Annual Report 2012 - Al badia cement

1

Annual Report 2012

2 3

Annual Report 2012

for the period from 01.01.2012 until 31.12.2012

4 5

Our Mission

Achievement of benefit and sustainable growth of Al Badia Cement customers, shareholders and employees and the community through commitment to providing the necessary support and continuity of improving the quality of products and services. For our customers:Achieve the highest quality of product and services, and ensure customer satisfaction in various areas of our work.

For our society:To be one of the best national companies and to perform our work in a responsible manner in line with our social and environmental priorities through the protection of our environment, providing fair economic opportunities, ensuring safe working environment and supporting the development of our society and the sustainability of its resources.

For our shareholders:To deliver the best returns to our shareholders through our continuous growth and seizing appropriate opportunities.

For our employees:To constantly work on enriching their lives and supporting their potentials on the professional and personal levels while providing fair rewards and creating opportunities for development and progress at work.

For our suppliers:To remain the preferred customer for our suppliers through respect of conventions, sustainability of work with them in a fruitful way, by providing equal opportunities to all suppliers, respect conventions and achievement of mutual benefit.

7

Index

- Board of Directors and Executive Management 5

- Chairman Statement 9

- Company Profile 11

- Description of the subsidiaries 11

- Board of Directors and Chief Executive Officer CV 12

- Statement of senior shareholders 14

- The company’s competitive position 14

- Level of reliance on specific suppliers and/or major clients 14

- Description of any government protection or privileges 15

- Government decisions/ international organizations resolutions of impact 15

- Company application to international quality standards 15

- Company’s organizational structure 17

- Development Human Resources 18

- Description of the risks faced by the Company 18

- Description of the company’s achievements during the past year 20

- Excerpts of the General Assembly Minutes of the Meeting 22

- The financial impact of the operations of a non-frequent nature 23

- Time sequence of profit and loss and net shareholders’equity 23

- Developments and Future Plan 23

- Audit fees for the Company and its subsidiaries 24

- Financial Securities owned by related parties 24

- Privileges and rewards of the Board of Directors and top management 24

- Donations and grants 24

- Contracts and projects and links with related parties 24

- Report of the company’s auditor 26

- Annual Financial Statements of the company 28

- Statement of Financial position

- Statement of Comprehensive Income

- Statement of Changes in Equity

- Statement of Cash Flows

- Notes about financial statements

- The company’s Board of Directors acknowledgments (stated in the Chairman’s speech) 9

6

Board of Directors Executive & Top Management

Chief Executive Officer Mr. Khaled Al Sawaf

Security, Vocational Safety & Environment Mr. Ihab Elyafe

Technical Sector Technical Affairs Consultant Eng. Anas Al Samsaam

Plant Manager Eng. Samir Babat

Financial & IT SectorConsultant of Finance &Information Technology Mr. Roman Folwarczny

Finance Manager Mr. Bassel Zaabalawi

Administration SectorDirector of Human Resources & Corporate Affairs Mr. Khaled Sawalha

Commercial SectorCommercial Affairs Consultant Mr. Sameh Nashaat

Sales & Marketing Manager Mr. Khaled Raslan

Supply Chain Manager Mr. Khaldoun Sibai

Department of Internal Audit

Internal Audit Manager Ms. Susan Dalloul

Chairman Mr. Emad Al Muhaidib

Vice-Chairman Dr. Fouad Al Saleh

Board Member Eng. Raed Al Mudaiheem

Board Member Mr. Fabrizio Donega

Board Member Mr. Ziad Al Zaim

Board Member Eng. Mohammad Al-Ageel

Board Member Mr. Mohamad Al Hallak

Legal Consultant

Mr. Osama Karawani

Karawani Law Firm

Auditor

Mr. Nassir Tamimi

Deloitte & Touche

Tax Advisor

Mr. Awni Zakia

Awni Zakia Office for Auditing and Tax Consultancy

98

10 11

Governance

Governance is a set of laws, rules and standards that define the relationship between the company’s management on one hand and the shareholders, stakeholders or parties related to the company on the other hand.

The rules and disciplines of governance aim at achievement of transparency and fairness, and thus achieve protection for shareholders, stakeholders or parties related to the company by imposing effective control methods and continuous follow-up. These rules ensure the importance of compliance with laws and regulations issued.

Al Badia Cement Company is keen to adhere to the text of good practices system rules of corporate governance «Rules of Corporate Companies Governance» issued by Resolution No. 31/m from the Syrian Commission on Financial Markets & Securities, on 29.06.2008, under which the commission practices supervision and control over the securities sector. The system indicates rules and standards governing the management of shareholding companies in the following areas:

1 Shareholders’ Equity: By company’s activation of the principle of fair and equal treatment between the company’s shareholders and its commitment to invite shareholders to attend the meetings of General Assembly, vote on resolutions, discuss its agenda and direct questions to the Board Members and auditors to the extent that does not endanger the company’s interest.

2 Stakeholder rights: Respect the rights of beneficiaries, protected by the relevant laws such as labor law, Companies Act, and Trade Law.

3 Disclosure and transparency: Through the disclosure of company’s data in a clear and accurate way, in accordance with the adopted criteria at specific times and satisfy the requirements of shareholders and potential investors to obtain sufficient and organized information enabling them to make proper investment decision.

4 Executive Management: Identifying a system for financial and administrative authorities of the executive management in accordance with an organizational structure supported by the company’s Board of Directors. The system should show a detailed structure of authorities for all divisions and departments in the company. It will be presented to the Board of Directors in order to be ratified. Work is going on concerning the development of policies and procedures for various divisions and departments in line with the objectives and strategies adopted by the Board of Directors and make sure of the availability of clear control tools approved by the Board of Directors.

5 Accounts Auditors: Through the company’s commitment to the rules and regulations relating to the election of account auditor as an independent supervisory from the Board of Directors which has a mission of identifying the company’s commitment to prepare financial statements and data according to the international accounting standards.

6 Internal Audit: Through the ongoing audits on the company’s departments and sections on a regular basis to monitor the Company’s compliance with laws and regulations and to inform the Board of Directors and the Audit Committee of any violations.

7 Board of Directors and its Committees: In addition to its leading role in setting the policies and targets of the company, methods of achieving them and monitoring its performance, the Board of Directors has formed a number of committees to ensure the performance of its functions effectively:

Executive Committee Audit and Risk CommitteeNomination and Remuneration

Committee

Name Position Name Position Name Position

Mr. Fabrizio Donega Chairman Eng. Raed Al Mudaiheem Chairman Eng. Mohammad Al-Ageel Chairman

Dr. Fouad Al Saleh Member Mr. Fabrizio Donega Member Mr. Mohamad Al Hallak Member

Eng. Raed Al Mudaiheem Member Dr. Fouad Al Saleh Member Mr. Khaled Al Sawaf Member

12 13

Al Badia Cement … QUALITY TO TRUST

14 15

Chairman Statement

Dear Shareholders,

Al Badia Cement Company demonstrated its ability to withstand and continue as a major player in the Syrian cement industry, despite the harsh conditions experienced by the country during the past year and negative impacts of these circumstances which led to deterioration of the security situation and the economic downturn as well as weaken the Syrian industry sector. This also caused losses on all levels, especially in terms of brain drain and experience and the difficulty of securing resources.

At the security level:The company faced several challenges, which resulted in the sudden and complete departure of Chinese labor the contracting company during the month of January of 2012, which led to the cessation of the training of local employment. In addition to disrupt the completion of final acceptance of the plant and the necessary maintenance process, which is the responsibility of the contractor. Also all foreign experts who were supporting the company or who have been hired after the Chinese contractor departure; left the company. This is in addition to the Company's exposure to a series of robberies targeting some of the company's assets as of December of 2012.

However, the company and through its national staff has been able to continue without any interruption in supplying the local markets with its product of Portland cement brand "JAMAL" which confirms the success of the company at the level of qualification of human resources and the creation of effective plans to deal with all of the events.

At the production and marketing level:The company did not manage to achieve more than 58% of its production plan by 907.583 ton of clinker. Whereas, the sales plan achievement was at the rate of 56% by 916.041 ton of Portland cement. Achievement rates of production plans have been influenced by the departure of the operating foreign contractors. Also sales plans were affected by the drop on cement demand in the Syrian market and neighboring markets as a result of the current conditions. However, despite the decline in demand, Al Badia Cement has succeeded to increase its share of the Syrian cement market during the year 2012. During its second operation year, the company managed

through high quality of its product and due to its strategic geographical location to be at the top of the most important Portland cement plants in the governorates of Damascus and its countryside, the southern and central region.

At the project level and the final acceptance of the plant:Final acceptance procedures of the plant were stopped due to the departure of the Chinese contractor and the existence of a list of remaining works and observations registered at the time of signature the primary acceptance protocol as demands to be implemented by the contractor, where no action has been taken by the contractor. In addition to the observations that emerged during the warranty period.

As for the new projects, the company has suspended future development projects in the plant due to the current conditions. The company implemented some important vital projects required for the current phase and the next phase, which are currently under construction. Most notably is the establishment of an additional tank for fuel and a contract to construct a new line for bagged cement.

At the administrative level and financial:The company proceeded with the implementation of its plans for employment which led to the availability of 76 additional posts during the year 2012. Number of Syrians workers has reached 302 by the end of the year, as well as more than 500 posts through the works that were outsourced to local contractors to ensure the continuation of works at the quarries, maintenance and operation of the power station. In addition to securing the services of loading, medical clinic, transfer of personnel, housing colony, catering, cleaning, guarding and security measures at the plant. The company also continued to meet all the needs of training and rehabilitation of its staff.

The company managed to settle all financial obligations of the banks over the past year with respect to payments arising from the loans, work procedures were completed by resource planning system ERP along with continuous development of the various systems and activities adopted by the financial, accounting, warehouses, procurement, sales departments as well as the maintenance systems, with emphasis on achieving full

transparency in work and tax compliance which kept the company as role model and important tributary to the national economy.

In terms of industrial and occupational safety and the environment:Al Badia Cement is proud to announce that up to the date of preparation of this report, none of its employees was subject to any accidents or work injuries which led to the death or permanent disability in various locations of the company which confirms the strong concern to safety of all workers present at our sites. The company will continue despite the current circumstances, to take all possible measures to ensure the highest levels of security, occupational safety and environmental conditions.

