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Ashaka Cement Annual Report 2012

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Ashaka Cement Annual Report 2012

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Ashaka Cement Annual Report 2012

  1. 1. 2012 ANNUAL REPORT • PAGE 1ASHAKACEM PLC ASHAKA CEMENT PLC 1 2 3 4 PROFILE PRESENTATION INFORMATION ON LAFARGE CORPORATE GOVERNANCE SOCIAL AND ENVIRONMENTAL RESPONSIBILITY Directors’and Statutory Information 10 Notice of Annual General Meeting 11 Results at a Glance 12 Chairman’s Statement 13 Managing Director’s Report 16 Board of Directors’Profile 20 Report of the Directors 23 Executive Management Team 29 Senior Management Team 30 SHAREHOLDING AND OTHER INFORMATION Shareholding Information 92 Depots and Addresses 93 Mandate for E-Dividend Payment 95 Proxy Form 97 Health, Safety and Environment 32 Donations, Charitable Gift and Community Projects 33 FINANCIAL STATEMENTS F Certification of Financial Statements 36 Statement of Directors’Reponsibilities 37 Report of Independent Auditors 38 Report of Audit Committee 39 Statement of Profit or Loss and Other Comprehensive Income 40 Statement of Financial Position 41 Statement of Change in Equity 42 Statement of CashFlows 43 Notes to the Financial Statements 44 Statement of Value Added 88 Financial Summary 89 Charts 90
  2. 2. ASHAKACEM PLCPAGE 2 • 2012 ANNUAL REPORT MISSION To be the preferred supplierto our customers. To be the preferred employerto our people. To be the preferred investmentto our shareholders. To be the preferred partnerto the local communities. AIMS “The Company aims to serve the needs of its customers, shareholders, employees and the community by producing cement of the highest quality, profitably and consistently.” VISION “To be the leading cement manufacturing and marketing company in the Northern region and create value to our stakeholders.”
  3. 3. 2012 ANNUAL REPORT • PAGE 3ASHAKACEM PLC 1 PROFILE PRESENTATION AshakaCem Plc was incorporated on 7th August, 1974 and converted to a public company on 7th September, 1974. It started operations in September 1979; it is located in Gombe State, Nigeria. It has depots in twelve locations and offices in Abuja, Kano and Lagos. AshakaCem Plc is engaged in manufacturing and marketing of ASHAKACEM PLC cement. We create value for our customers and assist them achieve set business objectives and goals. We are a specialized business partner with a growing and evolving team structure and a cumulative experience of over 30 years in the cement industry. The Company is proud of its commercial expertise, its efficiency and technical skills. We are pleased to have achieved good result by conducting our business with uncompromising integrity. We are committed to actively participate in development of our customers, employees, shareholders and the community. The Cement product is a grayish powder made from a burned mixture of limestone and shale. It has been used for building and civil engineering works since as far back as the Roman and Egyptian civilizations. Cement is the critical raw material for infrastructural development and its consumption is taken as important indicator of economic growth. Prior to 1974, a substantial part of cement consumed in Nigeria was imported. In order to reverse this trend and in furtherance of the Federal Government’s plan with AshakaCem Plc is a cement manufacturing and marketing company focused on providing innovative solutions to the needs of our stakeholders. The company has been participating in the economic growth and developmentofNigeriaforoverthreedecades. AshakaCem, the star of the North
  4. 4. PAGE 4 • 2012 ANNUAL REPORT ASHAKACEM PLC PROFILE PRESENTATION its laudable objectives of import substitution, proper harnessing of locally-available resources, infrastructural development, generation of employment and nation-wide industrial dispersal, AshakaCem Plc was initiated. The Company was promoted by the Nigerian Industrial Development Bank Limited in partnership with the Federal Ministry of Industries, Blue Circle Industries PLC, UK now Lafarge Nig. (UK) Limited, the Nigerian Bank for Commerce and Industry, Northern Nigeria Investment Limited and the Government of the then North- Eastern State (now Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe States). With the emergence of our foreign partners in 2002, the share structure took a new look as below; a. Lafarge Cement UK Plc (Formerly Blue Circle Industries Plc) 50.00% b. Lafarge Nigeria Limited 0.16% c. Nigerian Public 49.84 %. Presently, the share structure is as follows; a. Lafarge Nigeria (UK) Limited 58.61% b. Nigerian Investors 41.39% In spite of challenges faced by the Company, there has been significant improvement in the production sector and with the coal project at Maiganga, the Company now uses lignite from our coalmine with positive impact on profitability for the benefit of our stakeholders. In line with our policy to make safety a core value, we have continued to adhere to best practices and we are proud of our membership of the Lafarge Group Health and Safety Excellence Club. AshakaCem operates closely with its neighbouring communities and this partnership is working to our mutual benefits. We have continued to invest in CSR projects in the areas of water, health, education and youth empowerment. We are truly committed to the development of our communities and look to the future for the strengthening of this partnership. Ashaka Cement Silos
  5. 5. 2012 ANNUAL REPORT • PAGE 5ASHAKACEM PLC 1 PROFILE PRESENTATION THE LAFARGE ADVANTAGE THE LAFARGE ADVANTAGE Since its acquisition by the Lafarge Group, AshakaCem Plc has become part of a truly multi-national company, strategically positioned for greater heights. Lafarge Group is located in 64 countries with 65,000 employees, a world leader in building materials, with top-ranking positions in its Cement, Aggregates & Concrete businesses. For the second year in a row, Lafarge ranked amongst the top 10 of 500 companies evaluated by the “Carbon Disclosure Project” in recognition of its strategy and actions against global warming. With the world’s leading building materials research facility, Lafarge places innovation at the heart of its priorities, working for sustainable construction and architectural creativity. Lafarge Group’s core values include Health and Safety as first priority, People Development, Respect for Employees and local culture, Corporate Governance, Customer Care and Market Orientation together with commitment to be ranked among the World’s most effective industrial groups in terms of Environmental Protection, Social Responsibility and Corporate Governance. To make advances in building materials, Lafarge places the Customer at the heart of its concerns. It offers the construction industry and the general public innovative solutions bringing greater safety, comfort and quality to their everyday surroundings. Together, We Win!
  6. 6. PAGE 6 • 2012 ANNUAL REPORT ASHAKACEM PLC PROFILE PRESENTATION Lafarge’s long-term presence in AshakaCem Plc, its high degree of vertical integration and advance in product research and innovation gives the Company a competitive advantage in terms of product quality and consistency, product differentiation as well as allowing stronger operational efficiencies. PRESENCE IN AFRICA With the acquisition of West Africa Portland Cement Plc (WAPCO), AshakaCem Plc (Ashaka), Atlas Cement, Port-Harcourt and a substantialstakeinUnicem,(Calabar), Lafarge holds leadership position in the Nigeria cement industry with investment in companies that have a total production capacity of about 8.5 million metric tonnes per annum. It has significant presence in Africa with over 25 years of experience, 13 cement plants and 5 grinding stations spread over 10 countries: Benin, Nigeria, Cameroun, Uganda, Kenya, Tanzania, Malawi, Zambia, Zimbabwe and South Africa which are strategically located with facilities for exports to other African countries. INNOVATION With an annual R&D budget exceeding 170 million Euros, the largest building materials laboratory in the world, and more than 1,300 employees in R&D and Technical program, innovation is undoubtedly one of the driving forces in Lafarge‘s strategy. Lafarge also has formal partnerships with some of the world’s best research teams and Universities in Europe, the United States and Asia (MIT, Berkeley, CNRS, etc). BUILDING CONSISTENCY IN THE NIGERIAN MARKET AshakaCem Plc stands to enjoy high value creation from Lafarge as the Group introduces a turning point to display customer orientation, technical excellence and innovation from its branding platform. A benefit of being part of Lafarge is that our shareholders can expect good return on investments from a better managed organization and feel proud to be part of a global brand leader. Customers can equally be proud to be associated with an international brand and expect high quality products from modern equipment, international standards and enhanced customer relations. Our employees can look forward to development and technical Maiganga Coal Mines - source of sustainable competitive advantage
  7. 7. 2012 ANNUAL REPORT • PAGE 7ASHAKACEM PLC 1 trainings, as well as wider access to knowledge through the Group’s intranet and internationalization. Our communities benefit from best practices on environment, community relations and social responsibility. COMMITMENTTOSUSTAINABLE DEVELOPMENT For many years, Lafarge has been committed to a deliberate strategy of sustainable development that combines industrial know-how with performance, value creation, respect for employees and local cultures, environmental protection and the conservation of natural resources and energy. The Company is committed to progress and attentive to the ever- changingneedsoflocalcommunities, contributing to the improvement of their quality of lives by setting up local development programs, healthcare, housing, education and human capital development. Knowledge sharing with solid team work Lafarge recently launched the Sustainability Ambitions 2020, a signature of its leadership and a unique selling proposition of the brand as a net positive contributor to society. The Sustainability Ambitions 2020 has thirty-four (34) objectives focused around nine (9) transformational ambitions, all of which rest on three (3) key pillars of sustainable development including building sustainably, building communities and building the circular economy. The Ambitions are: Building Communities • Health and Safety – zero fatalities and elimination of Loss Time Injury (LTIs) for employees and contractors • Diversity – 35% of senior management positions to be held by women • Volunteer Work – 1,000,000 volunteer hours per year Building the Circular Economy • Local Job Creation – 75% of countryoperationstoimplement a plan for local job creation • Affordable Housing – 2,000,000 people to have access to affordable and sustainable housing • Sustainable Products and Services – 3 Billion Euro target for new sustainable solutions, products and services Building Sustainably • CO2 Emissions – 33% reduction of our CO2 emissions per ton of cement • Non-Fossil Fuels – 50% use of non-fossil fuels in our cement plants • Reused and Recycled Materials – 20% of our concrete to contain reused or recycled materials
