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Dangote flour mills annual report 2009

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Dangote flour mills annual report 2009

Dangote flour mills annual report 2009

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  • 1. RC 501757
  • 2. 1DA N G OT E F L O U R M I L LS P L C Notice of 4th Annual General Meeting 2 Directors, Advisers and Other Corporate Information 3 Financial Highlights 4 Chairman’s Statement 5 Board of Directors 7 Report of the Directors 8 Corporate Governance Report 12 Report of the Audit Committee 14 Report of the Independent Auditors 15 Statement of Significant Accounting Policies 16 Consolidated Profit and Loss Account 18 Consolidated Balance Sheet 19 Consolidated Statement of Cash Flows 20 Notes to the Consolidated Financial Statements 21 Consolidated Value Added Statement 32 Consolidated Four-Year Financial Summary 33 Share Capital History 34 Proxy Form Contents
  • 3. 2 DA N G OT E F L O U R M I L LS P L C NOTICE IS HEREBY GIVEN that the 4th ANNUAL GENERAL MEETING OF DANGOTE FLOUR MILLS PLC will hold at Tahir Hotel, Kano on Wednesday, 6th October, 2010 at 12.00 noon prompt to transact the following business: ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the year ended 31st December 2009 along with the reports of the Directors and Audit Committee thereon for the year 2009. 2. To declare a Dividend. 3. To re-elect Directors. 4. To re-appoint the Auditors. 5. To authorize the Directors to fix the remuneration of the Auditors. 6. To appoint members of the Audit Committee. SPECIAL BUSINESS To fix the remuneration of the Directors. PROXY A member of the Company entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company. A proxy for an organization may vote on a show of hands and on a poll. For the appointment to be valid, a completed proxy form must be deposited at the registered office of the Company or with the Registrar not later than 48 hours before the time fixed for the meeting. DIVIDEND The Board recommends for the approval of shareholders a payment of final dividend of 50 kobo per ordinary share of 50 kobo each, out of the profits declared in the financial year ended 31st December, 2009 and which will be subject to withholding tax at the appropriate rate having paid an interim dividend of 30 kobo per share for the period ended 30th September, 2009 the total dividend payable for the year ended 31st December, 2009 will be 80 kobo per share. DIVIDEND WARRANTS If approved, the dividend warrants will be posted on Monday, 25th October, 2010 to shareholders, whose names appear in the Company Register of Members at the close of business on Friday, 17th September, 2010. NOTES 1. CLOSURE OF REGISTER AND TRANSFER BOOKS NOTICE IS HEREBY GIVEN that the Register of Members and Transfer Books of the Company will be closed from Monday, 20th September, 2010 to Monday, 27th September, 2010 both days inclusive. 2. AUDIT COMMITTEE In accordance with Section 359(5) of the Companies and Allied Matters Act 1990, a nomination (in writing) by any member or shareholder for appointment to the Audit Committee should reach the Company Secretary at least 21 days before the Annual General Meeting. The Audit Committee comprises three shareholders and three Directors. BY ORDER OF THE BOARD A. L. ISA (MRS) Company Secretary Dated this 6th day of September, 2010 DANGOTE FLOUR MILLS PLC 8, Rycroft Street, Off Liverpool Road, Apapa, Lagos, Nigeria. Notice of 4th Annual General Meeting A. L. ISA (MRS) Company Secretary
  • 4. 3DA N G OT E F L O U R M I L LS P L C DIRECTORS Alhaji Aliko Dangote — Chairman Alhaji Sani Dangote — Director Mr. Olakunle Alake — Director Mr. Uzoma Nwankwo — Director Alhaji Abdu Dantata — Director Alhaji Abdullahi Mahmoud — Director Mr. Asue Ighodalo — Director Brigadier-General S. L. Teidi (Rtd) — Director Mr. Rohit Chaudhry — Managing Director Alhaji Shuaibu Idris — Deputy Managing Director COMPANY SECRETARY/LEGAL ADVISER A. L. Isa (Mrs) REGISTERED OFFICE 1, Alfred Rewane Road, Falomo, Ikoyi, Lagos. REGISTRAR AND TRANSFER OFFICE Oceanic Registrars Ltd. 154, Ikorodu Road, Onipanu, Shomolu, Lagos. AUDITORS Akintola Williams Deloitte (Chartered Accountants) 235, Ikorodu Road, Ilupeju, Lagos. BANKERS Zenith Bank Plc Afribank Plc Equitorial Trust Bank Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Oceanic Bank Plc Diamond Bank Plc Access Bank Plc Intercontinental Bank Plc First City Monument Bank Plc United Bank for Africa Plc Directors, Advisers and Other Corporate Information
  • 5. 4 DA N G OT E F L O U R M I L LS P L C Financial Highlights The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 PROFIT AND LOSS Turnover 61,388,064 47,927,300 41,839,919 30,109,610 Profit before taxation 5,374,056 3,167,625 5,156,801 1,758,137 Taxation 187,024 (178,066) 203,060 (54,045) Profit after taxation 5,561,080 2,989,559 5,359,861 1,704,092 BALANCE SHEET Share capital 2,500,000 2,500,000 2,500,000 2,500,000 Shareholders’ funds 28,469,073 24,707,190 26,749,581 23,157,859 Per 50 kobo share data (kobo) Earnings per share (kobo) 111 60 107 34
  • 6. 5DA N G OT E F L O U R M I L LS P L C Distinguished shareholders, Members of the Board of Directors, Gentlemen of the Press, Ladies and Gentlemen, It is my pleasure to welcome you on behalf of the Board of Directors to the 4th Annual General Meeting of our great Company, Dangote Flour Mills Plc. This meeting gives me the opportunity to present our Company financial statements and scorecard to shareholders and various stakeholders for the year ended 31st December 2009, the challenges we faced, how these challenges were managed to make the Company stay afloat. Before I go into the details of the accounts, permit me to briefly state major economic events which impacted our operations during the year under review. PREVAILING ECONOMY The year 2009 was a challenging one for business both locally and globally. The global financial crisis, which started in 2007, reached its climax in 2009 with the crash of the global stock markets and failure of several Chairman’s Statement banks, which led to government interventions to recapitalise the financial system. The Nigerian Stock Exchange also experienced huge stock price fall in 2009 with the All Share Index dropping drastically. This triggered loss of investors’ confidence and subsequent liquidity crisis in the Nigerian economy; thereby affecting our customer’s ability to fund their businesses appropriately. There was no significant improvement in the poor state of infrastructure including power and road network during the year. Despite government’s efforts, only an average of 3,500 megawatts was reportedly achieved as opposed to the target of 6,000 megawatts. The crisis in the Nigerian energy sector has constituted a hindrance to socio-economic transformation and, consequently, capacity utilization in the industry where we operate. The state of our road network also was a major challenge in 2009 financial year. These developments impacted adversely on our business and has not helped the operating environment. Inspite of this tough period however, your Company was able to significantly increase its market share, revenue and profit. COMPANY PERFORMANCE With a relative stability in price for all our products for the year under review, I am delighted to report that our Company has delivered record revenue and profit for the financial year ended 31 December 2009. Dangote Flour Mills Plc achieved a profit before tax of N=5.374 billion in 2009, representing a growth rate of 69.7% from N=3.167 billion reported in the previous year. The turnover also increased from N=47.927 billion in 2008 to N=61.388 billion in 2009 with profit after tax moving from N=2.989 billion in 2008 to N=5.561 billion in 2009. This represents 28.1% and 86% increase in turnover and profit after tax respectively. The subsidiaries have contributed an impressive N=19.5 billion to the Group turnover which is highly commendable despite all the challenges of surviving in a highly competitive industry. Continuous effort in growing economies of scales, and cost reduction through operational efficiency as well as the effect of focusing on human capital development had contributed to the Group’s better performance The flour milling business remains strong and constitutes a key component of the Group’s profitability.