At the level of the main difficulties experienced by the company:Security and economic situation experienced by the country were reflected on plant performance as well as the transfer, distribution, marketing of cement and the sharp drop on cement demand compared with previous years, as well as the negative effects resulting from the economic sanctions and the low exchange rate of Syrian pound. This has led to high costs and difficulty of importing raw materials, fuel and spare parts. The company has also suffered losses due to exchange rate assessment to financial obligations in foreign currency, as well as the result of robberies which the plant was subject to. On the other hand the company faced difficulties resulting from the competition of the public sector in relation to cement price, since the public factories are supported by the government in the supply of fuel and electricity. In addition to continuation of permission to import cement from the neighboring countries to the local market through a policy of dumping the market without legal controls and necessary procedures, as well as the illegal entry of cement to the Syrian market.

The continuation of the current crisis and the situation experienced by the country in addition to low exchange rates of the local currency may expose the company to greater difficulties in terms of operation, marketing and supply which could negatively affect the progress of work during

the next fiscal year, however, we do not expect that the company might not be able to proceed, hoping that the country will soon restore the state of security and stability.

Al Badia Cement Board of Directors confirms the authenticity of the financial statements approved by the auditor, and accuracy and completeness of the information and data contained in this report. The Board also affirms its commitment to providing an effective control system in the company.

The company renews its commitment to limit the risks that might impede the work during the coming period, both as regards to the continuation of operations, marketing and supply or in terms of protecting staff and assets of the company, along with the continued upgrading professional level, quality of products and services and enhance the good reputation earned by the Al Badia cement company, hoping to succeed in achieving our desired goals and fulfill our national responsibilities.

Finally, we pray to God to protect Syria and save its people of any harm and make the year 2013 a year of prosperity, peace and security. We would like to extend our sincere thanks for the support received by the company from our shareholders over the past years, and commitment of our suppliers, contractors and the efforts exerted by our real soldiers "management and staff of Al Badia Cement" in their quest to ensure stability and sustainability of the company, and God bless.

Emad Al Muhaidib Khaled Al Sawaf Chairman Chief Executive Officer

Al Badia Cement (JSC)

Board of Directors Reportfor the year 2012

1716

Board of Directors Report

Company ProfileAl Badia Cement was established in 2006 in Syria, as a joint shareholding company, by a group of investors at an investment cost amounted to U.S. $ 400 million US dollars. The first production line with an annual capacity of 1.6 million tons of Portland cement was completed, with the possibility of future expansion for the second phase, to achieve the total capacity of the plant at 3.2 million ton/year through the completion of the second production line.

The plant which began production in early 2011, was established by an international contracting company specialized in cement factories establishment. The key equipment were imported from prominent European companies, to ensure the highest levels of product quality and savings in energy use and conservation of the environment and in accordance with local and international standards.

The Company adopts policies to ensure the highest standards of occupational safety and emission control, and work on reducing the environmental impact along with the commitment to provide jobs, training and qualification to highly qualified and skilled national staff.

Al Badia Cement plant is characterized by its location close to the capital Damascus, in addition to the strategic and important location that enables quick access to most cement markets in Syria, particularly the southern, central and coastal regions. In addition to the good reputation of the company’s product brand of “JAMAL”, and prestigious position among senior traders of building materials, ready-mix and block plants.

Description of the company’s subsidiaries, nature of their work, areas of activity and the results of its works

There is no subsidiaries to Al Badia Cement (JSC), except for Emdad Trade Offshore Company, which was established in Lebanon with a capital of 30 Million Lebanese pounds (around 20 thousand US Dollar), where Al Badia Cement owns 99% of the shares of Emdad Trade Offshore. The main purpose of the establishment of the company is to support the operations of supply and logistics of Al Badia Cement Company.

Until the end of 2012, Emdad Trade Offshore did not have any commercial or practical activity, thus there are no results for the company’s work.

Al Badia Cement (JSC) locations:

Head Office Address:86 Plaza Center,

Office No. 71, Tanzem Kafarsouseh

P.O.Box 34330

Damascus, Syrian Arab Republic

Tel +963 11 211 8562

Fax +963 11 2140095

[email protected]

www.albadiacement.com

Plant AddressAbu Al Shamat

Damascus Countryside

Syrian Arab Republic

1918

20 21


Mr. Fabrizio DonegaA graduate in Mechanical Engineering from Genoa University and post-graduate in Corporate Finance from SDA Boccioni (Milano, Italy) and Management Development from Harvard Business School (USA), Fabrizio Donega began his career with Italcementi, first as Technical Assistance Manager in 1991 followed by a period as Plant Manager.

From 1995 until 1998, he served as Diagnostic & Performance Supervisor at the Italcementi headquarters. In 1999, he was appointed General Manager for Greece and Bulgaria, with his responsibilities subsequently enlarged to Cyprus, Kazakhstan and Egypt until 2003. From 2004 to 2007, he was Deputy Manager of Italcementi S.p.A. responsible for the Industrial Operations of Italcementi Group in Italy.

Since October 2007, he has been Executive Vice President of Ciments Francais, responsible for Group activities in Bulgaria, Cyprus, Egypt, Greece, Kazakhstan, Kuwait and Turkey.

Mr. Khaled Al SawafAppointed as Executive Project Manager for Al Badia Cement in September 2007, then was promoted to the position of Chief Executive Officer in September 2009. Through his leadership to a distinguished work team, he established Al Badia Cement Company and managed a successful issue of the company’s shares, in addition to providing the required financing, and finalizing the project according to the time plan. Has more than 16 years of work experience in the field of Industrial Projects Management, where he contributed to the development of a number of projects, products and solutions in the Middle East along with concentration on creating work teams with high levels of performance and ability finalize financial and operational plans. Holder of a BSc in Business Administration with a Master’s degree in Quality Management.

Mr. Ziad Al ZaimEstablished and ran a number of companies and factories in the field of cotton ginning in a number of countries and in the field of cables in its various types in Saudi Arabia. Also established and ran a number of real estate companies in Syria and abroad. One of the founders of Syria Holding Company and founder of Al Zaim Holding Company. Certified in Cotton Sorting from the U.S.A

Eng. Mohammad Al-AgeelHolds a Bachelor of Science in Systems Engineering from King Fahd University of Petroleum and Minerals, held many important positions, including Chief Operating Officer at Fozan Holding, Credit Counselor, Director of the «Saudi Industrial Development Fund», Board Member of several companies including Farabi Petrochemical Company, United Cable and Medad Holding company.

Mr. Mohamad Al HallakOwner/Executive Manager of M. Subhi Hallak Sons› Trading Co. “Food Trading, Import and Export”; with an experience in the field of trading, industry and management for more than 25 Years.

University Graduate in Economy and Trade 1985. Board Member of Damascus Chamber of Commerce (DCC) since 2008. Board Member of Syrian Olive Oil Council. Syrian Side Chairman of Syrian - Bahraini Business Council. Certified Sworn Translator for English and Arabic.

Mr. Emad Al MuhaidibOccupied a number of positions on various Boards of Directors at industrial and commercial companies in Saudi Arabia and abroad; among them is the Abdul Kader Al Muhaidib and Sons Company. Holder of a BA in Economy in 1979 from Riyadh University.

Dr. Fouad Al SalehHolder of a PhD in Civil Engineering; has more than 30 years of experience in the fields of engineering and management in the industrial sector in the area of building materials. Worked as Co-professor in the Civil Engineering Department at King Saud University in Riyadh for 15 years.

Eng. Raed Al MudaiheemHolder of a Master’s degree in Electrical Engineering, with more than 20 years of engineering and management experience. Worked in various engineering fields, such as water, energy, trade and the building materials industry, especially in the trade and industry of iron and cement; member of a number of Boards of Directors at industrial and commercial joint companies.

22 23


• Statement of the company’s senior shareholders:The following statement shows senior shareholders of the company’s shares and the number of shares owned by each of them, whose ownership constitutes 5 % or more compared to previous year:

Name Nationality2011 2012

Number of shares

Percentage Number of

shares Percentage

Al Muhaidib Holding Company Saudi Arabia 28٫792٫000 29٫5 % 28٫792٫000 29٫5 %

Syrinvest Holding Company Dutch 25٫376٫000 26 % 25٫376٫000 26 %

Menaf SAS French 11٫712٫000 12 % 11٫712٫000 12 %

Mr. Ziad Al Zaim Saudi - Syrian 7٫320٫000 7٫5 % 7٫320٫000 7٫5 %

Al Fozan Holding Company Saudi Arabia 4٫880٫000 5 % 4٫880٫000 5 %

- Value of the above-mentioned shares reflects the nominal value of the share after shares split.

• The company’s competitive position Cement market in Syria has been affected by events, security and economic conditions experienced by the region during the year 2012, since the market has declined sharply in cement consumption compared to 2011, with the decline in the quantities of imported cement due to lower demand in addition to logistic difficulties and low exchange rate of Syrian pound.

The company devoted its efforts since the beginning of the actual production early of the second quarter of 2011 until the third production year to achieving a distinctive rate of production and sales, despite the difficult conditions experienced, cement sales in 2012 hits about (916,000 tons) of cement and thus the company has contributed effectively in meeting the needs of the local market and achieving growth in the cement factory and market the product in Syria.

Al Badia Cement contributed to meet the needs of the local market of cement to bridge the gap between supply and demand, as sales of cement of “Al JAMAL” brand spread in all Syrian areas, which shows the confidence of customers in its product. The Southern region of Syria, which is considered one of the highly consuming areas, has formed one of the largest share of the company sales, due to the distinguished geographical location of the Al Badia Cement plant close to this market. The company’s sales of bagged cement constituted around 85% of total sales compared to bulk cement, which did not exceed 15% since the cement market in Syria relies on the bagged cement.

24 25

Our Values

Excellence

Teamwork

Respect

Integrity

26 27


• Level of reliance on specific suppliers and/or major clients (Locally and abroad)

Sales:Al Badia Cement deals with a group of distinguished customers in the bulk and bagged cement. In choosing its customers the company depends on specific criteria, including financial solvency, size of distribution channels and client reputation and experience in cement sale and marketing. Three customers of bagged cement distribution gained more than 10% of the total sales Badia Cement Company in view of the level of their outstanding performance and the current status of the cement market in the areas of Syria during the year 2012. At the same time, Badia Cement Company performs permanent observance of the cement market to prevent any monopolistic practices that may affect the company using various tools to ensure equitable distribution of the product in the different areas.

Procurement processes:The company relies in the procurement process on suppliers with high degree of reliability, in terms of standards commitment and delivery times. Through calling for offers from a number of local and foreign sources in order to reduce the possibility of sudden disruption of the supply chain, and to achieve competitiveness in the prices offered.