  8. 8. PAGE 8 • 2012 ANNUAL REPORT ASHAKACEM PLC LAFARGE PROFILE KEY FIGURES (at December 31, 2012) 432M€ NET INCOME GROUP SHARE GROUP REVENUES BY DIVISION (at December 31, 2012) GROUP REVENUES BY GEOGRAPHIC AREA (at December 31, 2012) 1,570production sites 15,816revenues in million euros 65,000employees countries 64 Western Europe 20.1% North America 21.3% Central and Eastern Europe 8.0% Middle East and Africa 27.1% Latin America 6.1% Asia 17.4% Cement 65.6% Other 0.6% Aggregates and concrete 33.8% • xxxxxx - xxxxxx 2012
  9. 9. 2012 ANNUAL REPORT • PAGE 9ASHAKACEM PLC 58countries 41,200employees 10,373revenues in million euros 161production sites 36countries 21,800employees 5,353revenues in million euros 1,395production sites LAFARGE WORLDWIDE (at December 31, 2012) CEMENT WORLD LEADER N°2 AGGREGATES & N°4 CONCRETE LAFARGE PROFILE North America AsiaWestern Europe Central and Eastern Europe Middle East and Africa World map of lafarge's presence as of December 31, 2012 (plants and sales offices) Latin America xxxxx - xxxxxx 2012 •xxxxx - xxxxx 2012 • 01
  10. 10. ASHAKACEM PLCPAGE 10 • 2012 ANNUAL REPORT DIRECTORS Alhaji Umaru Kwairanga - Chairman Mr. John Stull - Vice Chairman Mr. Neeraj Akhoury - Managing Director/CEO Late HRH Abdulkadir Rashid Dukku (MFR) - Director (Passed away on 24th December, 2012) Mrs. Hamra Imam - Director Senator Muhammed Muhammed, OFR - Director Mr. Jean-Christophe Barbant - Director Late Alhaji Adamu Alkali Abubakar - Director (Passed away on 25th March 2013) Mallam Suleiman Yahyah - Director Mr. Dominique Brugier - Director Dr. Abubakar Ali Gombe - Director (From 27 June 2012) Chief Kolawole Babalola Jamodu, OFR - Director (From 27 June 2012) COMPANY SECRETARY/LEGAL ADVISER Bello A. Abdullahi Esq. REGISTRATION NUMBER RC 13422 REGISTERED OFFICE Ashaka Works, Near Gombe, Gombe State, Nigeria AUDITORS Akintola Williams Deloitte (Chartered Accountants) 4th Floor Bank of Industry Building Plot 256, Zone AO Cadastral Off Herbert Macaulay Way Central Business District Abuja, FCT REGISTRARS City Securities Limited 17A Tinubu Street, 2nd Floor, Primrose Tower, Lagos BANKERS Access Bank Plc Citi Bank Nigeria Limited First Bank of Nigeria Plc First City Monument Bank Plc Stanbic IBTC Bank Plc Union Bank of Nigeria Plc United Bank for Africa Plc Zenith Bank Plc SOLICITORS Giwa Osagie & Co. No. 4 Lalupon Close, Off Keffi S.W. Ikoyi, Lagos A. Dauda & Co. Opp. Coops Central Stores Biu Road, Gombe, Gombe State Dikko & Mahmoud No. 1 Lugard Avenue Nasarawa, P.O. Box, Kano STOCKBROKERS Unex Securities & Investment Ltd 3, Biaduo Street, Off Keffi Street S.W. Ikoyi, Lagos DIRECTORS’AND STATUTORY INFORMATION
  11. 11. 2012 ANNUAL REPORT • PAGE 11ASHAKACEM PLC NOTICE IS HEREBY GIVEN THAT the 38th Annual General Meeting of ASHAKACEM PLCwillbeheldatZARANDAHOTEL,Bauchi State, Nigeria on Thursday, 27th June 2013 at 11 a.m. to transact the following business: AGENDA ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the year ended 31st December 2012, and the Report of the Directors, together with the reports of the Auditors and Audit Committee thereon. 2. To declare a dividend. 3. To elect/re-elect retiring Directors. 4. To re-appoint Akintola Williams Deloitte as External Auditors 5. To authorize the Directors to fix the remuneration of the External Auditors 6. To elect members of the Audit Committee. SPECIAL BUSINESS 7. To approve the remuneration of Directors NOTES: PROXY A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a member of the Company. A proxy form is attached to the Annual Report. For the instrument of proxy to be valid for the purpose of the meeting it must be completed, duly stamped by the Commissioner of Stamp Duties in accordance with the Stamp Duties Act (cap S8 Laws of the Federation of Nigeria 2004) and deposited at the office of the Registrar of the Company, City Securities Limited, Primrose Tower, 17A Tinubu Street, Lagos, not later than 48 hours before the time for holding the meeting. NOTICE OF ANNUAL GENERAL MEETING DIVIDEND WARRANT IfthedividendrecommendedbytheDirectorsisapproved by members at the Annual General Meeting, the dividend warrants will be posted on the 28th day of June 2013, to members whose names appear in the Register of Members at the close of business on the 3rd day of June 2013. CLOSURE OF REGISTER The Register of Members and Transfer Books of the Company will be closed on the 4th to 7th of June 2013 (both dates inclusive) for the purpose of payment of dividend. AUDIT COMMITTEE In accordance with section 359(5) of the Companies and Allied Matters Act, (Cap C20, Laws of the Federation of Nigeria, 2004), any member may nominate a shareholder as a member of the Audit Committee by giving notice in writing of such nomination to the Company Secretary at least 21 days before the Annual General Meeting. BY ORDER OF THE BOARD BELLO A. ABDULLAHI Company Secretary/Legal Adviser FRC/2013/NBA/00000002301 Dated this 25th April, 2013 REGISTERED OFFICE Ashaka Works, Near Gombe, Gombe State. 2 INFORMATION ON ASHAKACEM PLC
  12. 12. PAGE 12 • 2012 ANNUAL REPORT ASHAKACEM PLC RESULTS AT A GLANCE 2012 2011 % N’000 N’000 Change Turnover 21,825,927 20,780,234 5.03 Profit before taxation 5,473,736 4,144,287 32.08 Profit for the year 3,124,848 2,885,963 8.28 Total comprehensive income for the year 2,784,554 2,728,857 2.04 Retained earnings 47,993,378 45,764,311 4.87 Share capital 1,119,727 1,119,727 - Shareholders’fund 49,514,245 46,726,932 5.97 PER SHARE DATA: Based on 2,239 million (2011: 2,239 million) ordinary shares of 50k each: Earnings per share (Kobo): - Basic 140 129 8.28 Net assets per share (Kobo) - Basic 2,211 2,087 5.97 Stock Exchange quotation at 31 December (Naira) 17.95 11.3 58.85 Cement deliveries (‘000 tonnes) 741 775 (4.39) Number of employees (number) 620 653 (5.05) INFORMATION ON ASHAKACEM PLC
  13. 13. 2012 ANNUAL REPORT • PAGE 13ASHAKACEM PLC CHAIRMAN’S STATEMENT INFORMATION ON ASHAKACEM PLC 2 Distinguished shareholders, my colleagues on the Board of Directors, gentlemen of the press, Ladies and Gentlemen, it gives me great pleasure to welcome you to the 38th Annual General Meeting of our Company, AshakaCem Plc. As is usual I will use the opportunity of today’s meeting to lay before our shareholders the performance of the Company for the 2012 financial year and the economic environment under which it operated. BUSINESS ENVIRONMENT Domestic demand for cement in 2012 was estimated at 18.3 million metric tonnes; up by approximately 7% on the estimated demand in 2011. This reflects a slowdown compared with the last five years where year on year growth in demand averaged approximately 10.8%. The slowdown in demand during 2012 was principally caused by an unusually prolonged rainy season which lasted into the fourth quarter of the year; a period of dry spell when construction activities were expected to pick up. The consequent flooding in most part of the country as a result of the heavy rainfall also meant that construction activities by major contractors and private home builders were disrupted. The Nigerian economy continues to offer opportunities to entrepreneurs in the manufacturing sector but the capacity to harness the opportunities is constrained by the prevailing challenges of the operating environment. Economic activities were paralyzed at the beginning of the year due to the complete removal by the Federal Government of subsidy on Premium Motor Spirit (i.e. Petrol). This consequently led to a nationwide civil unrest which only settled after an agreement with the Nigerian Labour Congress was reached for a partial removal of the subsidy. The partial removal of subsidy on petrol and increase in food prices as a result of flooding of farm lands led to a spike in inflation rate which increased to 11.9% by end of 2012 from 10.9% at the start of the year. The escalation in inflation rate was, however, reined in by a combination of monetary tool by the Central Bank of Nigeria (CBN) and some level of fiscal restraints by the Federal Government. Thankfully the CBN was able to maintain the range of the Naira exchange rate within -/+ 3% for the year as it committed to, thus allowing businesses to plan better. Although the security situation particularly in the Northern part of the country deteriorated during the year with significant curtailment of trade and disruptions of services in that region, the Company was able to act proactively to counter the adverse impact on production and distribution of cement from its plant. Ontheoverall,electricpowersupplyfromthenationalgrid only improved somewhat marginally in 2012. However, given the significant progress made on the privatization of the generation and distribution of electricity by the Federal Government, expectation by manufacturers is that electric power supply will gradually become stabilized with positive impact on industrial performance. RESULTS FOR THE YEAR The audited Financial Statements for 2012 financial year which are laid before shareholders today are for the first time compliant with International Financial Reporting Alhaji Umaru Kwairanga, Sarkin Fulani Gombe Chairman of the Board AshakaCem Plc
  14. 14. PAGE 14 • 2012 ANNUAL REPORT ASHAKACEM PLC Chairman’s Statement INFORMATION ON ASHAKACEM PLC Standards (IFRS) with the corresponding 2011 numbers re-stated to ensure comparison on a like-for-like basis. Total cement despatched for the year closed at 741,000 metric tonnes; down by 4.4% on 2011. The drop in cement despatched resulted principally from the security challenges in the North Eastern part of the country which restricted general trade and the distribution of goods and services. However, turnover for the year increased by 5% as a result of better selling prices that were achieved. Cost of sales was also kept in control as we continue to improve on the substitution of rate of expensive Low Pour Fuel Oil (LPFO) for the firing of our kilns with local coal from the company’s coal reserve in Maiganga, thus reducing the cost of cement production. This initiative and others which are now being progressed ensured that we achieved a 32% increase in profit before tax for the year at N5.5 billion compared with N4.1 billion for 2011. Tax charged for the year increased to N2.4 billion from N1.3 billion for 2011. The increase resulted mainly from increase in operating profit for the year.The 2012 financial year therefore closed with profit after taxation at N3.1 billion; 8.3% up on 2011. PROPOSED DIVIDEND Inspite of the marginal improvement in profit after tax, the Board of Directors has resolved to recommend to shareholders at today’s meeting a gross dividend of 42 kobo on every ordinary share in issue compared with 40 koborecommendedandapprovedbyshareholdersonthe results for 2011. We have, ahead of us several projects to uprate the production capacity of our existing plant, one of which is the debottlenecking of the kilns to increase clinker production. This requires significant amount of funding and it is therefore imperative that we conserve internally generated funds to launch these projects. BOARD CHANGES It is with sadness and a heavy heart that I announce to our shareholders the death of two of our Directors. HRH Alhaji Abdulrasheed Dukku, the Emir of Dukku, died on 24th December, 2012. HRH Alhaji Dukku served on the Board of Directors of the Company for over a period of 30 years and used his position and influence to bring stability to the Board. We will miss his wisdom that is always expressed in humility. Also, Alhaji Adamu Alkali Abubakar