paints and chemical industries company “pachin” s.a.e ... - london stock exchange · 2011. 11....
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Paints and Chemical Industries Company “Pachin”
S.A.E. The Consolidated Financial
Statements and Limited Review Report
For the Financial Period from July 1, 2011 until September 30, 2011
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Translation of Auditor’s Report
Originally Issued in Arabic
LIMITED REVIEW REPORT
To : The Board of Directors of Paints and Chemical Industries Company "Pachin"
Introduction
We have reviewed the accompanying consolidated balance sheet of Paints and Chemical Industries Company for the period from July 1, 2011 until September 30, 2011, and the related statements of consolidated income, cash flows and changes in shareholders’ equity for the three month period ending on that date, and the summary of significant accounting policies and the disclosures thereto. These financial statements are the responsibility of the company’s management. Our responsibility is to issue a report on these financial statements based on our review. Scope of Limited Review
We conducted our review in accordance with the Egyptian Standard No. (2410), which is applicable to the review engagements. This standard requires that we plan and perform the review to obtain moderate assurance that the financial statements are free of material misstatements. A review is limited primarily to inquire of the company’s personal and analytical procedure applied to the financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements as of September 30, 2011, do not give a true and fair view of the company’s financial position and the results of its operations and cash flows for the three month period ending on that date according to the Egyptian Accounting Standards. Cairo, November 2, 2011 Kamel M. Saleh ACA F.E.S.A.A (RAA 8510)
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Translation of Financial StatementsOriginally Issued in Arabic
Notes 30/9/2011 30/6/2011 30/9/2011 30/6/2011
Non - Current Assets EGP EGP EGP EGPProperty, plant and equipment (net) (2b, 4) 269 066 564 272 063 722 14 923 288 15 301 326Projects under construction (net) (2c, 5) 8 505 808 8 023 108 1 127 127 610 020Other Non - Current AssetsInvestments in subsidiaries (net) (2f, 6) -- -- 249 880 000 249 880 000Available for sale investments (2f, 7) 774 906 774 906 774 906 774 906Other long-term assets (2d, 8) 16 016 000 16 016 000 16 016 000 16 016 000Total Long-Term Assets 294 363 278 296 877 736 282 721 321 282 582 252Assets held for sale (2r, 10) 460 756 460 756 460 756 460 756Current AssetsInventories (net) (2g, 9, 18) 259 741 727 ����������� 62 799 306 54 412 102Letters of Credit (net) 3 666 591 ��������� 9 620 897 387Debtors and Notes Receivable Accounts receivable (net) (2h, 11, 18) 25 096 983 �������� 10 940 898 10 457 630Notes receivable (net) (12, 18) 14 992 444 �������� 1 845 936 2 388 159Due from subsidiaries (13) -- -- 40 125 142 39 408 579Other debit balances (net) (14, 18) 65 897 494 �������� 141 669 908 140 042 634Investments for trading purposes (2i, 15) 143 129 565 �������� 21 126 120 18 320 716Cash and cash equivalents (2j, 16) 55 649 234 ������� 14 938 431 8 770 460Total Current Assets (1) 568 174 038 491 312 078 293 455 361 274 697 667Current LiabilitiesProvisions (2k, 17) 36 724 107 39 174 844 32 531 933 34 982 670Accounts and notes payable (2l, 19) 104 524 914 71 051 356 21 694 065 6 348 829Due to El-Obour for Paints (20) -- -- 10 206 001 5 586 485Dividends Payable 85 800 000 -- 85 800 000 --Other credit balances (21) 70 927 363 53 560 347 23 969 650 15 684 464Total Current Liabilities (2) 297 976 384 163 786 547 174 201 649 62 602 448Working Capital (1) - (2) 270 197 654 327 525 531 119 253 712 212 095 219Total Investment financed by: 565 021 688 624 864 023 402 435 789 495 138 227Shareholders' EquityIssued and paid-up capital (22) 200 000 000 200 000 000 200 000 000 200 000 000Reserves (23) 224 265 309 217 596 869 178 608 813 178 608 813Foreign currency translation reserve 183 595 183 595 -- --Retained earnings 85 521 834 57 192 166 20 128 034 16 671 947Profits for the period / year 37 460 778 133 245 089 2 452 624 98 700 533Total Shareholders' Equity 547 431 516 608 217 719 401 189 471 493 981 293Non controlling interest 788 745 773 271 -- --Total Shareholders' Equity and Non controlling interest 548 220 261 608 990 990 401 189 471 493 981 293Long-term liabilities (24) 1 080 493 1 080 493 -- --Deferred tax (2q, 25) 15 720 934 14 792 540 1 246 318 1 156 934
565 021 688 624 864 023 402 435 789 495 138 227
- The accompanying notes from (1) to (30) form an integral part of the financial statements.
Chief Financial Officer Accountant: Ashraf Moustafa El Kahky
- Limited review report attached.
Eng.: Mohie El Din Abdel RazikChairman
Dr.: Hoda Ahmed Salah El Din
Total Financing of Working Capital and Long-Term Assets
Paints and Chemical Industries Company "Pachin" S.A.E.Consolidated Balance SheetAs of September 30, 2011
Consolidated Pachin
Managing Director
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Translation of Financial StatementsOriginally Issued in Arabic
30/9/2011 30/9/2010 30/9/2011 30/9/2010
Consolidated PachinNotes EGP EGP EGP EGP
Sales (net) (2n-1, 3) ���������� �������� ������� �������
Cost of sales ���������� ����������� �������� ����������
Gross Profit 45 749 725 57 495 002 4 483 214 4 577 787
General and administrative expenses �������� �������� ����� ����������
Allowances for Board of Directors members ����� ��������� ���� ���
Profit from Operations 40 554 402 52 845 581 2 343 181 2 733 362
Finance expenses -- ������� -- �������
Investment income in subsidiaries companies -- -- -- �����
Profits on sale of investments -- ����� -- �����
Proceeds from revaluation of investment for trading purposes
������ ������ ������� �������
Income from treasury bills ������� �������� �������� ���������
Interest income �������� ������ ������ �������
Other income �������� ��������� ������� ��������
Foreign currency valuation differences ������� ����� ������ ������
Net profit before discontinued operation losses 50 878 566 64 053 257 3 206 557 11 635 132
Discontinued operation losses (26) �������� ������ �������� ������
���������� �������� �������� ���������
Income tax ��������� �������� �������� --
Deferred tax (2q, 25) �������� �������� ������� �������
Profit after Tax and before Non controlling interest
37 478 390 63 713 113 2 452 624 11 299 240
Non controlling interest �������� �������� -- --
Profit after Tax and Non controlling interest 37 460 778 63 318 192 2 452 624 11 299 240
- The accompanying notes from (1) to (30) form an integral part of the financial statements.