  • 7. 6 DA N G OT E F L O U R M I L LS P L C Although overall average selling price had remained stable compared to the prior year, flour sales were more favourable. This increase resulted in a profit before tax recorded of N=5.37 billion for the year. OUR PEOPLE Our achievements this year would not have been possible without the dedication and commitment of our most important asset — our people. I would like to seize this opportunity to acknowledge the good contributions of our management and staff for their relentless and painstaking efforts towards the achievement of the Dangote Flour Mills Plc dream. On our part, we would remain committed to providing adequate and necessary development programmes and enabling environment in order to maximise their effectiveness and efficiency on the job at all times. FUTURE PROSPECT With an improved economic environment and barring any unforeseen circumstances, Dangote Flour Mills Plc is expected to perform favourably in 2010. The Group has embarked on an expansion project to enlarge our manufacturing and packaging facilities within the country. The current ongoing projects in our various mills are aimed at achieving 7,300 metric tons per day. These projects are scheduled to be completed in the last quarter of 2010. With the planned introduction of our wheat meal brand, Alkama and retail packs for flour and Danvita, the future looks bright and our Company is positioned to take over the market lead. The plan to commence direct and indirect export into Chad, Cameroon, Niger and Sudan is at final stage. Your futurist management is also exploring the need to site a mill in Senegal. There is also a plan to increase the capacity of our subsidiary (Agrosacks Limited) by 5 million bags per day. It is expected that this expansion will contribute positively to the Group and assist in achieving greater economies of scale. DIVIDENDS With the favourable profit for the year ended 31 December 2009, the Board of Directors is pleased to recommend a final dividend of 50 kobo per 50 kobo share for your approval at this Annual General Meeting. This is in addition to the interim dividend of 30 kobo per ordinary share earlier paid; thus bringing total dividend payout to 80 kobo per 50 kobo share. GLOBAL ENVIRONMENT Recent global events and their impact on our business is another important factor which must be mentioned here. The international price of our major raw material, wheat is already soaring due to bad harvest and fire incidence in Russia, one of the major producers of wheat. This is in addition to the current global financial crisis whose negative effects on sourcing offshore funds to finance imports of raw materials and spares have remained unabated. Despite the above, I wish to re-assure shareholders that our Company in its proactive manner has put strategies in place to cope with any challenges arising from this crisis. CORPORATE SOCIAL RESPONSIBILITY We would also continue to play our part in the society as a responsible corporate body by not only complying with required standards in products quality but also by engaging with the larger society to continue to contribute positively to the improved social welfare of our operating environment. CUSTOMERS Our customers are considered indispensable partners in our business. Within the year under review, we had series of interactive sessions with them which enabled them air their views and make significant contributions on how to grow our partnership together. We shall continue to hold this wonderful group of people in high esteem. On behalf of the Board, Management and Staff of the Company, I hereby wish to say a big thank you to all our numerous customers. APPRECIATION On behalf of the Board of Directors, I would like to express our heartfelt appreciation to the management and employees of the Group for their continued dedication, support and commitment during the year. I would also like to thank you, my fellow shareholders, as well as our customers, suppliers, bankers, government agencies and regulatory authorities, for the unrelenting support and confidence in Dangote Flour Mills Plc. Thank you and God bless. Alhaji (Dr.) Aliko Dangote, CON Chairman Chairman’s Statement cont’d
  • 8. (rtd.)
  • 9. 8 DA N G OT E F L O U R M I L LS P L C 1. ACCOUNTS The Directors are pleased to submit their report together with the audited accounts of the Company for the year ended 31st December 2009. 2. RESULT The Group The Company N=’000 N=’000 Turnover 61,388,064 41,839,919 Profit after taxation and minority interest 5,530,732 5,359,861 3. PRINCIPAL ACTIVITIES The principal activities of the Company during the year are as follows: (a) Manufacturing and selling of bread and biscuit flour (b) Manufacturing and selling of Wheat Offal (Bran) (c) Manufacturing of Semolina. The principal activities of its subsidiaries are: Pasta Manufacture of Spaghetti, Macaroni etc. Agrosacks Manufacture of packaging materials. 4. LEGAL FORM The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated as public limited liability company on 1 January 2006 and commenced operations on the same date. It however became quoted on the Nigerian Stock Exchange on 4 February 2008. Its principal activity is the milling, processing and marketing of branded flour. 5. DIRECTORS AND DIRECTORS’ INTEREST The names of Directors who are currently in office are as follows: (a) Alhaji Aliko Dangote (b) Alhaji Sani Dangote (c) Mr. Olakunle Alake (d) Mr. Uzoma Nwankwo (e) Alhaji Abdu Dantata (f) Alhaji Abdullahi Mahmoud (g) Mr. Asue Ighodalo (h) Brigadier-Gen. S. L. Teidi (rtd) (i) Mr. Rohit Chaudhry (j) Alhaji Shuaibu Idris (i) In accordance with the provisions of Section 259 of the Companies and Allied Matters Act 1990, one-third of the Directors of the Company shall retire from office. The Directors to retire every year shall be those who have been longest in office since their last election. In accordance with the provisions of this section, Mr. Olakunle Alake, Mr. Uzoma Nwankwo and Alhaji Abdullahi S. Mahmoud retire by rotation and being eligible, offer themselves for re-election. (ii) No Director has a service contract not determinable within five years. Report of the Directors for the Year Ended 31 December, 2009
  • 10. 9DA N G OT E F L O U R M I L LS P L C (iii) The Directors’ interest in the issued share capital of the Company as recorded in the register of members and/or as notified by them for the purpose of Section 275 of the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004 are as follows: Number of 50k Shares held as at 31 December 2009 (a) Alhaji Aliko Dangote 38,148,029 (b) Alhaji Sani Dangote 2,200,000 (c) Mr. Olakunle Alake 2,377,500 (d) Mr. Uzoma Nwankwo 271,500 (e) Alhaji Abdu Dantata — (f) Alhaji Abdullahi Mahmoud 43,750 (g) Mr. Asue Ighodalo — (h) Brigadier-Gen. S. L. Teidi (rtd) — (i) Mr. Rohit Chaudhry — (j) Alhaji Shuaibu Idris 118,680 6. DIRECTORS’ RESPONSIBILITIES The Directors are responsible for the preparation of financial statements which give true and fair view of the state of affairs of the Company at the end of each financial year and of the profit or loss for that period and comply with the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004. In doing so they ensure that: (a) Proper accounting records are maintained which disclose with reasonable accuracy the financial position of the Company and which ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act of Nigeria; (b) Applicable accounting standards are followed; (c) Suitable accounting policies are adopted and consistently applied; (d) Judgments and estimates made are reasonable and prudent; (e) It is appropriate for the financial statements to be prepared on a going concern basis; (f) Internal control procedures are instituted which as far as is reasonably possible, safeguard the assets and prevent and detect fraud and other irregularities. 7. CORPORATE GOVERNANCE Dangote Flour Mills Plc is committed to manage the Company with best practice and policies which align management of the Company with the interests of all stakeholders. This, in the long run results in beneficial relationship and long-term growth. Dangote Flour Mills imbibes good Corporate Governance as a key factor in achieving its business success while remaining within the ambit of the law as a good corporate entity. The Board in line with its responsibilities to Shareholder works to achieve the best practice of good Corporate Governance. The business of the Company is conducted in a fair, honest and transparent manner which conforms to high ethical standards. 8. SUBSTANTIAL INTEREST IN SHARES The Registrar has advised that according to the register of members on 31st December 2009, only Dangote Industries Limited with 3,667,716,667 ordinary shares of 50k each held more than 5% of the issued share capital of the Company. 9. FIXED ASSETS Movements in fixed assets during the year are shown in Note 6 to the Accounts. In the opinion of the Directors, the market value of the Company’s properties is not less than the value shown in the accounts. Report of the Directors cont’d for the Year Ended 31 December, 2009
