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Al Kout Industrial Projects Company K.S.C. (Closed) and its subsidiary Kuwait

Consolidated statement of financial position

As at 31 December 2009

3

2009 2008 Notes KD KD

Assets Non-current assets Investment in associates 6 10,000,000 15,808,316 Property, plant and equipment 7 9,673,786 9,800,164 19,673,786 25,608,480 Current assets Inventories 8 2,310,285 2,285,059 Trade receivables 9 2,893,137 3,191,940 Other receivables 10 270,181 358,749 Investments at fair value through statement of income 11 459,086 1,120,753 Bank balances and cash 12 5,774,389 588,041 11,707,078 7,544,542 Total assets 31,380,864 33,153,022 Equity and liabilities Equity Share capital 13 8,820,000 8,820,000 Statutory reserve 14 2,388,080 2,130,716 Voluntary reserve 15 2,350,073 2,092,709 Foreign currency translation reserve - 153,970 Changes in associate’s reserves 114,529 - Retained earnings 5,729,765 3,829,229 Total equity 19,402,447 17,026,624 Non-current liabilities Term loans 16 6,064,498 7,197,773 Provision for staff indemnity 569,607 533,686 6,634,105 7,731,459 Current liabilities Trade and other payables 17 2,156,251 1,703,317 Current portion of term loans 16 1,720,061 2,210,088 Short-term borrowings 18 1,468,000 4,481,534 5,344,312 8,394,939 Total liabilities 11,978,417 16,126,398 Total equity and liabilities 31,380,864 33,153,022

______________________________ Fahad Y. Al-Jouaan Chairman

The notes on pages 8 to 30 form an integral part of these consolidated financial statements.


Consolidated statement of income

For the year ended 31 December 2009

4

2009 2008 Notes KD KD Revenue 11,807,695 10,926,872 Cost of sales (5,616,440) (5,429,449) Gross profit 6,191,255 5,497,423 Unrealised loss from investments at fair value through statement of income

(113,951)

(452,638)

Realized (loss) / gain from investments at fair value through statement of income

(153,110)

57,419

Share of results of associate 6 (118,082) (766,464) Profit on disposal of an associate 6 230,698 - Dividend income 60,748 139,866 Other income 260,702 238,248 Impairment of investment in associates 6 (1,579,491) - General and administrative expenses 19 (1,065,437) (939,814) Selling and distribution expenses (484,943) (585,411) Finance costs (654,753) (423,591) Profit for the year before contribution to Kuwait Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST), Zakat and Directors’ remuneration 2,573,636

2,765,038

Contribution to KFAS (23,163) (24,885) NLST (67,293) (66,626) Zakat (25,916) (35,984) Board of directors’ remuneration (42,000) (42,000) Profit for the year 20 2,415,264 2,595,543 Basic and diluted earning per share (fils) 21 27.38 29.43



Consolidated statement of comprehensive income


5

2009 2008 KD KD

Profit for the year 2,415,264 2,595,543 Other comprehensive income Foreign currency translation adjustment relating to associates - 153,970 Foreign currency translation adjustment on disposal of an associate transferred to consolidated statement of income

(153,970) -

Changes in associate’s reserves 114,529 - Other comprehensive (expense) / income for the year (39,441) 153,970 Total comprehensive income for the year 2,375,823 2,749,513



Consolidated statement of changes in equity


6

Share capital

Statutory reserve

Voluntary

reserve

Foreign currency

translation reserve

Changes in associate’s

reserves

Retained earnings

Proposed dividend

Total equity

KD KD KD KD KD KD KD KD

Balance as at 31 December 2007 8,820,000 1,854,212 1,816,205 - - 1,786,694 3,087,000 17,364,111 Total comprehensive income for the year - - - 153,970 - 2,595,543 - 2,749,513 Dividends paid for 2007 - - - - - - (3,087,000) (3,087,000) Transfer to reserves - 276,504 276,504 - - (553,008) - - Balance as at 31 December 2008 8,820,000 2,130,716 2,092,709 153,970 - 3,829,229 - 17,026,624 Total comprehensive (expense) / income for the year - - - (153,970) 114,529 2,415,264 - 2,375,823 Transfer to reserves - 257,364 257,364 - - (514,728) - - Balance as at 31 December 2009 8,820,000 2,388,080 2,350,073 - 114,529 5,729,765 - 19,402,447