died on the 25th March, 2013. Alhaji Abubakar served on the Board of Directors first in early 2000 and returned in 2011. Our hearts go to their families and pray that Allah (SWT) grant them His peace and comfort. On behalf of shareholders and the Board of Directors I will like to acknowledge with gratitude the contributions of late HRH Ahaji Abdulrasheed Dukku and Alhaji Adamu Alkali Abubakar to the work of the Board of Directors and pray that Allah (SWT) grant them AljannahFirdausi. FUTURE OUTLOOK Despite the challenging operating environment our resolve is to continue to look for opportunities to expand the operations and markets of the Company. We will continue to pursue initiatives that will help to deepen our reach to customers and differentiate us from competitors. The deficit in urban housing stock and the urgent need by government at all levels to upgrade various road networks in the country provide growth opportunities for the cement sector and we will continue to adapt our production and commercial operations to these opportunities for the benefit of our shareholders. E-DIVIDEND AND ELECTRONIC DELIVERY MANDATE In order to eliminate issues of unclaimed dividend I will like to encourage shareholders who have not taken the E-Dividend option to do so. An E-Dividend Mandate Form is attached at the back of the Annual Report and Accounts for completion and return to the Registrars’ desk at the entrance of the hall of the meeting or at their office. Inspite of the marginal improvement in profit after tax, the Board of Directors has resolved to recommend to shareholders at today’s meeting a gross dividend of 42 kobo on every ordinary share in issue compared with 40 kobo recommended and approved by shareholders on the results for 2011.
  15. 15. 2012 ANNUAL REPORT • PAGE 15ASHAKACEM PLC INFORMATION ON ASHAKACEM PLC 2 Similarly in order to minimize printing and postage cost of Annual Report to shareholders, the Company has decided to introduce electronic delivery of Annual Report and other documents. With this initiative, each shareholder would be able to elect to receive a soft copy of these documents via his or her email address or by a Compact Disk (CD) sent by post instead of receiving hard copies of these documents in future. To express an option, shareholders will receive at this meeting for completion an Electronic Delivery Mandate Form. Please return the completed Form to the Registrars at the venue of this meeting or at their office While it is recognized that the completion of these forms is optional, however, because of the convenience these initiatives offer to shareholders and significant cost reduction to the Company, shareholders are urged to complete and return completed forms to the Registrars. APPRECIATION On behalf of the Board of Directors, I will like to express our appreciation to the Management and staff of the Company for their steadfastness and dedication in managing the operations of the Company in spite of security challenges within the environment in which the Company operates.We commend their efforts and loyalty. We are grateful to the Lafarge Group, our core investor and technical partners for bringing to bear on our manufacturing and commercial operations the benefit of its global experience and brand equity. On behalf of the Board of Directors and shareholders I place on record our appreciation of their contributions. The communities where we have our manufacturing plant have continued to provide the necessary ambiance for our operations to thrive and to collaborate with us in a mutually beneficial way to ensure that our Corporate Social Responsibility activities achieved their aim and impact. We are grateful for their partnership. Distinguished shareholders, my colleagues on the Board, Ladies and Gentlemen, I thank you for your presence at this year’s Annual General Meeting and I look forward to your full participation in the agenda of today’s meeting. Alhaji Umaru Kwairanga, Sarkin Fulani Gombe Chairman of the Board AshakaCem Plc Bringing light to our villagers - Maiganga Electrification Project
  16. 16. PAGE 16 • 2012 ANNUAL REPORT ASHAKACEM PLC INFORMATION ON ASHAKACEM PLC Distinguished shareholders, ladies and gentlemen, it gives me profound pleasure to welcome you to 38th Annual General Meeting of our great company and to present to you the results of the company for the year 2012. I would specifically like to note that it has been wonderful working with our Board of Directors and a team of dedicated staff who have worked hard to achieve the financial results for 2012 which are today laid before our shareholders. Ashaka has reached a turning point, following our strategic objectives to leverage and solidify the company’s MANAGING DIRECTOR’S REPORT business portfolio, creating sustainable corporate value in the process. We have progressed, taking steps to upgrade our management frameworks and infrastructure. The shaping of our Company’s long term vision is a continuous process, requiring management to take bold decisions and paving ways to speed up enduring changes. This will always present new challenges. This change, in terms of restructuring, adoption of new business processes and modification of performance measurement systems is ongoing. As important as this is, the path is not easy and could be disruptive but we recognize the need to reinvent Ashaka. We also recognize that the success factors of yesterday will not drive our future growth and sustainability. The journey is difficult and demands more than initiative and ambitions as the long term sustainability of Ashaka’s performance calls on each of us to take decisions that cut against grain of our historical inclinations and even the expectations of a few. It would not just ask for self-awareness but also self-control, determination and resilience. On behalf of all Ashaka employees, I assure our shareholders that we will continue to commit ourselves to deliver performance and that we will seek new discoveries and aspirations and that we will not hesitate to take on steps that develop our capacity to transform Ashaka. The year 2012 also marked a solid collaboration with our parent company, the Lafarge Group. The focus has been to broaden our ‘working together’ principles through sharing of resources and bringing more expertise to the Company. The exchange of knowledge, skills and competencies through short term BOOST programs have helped us to bring home the Group’s experienced resources and to engage them to coach our future technical leaders. Today we are not just changing. We are evolving. In today’s more competitive and challenging business environment, the changes are occurring very fast and these changes question the value that we create. These changes offer to us the opportunities to rethink our business models and processes. Underpinned by the spirit of our core strategy, our mission will always be to leverage business to help solve problems in Ashaka to the benefit of all our stakeholders, including customers, employees, shareholders, creditors, and our local communities. In Neeraj Akhoury Managing Director & Chief Executive Officer
  17. 17. 2012 ANNUAL REPORT • PAGE 17ASHAKACEM PLC INFORMATION ON ASHAKACEM PLC 2 line with Lafarge Group value, we remain dedicated to supporting sustainable development in our communities. HEALTH AND SAFETY Safety for our employees, contractors and indeed the entire community is always our number one priority. Tremendous efforts were made to sustain the achievements so far recorded in Health and Safety through commitment to the implementation of Health & Safety standards, advisories and adherence to best practices. The Company has recorded more than five years of continuous operation without any Lost Time Injury as a result of commitment of all employees to safety. The mobilization of all employees created several engagements on safety. We recorded more than 1,500 engagements onVisible Felt Leadership, almost 1,000 task observations and achieved score of 75% from a recent Lafarge Group audit of our Health & Safety performance. The management also invested in the Company’s clinic to modernize the infrastructure and & equipment to ensure that better level of health services are available to employees, their families and the communities. New key health professionals were also employed to improve service levels at the clinic. We are determined to remain one of the safest industrial enterprises and continue to focus on our performance on Health & Safety. In support of this determination action plans have been developed to augment our efforts and we remain confident that we shall be able to report significant improvements in the years to come. OPERATING RESULTS In 2012, we experienced several challenges in our operations, both from cost and revenue perspective. The input costs have increased significantly due to regulatory increase of LPFO and Power prices, which determine approximately 60% of the variable cost of production. Fuel Crisis in the beginning of the year resulted in LPFO sourcing from open market at much higher prices. This was followed by increase in regulated LPFO price from 68N per litre to 87.7N per Litre, an increase of 26%. Power price went up by 63% in the year coupled with constraints on availability from national grid.These environment led cost increases were managed through a series of mitigating action plans executed with firm determination to remain competitive. As a result we contained the cost of sales increase to a level of 1.7% over 2011. The market growth has been lower than our anticipation, especially in second half of the year. Several players in the sector have commissioned new capacities in 2012 which has resulted in adverse impact on our market share. The secondhalfoftheyearwasespeciallyverydifficultmarked by lower demand growth and supply glut. Therefore the cement supplied to our customers in the year under review was 5% down from 775,000 in 2011 to 741,000 in 2012. Despite the volume constraints, the management was able to improve prices and therefore our turnover has increased by 5% from N20.78 billion to N21.83 billion. The market based constraints also resulted in increase of sales & distribution costs as management decided to ship cement to depots rather than to reduce production. PROJECTS We remained committed to the improvement of Ashaka’s long term profitability through continuous optimization of the existing plant assets. We continue to work on Kiln debottlenecking and the optimization of the coal mill which are aimed at increasing production capacity and cost savings. The coal optimization project is progressing well and expected to be commissioned in 2013. This will enable us to target much higher coal substitution rate. A fully resourced project department has been commissioned to lead our progress. Managementhasdedicatedateamtoincreaseourcaptive limestone reserves to ensure that Ashaka has the required raw materials for any future expansion of its production The year 2012 also marked a solid collaboration with Lafarge Group, our parent company. The focus has been to broaden our ‘working together’ principles through sharing of resources and bringing more expertise to the company. The exchanges of knowledge, skills and competencies through short term BOOST programs have helped us to bring home the Group’s experienced resources and engage them to coach our future technical leaders.