The company relied on individual suppliers, including more than 10% of the volume of its purchases in securing fuels as fuel forms high percentage of the total cost of purchases, in addition to the difficulties encountered in purchasing fuels, whether locally or from abroad.

The company works continuously on limiting the individual suppliers, while applying ERP systems and supply management which monitor all purchase processes, prices and supply conditions in order to ensure availability of many options, and ensure governance standards in the selection of the best supplier always.

• Description of any government protection or privileges:Pursuant to the provisions of Article No. 7 of the system and Disclosure No. / 3943 / issued by the Syrian Commission on Financial Markets & Securities which stipulates the need to describe any government protection or privileges enjoyed by the company or any of its products under the laws and regulations or other, and to describe any patents or franchise rights were acquired, we provide you with the following:

Land and quarries:The General Establishment of Geology and Mineral Resources of the Ministry of Oil grant Al Badia Cement the right to invest the leased land, which includes the quarries area, the factory land and the surrounding area by means of a fifty year contract subject to extension.

Deregulation of the cement and distribution:Investment Office - the Supreme Council for Investment note No. 116/1/20 dated 22.01.2006 stated the approval to liberate the price of cement produced by the private sector, as well as liberalization of marketing the products of the private sector of cement in the local market.

Facilitate the import of fuel: Approval has been granted by the Ministry of Industry by its letter No. 224/rQ 4/8 dated 08.06.2009, based on the proposal of the Ministry of Oil and Mineral Resources to allow investment companies or private sector companies to import coal and petcock to run their factories. Under the decision of Ministry of Economy and Trade No. /3/ dated 03.01.2013 all importers were permitted to import diesel and fuel at their knowledge from multiple sources and settle the values on their own, with the exception of the provisions of import ban.

The company does not have any patents or copyrights privilege; however it has registered trade name protection of the company’s logo and brand distinguishing product «Al JAMAL» with the Directorate of Intellectual Property & Artistic Protection.

28 29


• A summary of any decision by the government or international organizations or other, that has any material impact on the company’s work, its products or competitiveness:

The economic sanctions imposed on Syria by many countries and bodies of Arab and foreign, and the low exchange rate of the Syrian pound, and the difficulty of access to sources of foreign exchange, and it transfers the value of imports in foreign currency and opening letters of credit and bank guarantees, in addition to decisions issued during 2012, raw materials price has increased by the General Establishment of Geology and large increases in fuel prices on different types of physical effect on the work and the company’s production and competitiveness.

• Company application to international quality standards:Al Badia Cement is committed to achieving better standards of product quality, and is also committed to applying the highest levels of security and occupational safety, preservation of the environment, through the application of the required policies and systems to ensure that all employees and customers of company compliance with the standards of quality and preservation of the environment, security and safety, in line with the company’s plans and aspirations for sustainable development.

Product quality standards:Al Badia Cement produces normal Portland cement of two kinds: (CEM I 32.5) and (CEM I 42.5) according to Syrian standard No. 3411 for the year 2008, which comply with the European standard No. 197-1 for the year 2000. The company also adopts American Standard ASTM No. C1271 in calibration of electronic control devices adopted in the product quality control at each stage of the manufacturing process.

The company depends on the laboratory analysis device X-Ray analyzer and analysis radiation device

Gama-Ray on-line analyzer for direct and immediate control of the raw materials as well as the control of the appropriate mixture of these materials during the production process to ensure product quality.

Environmental standards:The company is committed to apply the criteria Syrian Environmental Law No. 50 and European law directives for environmental safety (EC/1/2008)

Occupational Safety and Security:HSE Department at the company is keen on regular and permanent follow-up for all day-to-day business and monitors the performance of employees in accordance with the rules of the international Occupational Health and Safety and adopts all preventive measures to reduce the occurrence of any incidents within the plant.

Al Badia Cement is committed to applying the requirements of Labor Law No. / 17 / in terms of securing suitable working environment to protect workers from the dangers of physical, chemical, mechanical and electrical dangers, by providing an integrated medical clinic and working continuously on developing it through a qualified ambulance crew and an ambulance car dedicated for Al Badia Cement plant. In addition to special care to fire fighting and emergency by providing theoretical and practical training for a number of the company employees working in various departments and divisions.

Al Badia Cement is proud that up to the date of this report preparation none of its employees or visitors was subject to any work accidents or injuries that led to death, permanent or partial disability in the various company sites, which confirms our deep concern to protect all workers available at our sites.

30 31


HR & AdministrationSector

Commercial Sector Procurement &Supply Department

HRDepartment

InvestorRelations

Legal Affairs

PublicRelation

SalesDepartment

MarketingDepartment

Logistic SupportDepartment

Chief ExecutiveOfficer

Internal Auditor

Occupational Safety, Environment &

Administrative Affairs Department

Finance & ITSector

QuarriesDepartment

ProductionDepartment

MaintenanceDepartment

Quality ControlDepartment

Financial Department

ITDepartment

Technical sector

• Functional Organizational Chart

Board of Directors


• Development of Human ResourcesHuman Resources Department worked on filling the gap of labor shortages resulting from the loss of some efficient workers due of the current circumstances. The company in 2012 worked on labor shortages recovering which is necessary for operation, by assigning 76 new employees to the team work. The overall number of employees reached 302 at the end of the year.

As for the training and development, human resources management focused on strengthening the role of security and occupational health and safety in Al Badia Cement company, where a number of its staff from all technical divisions at the plant were invited to join the Occupational Safety Ambassadors Program which aims at improving levels of awareness in health issues and occupational safety during work execution. The program has covered four basic themes in the field of occupational health and safety, namely: (first aid, firefighting, defensive driving, occupational health, safety and environment). Work also focused on development of planning and management skills to raise the regulatory standards of safety and security at the plant.

In addition to training programs in various fields, the beginning of 2012 was characterized by the existence of a team from a specialized company in operation and maintenance of the plant, where the practical training to the staff in all areas of production, maintenance and quality, was one of the goals of the team. And with the departure of the training company team because the current circumstances, training management has to focus on the principle involved of the transfer of knowledge gained access to the full empowerment of local labor to do the operation and maintenance of the plant.

Our strategy does not rely on an individual, but it is the result of collective action with a clear vision and a specific goal, as our survival and continuity is our main target which every member of our family is working for. Out of our company’s support for this purpose, the human resources management worked on creating career performance standards and linked them to motivational programs which aim at reducing displacement of human resources and raising of production efficiency.

The slogan of all our human resources during 2012 was «to continue despite all the difficulties,» and our success in achieving this slogan granted us expertise in this area and gave us a motive to preserve the security, stability and continuity of the company during the year 2013.

3332

34 35


• Description of the risks faced by the Company:Risk management is one of the cornerstones of the corporate governance system where risks are managed in our operation process continuously through risk identification, assessment of occurrence and consequences and then take the steps and measures necessary to avoid or contain any negative results.

«Risk management” system has been designed, not only to reduce risk, but to increase the possibility of achieving the strategic goals of the company as well as to take appropriate action to reduce the probability and magnitude of possible losses.

The company identified risks related to the Company’s activities and recorded them in the so-called «risk register», which includes description of the nature of the threat, and its impact on the company’s operations. The register is modified periodically according to changes and internal, external circumstances that occur on the company’s operations.

The company’s risks were classified to strategic risks, operational risks, financial risks, compliance risks and the risk of an emergency. Following are some of the most important risks that have been identified:

Strategic risks:The strategic risk is represented by political situation experienced by the country, which led to the deterioration of the economic situation and was reflected by devaluation of the Syrian pound, in addition to the boycott and ban imposed on the key sectors of the Syrian economy, including banks, which led to difficulties in opening credits and import, as well as security deterioration in some areas, which in turn affected the flow of production traffic, distribution and marketing. Al Badia Cement Company worked within these circumstances to limit the impacts and strived to maintain the company’s business ensuring the interests of all company’s shareholders and employees.

Financial Risk:

Credit risk:

Credit risk is the party’s inability to meet its obligations, leading the other party to incur a financial loss. Thus the company has no significant credit risk as the company deals mainly with clients in the local market who are characterized by credibility in dealing along with the existence of adequate guarantees for the company, which reduces the risks associated with credit to a minimum.

Commission rate risk and interest rate:

The risks associated with the change in the value of financial instruments due to fluctuations in commission rates in the market on the financial position and cash flows of the company. The company prepared an analysis of sensitivity that measures the change impact of the interest rate on the company’s financial position. The analysis is listed in page 30 of the Financial Statements.

Liquidity risks:

The risks associated with the company’s inability to meet its short-term obligations. The company managed this risk by studying the previous cash flows in order to come out with periodical expectations. In addition to maintaining cash balances with banks in accordance with the size of its above-mentioned obligations.

Risk of changes in currency rates:

The risks associated with the change of the exchange rate used by the company in its financial transactions, which affect payments and receipts in foreign currency. It also affects the evaluation of the assets and financial commitments in foreign currency. The company has adopted all possible measures to limit this impact.

Operational risks:The company identified a number of operational risks related to the administrative systems, protection of the company’s assets, information systems and company’s staff, and is working on finding ways to reduce these risks.

All sections and departments of Al Badia Cement Company and employees bear their responsibilities in the implementation of internal controls related to the company’s risk management to ensure the achievement of the company objectives and save its resources.

36 37

Our Vision

“Quality of Excellence”

Our vision stems from our understanding of the importance of achieving “Excellence” in everything we do so that our company enjoys the appreciation of all our stakeholders through the quality of performance in terms of products, services and conditions of employment or at the level of offering opportunities and possibilities of attraction, sustainability, and more.

38 39


• Description of the company’s achievements during the past year

Operation and production:

Despite the circumstances and the great challenges Syria had experienced during the year 2012, Al Badia Cement proceeded with following up the operational and productive process to meet the needs of Syrian cement market and managed by virtue of its strategic location, the delivery of its products to the majority of areas in Syria.

And also managed to secure the continuity and the supply of raw and secondary materials and all types of fuel, spare parts and production requirements, despite the difficulties associated with the exchange rate, transport, clearance of goods preserving the operation according to the most advanced technologies under which the plant was designed.

The success of marketing operations:

Despite security circumstances experienced during the year 2012, Al Badia Cement company succeeded in achieving high rates in the implementation of its plan of cement sales by being able to market and distribute cement depending on the number of distributors with potential outstanding position both on the logistic level and in terms of reputation and efficiency in meeting the needs of the local market.

The company was also able to activate the sale of bulk cement directly to customers, to be delivered to ready-mix plants directly instead of factory floor. During the year 2012, company started the implementation of a plan to explore export markets for their product to neighboring countries and this plan will continue through the year 2013.