Consolidated statement of cash flows


7

2009 2008 Note KD KD OPERATING ACTIVITIES Profit for the year 2,415,264 2,595,543 Adjustments for: Depreciation 2,216,782 2,106,505 Provision for staff indemnity 124,145 153,095 Finance costs 624,486 423,591 Unrealized loss from investments at fair value through statement of

income

113,951 452,638 Share of results of an associate 118,082 766,464 Profit on disposal of an associate (230,698) - Impairment loss on investment in associates 1,579,491 - Loss on disposal of property, plant and equipment 29,398 514 Impairment loss on property, plant and equipment 59,361 - Allowance for doubtful debts 25,165 5,472 Write off of provision for slow moving inventories (96,370) - Dividend income (60,748) (139,866) 6,918,309 6,363,956 Movements in working capital: Decrease / (increase) in inventories 71,144 (249,787) Decrease in trade receivables 273,638 359,044 Decrease / (increase) in other receivables 88,568 (114,260) Increase in trade and other payables 490,919 273,932 Cash generated from operations 7,842,578 6,632,885 Payment to KFAS (24,885) - NLST paid - (59,379) Staff indemnity paid (88,224) (20,870) Net cash from operating activities 7,729,469 6,552,636 INVESTING ACTIVITIES Net movement in investments at fair value through statement of income 547,716 932,893 Investment in associates - (16,420,811) Proceeds on disposal of an associate 4,301,999 - Purchase of property, plant and equipment (2,185,814) (1,295,789) Proceeds on disposal of property, plant and equipment 6,651 5,300 Dividend received 60,748 139,866 Net cash from / (used in) investing activities 2,731,300 (16,638,541) FINANCING ACTIVITIES Dividends paid - (3,087,000) Net movement in term loans (1,623,302) 7,107,861 Net movement in short-term borrowings (1,000,000) 2,468,000 Finance costs paid (637,585) (351,104) Net cash (used in) / from financing activities (3,260,887) 6,137,757 Net increase / (decrease) in cash and cash equivalents 7,199,882 (3,948,148) Cash and cash equivalents at beginning of the year (1,425,493) 2,522,655 Cash and cash equivalents at end of the year 12 5,774,389 (1,425,493)



Notes to the consolidated financial statements


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1. GENERAL INFORMATION

Al Kout Industrial Projects Company K.S.C. (Closed) (formerly known as Al-Ahlia Industrial Projects Company K.S.C. (Closed), (“the parent company”), is a closed shareholding company incorporated on 28 December 1993 in accordance with the Commercial Companies Law in the State of Kuwait, and is listed on the Kuwait Stock Exchange. The group comprises of the parent company and its subsidiary (see note 5). The parent company is primarily engaged in the manufacture and sale of salt and chlorine products. The address of the parent company’s registered office is P.O. Box, 10277, Shuaiba 65453, State of Kuwait. The consolidated financial statements of the group for the year ended 31 December 2009 were approved and authorized for issue by the parent company’s Board of Directors’ on -------------------- 29 March 20102010 and are subject to the approval of the Annual General Assembly of the shareholders. The shareholders of the parent company have the power to amend these consolidated financial statements at the Annual General Assembly.

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRS) 2.1 Standards and Interpretations adopted by the group

The following new and revised Standards and Interpretations have been adopted by the group for the annual period beginning 1 January 2009:

• IAS 1 (revised) ‘Presentation of Financial Statements’ - effective 1 January 2009. The revised standard has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of the financial statements. The group has elected to present the ‘Statement of comprehensive income’ in two statements: the ‘Consolidated statement of income’ and a ‘Consolidated statement of comprehensive income’. The revised standard requires changes in equity arising from transactions with owners in their capacity as owners (i.e. owner changes in income) to be presented in the consolidated statement of changes in equity. All other changes in equity (i.e. non-owner changes in equity) are required to be presented separately in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on the reported results or consolidated financial position of the group.

• IFRS 7 ‘Financial Instruments - Disclosures’ (amendment) – effective 1 January 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of fair value measurement hierarchy. The group has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments. As the change in accounting policy only results in additional disclosures, there is no impact on the results of the group.




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2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) (continued)

2.1 Standards and Interpretations adopted by the group (continued)

• IFRS 8 ‘Operating Segments’ – effective 1 January 2009. The new standard which replaced IAS 14 ‘Segment Reporting’ requires a management approach for segment reporting under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in any change in the group’s reportable segments and had no impact on the reported results or consolidated financial position of the group.

• IAS 23 ‘Borrowing Costs’ (revised 2007). The revised standard requires the capitalisation of borrowing costs, to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use or sale. In prior periods, the Group’s policy was to immediately expense those borrowing costs. In accordance with the transitional provisions of the revised standard, the group has capitalised borrowing costs relating to qualifying assets for which the commencement date for capitalisation was on or after the effective date, being 1 January 2009. No retrospective restatement has been made for borrowing costs that have been expensed for qualifying assets with a commencement date before the effective date. The change in accounting policy had no material impact on the results of the group.

