Dangote Flour Mill annual report 2008

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Dangote Flour Mill annual report 2008

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Dangote Flour Mill annual report 2008

  1. 1. 1DA N G OT E F L O U R M I L LS P L C Notice of 3rd Annual General Meeting 2 Directors, Advisers and Other Corporate Information 3 Financial Highlights 4 Chairman’s Statement 5 Report of the Directors 7 Corporate Governance Report 11 Report of the Audit Committee 13 Report of the Independent Auditors 14 Statement of Significant Accounting Policies 15 Consolidated Profit and Loss Account 17 Consolidated Balance Sheet 18 Consolidated Statement of Cash Flows 19 Notes to the Consolidated Financial Statements 20 Consolidated Financial Summary 31 Consolidated Value Added Statement 32 Proxy Form Contents
  2. 2. 2 DA N G OT E F L O U R M I L LS P L C NOTICE IS HEREBY GIVEN that the 3rd ANNUAL GENERAL MEETING OF DANGOTE FLOUR MILLS PLC will hold at The Civic Centre, Ozumba Mbadiwe Road, Victoria Island, Lagos on the 9th of December, 2009 at 11 am prompt to transact the following business: ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the year ended 31st December 2008 along with the reports of the Directors and Audit Committee thereon for the year 2008. 2. To declare a Dividend. 3. To re-elect Directors. 4. To re-appoint the Auditors. 5. To authorize the Directors to fix the remuneration of the Auditors. 6. To appoint members of the Audit Committee. SPECIAL BUSINESS To fix the remuneration of the Directors. PROXY A member of the Company entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a member of the Company. A proxy for an organization may vote on a show of hands and on a poll. For the appointment to be valid, a completed proxy form must be deposited at the registered office of the Company or with the Registrar not later than 48 hours before the time fixed for the meeting. DIVIDEND The Board recommends for the approval of shareholders a payment of 20 kobo per ordinary share of 50 kobo each, out of the profits declared in the financial year ended 31st December, 2008 and which will be subject to withholding tax at the appropriate rate. DIVIDEND WARRANTS If approved, the dividend warrants will be posted on Wednesday 16th December, 2009 to shareholders, whose names appear in the Company Register of Members at the close of business on Friday 20th November, 2009. NOTES 1. CLOSURE OF REGISTER AND TRANSFER BOOKS NOTICE IS HEREBY GIVEN that the Register of Members and Transfer Books of the Company will be closed from Monday 23rd November to Monday 30th November, 2009 both days inclusive. 2. AUDIT COMMITTEE In accordance with Section 359(5) of the Companies and Allied Matters Act 1990, a nomination (in writing) by any member or shareholder for appointment to the Audit Committee should reach the Company Secretary at least 21 days before the Annual General Meeting. The Audit Committee comprises three shareholders and three Directors. BY ORDER OF THE BOARD A. A. SAMUEL Ag Company Secretary Dated this 3rd day of November, 2009 DANGOTE FLOUR MILLS PLC No. 8, Rycroft Road, Apapa, Lagos, Nigeria. Notice of 3rd Annual General Meeting
  3. 3. 3DA N G OT E F L O U R M I L LS P L C DIRECTORS Alhaji Aliko Dangote — Chairman Alhaji Sani Dangote — Director Mr. Olakunle Alake — Director Mr. Uzoma Nwankwo — Director Alhaji Abdu Dantata — Director Alhaji Abdullahi Mahmoud — Director Mr. Asue Ighodalo — Director Brigadier Gen. S. L. Teidi (Rtd) — Director Mr. Rohit Chaudhry — Managing Director Alhaji Shuaibu Idris — Executive Director COMPANY SECRETARY/LEGAL ADVISER A. A. Samuel, Esq. (Ag) REGISTERED OFFICE 8, Rycroft Road, Apapa, Lagos, Nigeria. REGISTRAR AND TRANSFER OFFICE Oceanic Registrars Ltd. 154, Ikorodu Road, Onipanu, Shomolu, Lagos. AUDITORS Akintola Williams Deloitte (Chartered Accountants) 235, Ikorodu Road, Ilupeju, Lagos. BANKERS Zenith Bank Plc Afribank Plc Equitorial Trust Bank Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Oceanic Bank Plc Diamond Bank Plc Access Bank Plc Intercontinental Bank Plc First City Monument Bank Plc United Bank for Africa Plc Directors, Advisers and Other Corporate Information
  4. 4. 4 DA N G OT E F L O U R M I L LS P L C Financial Highlights The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 Turnover 47,927,300 42,153,272 30,109,610 31,303,845 Profit before taxation 3,167,625 675,703 1,758,137 375,651 Taxation (178,066) (114,144) (54,045) (85,316) Profit after taxation 2,989,559 561,559 1,704,092 290,335 BALANCE SHEET Share capital 2,500,000 2,500,000 2,500,000 2,500,000 Shareholders’ funds 24,352,609 21,985,707 23,157,859 21,907,492 Per 50 kobo share data (kobo) Earnings per share (kobo) 60 11 34 6