  18. 18. PAGE 18 • 2012 ANNUAL REPORT ASHAKACEM PLC MANAGING DIRECTOR’S REPORT INFORMATION ON ASHAKACEM PLC capacity. I am confident that we are progressing in the right direction to make Ashaka more competitive in the coming years. SALES & MARKETING AshakaCem Plc has faced a serious competition in the region due to need for additional new capacities. However, we are proud with our esteem customers who despite these challenges remained committed to Ashaka showing great loyalty and affection to move the company forward. We would like to express our gratitude to our dealers and customers who have believed and have confidence in us; we fully recognise that Ashaka need to do more to remain a preferred supplier in the region. CORPORATE SOCIAL RESPONSIBILITY 2012 was a difficult year due to the economic uncertainty, rising costs of materials and a challenging domestic market. However we did not compromise on our CSR ambition to grow our businesses in a responsible way. During the year, the company continued to implement solutions in every part of our value chain to reduce the environmental and social impact of our operations. In turn, these solutions created new opportunities for us as a company as well as our stakeholders, and I am pleased that several impactful CSR initiatives were implemented during 2012. To develop our society the company supports a wide variety of local initiatives. The major intiative for 2012 was Project Employability, where we provided training to 60 localYouths on range of skills through 6 months intensive programs. These Youths are now skilled and useful to the society and Ashaka is privileged to be associated with them. We all personally believe that Ashaka will continue to engage the Youths and become a catalyst to transform their capacity to serve our society. In addition the company has provided Electrication to 3 villages in our Maiganga area in 2012, apart from building schools and providing healthcare. Sustainability is and will remain key to our long-term business success. In 2012, we will focus our efforts on addressing specific sustainability risks and opportunities related to both our production and entire value chain. HUMAN RESOURCES The Human resources continue to be our major thrust area in Ashaka. We continue to focus on retention and professional development of the company’s human capital through a robust recruitment and promotion policy. We have recruited 21 Graduate trainees through new skill acquisition program that will help us create a robust succession planning in the company. Over 60 employees were also recognized for their contributions and promoted to higher levels. LOOKING AHEAD TO 2013 The local cement industry is going through an exciting phase with significant increase in domestic production capacities and clear evolution of customer’s expectation. However, we shall continue to live our values and progressively be established as an organization of professionals which is responsive to market changes. We expect the market to follow healthy growth owing to Government efforts to improve infrastructure and housing. This will allow Ashaka to compete favourably in the industry and improve returns to the benefits of our esteemed stakeholders. CONCLUSION While our Business environment that changed considerably with the emergence of new production capacity, we will continue to do more to improve our results.The future outlook remains challenging due to the To develop our society the company supports a wide variety of local initiatives. The major intiative for 2012 was Project Employability, where we provided training to 60 local Youths on range of skills through 6 months intensive programs.
  19. 19. 2012 ANNUAL REPORT • PAGE 19ASHAKACEM PLC INFORMATION ON ASHAKACEM PLC 2 Today we are not just changing. We are evolving. In today’s more competitive and challenging business environment, the changes are occurring very fast and these changes question the value that we create. These changes offer to us the opportunities to rethink our business models and processes. intense pressure on cost of major production inputs and challenging power supply situation. However, we remain committed to make good improvements in our performance and add value to our shareholders in the subsequent years. I must take this opportunity to thank all our stakeholders, our customers, local communities, our suppliers, and the Government for their support to AshakaCem. I also thank the management and staff whose efforts were making this company to achieve continuous profit for many years. I also wish to express appreciation to members of the Audit committee for their diligence in discharging their statutory duties. I thank my colleagues on the Board for being focussed and supportive, and working tirelessly to see the success of the company. I also take this priviledge to welcome you to Bauchi “the pearl of tourism”. Bauchi is a very important market for Ashaka and much more, it is home to many Ashaka employees and other stakeholders. I am grateful to all of you for taking time to grace this occasion. I wish you all a fruiful delibration at this AGM. God bless and good luck. Neeraj Akhoury Managing Director/Chief Executive Officer AshakaCem Plc Ashaka Kiln Lab technician conducting quality control test
  20. 20. ASHAKACEM PLCPAGE 20 • 2012 ANNUAL REPORT BOARD OF DIRECTORS’PROFILE INFORMATION ON ASHAKACEM PLC Umaru Kwairanga (Sarkin Fulanin Gombe) Chairman John Stull Vice Chairman SuleimanYahyah Ismail Director Neeraj Akhoury Managing Director Jean-Christophe Barbant Director Senator Muhammed A. Muhammed OFR Director Dominique Brugier Director Hamra Imam (Mrs.) Director Kolawole Babalola Jamodu (Chief) OFR Director Dr. Abubakar Ali-Gombe Director
  21. 21. ASHAKACEM PLC 2012 ANNUAL REPORT • PAGE 21 INFORMATION ON ASHAKACEM PLC 2 Umaru Kwairanga (Sarkin Fulanin Gombe) holds a B.Sc (Hons) in Business Administration and MBA from the University of Maiduguri. He is a member of the Chartered Institute of Stock Brokers of Nigeria with 20 years cognate experience in banking, corporate finance, as well as an active player in the Capital Market. He is a well traveled executive with vast knowledge of corporate governance practices. He was appointed a director of the Company in June 2004 and became the Chairman of the Board of Directors in February 2012. John Stull (American) holds a B.Sc in Chemical Engineering from University of Akron and a Business Management Degree from Harvard University. He joined Lafarge in 1992 as Operations Manager. In 1996 he was promoted to president, Manufacturing US Region, until 2000 when he was promoted to President Missouri division, Ready-Mix and Aggregates. He held numerous positions including Senior Vice President, marketing and Supply Chain, Paris and Regional President, Latin America. He was the Regional president, sub-Saharan Africa of Lafarge Group. He is presently the Country CEO USA. He was appointed to the Board of AshakaCem PLC in July 2009. Neeraj Akhoury (Indian) is a Graduate of Economics and holds a postgraduate degree in Economics and Business Management. He joined AshakaCem Plc as a Deputy Managing Director in April 2011 and promoted to Managing Director/CEOon 25thJanuary2012. Priortothis,hewas theCommercial Director ofLafarge India.Hehas demonstrated experience to manage cement and steel businesses. He has worked with Tata Steel, a leading Indian manufacturer of Steel followed by Lafarge Group which is a leader in Building materials. His experience covers Sales & Marketing, Supply Chain, Corporate Affairs and new projects & capital investments. Jean-Christophe Barbant (French) is a graduate of Ecole Nationale Superieure des Mines de Paris/France and SchoolforSciencesandEngineering.HejoinedLafargeGypsumin1995asaDirectorforstrategicdevelopmentprojects. He was appointed Senior Vice President North and Central Europe between 1996 and 2000 following which he proceeded to the Lafarge Group, France as Director for Corporate E-business between 2000 and 2003. He was the CEO of Lafarge Roofing/Monier and member of the Lafarge Group Executive Committee till February 2007. He is currently the Lafarge Country CEO for Nigeria and Benin Republic. He was appointed to the Board of Lafarge Cement WAPCO Nigeria Plc on the 27th of May 2009 and was elected Vice Chairman on the 27th September 2012. SuleimanYahyah Ismailholds a B.Sc (Econ), Master of Philosophy Degree in Economics & politics of Development (M.Phil), Cambridge University U.K. He has expensive experience in financial management and capital markets having worked in Rosehill Group Ltd, Talafon Pay Phones Ltd, Investment & Securities Tribunal, and NUB International bank Ltd, FCMB Capital Markets Ltd, Economic & Financial Consultant on Strategy, Empire Ventures Ltd, Fed. Radio Corp. Of Nigeria amongst others. He was appointed a Director in October 2010. Senator Muhammed A.Muhammed OFR is a graduate of Birmingham &Wednesbury Colleges of Commerce, U.K, a fellow of the ACCA U.K and ICAN. He has attended managerial, financial and leadership related courses in Nigerian and overseas and has broad experience in both public and private sectors. He joined the Board in 2004.
  22. 22. PAGE 22 • 2012 ANNUAL REPORT ASHAKACEM PLC BOARD OF DIRECTORS’PROFILE INFORMATION ON ASHAKACEM PLC Dominique Brugier (French) is a mechanical engineer from Ecole des Arts Metiers; Paris. He joined Lafarge in 1991 as Mechanical Expert. He has worked in Lafarge China in 1995 as a Maintenance Manager, then Project in 1997, Plant Manager in 2002 and rose to Industrial Director in 2005. In 2009 he was promoted to the position of Director, Performance and Progress, East and west sub-Saharan, Africa. He was appointed a director in October 2011. Hamra Imam (Mrs.) holds a B.A. (Hons) Public Administration and a Master of Public Administration from Ahmadu Bello University, Zaria. She is a member of Nigerian Institute of Management. She holds certificates in Administration from the University of Manchester, UK and Harvard University Graduate School of Business Studies. Mrs. Imam is a seasoned administrator who meritoriously served in the Public service and rose to the position of Permanent Secretary and Commissioner in the civil service of Borno State. She was appointed a Director in October 2003. Kolawole Babalola Jamodu (Chief) OFR is a seasoned accountant and a fellow of the Chartered Institute of Cost and Management Accountants, London Institute of Chartered Secretaries and Administrators and Institute of Chartered Accountants of Nigeria. He holds a Honorary Doctorate of Science from Federal University of Agriculture, Abeokuta.HeisalsotheChairmanoftheBoardofDirectorsofNigerianBreweriesLtd.HejoinedtheBoardofAshakaCem a director in June, 2012. Dr. Abubakar Ali-Gombe is a Medical Doctor and graduated from University of Maiduguri in 1983. He became a Fellow of West African College of Physicians in 1991 and obtained a M.Sc in Epidemiology of Rheumatic Diseases from the University of Manchester, UK. He was Chief Medical Director Federal Medical Centre Gombe and served as a Minister of State for Health between 1998 to 1999. He joined the Board in June, 2012.
