in Saudi Arabia for the year, which was approximately 4.2%. Exports: The total exported quantities during 2013 have reached 204,101 tons, compared to 420,614 tons in 2012, i.e. a decrease of (216,513) tons or approximately (51.5%). The above decrease was attributed mainly to declining demand for cement in the kingdom of Bahrain. = 7 =

8 Geographical analysis of Sales Revenue: Most sales were made locally within Saudi Arabia, and a small portion was exported as permitted by the authorities under the ongoing export restrictions. Exports of Portland cement were confined to Kingdom of Bahrain. The following table illustrates the geographical analysis of the company s sales revenue for 2013: SR (000's) Details Local Market 2,126,651 2,091,343 Export Market 60, ,104 Total 2,187,255 2,203,447 Significant Plans & Future Prospects: Currently, SCC has no plans for any expansion in its production facilities due to its inability to obtain any mining concessions for raw materials at other geographical regions in the Kingdom where there are better marketing opportunities. This is due to the fact that MINPET issued a few mining licenses, some of them were already put to public bids with conditions that prohibit existing cement companies from taking part in the bids. (a) Rehabilitation of Kilns: Following stoppage of all old kilns as well as Kiln 6 during 2009 due to too high levels of clinker inventory and continuation of export restrictions, SCC s clinker production was confined to its two new lines 7 & 8, which started commercially at the beginning of the year The operating efficiency of these two lines has reached remarkable levels exceeding their designed capacity. Local demand in Saudi Arabia grew considerably during the last three (an average growth of 13.9% for 2011 and 12.1% for 2012). It is expected that the coming years will witness reasonable percentages of growth by the grace of God Almighty and due to the infrastructure and housing projects announced by the Custodian of the Two Holy Mosques and also as a result of the many construction projects by the Private Sector and individuals. With the Grace of Allah, some Kilns were re-operated during the second half year of During the first half of 2013, the Company signed a contract for the rehabilitation of old Kilns (4 and 5) with a capacity of 1,500 tons / day each (total 3,000 tons / day), and it is expected that these two kilns will to be operated during the 3 rd quarter of year = 8 =

9 (b) Concentrating Cement Grinding Capacity at Hofuf Plant: Currently, SCC mainly utilizes its grinding facilities at Hofuf Plant and only partially depends on the grinding facilities at its Ain Dar Plant to cater for the cement dispatches by Rail and also to meet rising demand in the local market. SCC, however, aims to concentrate its grinding operations at its Hofuf Plant only in order to cut costs and to better serve its customers. As such, SCC is currently at the final stages of awarding contracts for projects for the design, engineering and then installation of all the required rail tracks and wagon loading equipment at its Hofuf Plant. It is worth noting that the start of this project has been delayed because of the technical requirements of the Saudi Railway Organization, which are being taken care of. The contract is expected to be signed during the year 2014 and its execution is expected to take at least 18 months. The above projects require raising the operational efficiency of grinding facility at Hofuf plant to higher levels in order to compensate for old grinding facility which will be stopped in Ain Dar plant ( due to high operating cost and in order to save on additional clinker transportation charges from Hofuf plant to Ain Dar plant), as well as to meet the expected rising demand and improve the cement quality and meeting MEPA s environmental requirements. Accordingly, the Board of Directors have resolved to add two new mills with total designed capacity of approximately 440 ton/hour, and the bid documents for this project have already been completed and qualified contractors will be invited during year 2014 to submit their bids. Risks facing the company: Like other cement companies in Saudi Arabia, SCC faces some operational cost risks such as the possibility of fluctuations in the prices of raw materials and other production inputs as well as marketing risks such as decline in demand. However, due to the expectations of continued good growth of the Saudi Economy accompanied with continuous high government spending (as clearly evident in the 2014 Government Budget) we do not foresee that such risks will materialize in fact. Environmental Protection and Pollution Control: SCC has intensified its efforts with the concerned authorities for implementing measures to improve its facilities and promote a better environment. In this regard, the design for the two new production lines has taken into consideration the latest technologies for dust collection that will lead to the highest standards in environmental protection and pollution control, which surpass MEPA s requirements. Meanwhile, the company has replaced the Electrostatic Precipitators (EPs) for kiln 6 by Bag House filters, hence completing the whole dust emission control system at SCC s plant to reach the least dust pollution levels for all its facilities as required by the authorities. It should also be noted that all new projects to improve performance will incorporate the latest sophisticated equipment for controlling dust emissions. = 9 =