  5. 5. 5DA N G OT E F L O U R M I L LS P L C Fellow Shareholders It is with great delight that I welcome you all to the third Annual General Meeting of our Company, DANGOTE FLOUR MILLS PLC. This meeting gives me the opportunity to brief fellow shareholders on the performance of our Company and the Group for the year ended 31st December 2008. It is important to mention that the year had been one of significant change and one which laid the foundations for strong sustainable growth in the years ahead for our Company given the fact that all our performance indices for the year under review witnessed tremendous improvements, compared with the previous years. Before going into the details of our financial and operating performance, I consider it most appropriate to review the challenges we faced, how these challenges were managed to make the Company stay afloat and also to share with you all the strategic direction of the Company and the Group as well. Moreover, I will also like to touch on the business environment both locally and globally and how they impacted and are likely to impact on business management and performance in the near future. OPERATING ENVIRONMENT The year 2008 was a difficult one for business both globally and locally. The global financial meltdown imposed challenges on the business environment through reduced access to both local and foreign finance, reduced purchasing power in the economy and sustained high price of wheat, our major raw material. Despite the harsh operating environment however, your Company was able to operate profitably and retain its market share by focusing on efficiency and improved customer service. 2008 RESULTS AND DIVIDEND Increases in international prices of our raw materials necessitated us passing some of the cost to our customers in the form of increases in selling prices. The resultant customer resistance adversely affected our volumes in 2008. The Company’s sales turnover dipped slightly to N=30.1 billion in 2008 compared with N=31.3 billion in 2007. Our subsidiaries contributed N=16.6 billion to Group sales, resulting in a combined sales of N=47.9 billion. Although selling prices were increased, we were constrained by the market from passing on the entire increase and thus recouping the whole of the increased input cost. Management rather increased its focus on internal efficiency to cut down on other area of costs, the effect of which made the Company profit before taxation to increase from N=376 million in 2007 to N=1.8 billion in 2008. Group profit in 2008 also leaped from N=676 million in 2007 to N=3.2 billion in 2008 implying N=1.4 billion Group attributable profit from subsidiaries. Resulting from this impressive result, the Directors are recommending for your approval at this meeting, a dividend payment at the rate of 20 kobo per share for the year under review. THE BOARD After the last Annual General Meeting, the Board of Directors in its determination to ensure that the Company attains greater heights for the collective happiness of all Shareholders, appointed Mr. Rohit Chaudhry as the Managing Director of the Company. Mr. Chaudhry is a man of tremendous management experience and we are all happy that his competence and ability have positively transformed the performance of the Company as shown in the recently published 9 months unaudited results of the Company with an appreciable increase in the turnover and an interim dividend of 30 kobo per ordinary 50 kobo share already declared payable to all Shareholders. Fellow Shareholders, I enjoin you to wish Mr. Chaudhry greater success in the arduous task of taking the Company to the Promised Land. Furthermore, three of your existing Directors will retire by rotation and being eligible, they will offer themselves for re-election in the course of this meeting. OUR PEOPLE We strongly believe that having an excellent ‘people agenda’ at the heart of our business has a real and tangible effect on business performance. We are committed to growing, developing and retaining our talents as we recognize that this is fundamental to our long-term success and accordingly, we are increasing emphasis and investing in this area in order to continue to add value to them as important stakeholders in the organization. Chairman’s Statement