  23. 23. 2012 ANNUAL REPORT • PAGE 23ASHAKACEM PLC 3 CORPORATE GOVERNANCE REPORT OF THE DIRECTORS The Board of Directors has the pleasure in presenting to members, the Annual Report together with the Audited Financial Statements of the Company for the year ended 31st December 2012. Directors’Responsibilities In accordance with the provision of Sections 334 and 335 of the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria 2004), the Company’s Directors are responsible for the preparation of the Financial Statements which give a true and fair view of the affairs of the Company as at the end of the financial period and its results for that period and which comply with the Companies and Allied Matters Act, 2004. The Directors accept responsibility for the annual financial statements which have been prepared using appropriate accounting policies and gave a true and fair view of the company’s affairs. They also accept responsibility for the maintenance of accounting records, as well as adequate systems of internal control. Principal Activities AshakaCem Plc is principally engaged in the manufacturing and marketing of cement products. Summary of Financial Results for the year 2012 2011 N’000 N’000 Turnover 21,825,927 20,780,234 Gross profit 8,325,460 7,503,959 Profit before taxation 5,473,736 4,144,287 Taxation (2,348,888) (1,258,324) Profit after taxation 3,124,848 2,885,963 Dividend The Board of Directors is proposing a gross dividend of 42 kobo on every ordinary share in issue. This amounts to N940,570,313. The proposed dividend if approved by the shareholders is subject to withholding tax at the appropriate rate. Board Changes Dr. Abubakar Ali Gombe and Chief Kola Jamodu, OFR were appointed as independent non-executive directors of the Company on 27th June, 2012. HRH Alhaji A. R. Dukku died on the 24 December, 2012 and Alhaji A. A. Abubakar died on 25 March 2013 as directors after several years of service to the Company. Retirement by Rotation In accordance with Articles 88, 89, 90, 92 and 108 of the Articles of Association of the Company, the Directors to retire by rotation are Alh. Umaru Kwairanga, Sen. Muhammed Muhammed, OFR and Mal. SuleimanYahyah and being eligible they offer themselves for re-election. Directors and their interests 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 (Cap C20, Laws of the Federation Nigeria 2004) and in compliance with the listing requirements of the Nigerian Stock Exchange are as follows:
  24. 24. PAGE 24 • 2012 ANNUAL REPORT ASHAKACEM PLC CORPORATE GOVERNANCE Directors’shareholdings as at December 31, 2012 Names 2012 Holdings 2011 Holdings Alhaji Umaru Kwairanga 1,010,801 1,010,801 Mr. John W. Stull Nil Nil Mr. Neeraj Akhoury Nil Nil Mr. Jean-Christophe Barbant Nil Nil Mr. Dominique Brugier Nil Nil HRH A. R. Dukku 17,301 17,301 Alhaji Adamu Abubakar Nil 125,757 Mr. Suleiman Yahyah (Indirect) 650,250 650,250 Mrs. Hamra Imam 308,475 308,475 Senator Muhammed Muhammed, OFR 493,098 493,098 Chief Kolawole Babalola Jamodu, OFR Nil Nil Dr. Abubakar Ali Gombe Nil Nil Except as disclosed, none of the Directors has notified the Company of any disclosable interests in the Company’s share capital. Directors’Interest in Contracts None of the Directors has any declarable interest in contracts in which the Company was involved as at 31st December 2012 in accordance with Section 277 of the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004. Substantial Interest in Shares As at the date of this report, Lafarge SA held through its subsidiary Lafarge Nigeria (UK) Limited 58.61% of the issued and paid ordinary share capital of the Company. SHARE HOLDER CATEGORY UNIT OF SHARES % FOREIGN SHAREHOLDER LAFARGE NIGERIA (UK) LIMITED 1,312,543,477 58.61 NIGERIAN SHAREHOLDERS NIGERIAN SHAREHOLDERS 1,088,590,352 41.39 Grand Total 2,239,453,125 100.00 Corporate Governance The Company continued to uphold adherence to best corporate governance principles and practices as well as compliance with laws and regulations guiding its operations such as the Memorandum and Articles of Association, the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria 2004), the rules of the Nigerian Stock Excahnge, the Code of Good Corporate Governance of the Securities and Exchange Commission (SEC) and other regulatory bodies. The Company’s continous commitment to good corporate governance is at the forefront of its strategic plans which is aimed at improving the framework for accountability and transparency. The Company hereby present a detailed report to shareholders of its compliance with the corporate governance requirements during the year under review: 1. Board Composition and its Committees The Board has overall responsibility for ensuring that the Company is appropriately managed and achieve its strategic objectives. REPORT OF THE DIRECTORS
  25. 25. 2012 ANNUAL REPORT • PAGE 25ASHAKACEM PLC 3 CORPORATE GOVERNANCE The Company’s Articles of Association provides that the Company’s Board shall consist of not more than twelve Directors. During the year, the Board comprised of twelve Directors: Eleven (11) non-executives and one (1) executive. The Executive and Non-Executive Directors, all bringing high levels of competencies and experience with enviable records of achievement in their respective fields, made their contributions. The Board meets regularly to set broad policies for the company’s business and operations and ensures that a professional relationship is maintained with the company’s auditors in order to promote transparency in financial and non-financial reporting. 2. Role of the Board • Determining the company’s vision and mission to guide and set the pace for its current operations and future development. • Reviewing and evaluating present and future opportunities, threats and risks in the external environment and current and future strengths, weaknesses and risks relating to the Company. • Setting and determining strategic options, setting those to be pursued and deciding the means to implement and support them. • Ensuring that the company’s organisational structure and capability are appropriate for implementing the chosen strategies. • Reviewing alignment of goals, major plans of action, annual budget and business plans with overall strategy; setting performance objectives; monitoring implementation and corporate performance and overseeing major capital expenditure in line with approved budget. • Ensuring the intergrity of the Company’s accounting and financial reporting systems and that appropriate systems are in place for monitoring risk, financial control and compliance with the law. • TheBoardhassupervisoryresponsibilityforoverallbudgetaryplanning,majortreasuryplanning,scientificand commmercial strategies. The Board is reponsible for satisfying itself planning procedures and the Company’s overall objectives are appropriate. • Periodic and regular reviewing of actual business performance relative to estabilished objectives. • Reviewing and approving internal controls and risk management policies and processes. 3. Record of Directors’Attendance of Meetings In accordance with Section 258 (2) of the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria 2004), the record of Directors’ attendance of meetings held during year 2012 are available for inspection at the Annual General Meeting. The meetings of the Board were presided over by the Chairman and the Board met nine times during the year. Written notices of Board meetings, along with the agenda were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. Directors 25/1/12 8/3/12 29/3/ 12 31/5/12 27/6/ 12 17/9/ 12 22 /10/12 13/11/12 14/12/12 Total Umaru Kwairanga * * * * * * * * * 9 John Stull * * _ * * * * _ * 7 Neeraj Akhoury * * * * * * * * * 9 Hamra Imam (Mrs) * * * _ * * * * _ 7 Dominique Brugier * * * _ _ * * _ _ 5 HRH A.R. Dukku * * * * * _ * * * 8 Sen. Muhammed Muhammed,OFR * * * * * * * * * 9 Adamu Alkali Abubakar * * * * * * * * * 9 Jean-Christophe Barbant * * * * * * * * * 9 Kolawole Jamodu,OFR _ _ _ _ _ * * _ * 3 Dr Abubakar Ali Gombe _ _ - _ _ * * * * 4 Suleiman Yahyah * * * _ * * * * * 8 Ahmed Ibrahim (up to May 2012) * * * * _ _ _ _ _ 4