10 Loans: The following table illustrates the total SIDF and local banks Islamic Tawarruq loans, their movements during the year 2013 and the outstanding balances as at the end of 2013: Balance as of 01/01/2013 Used during the year SR Million Repaid Balance as during the of year 31/12/2013 The Bank Duration Continued Loans SAMBA Revolving N/A SFB Revolving N/A SIDF Eight Years Total SCC would like to express its thanks and gratitude to SIDF management and staff for their sincere endeavors to support SCC objectives, and also to express its thanks and gratitude to the management and staff of the above local banks for the great confidence and trust reposed in our company, and look forward to continued mutually beneficial relationships. Hiring and Training of Saudi Nationals: SCC implemented technical and administrative training courses during 2013, for a number of (114) of its Saudi employees. Additionally, SCC carried out co-operative training for college and university students, as well as its students summer training programs. SCC continued in its implementation of technical and administrative training courses to help in qualifying the employees and improve their efficiency. The percentage of Saudi workforce as at the end of 2013 has reached about 47.5 %. SCC is adopting Saudization plan as a national strategic goal and will continue in this plan. = 10 =

11 Social Responsibility: The Company believes that it no longer relies only on its financial position for building its reputation, but on carrying out its social responsibility towards its local community. This social responsibility includes providing employment to neighboring communities as well as protecting the environment. Accordingly, these communities could harvest the fruits of supporting it and embrace its facilities and plants in spite of absence of commercial relationships. The Company's carrying out of some social activities reflects its identity, national belonging, and its leading role in its local community, so that the latter acknowledges its existence and values its contributions. Also, the company emphasizes integrating its employees contribution in some of its social responsibility programs. The Saudi Cement Company, during the 2013 year, presented direct support to the following societies: Social Charitable Societies:- Benevolence Charitable Society in Eastern Province, Benevolence Charitable Society in Al Ahsa Province, Charitable Holy Qura'an Memorization Society in Eastern Province, Charitable Holy Qura an Memorization Society in Al Ahsa Province, Al Omran Charitable Society, Fatat Al Ahsa Charitable Society, Al Oyoon Charitable Society, Al Helailah Charitable Society, Al Mouwasat Charitable Society, Al Foddol Charitable Society, Al Mansourah Charitable Society, Charitable Women Society for Social Services, Qafelat El Khair Society for Social Services, Benevolence Charitable Society in El Kalabiah, El Bataliah Charitable Society, Al Morah Charitable Society, El Tarf Charitable Society, El Jesha Charitable Society, El Jaffer Charitable Society., Specialized Charitable Societies:- Al Rahma Charitable Medical Society, Saudi Charitable Society for Cancer Patients Care, Charitable Anti Drugs Society, Saudi Charitable Diabetics & Endocrinology Society, Anti-Smoking Charitable Society, Charitable Disabled Care & Rehabilitation Society, Charitable Marriage Facilitation & Family Care Society. In addition to above, Saudi Cement Company has patronized many ceremonies and celebrations such as being a Diamond Patron for Chamber of Commerce Activities in Al Ahsa, patronizing the Schooling Health Supporting Schools Program of the General Directorate of Education, patronizing the 2 nd Dates & Palm Date Festival, patronizing "All We are Producers Program" that was = 11 =