Dr.: Hoda Ahmed Salah El DinAccountant: Ashraf Moustafa El KahkyChief Financial Officer Managing Director
Eng.: Mohie El Din Abdel Razik
Paints and Chemical Industries Company "Pachin" S.A.E.Consolidated Income Statement
For the Period from July 1, 2011 until September 30, 2011
Chairman
Net profit after discontinued operation andbefore taxes and non controlling interest
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Translation of Financial StatementsOriginally Issued in Arabic
30/09/2011 30/09/2010 30/09/2011 30/09/2010
Notes EGP EGP EGP EGP
Cash Flows from Operating Activities
Net Profit before Taxes and Non controlling interest 50 750 606 63 819 218 3 078 597 11 401 093
Adjusted by
Depreciation of fixed assets 3 846 346 3 689 201 391 706 371 862
Gain on revaluation of investments for trading purposes ( 509 963) ( 348 753) ( 205 199) ( 152 613)
Profits on the sale of investments -- ( 6 780) -- ( 6 780)
Net formed and used provisions (17) (2 450 737) ( 320 819) (2 450 737) --
Operating Profit before Working Capital Changes 51 636 252 66 832 067 814 367 11 613 562
(Increase) in receivables and other debit balances (6 794 459) (2 910 280) (2 284 885) (3 732 811)
(Increase) in inventories and letters of credit (16 036 173) (13 100 629) (7 499 437) (3 581 558)
Increase in creditors and other credit balances 31 380 300 40 296 775 18 268 905 7 217 394
Net Cash Provided from Operating Activities 60 185 920 91 117 933 9 298 950 11 516 587
Cash Flows from Investing Activities
Payments for the purchase of investments for trading purposes (73 316 680) (100 098 400) (11 892 959) (17 075 967)
Proceeds from the sale of investments for trading purposes 43 902 477 53 444 542 9 292 755 13 372 956Payments for the acquisition of fixed assets and projects under Construction (1 331 888) (3 526 019) ( 530 775) --
Net Cash (used in) Investing Activities (30 746 091) (50 179 877) (3 130 979) (3 703 011)
Cash Flows from Financing Activities
Payments for banks overdraft -- ( 16 685) -- ( 6 343)
Dividends paid (5 332 668) (20 453 024) -- --
Net Cash (used in) Financing Activities (5 332 668) (20 469 709) -- ( 6 343)
Net change in cash and cash equivalents during the period 24 107 161 20 468 347 6 167 971 7 807 233
Net cash and cash equivalents at beginning of the period (2j, 16) 31 542 073 31 982 376 8 770 460 9 216 198
Net cash and cash equivalents at end of the period (2j, 16) 55 649 234 52 450 723 14 938 431 17 023 431
- The accompanying notes from (1) to (30) form an integral part of the financial statements.
Chief Financial Officer
Accountant: Ashraf Moustafa El Kahky
Managing Director
Eng.: Mohie El Din Abdel Razik
Chairman
Dr.: Hoda Ahmed Salah El Din
Paint and Chemical Industries Company "Pachin" S.A.E.
Consolidated Cash Flows Statement
For the Period from July 1, 2011 until September 30, 2011
Consolidated Pachin
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Translation of Financial StatementsOriginally Issued in Arabic
EGP EGP EGP EGP EGP EGP EGP
Balance as of June 30, 2010 200 000 000 210 046 208 30 279 307 154 663 296 ( 116 922) 594 871 889 4 818 581 599 690 470
Transferred to retained earnings -- -- 34 837 373 (34 609 611) -- 227 762 ( 227 762) --
Transferred to reserves -- 7 550 661 -- (7 550 661) -- -- -- --Foreign currency translation gains -- -- -- -- 300 517 300 517 -- 300 517Dividends for shareholders, employees, and Board of Directors (7 924 514) (112 503 024) -- (120 427 538) 159 429 (120 268 109)
Net profits as of June 30, 2011 -- -- -- 133 245 089 -- 133 245 089 (3 976 977) 129 268 112
Balance as of June 30, 2011 200 000 000 217 596 869 57 192 166 133 245 089 183 595 608 217 719 773 271 608 990 990
Transferred to retained earnings -- -- 28 329 668 (28 329 668) -- -- -- --
Transferred to reserves -- 6 668 440 -- (6 668 440) -- -- -- --
Dividends for shareholders, employees, and Board of Directors -- -- -- (98 246 981) -- (98 246 981) ( 2 138) (98 249 119)
Net profits as of September 30, 2011 -- -- -- 37 460 778 -- 37 460 778 17 612 37 478 390
Balance as of September 30, 2011 200 000 000 224 265 309 85 521 834 37 460 778 183 595 547 431 516 788 745 548 220 261
- The accompanying notes from (1) to (30) form an integral part of the financial statements.
Chief Financial Officer Accountant: Ashraf Moustafa El Kahky
Managing DirectorEng.: Mohie El Din Abdel Razik
Total Shareholders' Equity and Non
controlling interest
Non controlling
Interest
Total Shareholders'
Equity
ChairmanDr.: Hoda Ahmed Salah El Din
Paints and Chemical Industries Company "Pachin" S.A.E.Consolidated Statement of Changes in Shareholders' Equity
For the Period from July 1, 2011 until September 30, 2011
Capital Reserves
Foreign currency
Translation (Losses ) / Gains
Profits for the Year / Period
Retained Earnings
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Translation of the Financial Statements
Originally Issued in Arabic
Paints and Chemical Industries Company “Pachin”
(S.A.E.) Notes to the Consolidated Financial Statements
As of September 30, 2011
1. The Group’s Background
Paints and Chemical Industries Company “Pachin” The company was established according to the Ministerial Decree No. 751 for 1958. On October 3, 1997, the Extraordinary General Assembly agreed to circulate 27% of its share via GDR offer in the Stock Markets of London and New York accordingly, the Holding Company’s share was reduced to less than 50 %, and the company became subject to the Companies Law No. 159 for 1981 and its executive regulation. The Commercial Register was issued after this modification on October 15, 1997. On October 31, 2000, the Extraordinary General Assembly agreed to amend some articles in the Articles of Incorporation. The company’s objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products, in addition to purchasing and dividing land for the purpose of using or reselling, and performing specialized construction works.
Acquisition Based on the Extraordinary General Assembly Meeting of the company held on September 29, 2011, the merge of El-Obour for Paints & Chemical Industries Company (S.A.E) (acquiree) and Paints & Chemical Industries company “Pachin” (S.A.E) (acquirer) was approved by the net book value. It was considered that December 31, 2011 is the date of acquisition and it is worth mentioning that the market value of the company may be used as basis for acquisition, if it is requested by the General Authority of Investment.