2.2 Standards and Interpretations in issue not yet adopted by the group

• IAS 27 (revised), ‘Consolidated and Separate Financial Statements’

Effective for annual periods beginning on or after 1 July 2009

• IAS 28 (revised), ‘Investments in Associates’ Effective for annual periods beginning on or after 1 July 2009

• IAS 31 (revised), ‘Interests in Joint Ventures’ Effective for annual periods beginning on or after 1 July 2009

• IAS 39 (revised), ‘Financial Instruments: Recognition and Measurement’

Effective for annual periods beginning on or after 1 January 2009 and 1 July 2009

• IFRS 3 (revised), ‘Business Combinations’ Effective for annual periods beginning on or after 1 July 2009

• IFRS 5 (revised), ‘Non-current Assets Held for Sale and Discontinued Operation’


• IAS 38 (amendment), ‘Intangible Assets’ Effective for annual periods beginning on or after 1 July 2009

• IAS 1 (amendment), ‘Presentation of Financial Statements’


• IFRIC 17 ‘Distributions of Non-cash Assets to Owners’


• IAS 24 (amendment), ‘Related Party Transactions’

Effective for annual periods beginning on or after 1 January 2011

• IFRS 9 ‘Financial Instruments’ Effective for annual periods beginning on or after 1 January 2013

The directors anticipate that the adoption of these Standards, amendments and interpretations in future

periods will have no material financial impact on the consolidated financial statements of the group in the period of initial application.




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3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Statement of compliance

The consolidated financial statements of the group have been prepared in accordance with the IFRS as issued by the International Accounting Standards Board (IASB), IFRIC interpretations as issued by the International Financial Reporting Interpretations Committee (IFRIC) and applicable requirements of Ministerial Order No. 18 of 1990.

3.2 Basis of preparation

These consolidated financial statements are presented in Kuwaiti Dinars (“KD”) and have been prepared under the historical cost convention, except for investments at fair value through statement of income that stated at fair value. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

3.3 Basis of consolidation

The consolidated financial statements comprise the parent company and its subsidiary drawn up to 31 December 2009 (refer to note 5). The subsidiary’s reporting date is 31 December. Subsidiaries are all entities over which the parent company has the power to control the financial and operating policies. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Equity and net income attributable to minority interests are shown separately in the consolidated statement of financial position, consolidated statement of income and consolidated statement of comprehensive income, respectively. Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated on consolidation. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group. The minority interests are measured by the proportion of the pre-acquisition carrying amounts of the identifiable assets and liabilities of the subsidiaries.

3.4 Investment in associates

Associates are those entities over which the group is able to exert significant influence but which are neither subsidiaries nor interests in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The group’s investment in associates is accounted for under the equity method of accounting, i.e. on the consolidated statement of financial position at cost plus post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in value and the consolidated statement of income reflects the group’s share of the results of operations of the associate.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.4 Investment in associates (continued)

Any excess of the cost of acquisition over the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the consolidated statement of income. All subsequent changes to the group’s share of interest in the equity of the associate are recognised in the carrying amount of the investment. Distributions received from associates reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the group’s share in the associate arising from changes resulting from other comprehensive income of the associate or items recognised directly in the associate’s or equity of the group, as applicable. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions with associate are eliminated to the extent of the group’s share in the associate. Unrealised losses are also eliminated unless the transactions provide evidence of impairment in the asset transferred. An assessment for impairment of investments in associates is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist. The associate’s financial statements are prepared either to the parent company’s reporting date or to a date not earlier than three months of the parent company’s reporting date. Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group. Where practicable, adjustments are made for the effect of significant transactions or other events that occurred between the reporting date of the associates and the parent company’s reporting date.

3.5 Property, plant and equipment

Property, plant and equipment except free hold land are stated at cost less accumulated depreciation and any accumulated impairment losses. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the group’s accounting policy (see borrowing costs policy). Depreciation is calculated based on the estimated useful lives of the applicable assets on a straight-line basis commencing when the assets are ready for their intended use. The estimated useful lives, residual values and depreciation methods are reviewed at each year end, with the effect of any changes in estimate accounted for on prospective basis. Maintenance and repairs, replacements and improvements of minor importance are expensed as incurred. Significant improvements and replacements of assets are capitalised. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in consolidated statement of income in the period in which they occur.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.6 Inventories

Work in progress and finished goods are stated at the lower of weighted average cost and net realisable value. The cost of finished products includes direct materials, direct labour and fixed and variable manufacturing overhead and other costs incurred in bringing inventories to their present location and condition. Spare parts are not intended for resale and are valued at cost after making allowance for any obsolete or slow moving items. Cost is determined on a weighted average basis. All other inventory items are valued at the lower of purchased cost or net realisable value using the weighted average method after making provision for any slow moving and obsolete stocks. Purchase cost includes the purchase price, import duties, transportation, handling and other direct costs.

3.7 Trade receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method less provision for impairment losses.

3.8 Financial assets and financial liabilities

Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Financial assets and financial liabilities are initially measured at fair value plus transaction costs, except for those financial assets and financial liabilities carried at fair value through statement of income, which are initially measured at fair value.