  • 11. 10 DA N G OT E F L O U R M I L LS P L C 10. DONATIONS AND CHARITABLE GIFTS The holding Company Dangote Industries Limited currently makes donation on behalf of the Group Companies. 11. POST BALANCE SHEET EVENTS There were no significant developments since the balance sheet date which could have had a material effect on the state of affairs of the Company as 31st December, 2009 and the profit for the year ended on that date which have been adequately recognized. 12. COMPANY DISTRIBUTORS The Company’s products are distributed through many distributors spread across the whole country. 13. SUPPLIERS The Company procures its materials at arm’s length basis from overseas and local suppliers. Amongst its main overseas and local suppliers are Cargill International SA, Ameropa SA, Vitachem Nigeria Limited and Biochemical Nigeria Limited. 14. ANALYSIS OF SHAREHOLDINGS Analysis of shareholdings as at 31st December, 2009 Range No. of Holders Per cent Units Per cent 1 — 50,000 381,999 99.58 782,865,597 15.66 50,001 — 100,000 817 0.21 63,053,575 1.26 100,001 — 1,000,000,000 809 0.20 486,364,869 9.73 1,000,000,001 and above 1 0.01 3,667,715,959 73.35 383,626 100.00 5,000,000,000 100.00 15. HUMAN RESOURCES 1. Employment, Training and Employees The Company recruits without discrimination in considering application for employment through selection process to get the best and most suitable for various positions after interview. The Company employs management professional and technical expertise and continues to invest in developing such skills and maintain to set standards. The Company also has in-house training facilities in additional to external training for employees. This gives every employee equal opportunity for career development. 2. Employees Welfare and Safety at Work The Company continuously strives to improve its operations to ensure a safe working environment. The Company maintains a high standard of hygiene in all its premises through sanitation practices and the regular fumigation exercises have been further strengthened by the installation of pest and rodent control gadgets. Safety and environment workshops have been organized for all senior employees with a broad focus on good house-keeping to ensure good and safe working environment. Nutritionally balanced meals are provided in staff canteens at fully subsidized prices. The use of safety shoes, goggles, apron e.t.c. is enforced. The Company carries out safety and fire awareness drills for all staff on regular basis. As a guide in the performance of all functions, a written Safety Policy for ensuring safe working practices is in place. Safety Officers and Security Supervisors are on hand to ensure the use of the systems and implementation of procedures for safety by all staff. Also, there is a clinic within each factory to provide adequate medical care in the event of accidents or any emergency in the work place. 3. Employee Development Local and overseas training and development programmes have been organized to meet the need of the Company’s modernization, automation strategy implementation. The Company continues to place premium on its human capital development arising from the fact that this would ensure improved efficiency of the business while maintaining strategic advantage over competition. On the other hand, the employee is fully equipped to provide quality service which at the end will be beneficial to the organization and thus contribute to its growth. Report of the Directors cont’d for the Year Ended 31 December, 2009
  • 12. 11DA N G OT E F L O U R M I L LS P L C 16 AUDIT COMMITTEE In compliance with the provisions of Section 359(3) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004, the Company has an Audit Committee comprising 3 Shareholders and 3 Directors as follows: 1. Mr. Alex Adio 2. Alhaji Kasumu Ibrahim 3. Chief M. O. Mbonu 4. Alhaji Abdullahi Mahmoud 5. Mr. Asue Ighodalo 6. Mr. Olakunle Alake The functions of the Audit Committee are as laid down in Section 357(2) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004. 17. AUDITORS Messrs Akintola Williams Deloitte (Chartered Accountants) have indicated their willingness to continue in office as the Company’s Auditors in accordance with Section 357(2) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria, 2004. A resolution will be proposed authorizing the Directors to fix their remuneration. BY ORDER OF THE BOARD A. L. ISA (MRS) Company Secretary Dated this 6th day of September, 2010 Report of the Directors cont’d for the Year Ended 31 December, 2009
  • 13. 12 DA N G OT E F L O U R M I L LS P L C DANGOTE FLOUR MILLS PLC is committed to the best practice and procedures in corporate governance. Overseen by the Board of Directors, corporate governance practice are constantly under review, in line with the dynamics of the business environment. The Corporate Governance policies adopted by the Board of Directors are designed to ensure that the Company’s business is conducted in a fair, honest and transparent manner which conforms to high ethical standards. THE BOARD Appointment to the Board is made by Shareholders at the Annual General Meeting, upon the recommendation of the Board of Directors. The Board consists of ten (10) members comprising the Chairman, Managing Director, assisted by one (1) Deputy Managing Director and seven (7) non-Executive Directors. The Board governs and supervises the overall activities of the Company through the Managing Director. Members of the Board of Directors hold quarterly meetings to decide on policy matters and direct the affairs of the Company, review its performance, its operations, finances and formulate growth strategy. Attendance at Directors’ meetings was impressive. In line with provisions of Section 258(2) of the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004, the records of Directors’ attendance at Board meetings is available for inspection at the Annual General Meeting. The remuneration of Executive Directors is fixed and reviewed by a Committee of non-Executive Directors. Composition of Committees within the Board of Directors Members of Nomination and Remuneration Committee Mr. Asue Ighodalo Alhaji Abdu Dantata Mr. Uzoma Nwankwo Members of Finance and Investment Committee Alhaji Abdullahi S. Mahmoud Brigadier-Gen. S. L. Teidi (rtd) Mr. Olakunle Alake The Board delegates the day-to-day running of the Company’s affairs to the Managing Director/Chief Executive. The Managing Director/Chief Executive is supported in this task by an Executive Management Committee. The Board consists of 10 members, made up of the Chairman, Managing Director, 1 Deputy Managing Director and 7 non-Executive Directors. FREQUENCY OF MEETINGS The Board of Directors holds at least four (4) meetings a year, to consider important corporate events and actions such as approval of Corporate Strategy, Annual Corporate Plan, review of internal risk management and control systems, review performance and direct the affairs of the Company, its operations, finances and formulate growth strategies. It may however, convene a meeting if the need arises. During the year under review, the Board had a total of four (4) meetings. Attendance at Directors’ meetings is impressive. In line with provisions of Section 258(2) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004, the record of Directors’ attendance at Board meetings is available for inspection at the Annual General Meeting. RESPONSIBILITIES OF THE BOARD OF DIRECTORS It is the responsibility of the Board of Dangote Flour Mills Plc to: • Ensure that the Company’s operations are conducted in a fair and transparent manner that conforms to high ethical standards; • Ensure integrity of the Company’s financial and internal control policies; • Ensure the accuracy, adequacy and timely rendition of the statutory returns and financial reporting to the regulatory authorities (NSE, CAC, SEC) and Shareholders; Corporate Governance Report