12 organized by Fatat Al Ahsa Society, participation in patronizing "Your Safety is Our Aim Program", in collaboration with the Chamber of Commerce of Al Ahsa & General Directorate of Traffic, and organization of the Coloring Studio Program for the third year in collaboration with Al Othaim Mall in Al Ahsa, in addition to organizing May visits to the patients including Al Oyoon General Hospital and Abqaiq General Hospital.etc. Accidents & Casualty Center in the National Guard Hospital: Based on the consensus of the Company's Board of Directors for the necessity to emphasize the Company s social role, in their Extraordinary General Assembly on 4/6/1431H corresponding 18/5/2010, Saudi Cement Company has approved the recommendation of their Board of Directors for the allocation of an amount of 50 Million Saudi Riyals (Fifty Million Saudi Riyals) from the Company s reserves, for the agreed upon construction of the building of Accidents & Casualty Center in the National Guard Hospital in Al Ahsa Province. Through coordination with the National Guard s Management, they informed that the first phase projects have been awarded and that the second phase of the projects, which include the Accidents & Casualty Center, is expected to commence during 2014/2015. Thrift Saving Program for Company employees: The company contributes to a Thrift Savings Program for its employees that was approved by the then Ministry of Labor & Social Affairs on 11/05/1414 corresponding to 27/10/1993 to motivate them to exert their best efforts in servicing the Company, and increase their loyalty. The following is the movement of the Thrift Saving Program During the year. Quality Certificates: Description Amounts in SR Balance at the beginning of the year 6,812,793 Additions during ,048,787 Deletions during Balance at the end of the year 11,7511,, SCC continued its application of, and compliance with, international Quality Management Systems, and maintained its ISO 9001:2008 certifications obtained from specialized and accredited German Company (TUV NORD) for the Hofuf and Ain Dar Plants. This reaffirms the commitment of SCC towards the full compliance and implementation of the quality management programs in all its internal administration and production / technical processes with the purpose of attaining the desired level of efficiency, = 12 =

13 effectiveness, and continuous improvement for all SCC s different operating sectors and functional lines. Also, SCC continued to comply with quality standards of the Saudi Arabian Standards Organization (SASO), as well as the special quality requirements of some neighboring GCC countries. SCC has also maintained the (CE) Certification of Conformity issued by the Belgian Certification Body (CRIC) for its products dispatched from the Ain Dar Plant. Furthermore, SCC continued to comply with the requirements of the American Petroleum Institute (API) in its production of oil-well cement. Board Membership & classification: The Board of Directors consists of eleven (11) members, and their classification for 2013 was as follows: Name of Board Member Designation Classification Khaled Abdulrahman Al-Rajhi Chairman Non-Executive Walid Ahmed Juffali Board Member & Managing Director Executive Mohammed S. Balghonaim Board Member Independent Abdulla Abdulrahman Al-Suhibani * Board Member Non-Executive Khaled Abdulrahman Al-Abdulkarim Board Member Independent Fahad Abdullah Al Saleh ** Board Member Non-Executive Sami Ali Juffali Board Member Independent Hamad Abdulla Olayan Board Member Non-Executive Abdulrahman Suleiman Al-Rajhi Board Member Non-Executive Mohammed Ali Al Garni Board Member & Chief Executive Officer Executive Ahmed Mohammed Al-Omran* Board Member Non-Executive Mohammed A. El-Khereiji *** Board Member Independent * The Board of Directors on 30/09/2013 (24/11/1434 ) approved the appointment of Mr. Ahmed bin Mohammed Al- Omran as representative of the General Organization for Social Insurance effective Oct , as per the Organization request, to replace and complete the remaining period of his predecessor, Engineer / Abdullah bin Abdulrahman Al-suhaibani (non-executive board member) due to his retirement from the organization. This appointment shall be presented for ratification to the 55 th ordinary general assembly which will be held on 17/03/2014(16/05/1435. ** Representative of General Organization for Retirement. *** The 54 th ordinary general assembly, which was held on 20/03/2013, ratified the decision of the Board of Directors on 05/01/2013 (23/02/1434) to appoint him as a new (independent) member to fill the vacant Board s position, and to complete the term of his predecessor until the end of the current session using block voting method. The Board of Directors would like to thank departing members, and welcome new members, and wish all success. = 13 =