Effective communication with customers:

During the year 2012, the company activated several promotional activities that have contributed to the promotion and support of ongoing communication with clients and prepare an integrated marketing database to stimulate and support the development of sales and improve after-sales service.

Company Representation in specialized conferences for the cement industry:

Al Badia Cement Company participated in specialized and marketing cement conferences, which was held throughout the year in many of the neighboring countries

Representation of the company in specialized coal conferences:

Al Badia Cement Company participated in the 7th Coal Conference in Moscow and presented the plant’s needs of biofuels for the operation process, in order to attract new suppliers interested in supplying the needs of the company.

Internal Audit and Oversight:

The Internal Audit Department reports regularly to the company’s management and the Audit Committee about audits operational, administrative and financial reviews regularly to verify the effectiveness of the internal control system in protecting the assets of the company; assess business risks and measures performance efficiency.

Fundamental weaknesses in the system of internal control of the company have been identified, and most observations were mainly in the areas of performance improvement, activation of operational departments, enhancing its efficiency and completion of procedures documentation in order to give more power to the system of internal control in the company and exploitation of the available resources in the best way.

Ordinary and Non-ordinary meeting of the General Assembly :

The company’s General Assembly Ordinary and Non-Ordinary Meeting held on 20 March 2012 studied and discussed the Board of Directors report, auditor’s report, and Financial Statements of 2011. The resolution to form the company’s new board of directors has been approved, in addition to ratifying the company’s bylaw in accordance with the Companies Law promulgated by Legislative Decree No. / 29/2011 and the amendment of Article No. /2/ of the company’s bylaw related to “ the purpose of the company “.

For further information concerning the meeting you are kindly requested to check “Excerpts of the General Assembly Ordinary and Non-Ordinary Minutes of the Meeting” page No. 22.

Formation of Al Badia Cement new Board of Directors: During its meeting held on February 24, 2012, the Board of Directors approved the names of the persons nominated for membership of the company’s board to replace the board members whose authority was valid until 28 August 2012. The General Assembly Ordinary and Non-Ordinary Meeting held on 20 March 2012 approved the Board’s decision to elect the following gentlemen for membership of the Board of Directors:

Gentlemen Representing Ownership rate

Mr. Emad Al Muhaidib Al Muhaidib Holding Company 29.5%

Dr. Fouad Al SalehSyr Invest Holding Company 26%

Mr. Raed Al Mudaiheem

Mr. Fabrizio Donega Menaf SIS 12%

Mr. Ziad Al Zaim Himself 7.5%

Eng. Mohamed Al-Ageel Al Fozan Holding Company 5%

Mr. Mohamed Al Hallak Board Member (Advisor) -

Naming Chairman and Vice Chairman of the new board of directors:

A decision of the Board of Directors has appointed Mr. Emad Abdul Kader Al Muhaidib as Chairman of the Board of Directors elected during the General Assembly Ordinary and Non-Ordinary meeting held on March 20, 2012, and Dr. Fouad Fahd Al Saleh has been appointed as Vice-Chairman of the Board.

Issuance of permanent ownership certificates:Subsequent to the Badia company’s decision to reduce the capital and segment the nominal value of the share, according to resolutions of the Ministry of Economy and Trade No. /2488/ and No. /1899/ the Company has started the issuance of permanent ownership certificates for the shareholders during the first quarter of 2013, to be announced and delivered in daily newspapers during 2013.

Development of residential buildings:Out of the company management keenness to secure all types of essential services for its employees, the company established during 2012 playgrounds, recreation and sports halls a the housing colony of Al Badia cement plant to ensure the comfort of the plant’s employees after the official working hours, especially for the long shifts employee. The administrative section also continued to provide all basic high quality services which ensured the continuity of work over the past year.


4140


• Excerpts of Al Badia Cement General Assembly Ordinary & Non-Ordinary Minutes of the Meeting held on 20 March 2012

Upon invitation of the Board of Directors of Al Badia cement company held its ordinary and non-ordinary General Assembly meeting on the 20th of March 2012 in order to discuss all points set out in accordance with the Companies Law promulgated by Legislative Decree No. /29/ for the 2011 and to discuss and adopt the agenda of ordinary and non-ordinary general assembly.

Following is the summary of the most prominent decisions made during the meeting:

FirstApproved the amendment of the company’s bylaw according to the model of the «Indicative System of Public Shareholding Companies», issued by Ministry of Economy and Trade, in conformity with the Companies Law No /29/ for the year 2011, in addition to the adoption of the amendment of article No. /2/ of the company’s bylaw related to “purpose of the company”, by adding the statement: «to import all the raw materials and supplies necessary for the production”.

SecondApproved the Board of Directors resolution to appoint Mr. Tariq Al Zaim as an alternate member for the resigned board member.

ThirdAdoption of the formation of the new Board of Directors which included seven members who meet the conditions for membership of the Board, in accordance with the Companies Act promulgated by Legislative Decree No. /29/ for the year 2011.

• The financial impact of non-recurrent operations occurred during the fiscal year that does not fall within the main activity of the company

The year 2011 did not witness any operations of re-current nature that have tangible impact on the company’s statements.

• The time series of profits and losses achieved, dividends, net equity and the prices of securities issued by the company

Description Currency From 03.09.2008

Till 31.12.2009 2010 2011 2012

Net Profit/loss SYP -360,135,545.00 -182,552,680.00 -669,171,978.00 -604,852,230,00

Profit Distribution SYP/share - - - -

Shareholders net rights SYP 6,957,014,945.00 9,217,311,775.00 8,548,139,797.00 7,943,287,567,00

Share nominal value SYP/share * 500.00 * 500.00 ** 100,00 ** 100,00

Share book value SYP/share 285.12 377.76 87.58 81,39

* The paid amount out of the original nominal value of the share 400 SYP only. ** Nominal value has become 100 SYP after split of shares.

• Analysis of the company’s financial positionThe clarifications annexed to the audited financial statements of the company included a number of financial analysis. These analysis have dealt with both the company’s liquidity, risks of fluctuations in interest rates and the risk of fluctuations in currency exchange rates, as stated in the page number 28, 29,30 and 31 of the notes to the financial statements attached to this report.

4342

44 45


• The company’s strategy and future planThe company’s strategy

The company has prepared a strategic plan for the next three years with focus on the following key themes:

1- Achieve security of its personnel

2- Ensure the continued operation which does not damage the resources and assets of the company

3- Announce ambitious plans for the operation, production, marketing and sales

4- Set out investment and development plans for the plant

5- Achieve the slogan of «Excellence In Quality»

6- Full empowerment for the local staff, while ensuring the continuity and development of the staff

The circumstances experienced by the country and what might result of negative effects on the level of the security, economic, and logistics, which could hamper operations, marketing and logistics of the company, made it a must to give priority to ensure the security of workers, safety and stability of company facilities, through all possibilities under the current circumstances,

adjust development and operation plans and follow-up investment plans and projects if the security situation improves.

All that would ensure access to the following fundamental objectives that will be activated through the protection, development and empowerment of the performance of all the company’s resources for each stage, depending on the circumstances and possibilities, to ensure maintaining the stability and security of the company and the unique position enjoyed by the company:

• Seeking to achieve satisfactory returns for shareholders and continue to answer all their questions, facilitate the procedures necessary for them and accomplish all the preparations for the inclusion on the Damascus Stock Exchange.

• Ensure the highest levels of discipline and governance through the automated system (ERP) to plan company resources and strict systems for financial and commercial transactions management, business and affairs of supply, operation and maintenance, human resources and internal audit procedures.

• Develop solutions that will reduce the environmental impact and follow-up work to the highest standards of health and occupational safety

• Implementation of a communication plan to introduce the company and its goals as well as activation of its social role.

46 47


• Amount of audit fees for the company and its subsidiariesAs for the auditor’s fees of the company’s accounts, Deloitte & Touch, the fees have been identified at the amount of: $ 51,000.00 only fifty one thousand dollars for performing an audit of the accounts of Al Badia Cement. As for the fees for the related companies up to the date of preparing this report no auditor was appointed for the year 2012 for Emdad Trade offshore.

• Benefits and emoluments of the Chairman and Board Members of the Board of Directors, Senior Management personnel, and auditor:

Based on the disclosure instructions concerning the benefits and bonuses paid to the Chairman and Board Members, we would like to indicate that the Chairman and Board Member, including the Board Members based outside of Syria, did not any compensation or bonuses, benefits or allowances for travel and accommodation for attendance of Board meetings or their management of affairs of the company, during the year 2012.

With respect to benefits and bonuses paid to senior management members, which is represented by the wages and salaries, fees, bonuses and travel expenses they receive, the sum of these amounts are included in the notes of the audited financial statements on page /21/ of the clarification related to the financial statements under the heading of Statement of Comprehensive Income attached to this report.

• Statement of contributions and grants paid by the company during the financial yearOut of the company’s commitment to social responsibilities principles towards the society, the company sponsored the SOS (Syrian Orphans Society) by providing all housing and school requirements for the society’s children during the year 2012, supporting the children who are deprived of family care in view of the harsh circumstances witnessed by Syria.

• Statement of contracts, projects and agreements held by the CompanyThe company did not enter into any contracts with subsidiaries; allied or sister company neither did the Chairman of the Board of Directors, the Director General, or any employee of the Company or their relatives.