  • 14. 13DA N G OT E F L O U R M I L LS P L C • Ensure value creation for the Shareholders, employees and other stakeholders; • Review and approve corporate policies, strategy, annual budget and business plan; • Monitor implementation of policies and the strategic direction of the Company; • Set performance objectives, monitor implementation and corporate performance; • Review and approve all major and capital expenditure of the Company; • Ensure that the statutory rights of all Shareholders are protected at all times; • Provide the Company with entrepreneurial leadership within a framework of prudent and effective controls which enables risk to be assessed and managed; • Deploy the Company’s resources to profitable use; • Outline the Company’s strategic and corporate aims; • Ensure that the necessary financial and human resources are in place for the Company to meet its objectives; • Review management performance on a continuous basis; • Set the Company’s values and standards; • Take decisions objectively in the interests of the Company; • Ensure that its obligations to its Shareholders and other stakeholders are understood and met; • Constructively challenge and help develop proposals on strategy developed by Management. The Board carries out some of the above responsibilities through the Board Committees whose terms of reference set out clearly their roles, responsibilities, scope of authority and procedure for reporting to the Board. Each Committee is presided over by a non-Executive Director to ensure strict compliance with the principles of good Corporate Governance practice; while the Audit Committee has a representative of the Shareholders as its Chairman. In compliance with the practices of good Corporate Governance, the Chairman of the Board is not a member of any of the Committees, namely: THE FINANCE AND INVESTMENT COMMITTEE 1. Alhaji Mahmoud S. Abdullahi — Chairman 2. Brigadier-Gen. S. L. Teidi (rtd) — Member 3. Mr. Olakunle Alake — Member THE NOMINATION AND REMUNERATION COMMITTEE 1. Mr. Asue Ighodalo — Chairman 2. Mr. Uzoma Nwankwo — Member 3. Alhaji Abdu Dantata — Member THE AUDIT COMMITTEE The Audit Committee is made up of six (6) members, consisting of three representatives of the Shareholders and three members of the Board of Directors. Members of the Audit Committee are elected at the General Meetings. The Committee, in compliance with the requirements of Corporate Governance practice is chaired by a Shareholder. The Committee met two (2) times during the year under review. Members of the Committee are: 1. Mr. Alex Adio — Shareholder/Chairman 2. Chief M. O. Mbonu — Shareholder 3. Alhaji Kasumu Ibrahim — Shareholder 4. Mr. Asue Ighodalo — Director 5. Mr. Olakunle Alake — Director 6. Alhaji Mahmoud Abdullahi — Director In addition to its responsibility to review the scope, independence and objectivity of the audit, the Audit Committee carries out all such matters as are reserved to the Audit Committee by the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria, 2004. • Review adequacy and effectiveness of Dangote Flour Mills Plc internal control policies prior to endorsement by the Board. • Direct and supervise investigations on matters within the scope, such as evaluations of the effectiveness of Dangote Flour Mills Plc internal controls, cases of employee, business partner and client misconduct or conflict of interest. Corporate Governance Report cont’d
  • 15. 14 DA N G OT E F L O U R M I L LS P L C TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, 1990, we have examined the Auditors’ report for the year ended 31st December, 2009. We have obtained all the information and explanation we required. In our opinion, the Auditors’ report is consistent with our review of the scope and planning of the audit. We are also satisfied that the accounting policies of the Company are in accordance with the legal requirements and agreed ethical practice. Having reviewed the Auditors’ findings and recommendations on Management matters, we are satisfied with Management’s response therein. Mr. Alex Adio Chairman, Audit Committee Dated this 6th day of September, 2010 Members of the Committee Alhaji Kasumu Ibrahim Chief M. O. Mbonu Mr. Asue Ighodalo Alhaji Abdullahi S. Mahmoud Mr. Olakunle Alake Report of the Audit Committee
  • 16. 15DA N G OT E F L O U R M I L LS P L C TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC We have audited the accompanying consolidated financial statements of Dangote Flour Mills Plc and its subsidiaries, set out on pages 16 to 33 which comprise the balance sheet as at 31 December 2009, the income statement, statement of cash flows and statement of value added for the year then ended, and a summary of the significant accounting policies and other explanatory information. Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Companies and Allied Matters Act, CAP C20, LFN 2004 and for such internal control as the Directors determine are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Dangote Flour Mills Plc and its subsidiaries as at 31 December 2009, and of its financial performance and its cash flows for the year then ended; the Company and its subsidiaries have kept proper books of account, which are in agreement with the balance sheet and income statements in the manner required by the Companies and Allied Matters Act, CAP C20, LFN 2004 and in accordance with the Statements of Accounting Standards issued by the Nigerian Accounting Standards Board. Chartered Accountants Lagos, Nigeria 19 August, 2010 Akintola Williams Deloitte 235 Ikorodu Road, Ilupeju P.O. Box 965, Marina Lagos, Nigeria Tel: +234 1 2717800 Fax: +234 1 2717801 www.deloitte.com/ng Report of the Independent Auditors
  • 17. 16 DA N G OT E F L O U R M I L LS P L C The following are the significant accounting policies which have been adopted. 1. Basis of accounting The consolidated financial statements are prepared on the historical cost basis. Adjustment has not been made to reflect the impact of specific price changes or changes in the general level of prices on the financial statements. 2. Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries which are Dangote Pasta Limited and Dangote Agrosacks Limited whose financial statements are equally made up to 31 December. All inter-company transactions and balances are eliminated. 3. Turnover Turnover represents the net value of goods and services sold to third parties during the year less discounts. 4. Fixed assets Fixed assets are stated at cost less accumulated depreciation. 5. Depreciation Depreciation is calculated to write off the cost of fixed assets on a straight line basis over their expected useful lives. The principal annual rates used for this purpose are: % Leasehold land and buildings — 2 Plant and machinery — 6 Motor vehicles — 25 Tools and equipment — 20 Furniture and fittings — 20 Computer equipment and softwares — 33 6. Stocks and work-in-progress Stocks and work-in-progress are stated at the lower of cost based on FIFO and net realisable value while goods in transit are stated at the invoice price. Cost of stocks includes purchase cost, conversion cost (materials, labour and overhead) and other costs incurred to bring inventory to its present location and condition. 7. Foreign currencies Transactions in foreign currencies are recorded in Naira at the rates of exchange ruling at the time they arise. Assets and liabilities existing in foreign currencies are converted to Naira at the rates of exchange ruling at the balance sheet date. Gains or losses arising therefrom are included in the profit and loss account. 8. Debtors Debtors are stated after deduction of specific provisions for debts considered doubtful of recovery. 9. Taxation (i) Companies income tax Income tax and education tax are provided by applying the current statutory rate on the taxable profit and adjusted profit respectively. (ii) Deferred taxation Deferred taxation is provided using the liability method at the current rate of income tax on all timing differences between the treatment of certain items for accounting purposes and their treatment for taxation in accordance with SAS 19. Statement of Significant Accounting Policies for the Year Ended 31 December, 2009 2 – 3 1 – 3
  • 18. 17DA N G OT E F L O U R M I L LS P L C 10. Employees retirement benefit scheme The Company and its subsidiaries make provision for retirement benefits in accordance with the Pension Reform Act of 2004. The contribution of the employer is 7.5% while that of the employee is 7.5% of relevant emoluments. The Company and its subsidiaries also operate a gratuity scheme for its permanent Nigerian staff, the benefits under which are related to employees’ length of service and remuneration. The provision for liability in respect thereof based on actuarial valuation is provided in full in the financial statements. 11. Investments Investments are stated at cost after specific provision for diminution in value. 12. Provisions Provisions are recognized when the Company and its subsidiaries have present obligation whether legal or constructive, as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation in accordance with the Statement of Accounting Standards (SAS) 23. 13. Segment reporting The Company’s business segments are presented by products that are subject to similar risks and returns. Statement of Significant Accounting Policies cont’d for the Year Ended 31 December, 2008