14 Board Members Meetings and Attendance: The Board of Directors held 4 (four) times during 2013, with the following attendance record: Attendance register Name of Board Member 5/2/ /3/ /5/ /11/2013 Khaled Abdulrahman Al-Rajhi Walid Ahmed Juffali X Mohammed S. Balghonaim Abdulla Abdulrahman Al-Suhibani N/A Khaled Abdulrahman Al-Abdulkarim Fahad Abdullah Al Saleh Sami Ali Juffali X X Hamad Abdulla Olayan Abdulrahman Sulaiman Al-Rajhi Mohammed Ali Al Garni Ahmed Mohammed Al-Omran N/A N/A N/A Mohammed Abdulkarim A. El-Khereiji Attending X Absent Board of Directors Remuneration and Other Compensation paid during 2013: The Chairman and the Members of the Board did not receive any remunerations or privileges other than those clearly mentioned in the Appropriation of Profits which were made in accordance with Article (46) of SCC s Bylaws. The below schedule shows the remuneration and expenses paid for each Board Member during 2013: Schedule Saudi Riyal Name of Board Member Yearly Remuneration Other compens- -ations Total Omar Sulaiman Al-Rajhi 200, , Walid Ahmed Juffali 200,000,7,15,1 07,15,1 Abdulkarim A. El-Khereiji (GMBH) 200,000,1111,1,1111 Mohammed S. Balghonaim 200, , Abdulla Abdulrahman Al-Suhibani 200,000,71011,,71011 Khaled Abdulrahman Al-Abdulkarim 200,000 7,1111,7,1111 Fahad Abdullah Al Saleh 200,000,71011,,71011 Sami Ali Juffali 200,000 7,15,1,7,15,1 Hamad Abdulla Olayan 200,000 7,1111,7,1111 Khaled Abdulrahman Al-Rajhi 200,000 7,1111,7,1111 Mohammed Ali Al Garni 200,000 7,1111,7,1111 = 14 =

15 Highest Remunerations & Compensations paid in 2013 to Top Five Executives: The following schedule shows details of highest remunerations & compensations paid to the top five executives, including both CEO and CFO: In SR (000's) Description Amount in SR 000 Annual Salaries & compensation 27,,2 Annual Allowances Annual Bonus 771,, Annual Performance Incentives 77,,2 Interests and Rigths of Board Members, and their relatives in the Shares of Saudi Cement Company: Name No. of Shares Change Percentage Beginning End of the (Share) of change of the year year Khalid Abdulrahman Al Rajhi 12,163,252 12,297, , Walid Ahmed Juffali 4,500 4, Mohammed S. Balghonaim 202, , Abdulla Abdulrahman Al-Suhibani Not Owner Not Owner Khalid Abdulrahman Al Abdulkarim 17,137 17, Fahad Abdullah Al Saleh 1,500 1, Sami Ali Al Juffali 1,500 1, Hamad Abdulla Olyan 1,500 1, Abdulrahman Suleiman Al Rajhi 1,000 1, Mohammed Ali Al Garni 1,500 1, Ahmed Mohammed Alomran Not Owner Not Owner Mohammed Abdulkarim A. El Khereiji 759, , = 15 =

16 Interests and Rights of Executive Management, and their relatives in Shares of Saudi Cement Company: Name Mr. Hussain Bin Mansi Naser Abu Taki Sales Manager Mr. Khlifa Bin Saad Al-Dekhail Relation & Supporting svs. Manager Mr. Saeed Bin Saleh Ahmad Al-Zahrani Information technology Manager Beginning of the year No. of Shares End of the year Change (Share) Percentage of change 14,700 14, , (1,000) (100) Remarks: 1. There are no listed debt instruments of the Company. 2. There are no contractually based securities or warrants in the shares of the company. Works or Contracts of the Company in which a Board Member, CEO, or CFO or any party related to any of them have an interest: The Company has awarded the contract for 2013 insurance services (excluding medical insurance) to Wataniya Insurance Company (a related party to Dr. Walid Ahmed Juffali, who s a Board Member of Wataniya Insurance Company) after winning the bid that was invited during The total insurance premiums that have accrued on the various insurance policies during 2013 amounted to about SR. 7.5 million including marine insurance on company imports and rail cement cargos as well as insurance covers on additions to tangible assets during the year. = 16 =