• Statement of the number of financial securities issued by the company, and owned by parties with relationship to the company:

Name Designation NationalityNumber of shares

2011 2012

Mr. Emad Al Muhaidib representative of Al Muhaid-ib Holding Company

Chairman Saudi - -

Dr. Fouad Al Saleh representative of Syrinvest Holding Company

Vice Chairman Saudi - -

Mr. Raed Al Mudaiheem representative of Syrinvest Holding Company

Board Member Saudi - -

Mr. Fabrizio Donega representative of Menaf S.A.S. Company

Board Member Italian - -

Mr. Ziad Al Zaim Board Member Saudi - Syrian 7320000 7320000

Mr. Mohamad Al Ageel representing Al Fozan Hold-ing Company

Board Member Saudi - -

Mr. Khaled Al Sawaf Chief Executive Officer Syrian 10744 10744

Wife of the Vice Chairman of the Board of Directors A related party Saudi 196280 -

Wife of a board member of the company Mr. Raed Al Mudaiheem

A related party Saudi 99168 99168

Wife of the Chief Executive Officer of the company A related party Syrian 2000 2000

Wife of a board member Mr. Mohamad Al Hallak Board Member Syrian - 5944

Al Badia Cement (JSC)

Board of Directors Reportfor the year 2012

4948

50 51

Independent Auditor Report

52 53

Financial Statements

Statement Of Financial Position

As of December 31,

ASSETS Notes 2012 2011

Current assets SYP SYP

Cash on hand and at banks 5 969,327,990 1,319,312,157

Advances to contractors 6 369,430,474 461,260,455

Due from related parties 15 2,000,415 2,013,114

Inventory 7 2,229,516,388 1,192,665,519

Other debit balances 8 66,157,072 41,673,683

Total current assets 3,636,432,339 3,016,924,928

Non-current assets

Project under construction 9 314,758,503 369,946,338

Property, plant and equipment 10 13,855,659,065 14,919,751,237

Intangible assets 11 95,990,776 742,554

Total non-current assets 14,266,408,344 15,290,440,129

Total assets 17,902,840,683 18,307,365,057

As of December 31,

LIABILITIES Notes 2012 2011

Current liabilities SYP SYP

Due to suppliers and contractors 12 267,826,341 367,665,582

Short-term loans 13 3,000,717,156 1,709,870,684

Other payables and accrued expenses 14 557,163,576 625,342,918

Advances from customers 113,196,230 135,806,980

Total current liabilities 3,938,903,303 2,838,686,164

Non current liabilities

Due to related parties – non current 15 371,495,913 268,821,714

Long-term loan 16 5,649,153,900 6,651,717,382

Total non current liabilities 6,020,649,813 6,920,539,096

Total liabilities 9,959,553,116 9,759,225,260

SHAREHOLDERS’ EQUITY

Capital 17 9,760,000,000 9,760,000,000

Accumulated losses ( 1,211,860,203) ( 542,688,225)

Net loss for the year ( 604,852,230) ( 669,171,978)

Total shareholders’ equity 7,943,287,567 8,548,139,797

Total liabilities and shareholders’ equity 17,902,840,683 18,307,365,057

THE ACCOMPANYING NOTES FROM 1 TO 27 FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS THE ACCOMPANYING NOTES FROM 1 TO 27 FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS

54 55

Financial Statements

STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME

For the year ended December 31,

Notes 2012 2011

SYP SYP

Net sales 18 5,397,321,807 4,053,782,907

Cost of sales 19 ( 3,555,664,447) ( 2,766,051,733)

Gross profit 1,841,657,360 1,287,731,174

General and administrative expenses 20 ( 351,783,934) ( 483,914,314)

Net loss on difference of exchange 21 ( 1,411,503,689) ( 710,655,529)

Interest income 22 14,145,651 20,490,614

Interest expense 23 ( 701,627,273) ( 479,716,528)

Other income 4,259,655 -

Provisions for contingencies and charges 14 - ( 303,107,395)

Loss for the year ( 604,852,230) ( 669,171,978)

Other comprehensive income - -

Total comprehensive income ( 604,852,230) ( 669,171,978)

Loss per share for the year 24 ( 6.20 ) ( 6.86 )

Statement Of Changes In Shareholders’ Equity

Accumulated

Capital losses Total

SYP SYP SYP

Balance as of December 31, 2010 9,760,000,000 ( 542,688,225) 9,217,311,775

Loss for the year 2011 - ( 669,171,978) ( 669,171,978)

Balance as of December 31, 2011 9,760,000,000 ( 1,211,860,203) 8,548,139,797

Loss for the year 2012 - ( 604,852,230) ( 604,852,230)

Balance as of December 31, 2012 9,760,000,000 ( 1,816,712,433) 7,943,287,567

STATEMENT OF CASH FLOWS


Notes 2012 2011

SYP SYP

Cash flows from operating activities:

Loss for the year ( 604,852,230) ( 669,171,978)

Adjustments to reconcile loss to cash flows used in operating activities

Depreciation 10 819,265,008 620,381,291

Write-off of fixed assets 10 304,696,332 -

Losses from stolen fixed assets 10-20 15,304,057 -

Provision for stolen defective materials 7 11,975,408 -

Amortization 11 11,447,915 430,485

557,836,490 ( 48,360,202)

Increase in inventory ( 1,048,826,277) ( 830,622,285)

(Increase) /decrease in other debit balances ( 24,483,389) 51,334,378

Decrease in due from related parties 12,699 2,238,282

Decrease in other non-current assets - 47,015,000

Decrease in due to suppliers and contractors 12 ( 99,839,241) ( 1,545,266,807)

(Decrease) /increase in advances from customers ( 22,610,750) 135,806,980

(Decrease) /increase in other payables and accrued expenses ( 68,179,342) 542,457,413

Net cash flows used in operating activities ( 706,089,810) ( 1,645,397,241)

Cash flows from investing activities:

Decrease /(increase) in advances to contractors 6 91,829,981 ( 176,379,543)

Additions to project under construction 9 ( 50,500,329) ( 873,402,638)

Acquisition of property and equipment 10 ( 75,173,225) ( 48,696,581)

Additions to intangible assets 11 ( 1,007,973) ( 214,499)

Net cash flows used in investing activities ( 34,851,546) ( 1,098,693,261)

Cash flows from financing activities:

Long - term loans 16-25 115,098,124 2,688,201,745

Short-term loans 13-25 ( 1,301,579,472) 1,161,303,908

Decrease in financing from related parties 25 - ( 63,899,043)

Net cash flows (used in) / provided by financing activities ( 1,186,481,348) 3,785,606,610

Unrealized difference of exchange 1,577,438,537 -

Net (decrease) /increase in cash on hand and at banks ( 349,984,167) 1,041,516,108

Cash on hand and at banks, beginning of the year 5 1,319,312,157 277,796,049

Cash on hand and at banks, end of the year 5 969,327,990 1,319,312,157

THE ACCOMPANYING NOTES FROM 1 TO 27 FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS THE ACCOMPANYING NOTES FROM 1 TO 27 FORM AN INTEGRAL PART OF THE FINANCIAL STATEMENTS

56 57

1. OBJECTIVE AND FORMATION OF THE COMPANYAl Badia Cement Company is a Public Joint Stock Company established by Decree No.2465 dated June 1, 2006 in accordance with the Syrian Investment Law No. 10 of the year 1991 and its amendments, which exempts the Company from income tax for a period of five years commencing from the date of production or investment. The Company was registered under Damascus Countryside Commercial Registry No.8593 on September 3, 2008.

The period of execution of the industrial project has been extended by resolution number 2305 issued by the General Director of Syrian Investment Authority dated July 7, 2009 to become five-years ending the earlier of June 1, 2011 or the production date.

The Company’s duration is 25 years starting from September 24, 2007. The Company acquired its industrial license on May 15, 2011.

On June 7, 2011 the company signed the PAC (Provisional Acceptance Certificate) certifying that as of June 7, 2011, the “Contractor”, CBMI contractor, completed the works at Al Badia Cement Production line # 1 and the installations are ready for taking –over by the “Owner” Al Badia Cement Public Joint Stock Company, as per contract clause 10.11. By signing the PAC the company moved from its commissioning phase to its operational phase.

The Company’s objective is to establish and invest in Portland normal and black cement project and import all necessary requisites for production, associating in similar or complementary projects, acquire any required rights and franchise for the Company and import transportation equipment.

On August 28, 2008, the constituting general assembly was held and the first Board of Directors was elected.

On March 20, 2012, the ordinary and extraordinary general assembly was held and elected the new Board of Directors for four years period to follow the previous Board of Directors which its period ended on August 28, 2012.

2. Adoption Of New And Revised International Financial Reporting Standards (Ifrss)

2.1 New and revised Standards and Interpretations effective for the current periodThere are no new Standards, amendments to Standards and Interpretations that are effective for the first time for the financial year beginning on January 1, 2012 that had a material impact on the Company’s financial statements.

The Company has applied the amendments to IAS 1 Presentation of Items of Other Comprehensive Income in advance of the effective date (annual periods beginning on or after July 1, 2012) .The amendments introduce new terminology for the statement of comprehensive income (renamed statement of profit and loss and other comprehensive income) and income statement (renamed statement of profit and loss).The amendments also require to Company items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently. Income tax on items of other comprehensive income is required to be allocated on the same basis.

2.2 New and revised IFRS(s) in issue but not yet effectiveA number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 1, 2012 and have not been applied in preparing these consolidated financial statements. Those new and amended standards and interpretations which are applicable to the Company’s operations or might have an effect on the consolidated financial statements of the Company in the period of initial application are set out below:

• IFRS 9 Financial Instruments issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. (Annual periods beginning on or after January 1, 2015).

• IFRS 10 Consolidated Financial Statements uses control as the single basis for consolidation, irrespective of the nature of the investee and includes a new definition of control. IFRS 10 requires retrospective application subject to certain transitional provisions providing an alternative treatment in certain circumstances. IAS 27 Consolidated and Separate Financial Statements and IAS 28 Associates and Joint Ventures have been amended for the issuance of IFRS 10 and SIC-12 Consolidation Special Purpose Entities will be withdrawn upon the effective date of IFRS 10 (Annual periods beginning on or after January 1, 2013).

• IFRS 11 Joint Arrangements establishes two types of joint arrangements: Joint operations and joint ventures. The two types of joint arrangements are distinguished by the rights and obligations of the parties to the joint arrangement, rather than its legal form. Joint control involves the contractual agreed sharing of control, and arrangements subject to joint control are classified as either a joint venture or a joint operation. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenues and expenses. Joint ventures arise where the joint venture has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. IAS 28 Investments in Associates and Joint Ventures has been amended for the issuance of IFRS 11 and SIC-13 Jointly Control Entities will be withdrawn upon the effective date of IFRS 11 (Annual periods beginning on or after January 1, 2013).

• IFRS 12 Disclosure of Interests in Other Entities is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards. IFRS 12 is effective for annual periods beginning on or after January 1, 2013.

• Amendments to IFRS 7 Financial Instruments: Disclosures relating to disclosures about the initial application of IFRS 9 (Annual periods beginning on or after January 1, 2015, or otherwise when IFRS 9 is first applied).

• Amendment to IFRSs 10, 11 and 12 on transition guidance: These amendments provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. Effective for annual periods beginning on or after 1 January 2013.

• IFRS 13 Fair Value Measurement establishes a single framework for measuring fair value, and requires disclosures about fair value measurement. The Standard defines fair value on the basis of an ‹exit price› notion and uses a ‹fair value hierarchy›, which results in a market-based, rather than entity-specific, measurement. IFRS 13 is applicable for both financial and non-financial items for which other IFRSs require or permit fair value measurement and disclosures about fair value measurements, except in specified circumstances. IFRS 13 is effective for annual periods beginning on or after January 1, 2013.