  6. 6. 6 DA N G OT E F L O U R M I L LS P L C At this juncture, I express on your behalf, the appreciation of the shareholders and the Board to all our valued employees and our colleagues around the business who are instrumental in delivering this year laudable results through their drive and commitment. FUTURE OUTLOOK The Global Financial Meltdown is showing signs of easing in 2009. Oil prices are inching up and the price of wheat is stabilizing. This should translate to increased purchasing power in the local economy and also facilitate our ability to manage our material cost better. We are using the opportunity provided by the improved prospects to expand the business. Our Noodles factories in Ikorodu, Kano and Calabar were all commissioned in 2009. Furthermore, expansion of our production capacities in our factories in Apapa, Calabar and Ilorin is ongoing. The plan is to expand the current 4,800 metric tons of milling capacity per day to 7,300 metric tons. GLOBAL ENVIRONMENT I consider my speech incomplete without commenting on global external environment and the impact on Nigeria and our business. The current global financial crisis which has reduced availability of offshore funds to finance imports makes sourcing for imported raw materials and spares not only challenging but more expensive as cost of funds has been rising in the global markets. In some cases, local banks are experiencing outright cancellation of foreign currency lines hitherto being enjoyed prior to the crisis. Aside the above challenge, the Federal Government official data confirms inflation rate at about 14%. The growth in inflation is attributed to higher food prices. Food price pressure has become a global phenomenon because some commodities such as wheat, sugar and corn being used in the production of ethanol have created strong demand for bio-fuel. Bio-fuel is being used in most of the advanced economies as a supplement to transportation fuels. The implication of this again is that the international prices of this category of commodities would further be propelled because of possible greater demand for them. All these notwithstanding, I wish to assure my fellow shareholders that our Company is financially well insulated to cope with any challenges that may arise from these crises. We shall proactively continue to put required safeguards in place to deal with any environmental constraints, be they local or global. CORPORATE SOCIAL RESPONSIBILITY We would continue to play our part in the society as a responsible corporate citizen by not only complying with required standards in products quality but also by engaging with the larger society to continue to contribute positively to the improved social welfare of our operating environment. CUSTOMERS Customers/Dealers are considered indispensable partners in this difficult but interesting journey of progress. We shall continue to hold this wonderful group of people in high esteem. On behalf of the Board, Management and Staff of the Company, I hereby wish to say a big thank you to all our numerous customers. CONCLUSION I thank you all for your attendance and contribution to our Company. I thank you all also for listening. I wish you journey mercy back to your various destinations. Thank you and God bless. Alhaji (Dr.) Aliko Dangote, CON Chairman Chairman’s Statement cont’d
  7. 7. 7DA N G OT E F L O U R M I L LS P L C 1. ACCOUNTS The Directors are pleased to submit their report together with the audited accounts of the Company for the year ended 31st December 2008. 2. RESULT The Group The Company N=’000 N=’000 Turnover 47,927,300 30,109,610 Profit after taxation and minority interest 2,947,448 1,704,092 3. PRINCIPAL ACTIVITIES The principal activities of the Company during the year are as follows: (a) Manufacturing and selling of bread and biscuit flour (b) Manufacturing and selling of Wheat Offal (Bran) (c) Manufacturing of Semolina. The principal activities of its subsidiaries are: Pasta Manufacture of Spaghetti, Macaroni etc. Agrosacks Manufacture of packaging materials. 4. LEGAL FORM The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated as public limited liability company on 1 January 2006, commenced operations on the same date and became quoted on the Nigerian Stock Exchange on 4 February 2008. Its principal activity is the milling, processing and marketing of branded flour. 5. DIRECTORS AND DIRECTORS’ INTEREST The names of Directors who are currently in office are as follows: (a) Alhaji Aliko Dangote (b) Alhaji Sani Dangote (c) Mr. Olakunle Alake (d) Mr. Uzoma Nwankwo (e) Alhaji Abdu Dantata (f) Alhaji Abdullahi Mahmoud (g) Mr. Asue Ighodalo (h) Brigadier Gen. S. L. Teidi (Rtd) (i) Mr. Rohit Chaudhry (j) Alhaji Shuaibu Idris (i) In accordance with the provisions of Section 259 of the Companies and Allied Matters Act 1990, one-third of the Directors of the Company shall retire from office. The Directors to retire every year shall be those who have been longest in office since their last election. In accordance with the provisions of this section, Mr. Asue Ighodalo, Alhaji Abdu Dantata and Brigadier Gen. S. L. Teidi (Rtd) retire by rotation and being eligible, offer themselves for re-election. (ii) No Director has a service contract not determinable within five years. Report of the Directors for the Year Ended 31 December, 2008