  • 19. 18 DA N G OT E F L O U R M I L LS P L C The Group The Company 2009 2008 2009 2008 Note N=’000 N=’000 N=’000 N=’000 Turnover 3 61,388,064 47,927,300 41,839,919 30,109,610 Cost of sales (48,560,958) (38,288,106) (31,842,774) (24,078,077) Gross profit 12,827,106 9,639,194 9,997,145 6,031,533 Distribution and administrative expenses (4,944,119) (5,182,564) (2,787,500) (3,271,788) Operating profit 7,882,987 4,456,630 7,209,645 2,759,745 Other income 4 411,530 1,012,493 185,877 940,375 Profit before interest payable 8,294,517 5,469,123 7,395,522 3,700,120 Interest income 95,821 97,121 65,385 15,370 Interest payable and similar charges (3,016,282) (2,398,619) (2,304,106) (1,957,353) Profit before taxation 5 5,374,056 3,167,625 5,156,801 1,758,137 Taxation 6 187,024 (178,066) 203,060 (54,045) Profit after taxation 5,561,080 2,989,559 5,359,861 1,704,092 Attributable to: Equity holders — parent 20 5,530,732 2,947,448 5,359,861 1,704,092 Non-controlling interest 21 30,348 42,111 — — 5,561,080 2,989,559 5,359,861 1,704,092 Earnings per share — Basic (kobo) 111 60 107 34 The accounting policies on pages 16 and 17 and other explanatory notes on pages 21 to 31 form part of these consolidated financial statements. Consolidated Profit and Loss Account for the Year Ended 31 December, 2009
  • 20. 19DA N G OT E F L O U R M I L LS P L C Consolidated Balance Sheet as at 31 December, 2009 The Group The Company 2009 2008 2009 2008 Note N=’000 N=’000 N=’000 N=’000 FIXED ASSETS 7 35,238,199 32,449,283 18,961,804 15,732,634 INVESTMENTS 8 — — 7,463,637 7,463,637 GOODWILL 278,925 278,925 — — DEFERRED TAXATION 16 328,067 — 328,067 — CURRENT ASSETS Stocks 9 8,246,918 9,910,531 3,248,788 5,397,449 Trade debtors 10 9,402,933 7,410,110 7,838,096 6,118,790 Other debtors and prepayments 11 1,681,842 1,333,748 952,239 626,649 Due from subsidiaries 27.1 — — 9,218,193 12,806,780 Due from related companies 27.2 6,997,161 8,865,888 5,716,330 2,972,121 Bank and cash balances 1,929,598 1,648,773 1,226,829 371,632 28,258,452 29,169,050 28,200,476 28,293,421 CREDITORS: Amounts falling due within one year Bank loans and overdrafts 12 13,868,256 20,595,334 10,652,531 15,214,170 Trade creditors 6,408,279 4,387,431 5,214,589 3,173,700 Other creditors and accruals 13 8,375,659 7,039,548 5,237,955 4,849,947 Due to subsidiaries 27.1 — — 974,969 690,711 Dividend payable 14 822,460 — 822,460 — Taxation 6 351,068 423,248 212,389 139,361 Due to related companies 27.3 5,016,326 3,960,932 4,624,887 3,887,582 34,842,048 36,406,493 27,739,780 27,955,471 NET CURRENT LIABILITIES (6,583,596) (7,237,443) 460,696 337,950 TOTAL ASSETS LESS CURRENT LIABILITIES 29,261,595 25,490,765 27,214,204 23,534,221 PROVISION FOR LIABILITIES AND CHARGES Gratuity 17 (559,926) (582,037) (464,623) (376,362) NET ASSETS 28,701,669 24,908,728 26,749,581 23,157,859 CAPITAL AND RESERVES Share capital 18 2,500,000 2,500,000 2,500,000 2,500,000 Share premium 19 11,806,537 11,806,537 11,806,537 11,806,537 Revenue reserve 20 14,162,536 10,400,653 12,443,044 8,851,322 Shareholders’ fund 28,469,073 24,707,190 26,749,581 23,157,859 Non-controlling interest 21 232,596 201,538 — — 28,701,669 24,908,728 26,749,581 23,157,859 The consolidated financial statements on pages 16 to 33 were approved by the Board of Directors on 19 August, 2010 and signed on its behalf by: Alhaji Aliko Dangote Rohit Chaudhry The accounting policies on pages 16 and 17 and other explanatory notes on pages 21 to 31 form part of these consolidated financial statements. }Directors
  • 21. 20 DA N G OT E F L O U R M I L LS P L C Consolidated Statement of Cash Flows for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 Note N=’000 N=’000 N=’000 N=’000 Cash flows from operating activities Cash receipts from customers 60,197,219 45,993,302 40,220,976 28,917,530 Cash payments to suppliers and employees (42,978,388) (36,719,304) (26,513,175) (21,300,004) Value added tax paid — — — — Income tax paid (213,223) — (51,979) — Net cash provided by operating activities 22 17,005,608 9,273,998 13,655,822 7,617,526 Cash flows from investing activities Proceeds from disposal of fixed assets — 138 — 138 Purchase of fixed assets 7 (5,399,703) (7,181,130) (4,322,725) (3,289,943) Net cash provided by investing activities (5,399,703) (7,180,992) (4,322,725) (3,289,805) Cash flows from financing activities Dividend paid (1,677,540) — (1,677,540) — Interest income 95,821 97,121 65,385 15,370 Term loan: — Obtained — 244,000 — — — Repaid (483,863) (1,094,490) — — Interest paid (3,016,283) (2,398,619) (2,304,106) (1,957,353) Net cash provided by financing activities (5,081,865) (3,151,988) (3,916,261) (1,941,983) Net increase/(decrease) in cash and cash equivalents 6,524,040 (1,058,982) 5,416,835 2,385,738 Cash and cash equivalents at 1 January (18,462,698) (17,403,716) (14,842,538) (17,228,276) Cash and cash equivalents at 31 December 23 (11,938,658) (18,462,698) (9,425,702) (14,842,538)
  • 22. DA N G OT E F L O U R M I L LS P L C 21 Notes to the Consolidated Financial Statements for the Year Ended 31 December, 2009 1. THE COMPANY 1.1 Legal form The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated as public limited liability company on 1 January 2006, commenced operations on the same date and was quoted on the Nigerian Stock Exchange on 4 February 2008. In 2007, the Company acquired controlling interests in Dangote Pasta Limited and Dangote Agrosacks Limited. Particulars of these subsidiaries are: Subsidiaries Percentage held Principal Activities Dangote Pasta Limited 99 Manufacture of Spaghetti, Macaroni and other Pasta products. Dangote Agrosacks Limited 99 Manufacture of packaging materials. It holds 75% equity in Obajana Agrosacks Limited. 1.2 Principal activities The principal activities of the Company are the milling, processing and marketing of branded flour. 2. STRATEGIC CONSIDERATIONS Dangote Industries Limited has confirmed its capacity and commitment to continue to support Dangote Flour Mills Group and has committed to takeover all external borrowings and provide medium-term loan facilities. 3. ANALYSIS OF TURNOVER AND COST OF SALES The Group 2009 2008 Analysis by: Turnover Cost of sales Gross profit Turnover Cost of sales Gross profit Activity N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 Flour 38,808,447 30,330,161 8,478,286 26,269,299 21,746,622 4,522,677 Bran 2,399,162 723,589 1,675,573 1,996,365 419,821 1,576,544 Danvita and Semolina 632,310 378,455 253,855 2,401,532 1,911,634 489,898 Sacks 10,007,648 8,923,678 1,083,970 8,442,720 6,774,998 1,667,722 Spaghetti 8,401,722 7,216,594 1,185,128 8,456,424 7,435,031 1,021,393 Macaroni 1,138,775 988,481 150,294 360,960 — 360,960 61,388,064 48,560,958 12,827,106 47,927,300 38,288,106 9,639,194 The Company Flour 38,808,447 30,740,730 8,067,717 26,269,299 21,746,622 4,522,677 Bran 2,399,162 723,589 1,675,573 1,438,779 419,821 1,018,958 Danvita and Semolina 632,310 378,455 253,855 2,401,532 1,911,634 489,898 41,839,919 31,842,774 9,997,145 30,109,610 24,078,077 6,031,533
  • 23. 22 DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 4. OTHER INCOME Sale of scraps — 100,689 — 100,689 Provision no longer required 316,844 839,686 156,689 839,686 Sundry income 94,686 72,118 29,188 — 411,530 1,012,493 185,877 940,375 5. PROFIT BEFORE TAXATION This is arrived at after charging/(crediting): Directors’ emoluments: — Fees 2,550 2,100 2,550 2,100 — Salaries and allowances 66,020 58,756 51,820 20,450 Audit fee 50,190 45,500 28,800 27,500 Depreciation 2,603,849 1,801,832 1,093,555 932,014 Management fee (Note 28) 431,224 176,348 — — 6. TAXATION Profit and loss account Tax based on the profit for the year Income tax — 67,407 — — Education tax 141,043 110,659 125,007 54,045 141,043 178,066 125,007 54,045 Deferred taxation (Note 16) (328,067) — (328,067) — (187,024) 178,066 (203,060) 54,045 Balance sheet As per profit and loss account 141,043 178,066 125,007 54,045 At 1 January 423,248 245,182 139,361 85,316 Payments during the year (213,223) — (51,979) — At 31 December 351,068 423,248 212,389 139,361 The charges for taxation in these financial statements were based on the provisions of the Companies Income Taxation Act, CAP C21, LFN 2004 as amended and the Education Tax Act, CAP E4, LFN 2004.