  26. 26. PAGE 26 • 2012 ANNUAL REPORT ASHAKACEM PLC CORPORATE GOVERNANCE REPORT OF THE DIRECTORS 4. Board Committees and their Composition Establishment Committee The Committee met five times and considered human resources matters with a view to optimising the work force and ensuring adequate compensation and other welfare benefits. Members 24/01/12 30/05/12 7/08/12 9/10/12 Total Hamra Imam * - * * 3 Jean Christophe Barbant * * - * 3 Neeraj Akhoury * * * * 4 Dr. A. A. Gombe(Appointed in June 2012) - - * * 2 Finance and General Purpose Committee The Committee met four times to review and make recommendations to the Board of Directors with respect to the Company’s annual and long-term financial strategies and objectives. Members 07/03/12 30/03/12 31/07/12 09/10/12 Total Ahmed Ibrahim(Retired in May 2012) * * - - 2 Neeraj Akhoury * * * * 4 Jean-Christophe Barbant * * * * 4 Adamu A. Abubakar (up to June 2012) * * - - 2 Sen.M.Muhammed OFR (Appointed Chairman in June 2012) * * * * 4 Kolawole Jamodu OFR (Appointed in June 2012) - - - - 0 Projects Committee Members 09/10/12 Total Jean Christophe Barbant(Appointed in June 2012) * 1 Neeraj Akhoury (Appointed in June 2012) * 1 Hamra Imam (Appointed in June 2012 * 1 Suleiman Yahyah (Appointed in June 2012) * 1 Dominique Brugier(Appointed in June 2012) - 0 Corporate Governance Committee Members 02/10/12 9/10/12 Total Suleiman Yahyah ( Appointed in June 2012) * * 2 Neeraj Akhoury * * 2 Adamu A.Abubakar * * 2 Chief Kolawole Jamodu * - 1 Nomination Committee The Committee meets as the need arises to review the composition of the Board, recommend skill mix and diversity required for appointment of new members to the Board and consider remuneration of Directors.The Committee met once in 2012. Members 27/06/12 Total Umaru Kwairanga * 1 John Stull * 1 Hamra Imam, Mrs (Appointed in June 2012) - 0 Jean-Christophe Barbant (Appointed in June 2012) - 0 Suleiman Yahyah (Appointed on June 2012) - 0
  27. 27. 2012 ANNUAL REPORT • PAGE 27ASHAKACEM PLC 3 CORPORATE GOVERNANCE 5. Audit Committee In accordance with sections 359 (4) & (5) of the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria 2004), the committee members consisting of members and Directors were nominated and elected to serve up to the conclusion of the 38th Annual General Meeting.The meetings of the Committee were held four times during the year. The functions of the Committee are provided in section 359 (6) of the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria 2004). Members 28/03/12 27/07/12 05/09/12 14 /11/12 Total Abdullahi Umar * * * * 4 Adamu Abubakar * * * * 4 Sen.Muhammed Muhammed,OFR * * * * 4 Maigana M. Lamido * * * - 3 Paul Olele * * * * 4 Jean-Christophe Barbant (Appointed on June 2012) - - - * 1 6. Management Team The Management team comprises of the functional heads of the core business units of the Company. The Management team meets regularly and is responsible for setting the overall corporate targets, reviews the company’s performance and operational issues, as well as the day-to-day management of the business. 7. Insider Trading AshakaCem Plc maintains a share trading policy that guides Directors, Audit Committee members and all employees as to their dealings in the Company’s shares. They are prohibited from dealing in the Company’s shares at certain periods in accordance with the Investment and Securities Act 2007. 8. Ethics and Code of Business Conduct The Company has adopted the Lafarge Group’s code on ethics and business conduct. All employees are aware of this code and are required to observe the rules of business conduct in relation to the company’s business. The Lafarge Group code of business conduct workshops/trainings were organized for staff of the Company at different periods during the year. As one of its responsibilities the Audit Committee evaluates the extent of compliance and proffers suggestions, benchmarks and achievable objectives towards the realisation of the Company’s policy on ethics as approved by the Board. Management in addition, presents an annual report on ethics to the Audit Committee for review and evaluation. 9. Whistle Blowing The Company is committed to conducting its affairs ethically and responsibly. Unethical behaviours cost the Company money, time, human resources and can negatively affect the Company’s reputation before its stakeholders. All ethical abuses and fraud are reported through the company’s internal whistle blowing process. 10. Acquisition of own Shares The Company did not purchase any of its own shares during the year ended 31st December, 2012. 11. Human Resources i. Employment of Disabled Persons The Company is committed to providing equal employment opportunities to qualified individuals and does not discriminate against disabled persons. ii. Employees’ Health All employees enjoy free and comprehensive medical services, which are extended to their families through the Company’s clinic. iii. Employees’ Training Employees are sponsored to attend various types of local and overseas courses, workshops and seminars of high quality. 12. Donations No donation was made to any political organisation during the year. However, some donations and charitable gifts were made to some communities and organisations which amounted to N184,486,091. The detailed breakdown of the expenditure is on page 33.
  28. 28. PAGE 28 • 2012 ANNUAL REPORT ASHAKACEM PLC REPORT OF THE DIRECTORS CORPORATE GOVERNANCE 13. Risk Management The Board ensures that appropriate means and measures are put in place by the Management to enable identification, analysis and continued improvement in the management of risks to which the Company is exposed as a result of its operations. Every year the Board ensures that Management performs analysis of the various operational risks facing the business. The analysis is used as the basis for updating the Company’s internal control standards and procedures as well as to ensure improved management of risk. 14. Audit Committee The Audit Committee is established to perform the functions stated in Section 359(6) of the Companies and Allied Matters Act (Cap C20, Laws of the Federation of Nigeria, 2004).The Audit Committee of the Company was elected at the last Annual General Meeting. The Audit Committee consists of three each of the Directors and shareholders representing the Company and the shareholders. A shareholder representative is the Chairman of the Committee. The Committee met four times in the period under review. 15. Auditors Messrs Akintola Williams Deloitte (Chartered Accountants) served as the external auditors during the year under review. In accordance with Section 357(2) of the Companies and Allied Matters Act, Messrs Akintola Williams Deloitte, have indicated their willingness to continue in office. A resolution will be proposed to re- appoint them and to authorise the Directors to fix their remuneration. BY ORDER OF THE BOARD BELLO A. ABDULLAHI FRC/2013/NBA/00000002301 Company Secretary/Legal Adviser Dated this 25th April 2013
  29. 29. ASHAKACEM PLC 2012 ANNUAL REPORT • PAGE 29 EXECUTIVE MANAGEMENT TEAM Abdul - Hameed Balarabe GM, Projects Alfa Abdullahi GM, Human Resources Dr. Abdullahi SB Gimba GM, Sales & Marketing Yusuf Lamuwa GM, Finance & IT Administration/CFO Graeme Melvin Bride GM, Manufacturing Bello A. Abdullahi Company Secretary/ Legal Adviser Neeraj Akhoury MD/CEO 3 CORPORATE GOVERNANCE
  30. 30. ASHAKACEM PLCPAGE 30 • 2012 ANNUAL REPORT CORPORATE GOVERNANCE SENIOR MANAGEMENT TEAM Dahiru Abbasi Gatugel Purchasing Manager AdamuYaro BU Chief Accountant Adamu Ma’aji Works Operations Manager Kime Muktar Electrical/Electronic Manager Ishaq Dirani Application Business Owner Tony Opara Sustainable Development Manager Dr. BunuWali Chief Medcal Officer Garba Maigana Regional Sales Manager (North East) Musa Usman Power Strategy Manager BabaTukur Regional Sales Manager (NorthWest) Abdulrazaq Ola Ande Marketing Manager IsaYakubu Electrical Improvement Project Manager Adamu Abubakar Health, Safety & Environmental Manager Ibrahim Dongs Power Plant Manager
  31. 31. SENIOR MANAGEMENT TEAM Hauwa B. Ahmed Employee Relation Manager Tijjani Ahmed Maiganga Coal Operations Manager Husaini Bulama Mechanical Manager Mohammed Ganye Logistics Manager Yusuf Doma BU Controller Mohammed Ismael Production Manager Musa D. Usman Key Account/Export Manager FrancisWayas Essential Services Manager Salihu Ajiya Strategy Manager Usman Sabo Inventory Manager Jude Orazulike IT Manager Tukur M. Lawal Training & Learning Manager Dr. Sani Jalo Bajoga Medical Officer Mohammed Bala Corporate Relations Manager Nasir M.Yelma Methods Manager Yahaya Gorki Plant Project Manager 2012 ANNUAL REPORT • PAGE 31ASHAKACEM PLC CORPORATE GOVERNANCE 3
  32. 32. PAGE 32 • 2012 ANNUAL REPORT ASHAKACEM PLC HEALTH, SAFETY AND ENVIRONMENT Ashaka employees and host community participating in health assessment during 2013 Health & Safety Month Celebration First aiders discussing health emergency response 2012 was another successful year in Health & safety performance at AshakaCem. The year ended without any fatal or lost time injury recorded, we have so far operated for more than Six years (2337 Days) without LTI. Health & safety remain our number one priority and indeed a value. With the achievement of this feat, AshakaCem remained in the Lafarge Health & Safety Excellence Club. The new approach of the Management engaging and changing the mindset of employees and contractors has afforded the opportunities to further drive Health & safety performance and inculcate safe practices as an integral part of our operations. Visible felt leadership will continue to be used as a management tool. Other activities carried out include Tree planting campaign and development of health and safety cardinal rules. The care for our people, local communities and other stakeholders is being approached with passion by the Management of AshakaCem Plc. SOCIAL AND ENVIRONMENTAL RESPONSIBILITY The care for our people, local communities and other stakeholders is being approached with passion by the Management of AshakaCem Plc.