17 Board Members Holding Directorships in other Saudi listed Companies: The following Board Members hold directorship in other joint stock companies: Name of Board Member Khaled Abdulrahman Al-Rajhi Walid Ahmad Juffali Khaled Abdulrahman Al-Abdulkarim Hamad Abdullah Olyan - (Representative of Saudi Cement Company) Dr. Abdulla Abdulrahman Sulaiman Al Rajhi Mohammed Ali Al Garni (Representative of Saudi Cement Company) Ahmed Moahmmed Al-Omran Mohammed A. Al- Khereiji Name of Listed Company - Al-Bilad Bank - Saudi United Company for Cooperative Insurance Walaa - Takween Advanced Industries Co. - Wataniya Cooperative Insurance Company-KSA. - Group International Cement Company, Kuwait (representative of SCC until 23/11/2013) - Ibrahim Juffali & Brothers (Closed Joint Stock Company) - Samba Financial Group - Gulf Union Cooperative Insurance Company until 5/8/ United Cement Company (Bahraini Closed Joint Stock Company ) - Group International Cement Company(Kuwaiti Closed Joint Stock Company effective 24/11/2013) - Advanced Educational Company (Closed Joint Stock Company) - Saudi Industrial Investment Group - Al-Rajhi Brothers Group Company Company (Closed Joint Stock Company) - Syuop Arabian Company (Closed Joint Stock Company) - United Cement Company (Bahraini Closed Joint Stock Company ) - Group International Cement Company(Kuwaiti Closed Joint Stock Company) - Samba Financial Group - Ace Arabia Cooperative Insurance Co. = 17 =

18 Audit Committee: The Audit Committee s members are: Hamad Abdulla Olayan Dr. Ahmad Abdulla Al Maghamis Mohammed A. Al- Khereiji Chairman Member Member The committee has performed its duties and responsibilities through Seven meetings held during the year. Its most important duties and responsibilities are: Discussions of the Quarterly and yearly Financial Statements before being reported to the Board of Directors; recommendations to the Board for appointment, demission and determining the fees of the External Auditors; follow up of the work of the appointed External Auditors; studying the internal control system and giving a written report in this regard; supervising the company internal audit department and studying its reports and following up on the implementation of corrective actions of all observations in the internal audit reports. Nominations & Remunerations Committee: The Nominations & Remunerations committee s members are: Dr. Walid Ahmed Juffali Mohammed S. Balghonaim Khaled Abdulrahman Al-Abdulkarim Chairman Member Member The committee has performed its duties and responsibilities through three meetings held during the year. Summary of the most important duties and responsibilities are: recommend to the Board nomination of members; review the Board structure and recommend the possible changes that can be made; define clear and definitive policies for the compensation & remuneration of the Board members and the Executive Management on the basis of their performance; and to insure the independency of the independent Board members on yearly basis. Associated Companies: SCC owns shares in the following associated companies: % age of Company name ownership 1. United Cement Company (Bahraini closed Joint Stock Company) Issued shares one one BD nominal value/share and there are no issued debt instruments 2. Cement Product Industry Co. Ltd. (Saudi Limited Liability Company). 18,000 issued SR 1,000 nominal value/share. 3. Group International Cement Company * (Kuwait closed Joint Stock Company) Number of shares issued 60 Kuwait Fils nominal value/share and there are no issued debt instruments. Establi shed at Country of operation 36% Bahrain Bahrain 33.33% Jeddah, KSA KSA 40% Kuwait Kuwait Main activity Handling and transporting cement in Bahrain Manufacturing and selling of paper bags for cement packing. Trading and packing of Cement & Bulk Products (Activities not yet started ) = 18 =

19 * The Authorized Capital of the Company is ten (10) million KD and the Paid -Up Capital is Six (6) million Kuwaiti Dinar. SCC has paid a total of KD 2,400,000 (two million four hundred thousand) for its 40% share of current paid-up capital. Corporate Governance: SCC has already prepared its own Corporate Governance Charter, which was approved by the Board of directors on 22 nd of Safar 1430 corresponding to 17/2/2009. SCC is currently applying all the Corporate Governance Regulations provisions, except for the following: No. Pertinent Article/Para Reasons for non-adoption 6/(b) Cumulative voting method shall be will be applied once it becomes 1 applied for the election of Board Members mandatory. 6/(d) Investors who are legal persons and who act on behalf of others - e.g. investment funds- shall disclose in their annual reports Not mandatory by regulation beside their voting policies, actual voting, and ways non-availability of mechanism for 2 of dealing with any material conflict of execution so far. interests that may affect the practice of the fundamental rights in relation to their investments /(e) Outlining a written policy that regulate the relationship with stakeholders with a view to protecting their respective rights; in particular, such policy must cover..etc. 12/(i) Legal person who is entitled under the company s Articles of Association to appoint representatives in the Board of Directors, is not entitled to vote on the appointment of other members of the Board of Directors. Not mandatory by regulation and the policy is under preparation will be applied once it becomes mandatory. Board of Directors Declarations: The Board of Directors declares the followings: A Proper books of account have been maintained; B The internal control system is sound in design, and has been effectively implemented; and C - There are no significant doubts about the company's ability to continue as a going concern. Results of Annual Audit of the effectiveness of internal control procedures: The Internal Audit Department of the company implements a continuous operational audit program to ensure the effectiveness of internal control system in safeguarding the company assets, and assess operational risks and the adequacy of performance effectiveness. The internal auditing programs did not show any material weakness in the internal control system of the company. Also, the External Auditors conduct usually an evaluation of that system within the process of their regular audit of the company final financial statements, and has the right of access to all the reports of the internal audit committee and the internal audit department reports for the period subject to their audit. = 19 =