3.8.1 Investments

The company classifies all its investments as ‘investments at fair value through statement of income’.

Financial assets at fair value through statement of income Investments at fair value through statement of income include investments held for trading and investments designated upon initial recognition as at fair value through statement of income.

3.8.2 Cash and cash equivalents Cash and cash equivalents include cash on hand, current accounts with banks and short-term deposits with an original maturity of three months or less, net of bank overdrafts.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.8 Financial assets and financial liabilities (continued) 3.8.3 Financial liabilities

The group’s financial liabilities include term loans, borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method. (a) Interest bearing borrowings Interest bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated statement of income over the period of the borrowings on an effective interest basis. (b) Trade and other payables Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

3.9 Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued. Statutory and voluntary reserves represents amounts transferred from profits in accordance with Commercial Companies Law of 1960, as amended and the parent company’s articles of association (Note 14 and 15). Foreign currency translation differences arising on the translation of the group’s foreign entities are included in the translation reserve. Retained earnings include all current and prior period retained profits. Dividends are recognised as a liability in the group’s consolidated financial statements in the period in which the dividends are approved by the shareholders.

3.10 Provision for staff indemnity

Provision is made for amounts payable to employees under the Kuwaiti Labour Law and employment contracts. This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination on the statement of financial position date, and approximates the present value of the final obligation.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.11 Provisions

Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the consolidated statement of financial position date. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. The expense relating to any provision is presented in the consolidated statement of income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.12 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from the sale of goods is recognised when all the following conditions are satisfied: • the group has transferred to the buyer the significant risks and rewards of ownership of the

goods; • the group retains neither continuing managerial involvement to the degree usually associated

with ownership nor effective control over the goods sold; • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the entity;

and • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividend income is recognised when the right to receive payment is established.

Interest income is recognised on an accrual basis using the effective interest method. 3.13 Foreign currency translation

Foreign currency transactions are translated into the functional currency KD using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognised in the consolidated statement of income. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13 Foreign currency translation (continued)

For the purpose of presenting consolidated financial statements the, assets and liabilities have been translated into KD at the closing rate at the reporting date. Income and expenses have been translated into the group’s presentation currency at the average rate over the reporting period. Exchange differences are charged / credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation differences recognised in equity are reclassified to the consolidated statement of income and recognised as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into KD at the closing rate.

3.14 Impairment of tangible assets

At each financial position date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated statement of income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the consolidated statement of income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.




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3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.15 Impairment

Trade receivables A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms. 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 advances are 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.

3.16 Related party transactions

Related parties consist of directors, executive officers, their close family members and companies of which they are principal owners. All related party transactions are conducted on an arm’s length basis and are approved by management.

3.17 Contingent liabilities and assets

Contingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless there is a possibility of outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the consolidated financial statements, but disclosed when an inflow of economic benefit is possible.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS

Accounting judgements

In the process of applying the group’s accounting policies, management has used judgements and made estimates in determining the amounts recognised in the consolidated financial statements. The most significant use of judgements and estimates are as follows:

Impairment of trade receivables

An estimate of the collectible amount of trade receivables is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates. At the consolidated statement of financial position date, gross trade receivables were KD 3,130,568 (2008: KD 3,425,673), and the provision for doubtful debts was KD 237,431 (2008: KD 233,733). Any difference between the amounts actually collected in future periods and the amounts expected to be collected will be recognized in the consolidated statement of income. Useful lives of tangible assets As described in note 3.6, the group reviews the estimated useful lives over which its tangible assets are depreciated. The group’s management is satisfied that the estimates of useful lives are appropriate.




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5. SUBSIDIARY

Name of subsidiary Country of

incorporation Ownership interest

(%) Principle activity

Ahlia Logistics Transport Company W.L.L. Kuwait 100 Transportation services

6. INVESTMENT IN ASSOCIATES Ownership interest Carrying amount Name of

associate Country of

incorporation

2009

2008

2009

2008 % % KD KD Al Dora Petroleum

Services Company K.S.C. (Closed) (Al Dora)

Kuwait

23

23

10,000,000

11,188,825 * Moya Holding

Company (Moya)

Bahrain

-

30

-

4,619,491 10,000,000 15,808,316

* The investment in associate Moya was disposed off during the 3rd quarter of 2009.