• Amendments to IAS 32 Financial Instruments Presentation: relating to application guidance on the offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after January 1, 2014, with retrospective application needed.

• Amendments to IFRS 7 Financial Instruments Disclosures: enhancing disclosures about offsetting of financial assets and liabilities. The amendments are effective for annual periods beginning on or after January 1, 2013, and disclosures should be provided retrospectively for all comparative periods.

Notes to the Financial Statements

58 59

• IAS 27 Separate Financial Statements (revised 2011) includes the requirements relating to separate financial statements and outlines the accounting requirements for dividends and contains numerous disclosure requirements. IAS 27 (revised 2011) is effective for annual periods beginning on or after January 1, 2013.

• IAS 28 Associates and Joint Ventures (revised 2011) includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11. IAS 28 (revised 2011) is effective for annual periods beginning on or after January 1, 2013.

• Annual improvements to IFRSs 2009 – 2011 Cycle. These include: Amendments to IAS 32 Financial Instruments, clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 Income Taxes. (Effective for annual periods beginning or after January 1, 2013).

Management anticipates that the adoption of the above Standards and Interpretations in future years will have no material impact on the financial statements of the Company in the period of initial application, except for the effect of the application of IFRS 9.

Summary of IFRS 9

Financial assetsIFRS 9 introduces new classification and measurement requirements for financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement. Specifically. As a general rule, IFRS 9 requires all financial assets to be classified and subsequently measured at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. However, equity securities and derivatives should all be measured at fair value.

As required by IFRS 9, debt instruments are measured at amortized cost only if the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. If either of the two criteria is not met, the debt instruments are classified as at fair value through profit or loss (FVTPL).

However, the Company may choose at initial recognition to designate a debt instrument that meets the amortized cost criteria as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

Debt instruments that are subsequently measured at amortized cost are subject to impairment.

Investments in equity instruments are classified and measured as at FVTPL except when the equity investment is not held-for-trading and is designated by the Company as at fair value through other comprehensive income (FVTOCI). If the equity investment is designated as at FVTOCI, all gains and losses, except for dividend income that is generally recognized in profit or loss in accordance with IAS 18 Revenue, are recognized in other comprehensive income and are not subsequently reclassified to profit or loss.

For debt instruments not designated at fair value through profit or loss under the fair value option, reclassification is required between fair value through profit or loss and amortized cost, or vice versa, if the Company’s business model objective for its financial assets changes so that its previous measurement basis no longer applies.

IFRS 9 requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated. Instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortized cost or fair value.

Financial liabilitiesIFRS 9 also contains requirements for the classification and measurement of financial liabilities. One major change in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability.

For financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in the fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

3. Summary Of Significant Accounting Policies

Statement of complianceThe financial statements have been prepared in accordance with International Financial Reporting Standards; (IFRS).

Basis of preparationThe financial statements have been prepared on the basis of the historical cost convention. The financial statements are extracted from records related to the Company.The financial statements are presented in Syrian Pounds (SYP), the functional currency of the Company and the currency of the eco

A. 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.

Sales of goodsRevenue from the sale of goods is recognized when all the following conditions are satisfied:

• The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;• The Company 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 Company; and• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest revenueInterest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

B. Projects under constructionProjects under construction are recognized at historical cost, less any recognized impairment loss.

C. Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if any. Depreciation of these assets commences when the assets are ready for their intended use.The fixed assets are depreciated once they are ready for their intended use.Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method at the following useful lives:


60 61

Years

Vehicles 10-5

Computers and other IT and electrical equipment 4-8

Furniture and office equipment 3-10

Plant building 10-25

Plant equipment 2-20

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

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 sales proceeds and the carrying amount of the asset and is recognized in the statement of comprehensive income.

D. Intangible assetsIntangible assets with finite useful life are carried at cost less accumulated amortization and accumulated impairment losses if any. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.

E. ProvisionsProvisions are recognized when the Company has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle obligation and a reliable estimate of the amount can be made.

F. Financial assets and liabilitiesFinancial assets and liabilities are recognized on the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instruments.

Accounts receivables are stated at their fair value, as reduced by appropriate allowances for estimated irrecoverable amounts, if any.

Accounts payables are stated at their nominal value.

G. Income TaxTaxation is provided in accordance with the Syrian income tax law fiscal regulations. No corporate income tax was provided in the accompanying financial statements. The Company is incorporated under Investment Law No (10) of the year 1991 and its subsequent amendments, which grants the Company 5 years exemption on corporate taxation starting the earlier of the effective commencement date of the operation or 60 months from the Decree number 2465 dated June 1, 2006. The exemption period started on June 1, 2011.

H. Borrowing costsBorrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of the asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use are complete.

Other borrowing costs are recognized directly in the statement of comprehensive income.

I. Foreign currencies

Transactions in currencies other than the Company’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of transactions. At each statement of financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the statement of financial position date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognized in the statement of comprehensive income in the period in which they arise.

The closing rates of exchange were as follows:

December 31

2012 2011

SYP SYP

USD 77.35 55.72

EUR 102.10 72.79

SAR 20.62 14.86

LBP 0.0471 0.0371

J. End of service indemnityThe Company is enrolled in a State defined end-of-service contribution fund and insurance schemes, whereby contributions are paid regularly on behalf of the staff. The obligation of the Company is limited to those contributions.

K. Inventories:Inventories are stated at the lower of cost and net realizable value. Cost is calculated using the weighted average cost method. Cost comprises direct purchases and, where applicable, costs and overheads incurred in bringing the inventories to their present location and condition.

Net realizable value represents the estimated selling price less all estimated costs of completion and the estimated costs necessary to make the sale.

Inventory comprises raw materials, fuel, finished products and work in progress, in addition to spare parts. The Company allies a periodic inventory count system to calculate ending inventory. The Company is using a “Periodic Inventory System” to account for its period end stock.

L. Cash and cash equivalentsCash and cash equivalents on cost and balances at banks with original maturities of three months or less

4. Critical Accounting Judgments And Key Sources Of Estimation UncertaintyIn the application of the company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.


62 63

Key sources of estimation uncertainty• Useful lives of property, plant and equipment:

As described in note 3, the Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period.

• Provision for contingencies and charges:

The Management estimates that costs related to the non resident contractor may increase by SYP 303,107,395. The latter will be cleared accordingly with the aforementioned agreements.

• Impairment of assets and required provisions:

Under the current unrest witnessed in Syria, Management has assessed the recoverability of the Company’s assets, and is satisfied that no additional provisions for impairment, other than those included in the accompanying financial statements, are needed.

5. CASH ON HAND AND AT BANKSThis caption comprises cash on hand, current bank accounts and deposits, highly liquid short-term investments that could be converted into cash without significant decline in value and short-term bank’s deposits due in one to three-months period as follows:

As of December 31, 2012 As of December 31, 2011

Original Counter Original Counter

currency value currency value

SYP SYP

Cash on hand

SYP - 861,300

EUR 37.50 3,829 -

3,829 861,300

Current accounts

SYP 30,830,051 650,100,244

USD 2,013,573 155,749,872 10,600,186 590,642,394

EUR 1,597,592 163,114,143 992,760 72,262,987

SAR 15,868,943 327,238,225 -

LBP 3,250,500,545 153,098,576 -

830,030,867 1,313,005,625

Margins against letters of credit

EUR 1,364,283 139,293,294 74,807 5,445,232

139,293,294 5,445,232

969,327,990 1,319,312,157

Margins against letters of credit covers 100% of these L/Cs.

6. ADVANCES TO CONTRACTORSThis caption comprises the following:

As of December 31,

2012 2011

SYP SYP

Non resident Contractor 121,354,160 82,031,741

Supplier of materials 217,985,213 342,615,910

Building contractor 1,011,694 -

Insurance for quarries 16,500,000 16,660,000

Consultant - 2,694,213

Others 12,579,407 17,258,591

369,430,474 461,260,455

The nonresident Contractor caption represents the balance of the payments made to CBMI & ASEC in exchange for the contracts for building and operating the factory, which were not supposed to be classified until December 31, 2012.

7. INVENTORYThis caption comprises the following:

As of December 31,

2012 2011

SYP SYP

Work in progress 876,931,144 505,099,420

Cement 72,477,141 75,662,858

Packing materials 41,844,912 64,687,076

Spare parts 610,174,042 129,739,487

Fuel 564,307,664 295,499,779

Raw materials 50,658,230 114,247,743

Explosives 5,899,025 1,332,948

Lubricants and Oils 19,199,638 6,396,208

2,241,491,796 1,192,665,519

Provision for stolen and defective materials (note 20) (11,975,408) -

2,229,516,388 1,192,665,519


64 65

8. OTHER DEBIT BALANCESThis caption comprises the following:

As of December 31,

2012 2011

SYP SYP

Insurance 14,694,312 7,368,798

Head office and plant rent 13,876,030 5,401,828

Advances to employees 8,174,373 5,118,818

Income tax advance 24,387,050 21,801,511

Other 5,025,307 1,982,728

66,157,072 41,673,683

Income tax advance represents the advances paid to the customs department by the company on its imports. This amount is deducted from income tax.

9. PROJECT UNDER CONSTRUCTIONThis caption represents the balance of the cement plant under construction and it comprises the following:

As of December 31,

2012 2011

SYP SYP

The value of work executed on site by subcontractors 312,786,003 271,012,242

Technical consulting fees and equipments 1,972,500 1,972,500

Other miscellaneous expenses - 96,961,596

314,758,503 369,946,338

Other miscellaneous expenses represent the amount capitalized for the investments in the company’s management information systems.