El-Obour for Paints and Chemical Industries Company “Pachin” The company was established according to the General Authority for Investment and Free Zones Decree No. 78 for 1999 and Law No. 8 for 1997 and its executive regulation. The company was registered at the Commercial Register on January 14, 1999. The Extraordinary General Assembly held on September 19, 2009 agreed to amend Article No. (2) of the company’s Articles of Incorporation to add the trademark “Pachin” to the company’s name. Therefore, the company’s name became El Obour for Paints and Chemical Industries Company “Pachin”. The company’s objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products and also, to manufacture other chemical products and special packages for the company’s products.
- According to decision of the Extraordinary General Assembly Meeting held on May 20, 2010, it was agreed to merge Pachin for Inks Company (S.A.E.) (acquiree) with El-Obour for Paints and Chemical Industries (S.A.E) (acquirer) using the book value, and March 31, 2010 was considered as the merge date.
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It was agreed to evaluate the net assets and liabilities of El-Obour for Paints and Chemical
Industries with assets amounting to EGP 269 215 000 (only two hundred sixty-nine million, and
two hundred-fifteen thousand EGP) “Acquirer”, and that the net assets and liabilities of Pachin
for Inks with assets amounting to EGP 35 153 000 (only thirty five million and one hundred fifty-
three thousand EGP) “Acquiree”. Therefore, the total net assets of the two companies amounted
to EGP 304 368 000 (only three hundred four million and three hundred sixty-eight thousand
EGP). This is according to the decision taken by the committee formed by the Investment and
Free Zones Authority, and the approval of the Deputy of the Investment and Free Zones
Authority on what was stated in the report dated June 6, 2011.
This evaluation was approved by the Extraordinary General Assembly Meeting held on
June 22, 2011. The decision of the General Assembly was presented for approval in preparation
of issuing the final merge decision by the General Authority of Investment.
Pachin for Inks
The company was established according to the General Authority for Investment and Free Zones
Decree No. 13623 for 2005, and Law No. 8 for 1997 and its executive regulation. The company
was registered at the Commercial Register on April 27, 2005.
The company’s objective is to manufacture and pack printing inks and related products and to
manufacture other chemical products and special packages for the company’s products.
Pachin for Paints and Chemical Industries Company
The company was established pursuant to a contract certified by the General Committee of
Justice at the Arab Republic of Libya and according to the provisions of Law No. (5) for 1997
concerning investment of foreign capital and its executive regulation and amendments, and the
decree of the General Committee’s Treasurer No. 86 for 2006 concerning amending the executive
regulation provisions for Law No. 5 for 1997.
The company’s objective is to:
- Establish and operate a factory for manufacturing paintings and supplementary products with its
various types, and other chemical materials and its packaging.
- Import various materials required for the project from abroad in the form of tools or equipments
or in the form of spare parts, or the material required for operation such as the primary
production material.
- Sell the project’s products locally and abroad.
- Bring labor and foreign technical expertise required for the project.
- Open bank accounts locally and abroad and its management and the right to obtain loans and
facilities.
- Transfer the profits.
- Own property and deliverables required for the activity.
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2. Significant Accounting Policies The consolidated financial statements have been prepared according to the Egyptian Accounting
Standards and applicable laws and regulations. The Egyptian Accounting Standards require
referral to the International Financial Reporting Standards “IFRS”, when no Egyptian Accounting
Standard or legal requirement exist to address certain types of transactions and their treatment.
The principal accounting policies adopted in the preparation of the financial statements are set out
below:
a. Basis for Preparing the Consolidated Financial Statements The consolidated financial statements incorporate the financial statements of the subsidiary
companies under the control of the Holding Company (Paints and Chemical Industries
Company “Pachin” (S.A.E). The subsidiaries are represented in El-Obour for Paints and
Chemical Industries Company where the Holding Company's share is 99.95%, and Pachin for
Inks where the Holding Company's share is 99.96%, and Pachin for Paints and Chemical
Industries Company where the Holding Company's share is 50%.
The consolidated financial statements are prepared on the following basis:
• All inter-company transactions and balances are eliminated.
• The unrealized profits resulting from the inter-company transactions are eliminated.
• The cost method is used to account for the ownership in subsidiaries.
• The consolidated income statement includes the results of operation for all subsidiary
companies starting from the date of ownership, and the minority interest is eliminated.
b. Fixed Assets Fixed assets are stated at historical cost less accumulated depreciation and accumulated
impairment losses. Historical cost includes all expenditures directly related to the acquisition of
items of fixed assets. Expenditures are subsequently recognized in the carrying amount of the
fixed asset or independent asset when it is probable that future economic benefits will flow into
the entity related to the asset, and its cost can be determined in a reliable manner. The
maintenance and repair expenses are to be recognized in profit or loss at the period in which
they were incurred.
For projects under construction which would be used in operation or administrative usages or
other usages not specified yet, they are stated at cost less accumulated losses resulting from
impairment. These assets are to be included in the appropriate classification of the fixed assets
when they are completed and ready for their intended use, and they are depreciated when they
are completed and ready for their intended use.
The lands and buildings under construction are not depreciated. The depreciation expense is
recognized for the regular distribution of the fixed assets costs (except for the lands and
buildings under construction) less the salvage value during the expected useful life of the asset
using the straight line method and using the same annual rates used in previous years which are
illustrated below. The useful life, salvage value and the used depreciation method are
reconsidered at the end of each financial year, and the effect of any changes in the estimates is
accounted for on future basis.
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Type of Asset Depreciation Rate Buildings and constructions 2 – 5 % Machinery and equipments 4.9 – 7.5 % Vehicles 10 – 20 % Tools 7.5 % Furniture and office equipments 10 %
The machinery and equipments item included a coloring machine depreciated on 3 to 5 years then granted to the dealer free, according to the contracts concluded with them.
Fixed assets are eliminated from the books when sold or when it is expected that there will be no flow of future economic benefits from the continuous use of the asset. Profit or loss arising from the disposal or scrapping of fixed assets is recognized by the difference between the net realizable value (less selling expenses) and the net book value in the profits and losses.
c. Projects under Construction Projects under construction are carried at cost, less any recognized impairment loss. Costs include all costs associated with acquiring the asset and bringing it to ready for use condition. The depreciation of these assets follows the same basis of similar fixed assets. The projects under construction are charged with the costs of new projects, and the purchased equipments that are not used yet.