Summarised financial information in respect of the group’s investment in its associates is set out below:

2009 2008 KD KD Share of associates’ statement of financial position: Current assets 4,229,557 9,436,366 Non-current assets 5,247,519 4,360,547 Current liabilities (1,048,941) (1,140,440) Non-current liabilities (118,749) (101,763) Net assets 8,309,386 12,554,710 Goodwill on acquisition 1,690,614 3,253,606 Carrying amount of the investment in associates’ 10,000,000 15,808,316 2009 2008 KD KD Share of associates’ revenue and results: Revenue 2,626,606 111,785 Results (118,082) (766,464)

Formatted: Indent: Before: 0.05"


















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6. INVESTMENT IN ASSOCIATE (continued) Share of result of associate, Al Dora was calculated based on the management accounts of Al Dora for the nine month period ended 30 September 2009 and the management’s estimate of a loss for the three month period ended 31 December 2009. The management does not expect any material differences in the figures in case audited financial statements would have been available as at 31 December 2009 in respect of the associate Al Dora. During the 2nd quarter of 2009, the group recognised an impairment loss of KD 394,220 in respect of its investment in associate Moya. On 10 August 2009, the group disposed of its investment in associate Moya and recognised a profit on disposal of the associate Moya amounting to KD 230,698 in the consolidated statement of income for the year. At 31 December 2009, the group has recognized an impairment loss of KD 1,185,271 (2008: KD Nil) in the consolidated statement of income for the year, in respect of its investment in associate Al Dorra based on estimate of recoverable value.




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7. PROPERTY, PLANT AND EQUIPMENT

Buildings Plant and machinery

Electrolyser and ED

membrane

Office furniture and

equipment Motor

vehicles

Capital work in progress Total

KD KD KD KD KD KD KD Cost Balance at 1 January 2008 4,830,839 11,091,100 3,802,931 451,524 1,127,786 675,578 21,979,758 Additions - 262,612 - 25,732 124,998 882,447 1,295,789 Disposals - - - - (8,900) - (8,900) Transfers 165,413 522,725 - - 229,600 (917,738) - Balance at 1 January 2009 4,996,252 11,876,437 3,802,931 477,256 1,473,484 640,287 23,266,647 Additions 4,955 253,403 - 43,068 241,458 1,642,930 2,185,814 Disposals - (10,308) - - (68,258) - (78,566) Transfers 77,219 418,575 - - - (495,794) - Balance at 31 December 2009 5,078,426 12,538,107 3,802,931 520,324 1,646,684 1,787,423 25,373,895 Accumulated depreciation Balance at 1 January 2008 2,669,848 5,999,093 1,907,078 341,451 445,594 - 11,363,064 Charge for the year 457,194 1,037,491 427,161 70,924 113,735 - 2,106,505 Relating to disposals - - - - (3,086) - (3,086) Balance at 1 January 2009 3,127,042 7,036,584 2,334,239 412,375 556,243 - 13,466,483 Charge for the year 476,899 1,139,588 391,896 54,485 153,914 - 2,216,782 Relating to disposals - (2,147) - - (40,370) - (42,517) Impairment loss - - - - 59,361 - 59,361 Balance at 31 December 2009 3,603,941 8,174,025 2,726,135 466,860 729,148 - 15,700,109 Carrying amount As at 31 December 2009 1,474,485 4,364,082 1,076,796 53,464 917,536 1,787,423 9,673,786 As at 31 December 2008 1,869,210 4,839,853 1,468,692 64,881 917,241 640,287 9,800,164 Annual depreciation rates 10% 6.66% to 20% 20% to 62% 33.33% 10% to 33.33% -

Buildings are constructed on land leased from the Government of Kuwait (see note 26). The group’s property, plant and equipment have been assigned as security for the term loan (see note 16).




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8. INVENTORIES 2009 2008 KD KD Finished goods 237,804 225,283 Raw materials 105,868 107,596 Spare parts 2,083,553 2,268,522 Imported salt 125,494 41,412 Packing materials 141,150 122,200 2,693,869 2,765,013 Allowance for slow moving inventories (383,584) (479,954) 2,310,285 2,285,059 9. TRADE RECEIVABLES 2009 2008 KD KD Trade receivables 3,130,568 3,425,673 Allowance for doubtful debts (237,431) (233,733) 2,893,137 3,191,940

Movement in the allowance for doubtful debts 2009 2008 KD KD Balance at beginning of the year 233,733 232,592 Amounts written off during the year (21,467) (4,331) Increase in allowance recognised in the consolidated statement

of income 25,165 5,472 Balance at end of the year 237,431 233,733

At the consolidated statement of financial position date, 71% of the net trade receivables are due from 7 customers (2008 - 79% from 11 customers).

At the consolidated statement of financial position date, net trade receivables amounting to KD 685,794 (2008: KD 741,001) were past due but not considered to be impaired. The ageing analysis of these receivables is as follows:

2009 2008 KD KD

90 – 180 days 405,070 414,196 180 - 360 days 35,937 49,578 Over 360 days 244,787 277,227

685,794 741,001

Amounts receivable that are not past due are considered collectible based on historic experience.