20 5 years Balance Sheets: (SR 000 s) Description Years Current Assets 986, , , ,476 1,035,064 Current Liabilities 841, , , ,555 1,299,140 Working Capital 144,941 34, , ,921 (264,076) Other Long Term Assets 220, , , , ,238 Fixed Assets 3,164,038 3,345,805 3,516,146 3,368,109 3,557,468 Total Assets 4,370,895 4,333,162 4,598,919 4,616,673 4,930,770 Long Term Liabilities 85,982 72,922 72,177 69,080 73,934 Long Term Loans 235, , , , ,800 Other Liabilities Total Liabilities 1,162,449 1,175,308 1,316,654 1,245,435 1,859,874 Paid up Capital 1,530,000 1,530,000 1,530,000 1,530,000 1,020,000 Retained Earnings & Reserves 1,678,446 1,627,854 1,752,265 1,841,238 2,050,896 Shareholders Equity 3,208,446 3,157,854 3,282,265 3,371,238 3,070,896 Total Liabilities & Shareholders Equity 4,370,895 4,333,162 4,598,919 4,616,673 4,930,770 5 years Income Statements: (SR 000 s) Description Years Sales 2,187,255 2,203,447 1,716,095 1,526,151 1,345,875 Cost of Sales (902,993) (974,237) (765,095) (757,245) (666,346) Gross profit 1,284,262 1,229, , , ,529 Admin & Selling Exps. (97,887) (87,153) (85,928) (87,518) (81,890) Operating Income 1,186,375 1,142, , , ,639 Other Income (15,344) 395 (12,508) (4,950) (143) Zakat (47,239) (40,663) (21,337) (16,911) (15,104) Net Income 1,123,792 1,101, , , ,392 Material Differences in Operating Results: There were no material differences between the operating results of the year 2013 and the previous year Outstanding Regulatory Payments: (SR 000) Details Years, Zakat & Income Tax 37,893 28,591 General Organization for Social Insurance 1,6 706 Raw Materials Exploitation Fees 5,10,3 57,026 = 20 =

21 Dividend Policy: The Company distributes the annual net profit after deducting all general and administrative expenses and all other costs and provision for Zakat as follows: 1. 10% of the net profit to formulate the Statutory Reserve, and it is the right of the Ordinary General Assembly to stop contribution to that reserve when it reaches 50% of the paid up capital. The 54 th Ordinary General Assembly held on 08 Jumada corresponding to 20 March 2013 ratified stopping of appropriation to Statutory Reserve since it had reached 50% of paid- up capital. 2. It is also the right of the Ordinary General Assembly based on Board of Directors recommendation, to set aside not less than 5% of the net profit to formulate an agreeable Reserve. 3. Distribute out of the remaining profit the first portion of dividend to shareholders representing 5% of paid up capital. 4. After all the above appropriations, appropriate a maximum of 10% of the remaining profit as Directors Fees to the Board Members, but not to exceed the maximum limit of SR 200,000 to each member. 5. Subsequently, It is possible to distribute all (or part of ) the remaining profit as additional Dividend to Shareholders, or carry it forward (totally, or partially) to next year, in accordance with Board of Directors recommendation. = 21 =