The amounts paid as advances for purchasing fixed assets are recorded as projects under construction. When the asset is received and is ready for use, it is transferred to fixed asset and is depreciated on the same basis as similar fixed assets.
d. Long�Term Assets The other long-term assets (Patent) are recognized according to acquisition cost. On the balance sheet date, the book value of assets is reviewed and in the case that there are indications that the recoverable amounts of these assets are lower than their book value, then the carrying value of assets will be reduced to its recoverable amount, and the impairment loss is recognized immediately and charged to the income statement.
e. Impairment of Assets
1. Tangible Assets
At the end of the reporting period, the company reviews the carrying amounts of its owned tangible assets, except for inventory, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the company estimates the recoverable amount for each asset separately in order to estimate the impairment losses. In case that the recoverable amount of the asset can not be properly estimated, the company estimates the recoverable amounts for the cash generating unit followed by the asset.
In case of using logical and fixed bases for the distribution of the assets upon the cash generating units, the company’s general assets would be also distributed upon these units. If this is unattainable, the general assets of the company shall be distributed upon the smallest group of the cash generating units, which the company determined using logical and fixed bases.
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The asset recoverable amount or the cash generating unit is represented by the higher of the fair value (less the estimated selling costs) or the estimated amount from the usage of the asset (or the cash generating unit).
The estimated future cash flow from the usage of the assets, or the cash generating unit using a discount rate before tax is discounted in order to reach the current amount for these flows which represents the estimated amount from using the asset (or the cash generating unit).
This rate reflects the estimates of the current market for the time value of cash and the risks related to the asset, which were not taken into consideration when estimating the future cash flows generated from it. When the recoverable amount of the asset (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 with the impairment loss recognized immediately in profit or loss.
In case the impairment on asset (or cash generating unit) decreases subsequently, and this decrease is related in a logical manner to one event or more taking place after the initial recognition of the impairment at the profit or losses, a reversal is done for the revised amount of losses ( or a part of it) - which had been recognized previously- in profit or loss, and the carrying amount for the asset is increased (or the cash generating unit) with the new estimated recoverable amount provided that the revised carrying amount of the asset after revising (or the cash generating unit) does not exceed the carrying amount determined for the asset, had the recognized losses resulting from impairment not recognized in previous years
2. Financial Assets
At the end of the reporting period, the company determines whether there is any indication that its financial assets have suffered an impairment loss.
Financial assets are exposed to impairment when an objective evidence that the estimated future cash flows have been affected by the event or more established at a date subsequent to the initial recognition of the financial asset.
The carrying value of all financial assets is reduced directly with the impairment losses except those related to the reduction in the expected value of the collections from the customers debts and other debit balances, where a formed allowances for impairment loss is formed on its value. When the debt of the clients or the owner of the debit balance is uncollectible, a written-off discount is applied upon that account. All the changes in the book value relating to this account are recognized in the income statement.
f. Investments in Subsidiaries and Available for Sale Investments - Investments in subsidiary companies and long-term investments are stated at cost. The
company assesses whether there is any indication that the value of each investment is impaired. If such indication exists, the value of the related investment is reduced by the impairment loss and this loss is charged to the income statement, for each investment separately.
- The available for sale financial investments, with no reliable fair value, are recognized according to all its related costs, less the impairment losses of its value. These losses are charged to the income statement.
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g. Inventories Inventories are stated at the lower of cost or net realizable value as follows: • Raw Materials, Packaging, Spare Parts and Fuel
Cost is calculated using the perpetual weighted average method. • Work in-Progress
The cost includes direct and indirect manufacturing costs of partially completed stages in addition to the material, direct wages costs of the completed production stage.
• Goods Available for Sale Goods available for sale are stated at cost.
• Finished Goods Finished goods are stated at manufacturing cost.
h. Accounts Receivable Accounts receivable are carried at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Allowances for accounts receivable are formed when there is evidence that the company will not be able to recover the amounts due according to the original terms of receivables. The provision represents the difference between the book value and the recoverable as stated in the expected cash flows.
i. Investments for Trading Purposes - Investments certificates which are issued by banks are stated at fair value, representing its
recoverable value as of evaluation date. The resulting differences are stated in the income statement.
- Treasury bills are stated at par value after deducting any undue returns at the financial statement date. Returns are recognized in the income statement during the year.
j. Cash and Cash Equivalents Cash on hand and at banks are stated at nominal value.
k. Provisions Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation as of the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Where discounting is used, the carrying amount of a provision increases in each period to reflect the time value of money resulting from the passage of time.
l. Accounts Payable Accounts payable are stated with the value of the total goods and service received from others.
m. Foreign Currencies Transactions The company maintains its accounts in Egyptian pound. Transactions denominated in foreign currencies are recorded using the exchange rates prevailing at the transaction date. On the financial statements date, balances of monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing on that date. Differences arising from revaluation are stated in the income statement.
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n. Revenue Recognition 1. Operating Revenue
Revenue is measured at the fair value of consideration received or receivable. Revenues are presented in the income statement after reducing the allowances. Revenues from the rendering of service are recognized when the services are rendered and accepted by clients, and the invoice is issued.
2. Interest Income, Other Revenues and Dividends Distribution - Interest income is recognized on a time-proportionate basis, taking into consideration the
principle outstanding and effective interest rate applicable throughout the period to maturity.
- Other revenues are recognized on an accrual basis. - Dividends shall be recognized when the shareholders’ right to receive payment is
established.
o. Borrowing Cost Borrowing cost is recorded in the income statement in the period it was incurred as financing expenses.
p. Cash Flows Statement The cash flows statement is prepared using the indirect method. For the purpose of preparing the cash flows statement, cash and cash equivalents are comprised of cash on hand and at banks and checks under collection.
q. Taxation The company’s tax is calculated based on the prevailing tax laws and regulations in Egypt; a provision is formed for tax liabilities after performing sufficient studies and in light of the tax assessments.
Deferred tax is recognized on the temporary differences between the assets and liabilities tax basis set by the new Egyptian tax law, and their reported amounts per the accounting principles used in the preparation of the financial statements. Accordingly, the income statement for the reporting period is to be charged by the tax burden represented by the current tax (calculated on taxable profit based on local tax laws, regulations, instructions and tax rates ruling at the date of the financial statements), as well as the deferred tax. Generally, the recognized deferred tax liabilities on taxable temporary differences are reported as long-term liabilities, whereas deferred tax assets reported as long-term assets shall not be recognized for deductible temporary differences except to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized or there is convincing evidence that sufficient taxable profit will be available in the future. On June 26, 2011, the Armed Forces issued Law No. 51 for 2011 to amend some provisions of Income Tax Law by adding a new section to the tax rates stated in Article Nos. (8), (49) in the first paragraph of Income Tax Law No. 91 for 2009. The new section indicated that if the company is subject to tax as of the following year, it will be included in the 4th section which relates to tax bases exceeding EGP 10 million, and in this case it will be subject to a tax rate of 25% instead of 20%.