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10. OTHER RECEIVABLES

2009 2008 KD KD

Prepayments 71,915 59,878 Advances 151,226 255,218 Employee receivables 32,105 30,589 Others 14,935 13,064

270,181 358,749

11. INVESTMENTS AT FAIR VALUE THROUGH STATEMENT OF INCOME 2009 2008 KD KD Trading: Local quoted securities - 169,310 Local unquoted securities 459,086 767,674 Foreign quoted securities - 183,769 459,086 1,120,753

The group’s investments are managed by a professional portfolio manager, under portfolio management agreement.

12. CASH AND CASH EQUIVALENTS 2009 2008 KD KD Cash in hand 6,708 6,251 Cash at banks 888,308 495,415 Short term deposits 4,879,097 - Cash in portfolio 276 86,375 Bank balances and cash 5,774,389 588,041 Bank overdraft (note 18) - (2,013,534)

Cash and cash equivalents in the consolidated statement of cash flows 5,774,389 1,425,493

The group’s short term deposits yield an interest rate of 1.75% (2008: 4.5%) per annum and mature within three months from the date of deposit.

13. SHARE CAPITAL

The authorized share capital KD 24 million (240,000,000 shares of 100 fils each), issued and paid up share capital is KD 8,820,000 (88,200,000 shares of 100 fils each), (2008: 88,200,000 issued and paid up shares of 100 fils each).

14. STATUTORY RESERVE

In accordance with the Commercial Companies Law of 1960 and the parent company’s articles of association, as amended, 10% of the profit for the year is required to be transferred to the statutory reserve until the reserve totals 50% of the paid up share capital. Distribution of the statutory reserve is limited to the amount required to enable the payment of a dividend of 5% of paid up share capital to be made in years when retained earnings are not sufficient for the payment of a dividend of that amount.





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15. VOLUNTARY RESERVE

In accordance with the parent company’s articles of association, 10% of the profit for the year has been transferred to the voluntary reserve. Such annual transfers can be discontinued by a resolution of shareholders in the Annual General Assembly meeting upon recommendation by the Board of Directors’. There are no restrictions on the distribution of the voluntary reserve.

16. TERM LOANS

2009 2008 KD KD Current portion 1,720,061 2,210,088 Non-current portion 6,064,498 7,197,773

The above represents term loans obtained from local banks and bear an interest rate ranging from 3.5% to 7.5% (2008: 3.5%) per annum.

2009 2008 KD KD

Payable in 1 year or less 1,720,061 2,210,088 Payable in 1-2 years 5,050,000 6,770,061 Payable in 2-5 years 1,014,498 427,712

7,784,559 9,407,861

The group’s plant, machinery and electrolyzers are pledged as collateral against the term loans amounting to KD 2,764,498 (2008: KD 3,027,712).

17. TRADE AND OTHER PAYABLES

2009 2008

KD KD Trade payables 395,888 384,201 Freight payable 28,680 45,973 Advance from customers 36,460 20,195 Accrued contractors expenses 17,628 37,517 Accrued utility charges 522,548 379,149 Employees’ accrued leave pay 67,037 75,393 KFAS payable 58,498 60,220 NLST payable 268,737 201,444 Zakat payable 41,311 38,334 Accrued interest 87,084 100,183 Directors remuneration payable 37,000 42,000 Staff bonus 287,090 197,884 Others 308,290 120,824

2,156,251 1,703,317




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18. SHORT-TERM BORROWINGS

2009 2008 KD KD

Short-term loan - 1,000,000 Notes payable 1,468,000 1,468,000 Bank overdraft - 2,013,534 1,468,000 4,481,534

Notes payable are repayable within six months. Interest rates on bank borrowings range from 5% to 6.5% (2008: 5.5% to 7.5%) per annum and are unsecured.

19. GENERAL AND ADMINISTRATIVE EXPENSES 2009 2008 KD KD Staff costs 600,770 494,682 Depreciation 145,416 161,557 Others 319,251 283,575 1,065,437 939,814 20. STAFF COSTS AND DEPRECIATION Staff costs and depreciation charges are included in the consolidated statement of income under the

following categories: 2009 2008 KD KD Staff costs: Cost of sales 1,527,881 1,610,791 General and administrative expenses 600,770 494,682 Selling and distribution expenses 116,239 158,094 2,244,890 2,263,567 Depreciation: Cost of sales 2,062,613 1,937,680 General and administrative expenses 145,416 161,557 Selling and distribution expenses 8,753 7,268 2,216,782 2,106,505 21. BASIC AND DILUTED EARNINGS PER SHARE 2009 2008 Basic and diluted earnings per share is calculated as follows: Profit for the year (KD) 2,415,264 2,595,543 Weighted average number of outstanding shares 88,200,000 88,200,000 Basic and diluted earnings per share (fils) 27.38 29.43




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22. PROPOSED DIVIDENDS

Subject to the approval of the annual general assembly, the board of directors propose to distribute a cash dividend of 15 fils (2008: Nil) per share to the shareholders existing at the date of the annual general assembly.