  33. 33. 2012 ANNUAL REPORT • PAGE 33ASHAKACEM PLC 4 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY DONATIONS, CHARITABLE GIFT AND COMMUNITY PROJECTS S/N CASH AND CHARITABLE PUBLIC DONATIONS COST 1 Other cash and charitable donations 3,329,300 TOTAL 3,329,300 S/N COMMUNITY PROJECTS COST 1 Renovation of Examinations Hall at Govt. Day Secondary School Ashaka 2,066,820 2 Donation of an Ultrasound scanning machine to General Hospital Bajoga 1,710,000 3 Drilling of a complete hand pump at Govt. College Nafada 756,000 4 Construction of a block of two classrooms at Jalingo-Ashaka 6,059,538 5 Construction of a block of two classrooms at Bungum community 6,059,538 6 Construction of a block of two classrooms at Bajoga 6,540,303 7 Electrification project at Maiganga & Kayel Baga communities 24,551,182 8 Drilling of a hand pump water well at Science Primary School Bajoga. 756,000 9 Others 720,444 TOTAL 49,219,825 S/N NON CASH COMMUNITY RELATED PROJECTS COST 1 Ashaka Medical Center 64,894,304 2 Primary School Education - Ashaka Primary School 9,596,658 3 Artisan Training 48,152,074 4 Scholarship to University undergraduates 4,920,000 5 Computer Education to Community 4,373,930 TOTAL 131,936,966 GRAND TOTAL 184,486,091
  34. 34. PAGE 34 • 2012 ANNUAL REPORT ASHAKACEM PLC Renovated & equipped AshakaCem Medical Centre SOCIAL AND ENVIRONMENTAL RESPONSIBILITY DONATIONS, CHARITABLE GIFT AND COMMUNITY PROJECTS MD handing over commissioned project to community leaders Block of class rooms in Bojoga donated by Ashaka Classroom furniture donated by Ashaka   MD & Chairman at the Commissioning of a Borehole at Kayelbaga, Akko LGA, GombeUltrasound scanning machine donated by AshakaCem
  35. 35. 2012 ANNUAL REPORT • PAGE 35ASHAKACEM PLC FINANCIAL STATEMENTS Certification of Financial Statements 36 Statement of Directors’Reponsibilities 37 Report of Independent Auditors 38 Report of Audit Committee 39 Statement of Profit or Loss and Other Comprehensive Income 40 Statement of Financial Position 41 Statement of Change in Equity 42 Statement of CashFlows 43 Notes to the Financial Statements 44 Statement of Value Added 88 Financial Summary 89 Charts 90
  36. 36. PAGE 36 • 2012 ANNUAL REPORT ASHAKACEM PLC CERTIFICATION OF FINANCIAL STATEMENTS FINANCIAL STATEMENTS Pursuant to section 7 (2) of the Financial Reporting Council of Nigeria Act 2011, we have reviewed the annual report of ASHAKACEM PLC for the year ended 31 December 2012. Based on our knowledge, the financial statements does not contain any untrue statement of a material fact or omit a material fact necessary and is not misleading with respect to the period covered by the report. The Company’s code of Ethics and statement of Business Practices formulated by the Board has been implemented as part of the corporate governance practices of the company throughout the period of intended reliance and the Directors and key executives of the Company had acted honestly, in good faith and in the best interests of the whole Company. Our financial statements and other financial information included therein, fairly present in all material respects, the financial condition, results of operations and cash-flows of the Company as of, and for, the period presented in the financial statements. We are responsible for designing the internal controls and procedures surrounding financial reporting process and assessing these controls (as require by Section 7 (2) (f) of the Financial Reporting Council of Nigeria Act 2011) and have desgined such internal controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the company is made known to us particularly during the period in which this report is being prepared. The controls, which are properly designed, have been operating effectively in the period of intended reliance. Based on the foregoing we the undersigned hereby certify that to the best of our knowledge and belief the information contained in the financial statements for the year ended 31 December 2012, appear to be true, correct and up to date. ________________________________ ______________________________ Neeraj Akhoury Yusuf Lamuwa Managing Director Chief Financial Officer FRC/2013/IODN/00000002595 FRC/2013/ANAN/00000002302
  37. 37. 2012 ANNUAL REPORT • PAGE 37ASHAKACEM PLC STATEMENT OF DIRECTORS’RESPONSIBILITIES FINANCIAL STATEMENTS By the provisions of S334 and S335 of the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004 (CAMA), the Directors are responsible for the preparation of financial statements which give a true and fair view of the state of affairs of the Company and of the profit or loss at the end of each financial year. TheDirectorsarerequiredbytheprovisionsoftheCodeofCorporateGovernanceissuedbytheSecuritiesandExchange Commission (SEC) in April 2011, to issue this statement in connection with the preparation of the financial statements for the year ended December 31, 2012. In compliance with the provisions of CAMA the Directors must ensure that: • proper accounting records are maintained • applicable accounting standards are followed • suitable accounting policies are adopted and consistently applied • judgment and estimates made are reasonable and prudent • the going concern basis is used, unless it is inappropriate to presue that the Company will continue in business • internal control procedures are instituted, which as far as is reasonably possible, are adequate, safeguard the assets and prevent and detects fraud and other irregularities The Directors accept responsibility for the preparation of these financial statements, which have been prepared in compliance with: • the provisions of CAMA • the provisions of the Financial Reporting Council of Nigeria, Act No. 6 of 2011 • the published accounting and financial reporting standard issued and adopted by the Financial Reporting Council of Nigeria • the regulations of SEC and the Nigeria Stock Exchange The Directors have made an assessment of the Company’s ability to continue as a going concern based on the supporting assumptions stated in the financial statements, and have every reason to hold that the Company will remain a going concern in the financial year ended. Approved by the Board of Directors on 25 April, 2013, and signed on its behalf by: ___________________________________ ___________________________________ Chairman - FRC/2013/CISN/00000002357 Managing Director - FRC/2013/IODN/00000002595 F
  38. 38. PAGE 38 • 2012 ANNUAL REPORT ASHAKACEM PLC FINANCIAL STATEMENTS Report on the Financial Statements We have audited the accompanying financial statements of AshakaCem Plc which comprise the statement of financial position as at 31 December 2012, 31 December 2011 and 1 January 2011, the statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows for the years ended 31 December 2012 and 31 December, 2011, a summary of significant accounting policies and other explanatory information set out on pages 4 to 57. Directors’Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with the Companies and Allied Matters Act (CAP C20 LFN 2004), the Financial Reporting Council of Nigeria Act No 6, 2011, the International Financial Reporting Standards and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these 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 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the 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 Directors, as well as evaluating the overall presentation of the 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 financial statements present fairly, in all material respects, the financial position of AshakaCem Plc as at 31 December 2012, 31 December 2011 and 1 January 2011 and the financial performance and cash flows for the year then ended 31 December 2012 and 31 December 2011 in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011 and the International Financial Reporting Standards. Chartered Accountants Abuja, Nigeria 25 April 2013 FRC/2013/ICAN/00000001709 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ASHAKACEM PLC
  39. 39. 2012 ANNUAL REPORT • PAGE 39ASHAKACEM PLC F REPORT OF AUDIT COMMITTEE FINANCIAL STATEMENTS In accordance with Section 359 (6) of the Companies and Allied Matter Act 2004, we have: (a) Reviewed the scope and planning of the audit requirements as presented by the External Auditors, (b) Reviewed the External Auditors’ Management Report for the year ended 31st December, 2012 as well as the management response thereon and, (c) Ascertained that the accounting and reporting policies of the Company for the year ended 31st December, 2012 are in accordance with legal requirements and agreed ethical practices. In our opinion, the scope and planning of the AshakaCem Plc audit for the year ended 31st December, 2012 were adequate and Management’s responses to the Auditors’findings were satisfactory. Abdullahi Umar Chairman, Corporate Audit Committee Dated this 23rd April, 2012 AUDIT COMMITTEE MEMBERS 1. Abdullahi Umar 2. Paul Olele 3. Maigana M. Lamido 4. Sen. Muhammed A. Muhammed, OFR 5. Adamu A. Abubakar (To March 2013) 6. Jean-Christophe Barbant Jean-Christophe Barbant Mr. Paul Olele Alh. A. A. Abubakar Alh. Umar Abdullahi Chairman, Corporate Audit Committee Senator Muhammed A. Muhammed OFR Alh. Muhammad M. Lamido
  40. 40. PAGE 40 • 2012 ANNUAL REPORT ASHAKACEM PLC FINANCIAL STATEMENTS STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2012 2012 2011 Note N’000 N’000 Revenue 6 21,825,927 20,780,234 Cost of Sale (13,500,467) (13,276,275) Gross Profit 8,325,460 7,503,959 Other income 7 604,635 64,062 Investment income 8 936,162 371,449 Administrative expenses (3,775,276) (3,321,278) Selling and distribution expenses (617,245) (473,905) Profit before tax 5,473,736 4,144,287 Income tax expense 10 (2,348,888) (1,258,324) Profit for the year 9 3,124,848 2,885,963 Other comprehensive income for the year net of taxes Actuarial losses (net of tax) 19.1 (340,294) (157,106) Total comprehensive income for the year 2,784,554 2,728,857 Earnings per share Basic (kobo) 26 140 129 Diluted (kobo) 26 140 129
  41. 41. 2012 ANNUAL REPORT • PAGE 41ASHAKACEM PLC F STATEMENT OF FINANCIAL POSITION FINANCIAL STATEMENTS for the year ended 31 December 2012 Dec 2012 Dec 2011 Jan 2011 Note N’000 N’000 N’000 ASSETS NON-CURRENT ASSETS Property, plant and equipment 11 48,271,636 49,527,100 50,451,312 Intangible assets 12 82,345 39,893 107,526 Total non-current assets 48,353,981 49,566,993 50,558,838 CURRENT ASSETS Inventories 13 5,114,022 3,723,060 5,243,565 Trade and other receivables 14 501,554 1,156,233 832,515 Cash and cash equivalents 15 13,355,675 10,765,549 3,194,995 Total current assets 18,971,251 15,644,842 9,271,075 TOTAL ASSETS 67,325,232 65,211,835 59,829,913 EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital 17 1,119,727 1,119,727 995,313 Capital contribution 18 898,540 - - Other reserves 19 (497,400) (157,106) 124,414 Retained earnings 20 47,993,378 45,764,311 43,550,184 Total equity 49,514,245 46,726,932 44,669,911 NON-CURRENT LIABILITIES Finance lease obligation 21 - 34,567 62,945 Retirement benefit obligation 22 2,491,879 2,084,733 1,870,706 Deferred tax liabilities 10 5,706,979 5,594,897 5,507,771 Total non-current liabilities 8,198,858 7,714,197 7,441,422 CURRENT LIABILITIES Trade and other payables 23 7,471,761 9,518,581 7,356,141 Finance lease obligation 21 31,545 27,957 27,957 Provisions 24 17,857 17,857 17,857 Current tax liabilities 10 2,090,966 1,206,311 316,625 Total current liabilities 9,612,129 10,770,706 7,718,580 TOTAL LIABILITIES 17,810,987 18,484,903 15,160,002 TOTAL LIABILITIES AND EQUITY 67,325,232 65,211,835 59,829,913 These financial statements on pages 36 to 90 were approved by the Board of Directors on 25 April 2013 and signed on its behalf by: _______________________ ______________________ _______________________ Alhaji Umaru Kwairanga Neeraj Akhoury Yusuf Lamuwa Chairman Managing Director/CEO Chief Financial Officer FRC/2013/CIBN/00000002357 FRC/2013/IODN/00000002595 FRC/2013/ANAN/00000002302