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r. Non-Current Held for Sale Assets Non-current assets (or the assets to be disposed) are stated as held for sale if its book value is expected to be recovered on the basis of sale transaction and not on the basis of its use. These assets stated as held for sale are measured at the least of the book value or the fair value less sale costs. The impairment losses are stated at the income statement upon the initial recognition of the held for sale assets.
s. Financial Instruments Financial instruments are recognized in the financial statements when the company becomes a party to the contractual rights or obligations of the financial instrument.
• Recognition of the Financial Assets and Financial Liabilities The financial assets and liabilities are recognized when it is probable that future economic benefits related to these assets and liabilities, will flow into the company and their cost can be measured with high reliability.
• Financial instruments comprise the following: - Financial assets: (cash on hand and balances at banks, accounts and notes receivable and
other debit balances). - Financial liabilities: (bank overdrafts, accounts and notes payable and other credit
balances). - Accounts and notes receivable: stated at the contractual value, less allowances for
uncollectible amounts. - Banks overdraft: recognized when collected amounts against receiving. Finance charges
are accounted for on an accrual basis. - Trade and notes payable: stated at the contractual value.
• Financial Liabilities and Equity Instruments Issued by the Company Financial instruments issued by the company are classified as financial liability or as equity in accordance with the contractual substance.
Equity Instruments Any contract which proves the right for the company’s remaining assets after deducting all the company’s liabilities. The equity instruments are recorded with the collected amount after deducting the transaction costs, if any.
Financial Liabilities The financial liabilities of the company are categorized as other financial liabilities. The other financial liabilities are initially recognized at fair value less transaction costs, if any. The company’s other financial liabilities are represented in the due to related parties and other credit balances.
t. Accounting Estimates According to the Egyptian Accounting Standards and due to the uncertainties associated with business operations, many financial statements’ items cannot be reliably measured but can be based on management’s best estimate, which does not reduce the degree of their reliability. Adjustments made as a result of revising estimates should not be considered as extraordinary items or errors, and therefore changes are not treated retroactively.
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u. Legal Reserve
In accordance with the Companies’ Law No. 159 for 1981, and the company's Articles of
Incorporation, 5% of annual net profit is transferred to the legal reserve. The company may
cease such transfer when the legal reserve reaches 50% of the issued capital. The deduction is
resumed whenever the reserve decreases. This reserve cannot be used in dividend distribution;
it is only used pursuant to the General Assembly’s decision based on the Board’s proposal
pursuant to the company’s interest.
v. Foreign Currencies
The individual financial statements of each group entity are presented in the currency of the
primary economic environment in which the entity operates (its functional currency).
For the purpose of the consolidated financial statements, the results and financial position of
each group entity are expressed in Egyptian pound; which is the functional currency of the
Group and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other
than Egyptian pounds are recorded at the rates of exchange prevailing at the dates of the
transactions. At each balance sheet date, monetary assets and liabilities denominated in
foreign currencies are retranslated to the Egyptian pound at the rates prevailing at the balance
sheet date.
Non-monetary assets and liabilities carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
Exchange differences are recognized in profit or loss in the period in which they arise, except
for exchange differences arising on non-monetary assets and liabilities carried at fair value,
where translation differences are recognized as part of changes in fair value.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the
Group’s foreign and local subsidiaries whose reporting currencies are different from the
presentation currency of the Group (EGP), are expressed in Egyptian pound using exchange
rates prevailing at the balance sheet date, equity items are expressed in Egyptian pound using
the historical exchange rates at the date of acquisition or incorporation. Income and expense
items are translated at the average exchange rates during the year.
Exchange differences arising, if any, are classified as equity and recognized in the Group’s
foreign currency translation reserve.
w. Dividends Distribution
Dividends declared to the shareholders, Board of Directors and employees are recognized as a
liability in the financial statements in the year during which these dividends have been
approved by the company’s shareholders.
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3. Sales Analysis Consolidated Pachin
Quantity (Ton)
Amount’000 Quantity (Ton)
Amount’000
Paints 21 918 215 195�� 3 251 40 538
Inks 482�� 11 929�� --�� --��
Net sales from continuing operation 227 124 40 538 Net sales from discontinuing
operation (Inks) 8�� 195 8�� 195
Sales from discontinuing operation �� 195 �� 195 Total Sales �� 227 319�� �� 40 733
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-11-4- Fixed assetsConsolidated
Items Lands Buildings Machinery and Equipments Vehicles Tools
Furniture and Office
EquipmentsTotal
Cost EGP EGP EGP EGP EGP EGP EGPCost of fixed assets as of July 1, 2011 40 618 767 167 902 575 138 179 335 22 326 530 18 129 978 17 882 130 405 039 315Additions during the period -- 38 023 635 136 101 077 63 595 11 357 849 188Disposals during the period -- -- -- ( 69 865) -- -- ( 69 865)Cost as of September 30, 2011 40 618 767 167 940 598 138 814 471 22 357 742 18 193 573 17 893 487 405 818 638Accumulated DepreciationAccumulated depreciation as of July 1, 2011 -- (30 996 771) (61 532 751) (15 041 413) (9 602 505) (11 392 979) (128 566 419)Depreciation for the period -- (1 071 341) (1 732 559) ( 523 434) ( 292 191) ( 226 821) (3 846 346)Accumulated depreciation of disposals -- -- -- 69 865 -- -- 69 865Impairment of Libya assets * -- (3 546 461) ( 541 579) ( 181 069) ( 66 303) ( 73 762) (4 409 174)Acc. Depreciation as of September 30, 2011 -- (35 614 573) (63 806 889) (15 676 051) (9 960 999) (11 693 562) (136 752 074)NBV as of September 30, 2011 40 618 767 132 326 025 75 007 582 6 681 691 8 232 574 6 199 925 269 066 564NBV as of June 30, 2011 40 618 767 133 359 343 76 105 005 7 104 048 8 461 170 6 415 389 272 063 722
Pachin
Items Lands BuildingsMachinery
and Equipments
Vehicles ToolsFurniture and Office Equipments
Total
Cost EGP EGP EGP EGP EGP EGP EGPCost of fixed assets as of July 1, 2011 158 817 20 459 818 25 140 111 6 171 602 4 058 434 6 656 259 62 645 041Additions during the period -- -- -- -- 13 668 -- 13 668Cost as of September 30, 2011 158 817 20 459 818 25 140 111 6 171 602 4 072 102 6 656 259 62 658 709Accumulated DepreciationAccumulated depreciation as of July 1, 2011 -- (11 440 085) (21 636 339) (5 286 748) (3 357 274) (5 623 269) (47 343 715)Depreciation for the period -- ( 133 105) ( 129 973) ( 49 353) ( 28 962) ( 50 313) ( 391 706)Acc. Depreciation as of September 30, 2011 -- (11 573 190) (21 766 312) (5 336 101) (3 386 236) (5 673 582) (47 735 421)NBV as of September 30, 2011 158 817 8 886 628 3 373 799 835 501 685 866 982 677 14 923 288NBV as of June 30, 2011 158 817 9 019 733 3 503 772 884 854 701 160 1 032 990 15 301 326 * Refer to Note No. (30).