23. RELATED PARTY TRANSACTIONS

Related parties primarily comprise associates, significant shareholders, directors, key management personnel and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the company’s management. Balances and transactions between the parent company and its subsidiary, which is a related party of the parent company, have been eliminated on consolidation and are not disclosed in this note. Transactions with related parties included in the consolidated statement of income is as follows:

2009 2008 KD KD Share of results of associates (118,082) (766,464)

Balances with related parties included in the consolidated statement of financial position are as follows:

2009 2008 KD KD Investment in associates 10,000,000 15,808,316 Investments at fair value through statement of income (Managed portfolio)

-

180,784

2009 2008

KD KD Compensation of key management personnel Short-term benefits 280,066 249,524 Employees’ end of service benefits 23,383 19,937 303,449 269,461

The current year accrual for bonus has not yet been allocated and therefore the amounts relating to key management personnel in respect of the current year are not yet determinable.

24. SEGMENT REPORTING

The group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the chief operating decision maker in order to assess its performance. In prior years the group’s primary basis for segment reporting was by business segments. Following the adoption of IFRS 8, the identification of the group’s reportable segments has not changed and the management has grouped the group’s products and services into the following operating segments under IFRS 8 as follows:




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24. SEGMENT REPORTING (continued)

• Chlor Alkali • Logistics and Transport

Information regarding the group’s reportable segments is presented below. Amounts reported for the prior year have been restated to conform to the requirements of IFRS 8.

a. Segment revenues and results

The following is an analysis of the group’s revenue and results by reportable segment:

2009 2008 2009 2008 KD KD KD KD Revenue Segment result Chlor Alkali 11,767,533 10,897,465 6,183,817 5,493,384 Logistics and transport 40,162 29,407 7,438 4,039 11,807,695 10,926,872 6,191,255 5,497,423 Investment income (206,313) (255,353) Share of results of associate (118,082) (766,464)

Profit on disposal of an associate 230,698 -

Other income 260,702 238,248

Impairment of investment in associates (1,579,491) -

Finance costs (654,753) (423,591) Unallocated expenses (1,708,752) (1,694,720)

Consolidated revenue and profit for the year 11,807,695 10,926,872 2,415,264 2,595,543

b. Segment assets and liabilities

For the purposes of monitoring segment performance and allocating resources between segments: 2009 2008 KD KD

Segment assets Chlor Alkali 30,324,455 32,141,621 Logistics & Transport 1,056,409 1,011,401 Total consolidated segment assets 31,380,864 33,153,022

Segment liabilities Chlor Alkali 11,869,916 16,078,210 Logistics & Transport 108,501 48,188 Total consolidated segment liabilities 11,978,417 16,126,398




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24. SEGMENT REPORTING (continued) c. Geographical segments 2009 2008 KD KD

Kuwait and Middle East 11,493,040 9,872,852 Europe 177,390 220,104 Asia 137,265 833,916 Total consolidated segment revenue 11,807,695 10,926,872

25. FINANCIAL INSTRUMENTS

The group in the normal course of business uses various types of financial instruments. Information on financial risks and fair value of these financial instruments is set out below:

a) Capital management

The parent company’s objectives when managing capital are to safeguard the parent company’s ability to continue as a going concern, through the optimisation of the debt and equity balance so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The parent company sets the amount of capital in proportion to risk. The parent company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the parent company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or debt and or sell assets to reduce debt. The capital structure of the group consists of term loans, cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings.

b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in note 3 to the consolidated financial statements.

c) Categories of financial instruments 2009 2008 KD KD Financial assets Bank balances and cash 5,774,389 588,041 Trade receivables 2,893,137 3,191,940 Investments at fair value through statement of income 459,086 1,120,753 Financial liabilities Term loans 7,784,559 9,407,861 Trade and other payables 2,156,251 1,703,317 Short-term borrowings 1,468,000 4,481,534

Formatted Table




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25. FINANCIAL INSTRUMENTS (continued) d) Credit risk

The group is exposed to credit risk in respect of losses that would have to be recognised if counterparties fail to perform as contracted. The group’s exposure to credit risk is primarily in respect of bank balances and trade receivables. As at the consolidated statement of financial position date, the group’s maximum exposure to credit risk is equal to the carrying amount of the assets disclosed in the consolidated statement of financial position.

e) Equity price risk

Equity price risk is the risk that the value of financial instruments will fluctuate as a result of changes in equity prices. Financial instruments, which potentially subject the group to equity price risk, consists principally of investments at fair value through statement of income. The group manages this risk by diversifying its investments on the basis of the pre- determined asset allocations across various categories, continuous appraisal of market conditions and trends and management estimate of long and short term changes in fair value. The following table demonstrates the sensitivity of the changes in fair value to reasonably possible changes in equity prices, with all other variables held constant. The effect of decreases in equity prices is expected to be equal and opposite to the effect of the increases shown.