  42. 42. PAGE 42 • 2012 ANNUAL REPORT ASHAKACEM PLC FINANCIAL STATEMENTS Share Capital Other Retained capital Contribution reserves earnings Total N’000 N’000 N’000 N’000 N’000 Balance at 1 January 2011 995,313 - 124,414 43,550,184 44,669,911 Profit for the year - - - 2,885,963 2,885,963 Other comprehensive income for the year (net of tax) - - (157,106) - (157,106) Total comprehensive income for the year - - (157,106) 2,885,963 2,728,857 Transfer from reserve for bonus issue 124,414 - (124,414) - - Dividend paid - - - (671,836) (671,836) Balance at 31 December 2011 1,119,727 - (157,106) 45,764,311 46,726,932 Profit for the year - - - 3,124,848 3,124,848 Other comprehensive income for the year (net of tax) - - (340,294) - (340,294) Total comprehensive income for the year - - (340,294) 3,124,848 2,784,554 Rebate received from Lafarge (see note 18) - 898,540 - - 898,540 Dividend paid - - - (895,781) (895,781) Balance at 31 December 2012 1,119,727 898,540 (497,400) 47,993,378 49,514,245 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2012
  43. 43. 2012 ANNUAL REPORT • PAGE 43ASHAKACEM PLC F FINANCIAL STATEMENTS STATEMENT OF CASHFLOWS for the year ended 31 December 2012 2012 2011 Note N’000 N’000 Cash flows from operating activities Cash received from customers 22,430,035 22,910,945 Cash paid to suppliers and employees (17,908,506) (13,962,322) Cash generated from operations 4,521,529 8,948,623 Income taxes paid (1,206,311) (214,181) Net cash generated by operating activities 25 3,315,218 8,734,442 Cash flows from investing activities Purchase of property, plant and equipment (701,592) (840,958) Purchase of intangible assets (53,235) - Interest received 936,162 371,449 Proceeds from disposal of property, plant and equipment 20,333 5,835 Net cash generated by/(used in) investing activities 201,668 (463,674) Cash flows from financing activities Dividend paid (895,781) (671,836) Repayment of finance lease (30,979) (28,378) Net cash used in financing activities (926,760) (700,214) Net increase in cash and cash equivalents 2,590,126 7,570,554 Cash and cash equivalents at the beginning of the year 10,765,549 3,194,995 Cash and cash equivalents at the end of the year 15 13,355,675 10,765,549
  44. 44. PAGE 44 • 2012 ANNUAL REPORT ASHAKACEM PLC 1 General information AshakaCem Plc was incorporated in Nigeria on 7 August 1974 as a private limited company and commenced operation in September 1979. Its registered office address is Ashaka Works Near Gombe, Gombe State. It was converted to a public company and the shares were quoted on the Nigeria Stock Exchange in July 1990. Its present ownership structure is 41.56% Nigerian and 58.44% Lafarge SA held through its subsidiary, Lafarge Nigeria (UK) Limited which owns 58.44% of AshakaCem Plc. The Company’s principal activities include the manufacture and sale of cement. 1.2 Going concern status The Company has consistently been making profits. The Directors believe that there is no intention or threat from any source to curtail significantly its line of business in the foreseeable future. Thus, these financial statements are prepared on going concern basis. 1.3 Financial period These financial statements cover the financial period from 1 January 2012 to 31 December 2012 with comparatives for the year ended 31 December 2011 and opening statement of financial position as at the transition date of 1 January 2011. 2 Operating environment Emerging markets such as Nigeria are subject to different risks compared to more developed markets, including economic, political, social, legal and legislative risks. As has happened in the past, actual or perceived financial problems or an increase in the perceived risks associated with investing in emerging economies could adversely affect the investment climate in Nigeria and the country’s economy in general. The global financial system continues to exhibit signs of deep stress and many economies around the world are experiencing lesser or no growth compared to prior years.These conditions could slow or disrupt Nigeria’s economy, adversely affect the Company’s access to capital and cost of capital and, more generally, its business, results of operations, financial condition and prospects. Because Nigeria produces and exports large volumes of oil, Nigerian’s economy is particularly sensitive to the price of oil on the world market which has fluctuated significantly during 2012 and 2011. for the year ended 31 December 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
  45. 45. 2012 ANNUAL REPORT • PAGE 45ASHAKACEM PLC F FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS for the year 31 December 2012 3 Application of new and revised International Financial Reporting Standards (IFRS) New and revised IFRSs in issue but not yet effective The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: Effective date IFRS 9 Financial Instruments annual periods beginning on or after 1 January 2015 IFRS 10 Consolidated Financial Statements annual periods beginning on or after 1 January 2013 IFRS 11 Joint Arrangements annual periods beginning on or after 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities annual periods beginning on or after 1 January 2013 IFRS 13 Fair Value Measurement annual periods beginning on or after 1 January 2013 Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities annual periods beginning on or after 1 January 2013 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures annual periods beginning on or after 1 January 2015 Amendments to IFRS 10, IFRS 11 Consolidated Financial Statements, Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities: Transition Guidance annual periods beginning on or after 1 January 2013 IAS 19 (as revised in 2011) Employee Benefits annual periods beginning on or after 1 January 2013 IAS 27 (as revised in 2011) Separate Financial Statements annual periods beginning on or after 1 January 2013 IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures annual periods beginning on or after 1 January 2013 Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities annual periods beginning on or after 1 January 2014 Amendments to IFRSs Annual Improvements to IFRSs 2009-2011 Cycle annual periods beginning on or after 1 January 2013 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine annual periods beginning on or after 1 January 2013
  46. 46. PAGE 46 • 2012 ANNUAL REPORT ASHAKACEM PLC FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS for the year 31 December 2012 3 Application of new and revised International Financial Reporting Standards (continued) IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include the requirements for the classification and measurement of financial liabilities and for derecognition. Key requirements of IFRS 9 are described as follows: IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. The most significant effect of IFRS 9 regarding 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. Specifically, under IFRS 9, for financial liabilities that are designated 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 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. IFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted. The directors anticipate that the standard will be adopted in the Company’s financial statements for the annual period beginning 1 January 2015.The application of this standard will not have significant impact on amounts reported in the financial statements. In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). Key requirements of these five Standards are described below. IFRS10replacesthepartsofIAS27ConsolidatedandSeparateFinancialStatementsthatdealwithconsolidated financial statements and SIC-12 Consolidation – Special Purpose Entities. Under IFRS 10, there is only one basis for consolidation, that is, control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, pending on the rights and obligations of the parties to the arrangements. In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting.
  47. 47. 2012 ANNUAL REPORT • PAGE 47ASHAKACEM PLC F FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS for the year 31 December 2012 3 Application of new and revised International Financial Reporting Standards (continued) IFRS 12 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. In June 2012, the amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the application of these IFRSs for the first time. These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time. The directors anticipate that the application of these five standards will have an insignificant impact on amounts reported in the financial statements. IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements.The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements.The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope. IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. The directors anticipate that IFRS 13 will be adopted in the Company’s financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. The amendments to IAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off”and“simultaneous realisation and settlement” The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments to IFRS 7 are effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required. The directors anticipate that the application of these amendments to IAS 32 and IFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future. The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus.
  48. 48. PAGE 48 • 2012 ANNUAL REPORT ASHAKACEM PLC NOTES TO THE FINANCIAL STATEMENTS for the year 31 December 2012 FINANCIAL STATEMENTS 3 Application of new and revised International Financial Reporting Standards (continued) The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Company’s financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Company’s defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact. The Annual Improvements to IFRSs 2009 – 2011 Cycle include a number of amendments to various IFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to IFRSs include: • amendments to IAS 1 Presentation of Financial Statements • amendments to IAS 16 Property, Plant and Equipment; and • amendments to IAS 32 Financial Instruments: Presentation. The amendments to IAS 1 clarify that an entity is required to present a statement of financial position as at the beginning of the preceding period (third statement of financial position) only when the retrospective application of an accounting policy, restatement or reclassification has a material effect on the information in the third statement of financial position and that the related notes are not required to accompany the third statement of financial position. The amendments also clarify that additional comparative information is not necessary for periods beyond the minimum comparative financial statement requirements of IAS 1. However, if additional comparative information is provided, the information should be presented in accordance with IFRSs, including related note disclosure of comparative information for any additional statements included beyond the minimum comparative financial statement requirements. Presenting additional comparative information voluntarily would not trigger a requirement to provide a complete set of financial statements. The directors do not anticipate that the amendments to IAS 1 will have a significant effect on the Company’s financial statements. The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in IAS 16 and as inventory otherwise. The directors do not anticipate that the amendments to IAS 16 will have a significant effect on the Company’s financial statements. The amendments to IAS 32 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. The directors anticipate that the amendments to IAS 32 will have no effect on the Company’s financial statements as the Company has already adopted this treatment. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (production stripping costs). Under the Interpretation, the costs from this waste removal activity (stripping) which provide improved access to ore is recognised as a non-current asset (stripping activity asset) when certain criteria are met, whereas the costs of normal on-going operational stripping activities are accounted for in accordance with IAS 2 Inventories.The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part. IFRIC 20 is effective for annual periods beginning on or after 1 January 2013. Specific transitional provisions are provided to entities that apply IFRIC 20 for the first time. However, IFRIC 20 must be applied to production stripping costs incurred on or after the beginning of the earliest period presented. The directors anticipate that IFRIC 20 will have no effect to the Company’s financial statements as the Company does not engage in such activities.

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