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5. Projects under Construction (net) Consolidated Pachin 30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011� EGP�� EGP�� EGP�� EGP��
Machinery and equipments 5 648 691 ������� 534 005� 530 105�Buildings 377 452� ������� � 28 123� 28 123�Tools and equipments ������� ������� ��� ���Software and programs 2 175 026 �������� ������ 44 500 8 528 681 ��������� 606 628� 602 728�Capital expenditures 517 357� ��� 517 357� �� Advance payment to purchase fixed assets
385 687� 1 267 811�3 142� 7 292�
Less: Impairment * (925 917) (925 917) �� �� 8 505 808� 8 023 108� 1 127 127� 610 020�* Refer to Note No. (30)
6. Investments in Subsidiaries (net) – Stand alone Company Name Issued
Capital
EGP
Currency Ownership
%
Ownership
Amount
Paid
%
30/9/2011
Paid Amount
EGP
30/6/2011
Paid Amount
EGP
El-Obour for Paints and
Chemical Industries ** 200 000 000 EGP 99. 95% 199 900 000 100% 199 900 000 199 900 000
Pachin for Inks *** 50 000 000 EGP 99. 96% 49 980 000 ���% 49 980 000 49 980 000
Pachin Libya for Paints and
Chemical Industries 2 000 000 LYD 50 % 1 000 000 ���% �������� ��������
��������� 254 361 507�
Impairment of the investment in subsidiaries **** (4 481 507) (4 481 507)
249 880 000 249 880 000
* These companies are not listed in the stock market.
** Based on the Extraordinary General Assembly Meeting of the company held on September 29, 2011, the merge of El-Obour for Paints & Chemical Industries Company (S.A.E) (acquiree) and Paints & Chemical Industries company “Pachin” (S.A.E) (acquirer) was approved by the net book value. It was considered that December 31, 2011 is the date of acquisition and it is worth mentioning that the market value of the company may be used as basis for acquisition, if it is requested by the General Authority of Investment.
*** According to decision of the Extraordinary General Assembly Meeting held on May 20, 2010, it was agreed to merge Pachin for Inks Company (S.A.E.) (acquiree) with El-Obour for Paints and Chemical Industries (S.A.E) (acquirer) using the book value, and March 31, 2010 was considered as the merge date. It was agreed to evaluate the net assets and liabilities of El-Obour for Paints and Chemical Industries with assets amounting to EGP 269 215 000 (only two hundred sixty-nine million, and two hundred-fifteen thousand EGP) “Acquirer”, and that the net assets and liabilities of Pachin for Inks with assets amounting to EGP 35 153 000 (only thirty five million and one hundred fifty-three thousand EGP) “acquiree”. Therefore, the total net assets of the two companies amounted to EGP 304 368 000 (only three hundred four million and three hundred sixty-eight thousand EGP). This is according to the decision taken by the committee formed by the Investment and Free Zones Authority, and the approval of the Deputy of the Investment and Free Zones Authority on what was stated in the report dated June 6, 2011.
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This evaluation was approved by the Extraordinary General Assembly Meeting held on June 22, 2011. The decision of the General Assembly was presented for approval in preparation of issuing the final merge decision by the General Authority of Investment.
**** The Arab Republic of Libya has been exposed to significant political events that had an impact on the country’s activities as a whole and therefore, the company’s investments in Pachin Libya located in Misrata – Libya were exposed to risks that had a negative impact on its performance, and resulted in the cease of activity since last February until the financial statements date. Therefore, the investments were reduced by its total value as there are no indications or data during the current period indicating that there are any economical benefits or cash flows from this investment during the current period.
7. Available for Sale Investments
Consolidated Pachin
30/9/2011 EGP
30/6/2011 EGP
30/9/2011 EGP
30/6/2011 EGP
Governmental bonds at the National Investment Bank
774 906 774 906 774 906 774 906
774 906 774 906 774 906 774 906
8. Other Long-Term Assets The other long-term assets as of September 30, 2011 amounting to EGP 16 016 000, and equivalent to Euro 2 200 000 represent the amount paid to the Danish Company Deroup A/S for the final cession of the trademarks according to the contract dated December 4, 2006, taking into consideration that there are no indications of impairment in the balance.
9. Inventories (net) Consolidated Pachin
30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011� EGP�� EGP�� EGP�� EGP��
Raw materials and packaging 205 154 653�� 191 486 778�� 44 978 505 41 823 613 Less: Impairment for materials * �1 938 623��� (1 938 623)�� �������� (900 000) 203 216 030�� 189 548 155�� 44 078 505�� 40 923 613��
Finished products 45 281 176�� 41 052 271�� 15 013 167�� 9 908 546��
Less: Impairment for finished goods * �798 649� (798 649) �798 649� (798 649) 44 482 527 40 253 622 14 214 518�� 9 109 897��
Fuel and spare parts 8 445 208�� 8 837 303�� 3 042 908 3 380 671 Less: Impairment for spare parts * �������� (481 533) �������� (481 533) 7 963 675 8 355 770 2 561 375�� 2 899 138��
Work in-progress 7 240 175 6 682 824 1 788 187 1 373 171 Inventories for resale purpose ������� 46 481�� ����� 46 481 Scrap 147 992 114 572 110 240 59 802 Less: Impairment of inventory ** (3 355 153)�� (3 355 153)�� ��� ��� 259 741 727 241 646 271 62 799 306 54 412 102
* Refer to Note No. (18) ** Refer to Note No. (30)
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10. Assets Held for Sale
30/9/2011 30/6/2011
EGP EGP
Factory at old Cairo 460 756 460 756
460 756 460 756
The company’s management decided to dispose of some assets that are not used in the main
company’s operations. Therefore, the company has started the procedures to sell these assets.
The company finalized the evaluation of these assets however, due to the current economical
situation, the sale procedures were not concluded yet. These assets are represented by the factory
at old Cairo with an area of 3 794 m2 including an area of 267 m2 which is seized by hand. On
January 4, 2011, the company concluded a public auction and sold some of these assets with a net
book value amounting to EGP 27 053.