  • 24. DA N G OT E F L O U R M I L LS P L C 23 7. FIXED ASSETS (a) The Group Freehold/ Computer Assets Leasehold equipment Furniture under land and Plant and Tools and and and Motor construc- buildings machinery equipment softwares fittings vehicles Trucks tion Total N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 Cost At 1 January 2,730,581 26,934,690 619,777 71,841 148,626 323,472 — 7,690,387 38,519,374 Additions 26,153 422,079 99,203 19,640 22,938 650,957 1,740,587 2,418,146 5,399,703 Disposals — — — (452) — — — — (452) Transfers 317,000 3,516,947 (8,854) — 127 — — (3,825,220) — Amortised to direct cost — — — — — — — (6,939) (6,939) At 31 December 3,073,734 30,873,716 710,126 91,029 171,691 974,429 1,740,587 6,276,374 43,911,686 Depreciation At 1 January 178,302 5,262,432 344,365 46,786 75,674 162,531 — — 6,070,090 Charge for the year 56,092 1,988,876 142,758 25,865 30,062 184,697 175,499 — 2,603,849 Disposals — — — (452) — — — — (452) At 31 December 234,394 7,251,308 487,123 72,199 105,736 347,228 175,499 — 8,673,487 Net book value At 31 December 2009 2,839,340 23,622,408 223,003 18,830 65,955 627,201 1,565,088 6,276,374 35,238,199 At 31 December 2008 2,552,279 21,672,258 275,412 25,055 72,952 160,940 — 7,690,387 32,449,283 (b) The Company Computer Assets Leasehold equipment Furniture under land and Plant and Tools and and and Motor construc- buildings machinery equipment softwares fittings vehicles Trucks tion Total N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 Cost At 1 January 1,844,899 10,541,472 415,525 47,266 77,983 113,383 — 5,433,864 18,474,392 Additions 2,164 20,260 33,695 13,746 16,274 95,476 1,740,587 2,400,524 4,322,725 Disposals — — — (452) — — — — (452) Transfers 317,001 1,267,363 (8,854) — 127 — — (1,575,637) — At 31 December 2,164,064 11,829,095 440,366 60,560 94,384 208,859 1,740,587 6,258,751 22,796,665 Depreciation At 1 January 109,323 2,284,816 209,207 29,363 39,084 69,965 — — 2,741,758 Charge for the year 38,149 718,235 89,044 16,648 17,040 38,940 175,499 — 1,093,555 Disposals — — — (452) — — — — (452) At 31 December 147,472 3,003,051 298,251 45,559 56,124 108,905 175,499 — 3,834,861 Net book value At 31 December 2009 2,016,592 8,826,044 142,115 15,001 38,260 99,954 1,565,088 6,258,751 18,961,804 At 31 December 2008 1,735,576 8,256,656 206,318 17,903 38,899 43,418 — 5,433,864 15,732,634 Assets under construction comprise of capacity expansion projects in flour production mills Apapa, Ilorin and Calabar. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009
  • 25. 24 DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 8. INVESTMENTS (UNQUOTED) Dangote Pasta Limited 49,500,000 ordinary shares of N=1 each in Dangote Pasta Limited — — 2,507,637 2,507,637 Dangote Agrosacks Limited 84,150,000 ordinary shares of N=1 each in Dangote Agrosacks Limited — — 4,956,000 4,956,000 — — 7,463,637 7,463,637 9. STOCKS Raw materials and work-in-progress 4,806,929 5,747,680 2,871,634 3,766,420 Finished goods 2,315,765 2,321,381 138,431 501,985 Engineering spares and other stocks 1,061,387 821,709 159,359 109,283 Goods-in-transit 79,364 1,019,761 79,364 1,019,761 8,263,445 9,910,531 3,248,788 5,397,449 Provision for slow moving items (16,527) — — — 8,246,918 9,910,531 3,248,788 5,397,449 10. TRADE DEBTORS Trade debtors 12,214,178 9,616,719 10,343,829 8,223,263 Provision for bad and doubtful debts (2,811,245) (2,206,609) (2,505,733) (2,104,473) 9,402,933 7,410,110 7,838,096 6,118,790 11. OTHER DEBTORS AND PREPAYMENTS Other debtors 1,130,483 349,908 442,633 424,147 Advances to suppliers 954,956 244,106 954,956 244,106 Deposit for stocks — 600,334 — — Staff debtors 67,367 — 67,367 — VAT receivable — 73,711 — 73,711 Prepayments 168,977 65,689 108,677 53,968 2,321,783 1,333,748 1,573,633 795,932 Provision for other debtors (639,941) — (621,394) (169,283) 1,681,842 1,333,748 952,239 626,649 12. BANK LOANS AND OVERDRAFTS Bank overdrafts 5,482,578 9,536,663 4,478,622 7,801,362 Short-term loans 8,385,678 10,574,808 6,173,909 7,412,808 Term loan (Note 15) — 483,863 — — 13,868,256 20,595,334 10,652,531 15,214,170 The loans and overdraft are secured by Corporate Guarantee of a related party, Dangote Industries Limited.
  • 26. DA N G OT E F L O U R M I L LS P L C 25 Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 13. OTHER CREDITORS AND ACCRUALS Customers’ deposits 1,459,624 1,069,176 595,198 680,712 Accruals 3,034,335 1,552,827 2,064,324 1,119,969 Pension contribution 66,702 — — — VAT payable 651,012 101,943 651,012 — Other creditors 3,163,986 4,315,602 1,927,421 3,049,266 8,375,659 7,039,548 5,237,955 4,849,947 14. DIVIDEND PAYABLE At 1 January — — — — Dividend declared (Note 20) 2,500,000 — 2,500,000 — Payment during the year (1,677,540) — (1,677,540) — At 31 December 822,460 — 822,460 — 15. TERM LOAN At 1 January 483,863 1,334,353 — — Repayment during the year (483,863) (1,094,490) — — Loan obtained during the year — 244,000 — — At 31 December — 483,863 — — Due within one year (Note 12) — (483,863) — — Due after more than one year — — — — 16. DEFERRED TAXATION At 1 January — — — — Provision for the year (Note 6) (328,067) — (328,067) — At 31 December (328,067) — (328,067) — The deferred tax asset of N=328 million arises from an excess of depreciation charged in the financial statements over capital allowances claimed on the related assets. The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 17. GRATUITY At 1 January 582,037 389,402 376,362 312,829 Provision for the year 183,792 267,415 143,158 114,419 Adjustments (129,470) — — — 636,359 656,817 519,520 427,248 Payments during the year (76,433) (74,780) (54,897) (50,886) At 31 December 559,926 582,037 464,623 376,362
  • 27. 26 DA N G OT E F L O U R M I L LS P L C The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 18. SHARE CAPITAL Authorised 6,000,000,000 ordinary shares of 50k each 3,000,000 3,000,000 3,000,000 3,000,000 Issued and fully paid 5,000,000,000 ordinary shares of 50k each 2,500,000 2,500,000 2,500,000 2,500,000 19. SHARE PREMIUM At 31 December 11,806,537 11,806,537 11,806,537 11,806,537 Exchange equali- 2009 2008 Revenue sation Capital Total Total N=’000 N=’000 N=’000 N=’000 N=’000 20. RESERVES The Group At 1 January 3,689,251 122,765 6,588,637 10,400,653 7,958,095 Transfer from non-controlling interest (710) — — (710) — Prior year adjustment 731,861 — — 731,861 (504,890) Dividend declared — Final 2008 (1,000,000) — — (1,000,000) — Dividend declared — Interim 2009 (1,500,000) — — (1,500,000) — Transferred from profit and loss account 5,530,732 — — 5,530,732 2,947,448 At 31 December 7,451,134 122,765 6,588,637 14,162,536 10,400,653 The Company At 1 January 8,851,322 7,600,955 Prior year adjustment 731,861 (453,725) Dividend declared — Final 2008 (1,000,000) — Dividend declared — Interim 2009 (1,500,000) — Transferred from profit and loss account 5,359,861 1,704,092 12,443,044 8,851,322 Prior year adjustment relates adjustment for prior year reconciling items in intercompany balance with Dangote Industries Limited cleared during the year. On 9 December 2009, a dividend of 20 kobo per ordinary share of 50 kobo totalling N=1 billion in respect of 2008 was approved by shareholders and subsequently paid. On 29 October 2009, the Board of Directors approved interim dividend of 30 kobo per ordinary share of 50 kobo each amounting to N=1.5 billion and subsequently paid. At the Board of Directors meeting held on 19 August 2010, the Directors proposed final dividend of 50 kobo per ordinary share of 50 kobo each amounting to N=2.5 billion. The dividend is subject to approval by shareholders at the Annual General Meeting net of withholding tax at the appropriate rate. Consequently, it has not been included as a liability in these financial statements as they do not constitute present obligation to the Company in accordance with (SAS) 23 on Provisions, Contingent Liabilities and Contingent Assets. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009