22 Appropriation Account: During its meeting on 19/07/1434 (29/05/2013) the Board of Directors has decided to distribute interim dividend for the first half of the year 2013 at the rate of Saudi Riyals Three and half (SR3.5) per share representing 35% of nominal paid up capital and totaling SR million to shareholders registered on Tadawul as at close of market on Monday 22/08/1434 (01/07/2013) and payment of this interim dividend started on Tuesday 01/09/1434 (09/07/2013). Also, in accordance with Article (46) of the Company By Laws, the Board of Directors recommends to your General Assembly the approval of its recommendation at its Meeting dated 6 Rabi II 1435 corresponding to 06 February 2014 to distribute interim dividends for the second half of 2013 at the rate of Saudi Riyals Three and half (SR3.50) per share representing 35% of nominal paid up capital and totaling SR million to shareholders registered on Tadawul records as at close of market on the day of this shareholders ordinary general assembly 16 Jumada (17 March 2014). If your General Assembly approve this distribution, the total dividend for the year 2013 will hence be Saudi Riyals Seven (SR7) per share i.e. 70% of nominal paid up capital. Below is the recommended profit appropriation: (SR 000s) 1,123,792 Net profit ---- Less: Statutory Reserve 1,123,792 76,500 Less: First portion of dividend to shareholders of 5% of paid-up capital (SR1,530 millions) 1,047,292 2,200 Less: Directors remunerations 1,045, ,154 Add: Profits brought forward from previous year 1,300, ,500 Less: Additional dividend to shareholders of 65% of paid up capital (SR1,530 millions) 305,746 Balance to be carried forward to next year = 22 =

23 Board of Directors' Recommendations: The Board of Directors recommends your adoption of the following resolutions:- 1) Approve the Board of Directors Annual Report for year ) Approve the Financial Statements and the External Auditors' report for the year ended December 31, ) Absolve the members of the Board of Directors from all responsibilities and obligations related to the year ended 31/12/ ) Approve the Board of Directors' recommendations for distribution of dividends for the year 2013 at the rate of SR1 per share representing 11% of the nominal value of the share of which SR 3.5 per share was already distributed for the first half of the year, Entitlement for the second half dividend of SR3.5 per share shall be to shareholders on Tadawul s records on market close of this General Assembly meeting s day. 5) Approve the disbursement of SR. 2,200,000 (Two Million Two Hundred Thousand) as director s remunerations at the rate of SR. 200,000 (Two Hundred Thousand) per director for the financial year ) Approve the appointment of Company s External Auditors, as recommended by the Audit Committee, for the audit of 2014 financial statements and review of quarterly preliminary financial statements and determine their fees or select other auditors. 7) Ratification of the Board's decision to appoint Mr. Ahmed Mohammed Al-omran as a new (Non-Excutive) member of the Board to fill the vacant position and complete the term of his predecessor Mr. Abdulla Abdulrahman Al-Suhibani (Non-Excutive member) due to his retirement using block voting method. = 23 =

24 Final Statement: The Board of Directors expresses its appreciation and gratitude to all SCC shareholders for their confidence and support and prays to God Almighty for His Blessings to our country and to our leaders, His Majesty the Custodian of the Two Holy Mosques King Abdulla Ibn Abdulaziz Al-Saud, and HRH Crown Prince Salman Ibn Abdulaziz Al-Saud Deputy Prime Minister & Minister of defense, and HRH Mugrin Ibn Abdulaziz Second Deputy Prime Minister The Board of Directors also extends its thanks and gratitude to all government departments and private sector entities and to all SCC s customers and suppliers for their continuous support; and, last but not least, to the Company employees for their continued efforts and their will to serve the Company most efficiently and diligently. May God bless you all. The Board of Directors, = 24 =

25 SAUDI CEMENT COMPANY KILNS PRODUCTION CAPACITIES (OPERATING & SUSPENDED) Clinker Annual Rated Capacity (tons) 11,200,000 Kilns Tons per day 2 x Tons per day 1 x 3500 Tons per day 6 x 1500 Tons per day 1 x 725 Tons per day 2 x 300 Cement Annual Grinding Capacity (tons) 11,500,000 Mills (Cement) Tons per hour 3 x 280 Tons per hour 2 x 160 Tons per hour 3 x 120 Tons per hour 2 x 80 Cement Mills of old lines will be used to grind quantities in excess of the grinding capacity of the new Mills Type of Cement Produced Ordinary Portland Cement (ASTM Type 1 Specification) Sulphate Resisting Cement (ASTM Type V Specification) Oilwell Cement (API Class G Specification) Under API License to use API Monogram Special Cement of any type & Specification as per market demand = 25 =