11. Accounts Receivable (net)
Consolidated Pachin
30/9/2011 30/6/2011 30/9/2011 30/6/2011
EGP�� EGP�� EGP�� EGP��
Accounts receivable 38 017 883 36 002 551 19 161 798 18 678 530
Less: �� �� �� ��
Impairment of accounts receivable * (12 920 900)�� (12 920 900)�� (8 220 900)�� (8 220 900)��
25 096 983 23 081 651 10 940 898 10 457 630
* Refer to Note No. (18)
12. Notes Receivable (net)
Consolidated Pachin
30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011�
EGP�� EGP�� EGP EGP Notes receivable 17 010 444 18 100 823 2 063 936 2 606 159
Less: �� �� �� ��
Impairment of notes receivable * (2 018 000)�� (2 018 000)�� (218 000)�� (218 000)��
14 992 444 16 082 823 1 845 936 2 388 159
* Refer to Note No. (18)
13. Due from Subsidiary (Pachin for Inks) – Stand alone
Pachin��
30/6/2011 30/9/2011 EGP�EGP��
39 408 579 40 125 142 Pachin for Inks
39 408 579 40 125 142
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14. Other Debit Balances (net)
Consolidated Pachin 30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011�
EGP� EGP� EGP� EGP�Accrued income ��������� � 3 515 979� 94 904 722 94 925 710 Suppliers - advance payments 12 633 619� 6 218 710� 2 444 966� 1 690 117�Employees loans 141 905 242 860 141 671 242 626 Deposits with others 2 796 414 2 655 141 1 676 053 1 666 949 Corporate tax * �������� � 28 860 101� �������� � 28 860 101�Withholding tax 10 559 295 9 822 874 8 889 415 8 777 430 Sales tax ��� 344 635� ��� ���
Prepaid expenses 47 683 �� ��� �� Other debit balances 9 109 388 10 341 905 5 202 980� 4 329 701�Less: Impairment ** (1 950 000) (1 950 000) (450 000) (450 000) Impairment of debtors *** (24 217) (24 217) �� ���������� 60 027 988 141 669 908� 140 042 634�
* This balance includes the amount of EGP 12.447 million, representing the payments to the Tax Authority for the years 1993 – 1997, according to the decisions of the Internal Committee and the Appeal Committee. This amount will be settled against the provision available for this objective, upon receiving the court decision. (Refer to Note No. 29), and the amount of EGP 16.413 million, paid on the due tax account for the years 1998 – 2001.
** Refer to Note No. (18) *** Refer to Note No. (30)
15. Investments for Trading Purposes
Consolidated Pachin
30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011�
EGP� EGP� EGP� EGP�Investment certificates
39 043 316 91 671 886 13 233 270 12 028 074
Treasury bills 104 086 249 21 533 512 7 892 850 6 292 642
143 129 565� 113 205 398� 21 126 120 18 320 716
16. Cash and Cash Equivalents
Consolidated Pachin
30/9/2011� 30/6/2011� 30/9/2011� 30/6/2011�
EGP� EGP� EGP� EGP�
Cash on hand 2 244 482 46 262 793 365 ��
Banks current accounts 48 107 518 26 457 382 12 901 099 6 097 141
Banks time deposits ������� � 2 115 893� 850 000 850 000
Checks under collection* 3 181 341 2 922 536 393 967� 1 823 319�
55 649 234� 31 542 073� 14 938 431 8 770 460
* Represents outstanding checks with due dates before 30/9/2011, which were collected after this date.
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17. Provisions
Balance as of
30/6/2011
Formed
during
the Period
Utilized
during the
Period
Balance as of
30/9/2011
EGP EGP EGP EGP
Provision for tax disputes 31 949 228 ��� ��� 31 949 228
Provision for claims 6 642 911 ��� (2 450 737) 4 192 174
Other provisions 582 705 ���� ��� 582 705
39 174 844 ��� (2 450 737) 36 724 107
18. Decrease / Impairment of Current Assets
Balance as of
30/6/2011
Formed
during
the Period
Utilized
during the
Period
Balance as of
30/9/2011
EGP EGP EGP EGP
Decrease of raw material 1 938 623 ��� ��� 1 938 623
Decrease of finished goods 798 649 ��� ��� 798 649
Decrease of spare parts 481 533 ��� ��� 481 533
Impairment of accounts
receivable 12 920 900 ��� ��� 12 920 900
Impairment of notes
receivable 2 018 000 ��� ��� 2 018 000
Impairment of other debit
balance 1 950 000 ��� ��� 1 950 000
20 107 705 ��� ��� 20 107 705
19. Accounts and Notes Payable
Consolidated Pachin
30/9/2011�� 30/6/2011�� 30/9/2011�� 30/6/2011��
EGP�� EGP�� EGP�� EGP��
Accounts payable 103 090 143 69 030 490 21 675 082 6 192 492
Notes payable 1 434 771 2 020 866 18 983 156 337
104 524 914�� 71 051 356�� 21 694 065 6 348 829
20. Due to Subsidiary (El-Obour for Paints and Chemicals Industries Company) – Stand alone
The balance of this account amounting to EGP 10 206 001, represents the operations results
between Paints and Chemicals Industries Company (Pachin) and El-Obour for Paints and
Chemicals Industries Company (purchases and sales for raw material and work in progress)
against EGP 5 586 485 on June 30, 2011.
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21. Other Credit Balances
22. Capital The company’s authorized capital amounted to EGP 200 million, and the issued and paid-up capital amounted to EGP 200 million, distributed among 20 million shares with par value of EGP 10 each.
23. Reserves Consolidated Pachin 30/9/2011� 30/6/2011� 30/9/2011 30/6/2011 EGP EGP EGP EGP
Legal reserve 145 656 496� ������� � 100 000 000� 100 000 000�Reserve invested in treasury bonds ������ ������ ������ ������ Fixed assets reserve ����� ����� ����� ����� Other reserves ��������� � ��������� � ��������� ��������� 224 265 309 217 596 869 178 608 813 178 608 813
24. Long-Term Liabilities The long-term liabilities are represented as the deferred revenue related to El-Obour for Paints and Chemicals Industries Company granted assets, which will be added to revenue over the estimated useful lives of those assets with an amount of EGP 1 080 493.