  • 28. DA N G OT E F L O U R M I L LS P L C 27 Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group 2009 2008 N=’000 N=’000 21. NON-CONTROLLING INTEREST At 1 January 201,538 159,427 Transfer to revenue reserve 710 — On acquisition of Obajana Agrosacks — 29,552 Dangote Agrosacks Limited 29,444 4,759 Dangote Pasta Limited 904 7,800 At 31 December 232,596 201,538 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 22. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Profit after taxation and exceptional item 5,561,080 2,989,559 5,359,861 1,704,092 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 2,603,849 1,801,832 1,093,555 932,014 Interest income (95,821) (97,121) (65,385) (15,370) Interest expenses 3,016,282 2,398,619 2,304,106 1,957,353 Prior year adjustment 731,861 (504,890) 731,861 — Fixed assets adjustment/transfer 6,939 555 — 555 Loss on disposal of fixed assets — 55 — 55 Changes in assets and liabilities Decrease in stocks 1,663,613 1,516,812 2,148,661 2,988,557 Increase in trade debtors (1,992,823) (2,277,300) (1,719,306) (1,989,308) Increase in other debtors and prepayments (348,094) (5,489,632) (325,591) (5,573,120) Decrease/(Increase) in due from subsidiaries — — 3,588,587 (1,148,270) Decrease/(increase) in due from related companies 1,868,728 966,583 (2,744,209) 1,734,176 Increase in trade creditors 2,020,848 1,633,160 2,040,889 1,633,904 Decrease in other creditors and accruals 1,336,110 6,330,657 388,008 5,714,252 Increase/(decrease) in due to related companies 1,055,394 (365,592) 737,305 (438,942) Increase in due to subsidiaries — — 284,258 — (Decrease)/increase in taxation payable (72,180) 178,066 73,028 54,045 (Decrease)/increase in gratuity provision (22,111) 192,635 88,261 63,533 Increase in deferred taxation (328,067) — (328,067) — Total adjustments 11,444,528 6,284,439 8,295,961 5,913,434 Net cash provided by operating activities 17,005,608 9,273,998 13,655,822 7,617,526 23. CASH AND CASH EQUIVALENTS Cash and bank balances 1,929,598 1,648,773 1,226,829 371,632 Short-term loans (8,385,678) (10,574,808) (6,173,909) (7,412,808) Bank overdrafts (5,482,578) (9,536,663) (4,478,622) (7,801,362) (11,938,658) (18,462,698) (9,425,702) (14,842,538)
  • 29. 28 DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 24. INFORMATION REGARDING DIRECTORS AND EMPLOYEES .1 Directors (i) Directors’ emolument comprises: — Fees 2,550 2,100 2,550 2,100 — Salaries and allowances 66,020 58,756 51,820 20,450 68,570 60,856 54,370 22,550 (ii) Highest paid Director 24,270 18,600 24,270 18,600 (iii) The number of Directors excluding the Chairman with gross emoluments within the bands stated below were: N=’000 N=’000 Number Number Number Number Nil — 4,000 — 1 — — 10,000 — 15,000 0 1 — — 15,000 and above 3 1 2 1 .2 Employees Average number of persons employed during the year: Management 170 157 121 106 Senior staff 581 500 369 364 Junior staff 2,989 2,755 356 375 3,740 3,412 846 845 N=’000 N=’000 N=’000 N=’000 Aggregate payroll costs: Wages, salaries, allowances and other benefits 3,889,782 1,565,636 1,242,490 604,458 Provision for gratuities 152,054 235,354 111,420 82,358 Pension cost 26,847 49,045 26,847 12,438 4,068,683 1,850,035 1,380,757 699,254 The number of employees with gross emoluments within the bands stated below are: N=’000 N=’000 Number Number Number Number 0 — 200 4 — — — 200 — 400 2,432 2,444 37 324 401 — 600 571 369 309 220 601 — 800 199 178 93 50 801 — 1,000 162 137 121 100 1,001 — 2,000 257 190 185 102 2,001 and above 115 94 101 53 3,740 3,412 846 849
  • 30. DA N G OT E F L O U R M I L LS P L C 29 Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 25. CONTINGENT LIABILITIES .1 There were no material contingent liabilities in respect of pending litigation against the Company and its subsidiaries at 31 December 2009 (2008: Nil). .2 The Directors are of the opinion that all known commitments and liabilities which are relevant in assessing the state of affairs of the Group have been taken into consideration in the preparation of these financial statements. 26. CAPITAL COMMITMENTS The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 Capital commitments 190,000 423,155 190,000 423,155 The capital commitments were made for capacity expansion projects in three of the four production mills (Apapa, Ilorin and Calabar). 27. RELATED PARTY TRANSACTIONS During the year the Company had dealings with subsidiaries and related companies. The balances emanating from the transactions which have been disclosed in the balance sheet as due from subsidiaries and related companies as well as due to related companies are as analysed below: The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 27.1 Due from/(to) subsidiaries Dangote Pasta Limited — — 9,218,193 12,806,780 Dangote Agrosacks Nigeria Limited — — (974,969) (690,711) — — 8,243,224 12,116,069 27.2 Due from related companies Dangote Noodles Limited 1,079,704 601,900 1,050,769 601,900 Dangote Industries Limited 4,740,399 8,259,269 4,504,942 2,039,645 National Salt Company of Nigeria Plc 51,378 — — 329,076 Dangote Fisheries Nigeria Limited 1,500 1,500 1,500 1,500 Danote Port operation 200 — 140 — Obajana Cement Plc 1,134,258 — 107,907 — Dangote Pasta Limited — — 72 — Dangote Textile Nigeria Limited 55,593 — 51,000 — Dangote Bail Nigeria Limited 12,263 — — — Benue Cement Company Plc 453 — — — Dangote Foundation 122,562 — — — Savannah Sugar Limited 43 — — — Others 171,508 3,219 — — 7,369,861 8,865,888 5,716,330 2,972,121 Less provision (372,700) — — — 6,997,161 8,865,888 5,716,330 2,972,121
  • 31. 30 DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 The Group The Company 2009 2008 2009 2008 N=’000 N=’000 N=’000 N=’000 27.3 Due to related companies Dangote Nigeria Limited 61,937 73,350 53,182 — Dangote Transport Nigeria Limited 2,591,008 2,492,769 2,506,152 2,492,769 Dangote Sugar Refinery Plc 128,601 1,389,885 57,155 1,389,885 Bluestar Shipping Company 3,500 3,500 3,500 3,500 Green View Development Nigeria Limited 10,882 1,428 14,347 1,428 National Salt Company of Nigeria Plc — — 924 — Dangote Pasta Limited 93,430 — — — Bulk Pack (Nig) Ltd 27,013 — — — MRS Plc 107,204 — — — Dangote Agrosacks Limited 3,124 — — — Dangote Industries Ltd. — Commercial paper 1,989,627 — 1,989,627 — 5,016,326 3,960,932 4,624,887 3,887,582 27.4 Dangote Pasta Limited Dangote Pasta is a subsidiary company to Dangote Flour Mills Plc. During the year, the supply of wheat and pasta flour to Dangote Pasta amounted to N=9.2 billion. 27.5 Dangote Agrosacks Nigeria Limited Dangote Agrosacks Nigeria Limited is a subsidiary of Dangote Flour Mills. During the year, the Company had significant transactions amounting to N=550 million for the supply of bags for packaging of Flour, Bran, Danvita, etc. 27.6 Dangote Industries Limited Dangote Industries Limited (DIL) is the parent company. DIL undertake payments for expansion projects, recommend external consultants, negotiate bank facilities and purchases of raw materials on behalf of the Group. The balance at 31 December 2009 amounted to N=4.5 billion (2008: N=2.03 billion). 27.7 Dangote Transport Nigeria Limited Dangote Transport Nigeria Limited is a related company to Dangote Flour Mills Plc. The Group had had transactions with respect to haulage of finished products to customers as well as wheat to other plants. The balance at 31 December 2009 stood at N=2.51 billion (2008: N=2.49 billion). 27.8 Dangote Sugar Plc Dangote Sugar Plc is a related company to Dangote Flour Mills Plc. Dangote Sugar supplies power to Dangote Flour Mills Plc. There is no trading relationship between the two companies. 27.9 Dangote Salt Nigeria Limited Dangote Salt is a related company to Dangote Flour Mills Plc. There were no material transactions between the two companies during the year. 27.10 Dangote Noodles Limited The amount due from Dangote Noodles Limited relates to funds committed to the infrastructural development of this entity which is yet to commence operations.