The movement concerning projects under construction is as follows:


2012 2011

SYP SYP

Balance beginning of the year 369,946,338 14,848,227,182

Additions during the year 50,500,329 873,402,638

Transfer from due to supplies & contractors - 75,883,548

Transfer to property, plant & equipment - (15,427,567,030)

Transfer to intangible assets ( 105,688,164) -

Balance end of the year 314,758,503 369,946,338 10. P

RO

PE

RT

Y, P

LAN

T A

ND

EQ

UIP

ME

NT

This

cap

tion

com

pris

es t

he fo

llow

ing:

Vehi

cles

Com

put

ers

Furn

iture

an

d o

ffice

eq

uip

men

tP

lant

bui

ldin

gP

lant

eq

uip

men

tTo

tal

His

toric

al c

ost

SY

PS

YP

SY

PS

YP

SY

PS

YP

Bal

ance

at

Dec

emb

er 3

1, 2

010

30,4

07,2

705,

514,

403

4,61

6,63

8-

37,6

71,3

5178

,209

,662

Ad

diti

ons

for

the

year

12,0

76,1

4514

,010

,060

6,72

7,03

776

5,00

015

,118

,339

48,6

96,5

81

Tran

sfer

from

pro

ject

s un

der

con

stru

ctio

n-

--

5,60

0,70

6,16

59,

826,

860,

865

15,4

27,5

67,0

30

Bal

ance

at

Dec

emb

er 3

1, 2

011

42,4

83,4

1519

,524

,463

11,3

43,6

755,

601,

471,

165

9,87

9,65

0,55

515

,554

,473

,273

Ad

diti

ons

for

the

year

13,1

83,0

4317

,229

,121

28,6

65,0

08-

16,0

96,0

5375

,173

,225

Sto

len

asse

ts (n

ote

20)

( 13

,731

,046

)(

4,93

4,92

5)(

201,

000)

--

( 18

,866

,971

)

Dis

pos

als

of fi

xed

ass

ets

*-

--

( 10

9,59

0,05

3)(

195,

106,

279)

( 30

4,69

6,33

2)

Bal

ance

at

Dec

emb

er 3

1, 2

012

41,9

35,4

1231

,818

,659

39,8

07,6

835,

491,

881,

112

9,70

0,64

0,32

915

,306

,083

,195

Acc

umul

ated

dep

reci

atio

n

Bal

ance

at

Dec

emb

er 3

1, 2

010

( 8,

536,

479)

( 1,

642,

827)

( 86

8,32

3)-

( 3,

293,

116)

( 14

,340

,745

)

Dep

reci

atio

n fo

r th

e ye

ar(

6,77

7,95

8)(

3,36

5,66

9)(

892,

936)

( 17

3,38

2,31

0)(

435,

962,

418)

( 62

0,38

1,29

1)

Bal

ance

at

Dec

emb

er 3

1, 2

011

( 15

,314

,437

)(

5,00

8,49

6)(

1,76

1,25

9)(

173,

382,

310)

( 43

9,25

5,53

4)(

634,

722,

036)

Dep

reci

atio

n fo

r th

e ye

ar(

8,82

7,58

7)(

7,25

8,63

2)(

3,54

4,58

9)(

222,

199,

171)

( 57

7,43

5,02

9)(

819,

265,

008)

Sto

len

asse

ts (n

ote

20)

2,68

7,44

086

7,28

88,

186

--

3,56

2,91

4

Bal

ance

at

Dec

emb

er 3

1, 2

012

( 21

,454

,584

)(

11,3

99,8

40)

( 5,

297,

662)

( 39

5,58

1,48

1)(1

,016

,690

,563

)(1

,450

,424

,130

)

Net

boo

k va

lue

At

Dec

emb

er 3

1, 2

012

20,4

80,8

2820

,418

,819

34,5

10,0

215,

096,

299,

631

8,68

3,94

9,76

613

,855

,659

,065

At

Dec

emb

er 3

1, 2

011

27,1

68,9

7814

,515

,967

9,58

2,41

65,

428,

088,

855

9,44

0,39

5,02

114

,919

,751

,237

The

cem

ent

fact

ory’

s eq

uip

men

t w

as m

ortg

aged

to

all t

he b

anks

as

colla

tera

l for

the

giv

en fa

cilit

ies.

*Dis

pos

als

of fi

xed

ass

ets

cap

tion

rep

rese

nts

a d

isco

unt

gran

ted

by

non-

resi

den

t co

ntra

ctor

for

the

cont

ract

of e

xecu

tion

of c

ivil

cons

truc

tions

whi

ch w

as a

gree

d u

pon

and

is y

et t

o b

e co

mp

lete

d.


66 67

Depreciation expenses for the year were allocated as follows:


2012 2011

SYP SYP

General and administrative expenses(note 20) 3,976,842 330,358,121

Cost of sales (note 19) 691,160,134 290,023,170

Inventory 124,128,032 -

819,265,008 620,381,291

The cement factory’s equipment was mortgaged to all the banks as collateral for the given facilities.

11. INTANGIBLE ASSETS

SYP

Balance at December 31, 2010 1,573,979

Additions 180,000


Additions 1,007,973

Transfer from projects under construction 105,688,164


Balance at December 31, 2010 ( 580,940)

Amortization for the year ( 430,485)

Balance at December 31, 2011 ( 1,011,425)

Amortization for the year ( 11,447,915)

Balance at December 31, 2012 ( 12,459,340)


Balance at December 31, 2011 742,554

12. DUE TO SUPPLIERS AND CONTRACTORSThis caption comprises the following:

As of December 31,

2012 2011

SYP SYP

Non resident Contractor 86,364,727 190,872,027

Financing services 18,578,726 56,577,882

Consultant 39,307,748 10,100,011

Supplier of materials 76,496,526 69,608,825

Building contractor 13,152,247 29,289,539

Others 33,926,367 11,217,298

267,826,341 367,665,582

13. SHORT TERM LOANSThis caption comprises the following:




SYP SYP

Facilities provided by banks:

SYP 370,134,400 277,600,800

USD 2,568,000 198,634,800 1,926,000 107,316,720

Short-term portion of

long term loan-USD 31,440,827 2,431,947,956 23,778,772 1,324,953,164

3,000,717,156 1,709,870,684

The first item represents the short term portion of the bank facilities (note 15).

The second item represents the short-term portion of the vendor loan provided by the non resident contractor.

The caption for vendor loan given by non-resident contractor comprises an amount of USD 31.5 million as of December 31, 2012 (USD 42.5 million as of December 31, 2011).

The non-resident contractor offered the company a loan of USD 50 Million, which equals the amount of all the accrued balances to the contractor, and is retro actively accumulated since the last contract payment according to the cement factory construction contract, the borrowed amount is equivalent to balances owed to the contractor according to the said contract. The payment of this loan and the accumulated interest will take place during the withdrawal period divided over thirty equal monthly payments starting June 1, 2011 on the condition that the final payment is made on November 1, 2013.

The loan is subject to a fixed yearly interest rate of 6.5%.


69

14. OTHER PAYABLES AND ACCRUED EXPENSESThis caption comprises the following:

As of December 31,

2012 2011

SYP SYP

Provision for contingencies and charges 303,107,395 303,107,395

Consumption taxes 75,944,536 161,169,330

Provision for local administrative

fees related to consumption taxes 61,987,748 55,595,409

Accrued interest on short-term Bank facilities 1,553,114 3,125,963

Government mining royalties - 27,022,516

Extraction fees 42,953,490 23,231,618

Custom clearance 9,540,713 15,440,146

Provision for human resources 36,250,000 16,000,000

Other credit balances 25,826,580 20,650,541

557,163,576 625,342,918

The Management estimates that costs related to the non resident contractor may increase by

SYP 303,107,395. The latter will be cleared accordingly with the aforementioned agreements.

Extraction fees are expenses paid to the government for the blasted raw materials (limestone and basalt, SYP 45 per ton).

15. RELATED PARTIESRelated parties comprise the Company’s directors, senior management and shareholders:

As of December 31,

2012 2011

SYP SYP

Due to related parties - non current

Al Muhaidib Holding Co. 129,750,072 92,883,004

Syrinvest Holding B.V. 114,355,925 81,862,935

Menaf SAS 53,449,464 38,327,339

Ziyad Sa’ad Al Deen Al Zae’em 30,691,487 23,668,757

Al Fozan Holding Co. 22,760,519 16,300,575

Ibrahim Shaik Dib 16,396,255 -

Nizar Al Asaad - 12,623,275

Mahmoud Zuhair Shabarek 4,092,191 3,155,829

371,495,913 268,821,714

Due from related parties

Ziyad Sa’ad Al Deen Al Zae’em 1,294,727 1,275,977

Al Muhaidib Holding Co. 705,688 706,572

Construction Holding Co. - 30,565

2,000,415 2,013,114

Statement of comprehensive income items

The Compensations of executive management, which consist of salaries and other short term benefits, for the year ended December 31, 2012 amount to SYP 81,458,799, the amount of SYP 74,808,801 has been charged to general and administrative expenses, and the amount of SYP 6,649,999 was added to the production cost as a direct labor.


68

70 71

16. LONG-TERM LOANThis caption comprises the following:




SYP SYP

Bank facilities:

SYP (A1) 3,676,264,800 4,046,399,200

USD (A2) 25,506,000 1,972,889,100 28,074,000 1,564,283,280

Long – term vendor loan - USD - 18,683,326 1,041,034,902

5,649,153,900 6,651,717,382

Bank financing is provided by local banks with a total amount of USD 122 million structured into two facilities as follows:

• Facility A1: is a long-term facility of USD 30 million

• Facility A2: is a long-term facility of SYP 4.324 billion

The facilities are subject to floating interest rates according to their currencies as follows:

• Utilized facilities in U.S. Dollars were subject to interest rates of LIBOR 3 months +425 bps per annum with a floor of 6.5% per annum.

• Utilized facilities in Syrian Pounds were subject to interest rate of the average of published interest rates paid by participating banks on term deposits for 3 months +275 bps per annum.

The Cement Plant’s equipments were mortgaged in favor of the syndicated Banks to secure the facilities provided.

The company may decide at any time before the beginning of the drawdown period not to use the vendor loan, and may decide at any time to skip any drawdown, to stop drawing or to reimburse a part or the total of the outstanding amount of the vendor loan and interest accrued to this date.

17. PAID IN CAPITAL The capital of the Company was set at SYP 12,200,000,000 initially divided into 24,400,000 shares with a par value of SYP 500 each. The founders subscribed in 85% of the capital amounting to

SYP 10,370,000,000 and 15% of shares amounting to SYP 1,830,000,000 were issued to public.

On June 8, 2011 a Non-Ordinary General Assembly meeting was held, during the meeting the following two resolutions were issued:

• Extraordinary General Assembly ratified reducing the company’s capital from

SYP 12,200,000,000 to SYP 9,760,000,000 by not calling the last installment of 20 %of the company’s capital, and by reducing the par value of share from SYP 500 to SYP 400.

The required procedures for the capital reduction were finalized during September 2011 and an updated version of the company’s commercial register was issued showing the new capital amount of SYP 9.76 billion.

• Following the company’s board of directors resolution dated May 8, 2011, and in accordance with paragraphs No.95-2 and 91-3 and clause No.3 of the paragraph No.91 of the companies’ law No.29 for the year of 2011. The extraordinary general assembly ratified splitting the company’s capital shares by issuing 4 new shares for each one of current shares, the nominal value of the new share is SYP 100 instead of SYP 400.