25. Deferred tax The balance of this account amounting to EGP 15 720 934 represents deferred tax liabilities resulting from the temporary differences between the net book value of fixed assets based on tax basis, and their net book value based on accounting basis. Consolidated Pachin 30/9/2011 30/6/2011 30/9/2011 30/6/2011 EGP EGP EGP EGP Opening balance of the period 14 792 540� 12 093 472� 1 156 934� 710 223�During the period 928 394 2 699 068 89 384� 446 711�Balance as of end of the period 15 720 934 14 792 540 1 246 318 1 156 934
Consolidated Pachin 30/9/2011 30/6/2011 30/9/2011 30/6/2011 EGP EGP EGP EGP
Accrued expenses 1 798 073 ��������� 538 772 739 673 Accounts receivable – credit balances 11 857 439 �������� 1 812 246 1 940 028 Sales tax 5 184 591 �������� 62 100 1 300 528 Fixed assets – creditors 855 630 �������� 28 845 28 844 Deposits of others 8 139 898 �������� 3 875 269 2 694 911 Employees’ share in profits 17 914 859 �������� 9 494 933 50 489 Withholding tax 321 189 ������� 161 994 171 114 Accrued sales tax installments ���� ���� ��� ��� Salary tax 880 127 ������� 880 127 2 198 651 Other employees benefits 3 891 009 ������� 3 891 009 3 891 445 Income tax – Tax Authority 16 925 813 ������ 2 506 775 ������� Other credit balances 3 100 477 �������� 717 580 698 595 70 927 363 53 560 347 23 969 650 15 684 464
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26. Discontinuing Operation Losses Coal Factory Inks Factory Total 30/9/2011 30/9/2010 30/9/2011 30/9/2010 30/9/2011 30/9/2010 EGP EGP EGP EGP EGP EGP Revenue from discontinuing operation -- 3 000 195 000 -- 195 000 3 000 Less Discontinuing operations expenses (128 908) (209 725) (194 052) (27 314) (322 960) (237 039) Net losses from discontinuing operations (128 908) (206 725) 948 (27 314) (127 960) (234 039)
27. Contingent Liabilities and Capital Commitments The uncovered portion of the letters of credit amounted to EGP 7 620 113 as of September 30, 2011, and the letters of credit of capital commitments for purchasing assets amounted to EGP 57 953 as of September 30, 2011.
28. Managing the Risks Related to Financial Instruments a. Foreign Exchange Risk
Foreign currency risk represents the change in currency rates which affects the receipts, disbursements and the translation of assets and liabilities in foreign currencies. The company exerts all efforts to avoid having a net foreign currency open position.
b. Credit Risk This risk represents some customers' failure to pay their debts on due dates. The company forms a provision for doubtful debts to meet this risk.
c. Interest Rate Risk This risk represents the changing of interest rates which affects the operations results. The company's management exerts all efforts to obtain the best conditions in the market for banking facilities and performs periodic review on the interest rates.
d. Fair Value The fair value of financial instrument does not differ from the book value as of the balance sheet date.
29. Tax Position Paints and Chemicals Industries Company Corporate Tax • The company is subject to corporate tax according to Law No. 91 for 2005. The company
submits its tax returns on due time and pays the due taxes. • As for the years since inception date till year 2000/2001, the Tax Authority has settled the
years till year 2000/2001 which has resulted in a credit balance for the company amounting to EGP 2 005 322.
• The Tax Authority inspected and assessed the company's books for years 2001/2002 until 2004/2005, and the company received a tax claim amounting to EGP 89 568 684 which the company has objected. The disputed points were transferred to the Internal Committee, and management believes that these claims will be greatly reduced.
• The company was not inspected for years 2005/2006 until 2009/2010 yet.
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Sales Tax • The Tax Authority inspected and assessed the company’s books until June 30, 2008.
Salary Tax • The Tax Authority inspected and assessed the company’s books until 2004.
Stamp Tax • The Tax Authority inspected and assessed the company’s books from the inception date until
31/8/1998, and the due taxes were paid.
• The Tax Authority inspected and assessed the company's books for the period from 1/9/1998
until 30/4/2002. The inspection resulted in due tax in the amount of EGP 175 307. The
company did not pay this amount since there is due tax in favor of the company amounting to
EGP 196 614. This amount represents the value of stamp tax for which a final ruling was
issued in the company’s favor. This amount is currently being settled with the Tax Authority.
• The Tax Authority inspected the period from 1/5/2002 until 31/3/2005 and the inspection
resulted in due tax in the amount of EGP 127 027.
• The Tax Authority inspected the period from 1/4/2005 until 31/7/2006 and the inspection
resulted in due tax in the amount of EGP 210 468. These items were discussed at the
Internal Committee and the tax was reduced by the amount of EGP 196 032.
El-Obour for Paints and Chemicals Industries Company Corporate Tax • The company is enjoying a tax exemption starting from the first year of operation according to
Law No. 8 for 1997 and its executive regulation. This exemption will end on June 30, 2011.
• The Tax Authority inspected the years from the inception of activity until 2002/2003. The tax
claims amounted to EGP 2 582 078. The dispute was transferred to the Appeal Committee
which has issued a decision to amend the due tax to be EGP 2 039 542, and this decision was
appealed.
• The Tax Authority inspected the years from 2003/2004 until 2004/2005, the inspection resulted
in tax claim amounting to EGP 5 593 829. The company formed an objection on this claim
which is currently in-process at the Internal Committee.
Sales Tax • The Tax Authority inspected and assessed the company’s books until June 30, 2008, and all
differences were settled.
Salary Tax • The company was not inspected as of to-date.
Stamp Tax • The Tax Authority inspected and assessed the company’s books from January 14, 1999 until
December 31, 2000, and the due taxes were paid.
• The period from January 1, 2001 until July 31, 2006 resulted in tax and development fees
amounting to EGP 363 809. The company formed an objection, and the objection is currently
in-process at the Internal Committee.
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Pachin for Inks Corporate Tax The company is subject to the provisions of Law No. 8 for 1997 and its executive regulation. The
company started its operation on May 8, 2008, and the company was not inspected by the Tax
Authority yet. The company is exempted from tax as of the first fiscal year following the inception
date according to the provisions of Law No. 8 for 1997, which represents the period from
May 8, 2008 until June, 30 2018.
Salary Tax Salary taxes are submitted to the Tax Authority on due dates. The Tax Authority calculated the company’s taxes on a deemed basis for the period July 1, 2005 until December 31, 2005. The tax amounted to EGP 18 270, and the company formed an objection on this amount.
Sales Tax Tax returns are submitted on a monthly basis, and the company was not inspected by the Tax Authority yet.
30. The Company’s Investments in Pachin Libya The Arab Republic of Libya has been exposed to significant political events that had an impact on the country’s activities as a whole and therefore, the company’s investments in Pachin Libya located in Misrata – Libya were exposed to risks that had a negative impact on its performance, and resulted in the cease of activity since last February until the financial statements date. Therefore, the investments were reduced by its total value as there are no indications or data during the current period indicating that there are any economical benefits or cash flows from this investment during the current period.
The total amount of the impaired assets amounted to EGP 9 622 663, represented as follows: EGP Item 4 409 174 Fixed Assets
925 917 Projects under construction 3 355 153 Inventory
908 202 Letters of credit 24 217 Other debit balances
9 622 663
Chief Financial Officer Managing Director Chairman Accountant: Ashraf Moustafa El Kahky Eng.: Mohie El Din Abdel Razik Dr.: Hoda Ahmed Salah El Din
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