  • 32. DA N G OT E F L O U R M I L LS P L C 31 Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2009 28. MANAGEMENT FEE Dangote Pasta Limited and Dangote Agrosacks Limited entered into management and technical service agreement dated 2 January 2006 with Dangote Industries Limited (DIL). The agreement is for an initial period of five years with an option to renew for a further period of five years subject to termination by either party in accordance with the terms of the agreement. As consideration for the services provided, a sum equivalent to 2% of the net revenue from the Dangote Pasta Limited and Dangote Agrosacks Limited sales for each month is payable to Dangote Industries Limited. Management fees for the financial year ended 31 December 2009 amounted to N=431.2 million (2008: N=176.3 million). 29. COMPARATIVE FIGURES Certain balances in prior year have been reclassified where necessary for more meaningful comparison. 30. POST BALANCE SHEET EVENTS There were no post balance sheet events that could have had a material effect on the consolidated financial statements of the Group which had not been adequately provided for or disclosed in these consolidated financial statements.
  • 33. 32 DA N G OT E F L O U R M I L LS P L C The Group The Company 2009 2008 2009 2008 N=’000 % N=’000 % N=’000 % N=’000 % Turnover 61,388,064 47,927,300 41,839,919 30,109,610 Other income 411,530 1,012,493 531,387 955,745 61,799,594 48,939,793 42,371,306 31,065,355 Less: Bought-in-materials and services — Imported (29,332,573) (26,556,495) (26,008,149) (23,623,137) — Local (17,404,151) (13,165,187) (6,427,938) (2,095,460) Value added 15,062,870 100 9,218,111 100 9,935,219 100 5,346,758 100 Applied as follows: To pay employees Salaries, wages and other benefits 4,068,683 27 1,850,035 20 1,380,757 14 699,254 13 To pay providers of capital Interest on loans and bank overdrafts 3,016,282 20 2,398,619 26 2,304,106 23 1,957,353 37 To pay government Taxation (187,024) — 178,066 2 (203,060) 1 54,045 1 To provide for enhancement of assets and growth Depreciation 2,603,849 17 1,801,832 20 1,093,555 12 932,014 17 Profit and loss account 5,561,080 36 2,989,559 32 5,359,861 50 1,704,092 32 15,062,870 100 9,218,111 100 9,935,219 100 5,346,758 100 “Value added” represents the additional wealth the Company has been able to create by its own and employees’ efforts. This statement shows the allocation of that wealth between employees, capital providers, government and that retained for future creation of more wealth. Consolidated Value Added Statement for the Year Ended 31 December, 2009
  • 34. DA N G OT E F L O U R M I L LS P L C 33 Consolidated Four-Year Financial Summary for the Year Ended 31 December, 2009 The Group The Company 31 DECEMBER 2009 2008 2007 2006 2009 2008 2007 2006 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 BALANCE SHEET Assets Fixed assets 35,238,199 32,449,283 27,357,655 — 18,961,804 15,732,634 13,375,453 13,365,235 Investments — 601,900 — — 7,463,637 7,463,637 7,750,559 — Goodwill 278,925 278,925 278,925 — — — — — Net current (liabilities)/assets (6,583,596) (7,839,343) (4,636,107) — 460,696 337,950 1,094,309 1,043,095 28,933,528 25,490,765 23,000,473 — 26,886,137 23,534,221 22,220,321 14,408,330 Deferred taxation 328,067 — — — 328,067 — — — Long-term liabilities — — (187,012) — — — — — Provision for liabilities and charges (559,926) (582,037) (389,402) — (464,623) (376,362) (312,829) (254,810) 28,701,669 24,908,728 22,424,059 — 26,749,581 23,157,859 21,907,492 14,153,520 CAPITAL AND RESERVES Share capital 2,500,000 2,500,000 2,500,000 — 2,500,000 2,500,000 2,500,000 1,500,000 Share premium 11,806,537 11,806,537 11,806,537 — 11,806,537 11,806,537 11,806,537 11,931,537 Revenue reserve 14,162,536 10,400,653 7,958,095 — 12,443,044 8,851,322 7,600,955 721,983 Minority interest 232,596 201,538 159,427 — — — — — 28,701,669 24,908,728 22,424,059 — 26,749,581 23,157,859 21,907,492 14,153,520 PROFIT AND LOSS ACCOUNT Turnover 61,388,064 47,927,300 42,153,272 — 41,839,919 30,109,610 31,303,845 35,672,696 Profit before taxation 5,374,056 3,167,625 675,703 — 5,156,801 1,758,137 375,651 721,983 Taxation 187,024 (178,066) (114,144) — 203,060 (54,045) (85,316) — Minority interest (30,348) (42,111) (36,849) — — — — — Retained profit transferred to general reserve 5,561,080 2,947,448 524,710 — 5,359,861 1,704,092 290,335 721,983 Per share data — 50k ordinary share Earnings: — Basic (kobo) 111 60 11 — 107 34 6 24 — Diluted (kobo) 111 60 11 — 107 34 6 14 Net assets (Naira) 6 5 4 — 5 5 4 5 Note: 1. Earnings per share are based on profit after taxation and the number of issued and fully paid ordinary shares at the end of each financial year. 2. Net assets per share are based on net assets and the issued and fully paid ordinary shares as at the end of each financial year.
  • 35. 34 DA N G OT E F L O U R M I L LS P L C Share Capital History Dangote Flour Mills Plc was quoted on the Nigerian Stock Exchange on 4th February, 2008. The share capital history of the Company is as indicated below: Date Authorised Share Capital Issued and Fully Paid Consideration Value Shares Value Shares 04/02/2008 3,000,000,000 6,000,000,000 2,500,000,000 5,000,000,000 Cash
  • 36. DA N G OT E F L O U R M I L LS P L C 35
  • 37. Proxy Form FLOUR Dangote Flour Mills Plc RC 501757 DANGOTE FLOUR MILLS PLC 4TH ANNUAL GENERAL MEETING TO BE HELD AT 12.00 NOON ON WEDNESDAY, 6TH OCTOBER, 2010 AT TAHIR HOTEL, KANO. I/We*........................................................................................................ of ............................................................................................................... hereby appoint...................................................................................... ................................................................................................................... of ............................................................................................................... or failing him, the Chairman of the meeting, as my/our proxy to act and vote for me/us and on my/our behalf at the Fourth Annual General Meeting of the Company to be held at 12.00 noon on Wednesday, 6th October, 2010 and at any adjournment thereof. Dated this ................ day of .......................................... 2010. Signature ................................................................................................. NOTES 1. Please sign this proxy card and post it to reach the registered office of the Company not less than 48 hours before the time for holding the meeting. 2. If executed by a corporation, the proxy card should be sealed with the common seal. 3. This proxy card will be used both by show of hands and in the event of a poll being directed or demanded. 4. In the case of joint holders the signature of any one of them will suffice, but the names of all joint holders should be shown. Admission Card DANGOTE FLOUR MILLS PLC PLEASE ADMIT THE SHAREHOLDER ON THIS FORM OR HIS/HER APPOINTED PROXY TO THE 4TH ANNUAL GENERAL MEETING TO BE HELD AT 12.00 NOON ON WEDNESDAY, 6TH OCTOBER, 2010 AT TAHIR HOTEL, KANO. Name of Shareholder* ........................................................................................................................................................................................ IF YOU ARE UNABLE TO ATTEND THE MEETING A member (shareholder) who is unable to attend Annual General Meeting is allowed by law to vote by proxy. A proxy need not be a member of the Company. The above proxy card has been prepared to enable you exercise your right to vote if you cannot personally attend. No. of Shares held Signature of person attending IMPORTANT Please insert your name in BLOCK CAPITALS on both proxy and admission card where marked*. A. L. ISA (MRS) Company Secretary/Legal Adviser ✂ RESOLUTIONS FOR AGAINST 1. To receive the Audited Financial Statements for the year ended 31st December 2009 and the Directors’, Auditors’ and Audit Committee’s Reports thereon 2. To declare a dividend 3. To re-elect Directors 4. To re-appoint the Auditors 5. To authorise the Directors to fix the remuneration of the Auditors 6. To appoint members of the Audit Committee SPECIAL BUSINESS 7. To fix the remuneration of the Directors Please indicate with an “X” in the appropriate space how you wish your votes to be cast on resolutions set out above. Unless otherwise instructed, the proxy will vote or abstain from voting at his/her own discretion. Before posting the above form, please sign/tear off this part and retain it for admission to the meeting.
  • 38. RC 501757RC 501757

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