Change in equity price

Effect on profit before KFAS, NLST, Zakat &

Board of Directors’ remuneration

Change in equity price

Effect on profit before KFAS, NLST, Zakat &

Board of Directors’ remuneration

2009 2009 2008 2008 KD KD

Kuwait +5% 22,954 +5% 56,038 f) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Financial instruments which potentially subject the group to interest rate risk consist primarily of term loans and short term borrowings.

The following table demonstrates the sensitivity of the consolidated statement of income to reasonably possible changes in interest rates, with all other variables held constant. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the group’s profit / (loss) before KFAS, NLST, Zakat and Board of Directors' remuneration for one year, based on the floating rate financial liabilities held at 31 December 2009. There is no impact on the consolidated other comprehensive income.

50 basis points movement Effect on consolidated statement of

income 2009 2008 KD KD Term loans 25,100 31,901 Short term borrowings 7,340 22,408




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25. FINANCIAL INSTRUMENTS (continued) f) Interest rate risk (continued)

The effect of decrease in interest rate is expected to be equal and opposite to the effect of the increases shown above.

g) Foreign exchange risk

Foreign exchange risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The group incurs foreign currency risk on transactions denominated in a currency other than the Kuwaiti Dinar. The management monitors the positions on a daily basis to ensure positions are maintained within established limits. The effect on profit (due to change in the fair value of monetary assets and liabilities), as a result of change in currency rate, with all other variables held constant is shown below:

Increase in currency rate by 5 % Effect on profit before KFAS, NLST,

Zakat & Board of Directors' remuneration

2009 2008 KD KD United State Dollar 207,930 -

The effect of decrease in currency rate is expected to be equal and opposite to the effect of the increases shown above.

h) Liquidity risk

31 December 2009 Within 1 to 3 to 12 1to 5 1 month 3 months Months years Total KD KD KD KD KD Term loans 200,000 340,022 1,180,039 6,064,498 7,784,559 Trade and other payables 330,718 1,766,817 58,716 - 2,156,251 Short term borrowings 1,468,000 - - - 1,468,000 TOTAL LIABILITIES 1,998,718 2,106,839 1,238,755 6,064,498 11,408,810

31 December 2008 Within 1 to 3 to 12 1to 5 1 month 3 months Months years Total KD KD KD KD KD Term loans - 690,022 1,520,066 7,197,773 9,407,861 Trade and other payables 177,742 1,075,290 450,285 - 1,703,317 Short term borrowings - - 4,481,534 - 4,481,534 TOTAL LIABILITIES 177,742 1,765,312 6,451,885 7,197,773 15,592,712




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25. FINANCIAL INSTRUMENTS (continued) i) Fair value of financial instruments a) Fair value of financial instruments carried at amortised cost

In the opinion of management, carrying amounts of the financial instruments carried at amortised cost are not materially different from their respective fair values as at the reporting date.

b) Valuation techniques and assumptions applied for the purposes of measuring fair value

The fair values of financial assets are determined as follows:

• The fair values of financial assets (quoted equity securities) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

• The fair values of financial assets (unquoted funds) are determined based on prices from observable

current market transactions.

• The fair values of other financial assets (unquoted equity securities) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using market data that are unobservable.

c) Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets

for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for

the asset or liability that are not based on observable market data (unobservable inputs).

31 December 2009 Level 3 KD

Investments at fair value through statement of income Local unquoted equities 459,086




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25. FINANCIAL INSTRUMENTS (continued) i) Fair value of financial instruments (continued) c) Fair value measurements recognised in the consolidated statement of financial position

(continued)

Reconciliation of Level 3 fair value measurements of financial assets

31 December 2009

Investments at fair value through

statement of income KD

As at 1 January 2009 1,120,753 Total losses in the consolidated statement of income (267,061) Sales (394,606) As at 31 December 2009 459,086 Total unrealized losses for the year included in the consolidated statement of income for assets held at the end of the reporting period (113,951)

Following the amendments to IFRS 7, the group is exempted from disclosing comparative information.

26. COMMITMENTS AND CONTINGENT LIABILITIES 2009 2008 KD KD

Capital commitments For the acquisition of property, plant and equipment 376,859 526,145

Contingent liabilities Letters of guarantee 2,717,664 1,715,762 Operating lease commitments The minimum operating lease commitments under non-cancellable operating leases are as follows: 2009 2008 KD KD Not later than one year 38,423 38,423 Later than one year but not later than five years 8,850 33,335 27. COMPARATIVE FIGURES

Certain comparative figures have been re-classified to conform to current year’s presentation.

al kout industrial projects company k.s.c. (closed) and ...€¦ · al kout industrial projects...

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