The procedures of splitting the Company’s shares were completed by the Company’s lawyer during October 2011. Accordingly the number of the Company’s shares has became equal to 97,600,000 shares with a par value of SYP 100 each.

The capital subscribed and paid as of December 31, 2012 is summarized as follows:

Total as of

Number of December 31,

Shareholders Percentage shares 2012

SYP

Founders Subscriptions 85% 82,960,000 8,296,000,000

Public Subscriptions 15% 14,640,000 1,464,000,000

100% 97,600,000 9,760,000,000

18. SALESThis caption represents the company’s sales of cement to local and neighbor market for the year ended

December 31, 2012.

19. COST OF SALESThis caption comprises the following:


2012 2011

SYP SYP

Fuel and overhead 1,654,123,680 1,812,701,249

Raw materials 662,962,205 474,023,921

Depreciation 691,160,134 290,023,170

Other overhead 247,662,488 18,975,212

Salaries, wages and benefits 162,141,271 48,604,161

Outsourced services 137,614,669 121,724,020

3,555,664,447 2,766,051,733


72 73

20. General And Administrative Expenses This caption comprises the following:


2012 2011

SYP SYP

Training expenses 10,210,003 2,839,940

Salaries, wages and allowances 128,470,081 80,606,560

Consulting and professional fees 49,431,796 23,677,003

Stolen and defective materials 27,562,720 -

Depreciation 3,976,842 330,358,121

Amortization 10,767,376 402,042

Rents 10,164,676 8,223,852

Bank commissions 26,548,516 4,128,025

Telecommunications 6,155,129 3,595,391

Reception and entertainment 10,022,198 2,705,725

Maintenance, repairs, and car insurance 2,054,422 2,534,558

Insurance expenses 28,382,341 -

Utilities 1,270,545 -

Importing expenses 1,432,820 -

Other financing expenses 410,437 -

Travel and accommodation expenses 12,951,098 4,521,944

Withholding tax for non residents 45,722 3,420,025

Capital Stamp duty in addition to local

administrative municipality fee 2,361,065 2,719,542

Fuel 2,626,824 2,223,983

Advertising and publishing 3,781,770 1,044,728

Other expenses 13,157,553 10,912,875

351,783,934 483,914,314

During the last days of 2012, the company’s factory underwent several robberies, which caused harm to some of the company’s assets and some of the company’s fixed assets were stolen. Net book value of these assets was approximated to amount to SYP 27, 562,720. The stolen goods and defective materials don’t have any effect on the Company’s operations and they are classified as follows:

For the year ended

December 31, 2012

SYP

Cash on hand & at banks (SYP) 283,255

Provision for stolen goods & defective materials (Note 7) 11,975,408

Net book value of stolen goods (Note 10) 15,304,057

27,562,720

21. LOSSES ON DIFFERENCE OF EXCHANGEThis caption comprises the losses resulting from difference of exchange on financial assets and liabilities denominated in foreign currency, since the entity presents its financial statements in Syrian Pounds its functional currency. Meanwhile, most financial liabilities are recorded in foreign currency, in addition to the currency devaluation compared to previous years.

22. INTEREST INCOMEThis caption comprises the following:


2012 2011

SYP SYP

Interest on short-term deposits 6,150,417 3,542,824

Interest on current amounts 7,995,234 16,947,790

14,145,651 20,490,614


74

23. Interest ExpenseThis caption comprises the following:


2012 2011

SYP SYP

Interest on bank facilities 588,408,796 432,605,936

Interest on vendor loans 113,218,477 150,152,002

701,627,273 582,757,938

Deduct:

Interest capitalized to property plant and equipment - (103,041,410)

Interest expense 701,627,273 479,716,528

24. Loss Per ShareThe loss per share is calculated using the weighted average method of outstanding shares during the year as below:


2012 2011

SYP SYP

Loss for the year (604,852,230) (669,171,978)

Weighted average shares for the year 97,600,000 97,600,000

Loss per share (6.20) (6.86)

25. Supplementary Note To The Statement Of Cash Flows For the purpose of preparing the statement of cash flows, the effect of non-monetary transactions was eliminated as follows:

• Transfer of amount of SYP 1,930, 679, 797 from long term loan to short term loan.

• Increase in the amount of SYP 102,674,199 to “Due to Related Parties – Non Current” representing translation adjustments.

• Transfer of amount of SYP 105,688,164 from “Projects Under Construction” to “Intangible Assets”.

26. FAIR VALUE AND RISK MANAGEMENTFair Values of Financial Assets and Liabilities

The carrying book value of financial assets and liabilities are not materially different from their fair values applicable at the statement of financial position date.

(a) Capital risk management The Company manages its capital to ensure it will be able to continue as a going concern while maximizing its return through the optimization of the debt and equity balance.

The capital structure of the Company consists of debts (contractors, related parties and due to banks).

The gearing ratio was as follows:

As of December 31,

2012 2011

SYP SYP

Due to suppliers and contractors 267,826,341 367,665,582

Short – term loans 3,000,717,156 1,709,870,684

Due to related parties - non current 371,495,913 268,821,714

Long-term loan 5,649,153,900 6,651,717,382

Cash on hand and at banks ( 969,327,990) (1,319,312,157)

Net debt 8,319,865,320 7,678,763,205

Equity 7,943,287,567 8,548,139,797

Net debts to equity ratio 104.74% 89.83%

(b) Market RiskMarket risk is caused by the fluctuations in value or in the revenues resulted from the assets, interest or exchange rates including the risks resulted from the mismatch between assets and liabilities.


75

76 77

(c) Liquidity Risk ManagementLiquidity risk is the risk that cash may not be available to pay obligations when due to a reasonable cost. To mitigate this risk, management anticipates cash flows for both assets and liabilities in a periodic basis.

As of December 31, 2012

Less than More than

one year one year Total

Assets SYP SYP SYP

Current assets:

Cash on hand and at banks 969,327,990 - 969,327,990

Advances to contractors 369,430,474 - 369,430,474

Due from related parties 2,000,415 - 2,000,415

Other debit balances 66,157,072 - 66,157,072

Total current assets 1,406,915,951 - 1,406,915,951

Total assets 1,406,915,951 - 1,406,915,951

Liabilities -

Current liabilities: -

Due to suppliers and contractors 267,826,341 - 267,826,341

Short-term loans 3,000,717,156 - 3,000,717,156

Advances from customers 113,196,230 - 113,196,230

Other payables and accrued expenses 557,163,576 - 557,163,576

Total current liabilities 3,938,903,303 - 3,938,903,303

Non-Current liabilities:

Due to related parties – non current - 371,495,913 371,495,913

Long term loan - 5,649,153,900 5,649,153,900

Total non-current liabilities - 6,020,649,813 6,020,649,813

Total liabilities 3,938,903,303 6,020,649,813 9,959,553,116

Liquidity excess/ (shortage) (2,531,987,352) (6,020,649,813) (8,552,637,165)


Less than More than

one year one year Total

Assets SYP SYP SYP

Current assets:

Cash on hand and at banks 1,319,312,157 - 1,319,312,157

Advances to contractors 461,260,455 - 461,260,455

Due from related parties 2,013,114 - 2,013,114

Other debit balances 41,673,683 - 41,673,683

Total current assets 1,824,259,409 - 1,824,259,409

Total assets 1,824,259,409 - 1,824,259,409

Liabilities

Current liabilities:

Due to suppliers and contractors 367,665,582 - 367,665,582

Short-term loans 1,709,870,684 - 1,709,870,684

Advances from customers 135,806,980 - 135,806,980

Other payables and accrued expenses 322,235,523 - 322,235,523

Total current liabilities 2,535,578,769 - 2,535,578,769

Non-Current liabilities:

Due to related parties – non current - 268,821,714 268,821,714

Long term loan - 6,651,717,382 6,651,717,382

Total non-current liabilities - 6,920,539,096 6,920,539,096

Total liabilities 2,535,578,769 6,920,539,096 9,456,117,865

Liquidity excess/ (shortage) (711,319,360) (6,920,539,096) (7,631,858,456)


78


(d) Interest Rate RiskThe Company’s interest rate risk arises from the possibility that changes in market interest rates will affect the value of interest earning assets and interest bearing liabilities.

The sensitivity analysis below have been determined based on the exposure to interest rates for floating rate liabilities.


Net assets/

Liabilities Assets (liabilities)

SYP SYP SYP

USD 6,217,923,100 - (6,217,923,100)

The following table shows the Company’s sensitivity to 0.5% increase in interest rates against Syrian Pound. In case of 0.5% decrease in interest rate, the effect will be similar but in opposite sign.

For the year ended December 31, 2012

Net assets/

Liabilities Assets (liabilities)

SYP SYP SYP

Loss (31,089,615) - (31,089,615)

(e) Foreign currency risk managementThe company undertakes transactions denominated in foreign currencies which are exposed to exchange rate fluctuations. During the year the company’s management has performed several analysis of the foreign exchange risk and approached a local bank in order to check the possibility of currency hedging, however, it was not possible to hedge SYP/USD exposure.

The carrying amounts of the company’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows


Liabilities Assets Net assets/ (liabilities)

SYP SYP SYP

USD (4,603,471,868) 155,749,872 (4,447,721,996)

EUR - 302,407,438 302,407,438

LBP - 153,098,576 153,098,576

SAR - 327,238,225 327,238,225

Until the date of approval of these financial statements, the foreign exchange rate for USD against SYP reached 94.5 Syrian Pounds for every 1 USD in the market. With a difference ratio of 22% from the declared price as per the Central Bank of Syria at the end of the year 2012. As such the sensitivity analysis shows the following:

Gain / (loss) as of December 31,

2012 2011

USD ( 986,059,967) (1,004,632,504)

EUR 67,043,729 52,611,431

SAR 72,515,991 -

LBP 33,941,954 -

This analysis was prepared under the assumption that the exchanged rate of Syrian Pounds against foreign currencies will drop by a ratio of 22%. Then numbers mentioned above indicate an increase in the loss of the company.

When the value of the Syrian Pounds improves by 22% with respect to other currencies, there will be a similar effect on the net loss but the balance will appear with an opposite sign.

27. APPROVAL OF THE FINANCIAL STATEMENTSThe financial statements were approved for issuance by the board of directors on January 31, 2013.

79

Al Badia Cement … QUALITY TO TRUST

Documents

Annual Report 2012 - Al badia cement