  8. 8. 8 DA N G OT E F L O U R M I L LS P L C (iii) The Directors’ interest in the issued share capital of the Company as recorded in the register of members and/ or as notified by them for the purpose of Section 275 of the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004 are as follows: Number of 50k Shares held as at 31 December 2008 (a) Alhaji Aliko Dangote 32,283,333 (b) Alhaji Sani Dangote — (c) Mr. Olakunle Alake 377,500 (d) Mr. Uzoma Nwankwo 271,500 (e) Alhaji Abdu Dantata — (f) Alhaji Abdullahi Mahmoud 43,750 (g) Mr. Asue Ighodalo — (h) Brigadier Gen. S. L. Teidi (Rtd) — (i) Mr. Rohit Chaudhry — (j) Alhaji Shuaibu Idris 100,000 6. DIRECTORS’ RESPONSIBILITIES The Directors are responsible for the preparation of financial statements which give true and fair view of the state of affairs of the Company at the end of each financial year and of the profit or loss for that period and comply with the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004. In doing so they ensure that: (a) Proper accounting records are maintained; (b) Applicable accounting standards are followed; (c) Suitable accounting policies are adopted and consistently applied; (d) Judgments and estimates made are reasonable and prudent; (e) The going concern basis is used, unless it is inappropriate to presume that the Company will continue in business; and (f) Internal control procedures are instituted which as far as is reasonably possible, safeguard the assets and prevent and detect fraud and other irregularities. 7. CORPORATE GOVERNANCE (a) The Company is committed to the best practice and procedures in corporate governance. Its business is conducted in a fair, honest and transparent manner which conforms to high ethical standards. (b) Members of the Board of Directors hold quarterly meetings to decide on policy matters and direct the affairs of the Company, review its performance, its operations, finances and formulate growth strategy. Attendance at Directors’ meetings was impressive. In line with provisions of section 258(2) of the Companies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004, the records of Directors’ attendance at board meetings is available for inspection at the Annual General Meeting. (c) The remuneration of Executive Directors is fixed and reviewed by a Committee of Non-executive Directors. (d) The Board of Directors consists of 10 members; a Chairman, Managing Director, Sales Director and 7 Non- Executive Directors. Appointment to the Board is made by Shareholders at the Annual General Meeting, upon the recommendation of the Board of Directors. (e) The oversight functions of the Board are performed through its Committees, namely: (i) The Finance and Investment Committee (ii) The Nomination and Remuneration Committee. 8. SUBSTANTIAL INTEREST IN SHARES The Registrar has advised that according to the register of members on 31st December 2008, only Dangote Industries Limited with 3,667,691,470 ordinary shares of 50k each held more than 5% of the issued share capital of the Company. Report of the Directors cont’d for the Year Ended 31 December, 2008
  9. 9. 9DA N G OT E F L O U R M I L LS P L C 9. FIXED ASSETS Movements in fixed assets during the year are shown in Note 6 to the Accounts. In the opinion of the Directors, the market value of the Company’s properties is not less than the value shown in the accounts. 10. DONATIONS AND CHARITABLE GIFTS The holding Company Dangote Industries Limited currently makes donation on behalf of the Group Companies. In addition during the year the Company made a donation of N=100,000 to National Youth Service Corps (NYSC). 11. POST BALANCE SHEET EVENTS There were no significant developments since the balance sheet date which could have had a material effect on the state of affairs of the Company as 31st December, 2008 and the profit for the year ended on that date which have been adequately recognized. 12. COMPANY DISTRIBUTORS The Company’s products are distributed through many distributors across the whole country. 13. SUPPLIERS The Company obtains its materials at arm’s length basis from overseas and local suppliers. Amongst its main overseas and local suppliers are Cargill International SA, Ameropa SA, Vitachem Nigeria Limited and Biochemical Derivatives Nigeria Limited. 14. ANALYSIS OF SHAREHOLDINGS Analysis of shareholdings as at 31st December, 2008 Range No. of Holders Per cent Units Per cent 1 — 50,000 384,755 99.58 789,558,334 15.79 50,001 — 100,000 801 0.21 61,800,253 1.24 100,001 — 1,000,000,000 778 0.20 480,949,943 9.62 1,000,000,001 and above 1 0.01 3,667,691,470 73.35 386,335 100.00 5,000,000,000 100.00 15. HUMAN RESOURCES 1. Employment and Employees The Company has reviewed its employment policy in line with the needs of the business. Careful recruiting is now the focus to ensure that potential high performers are attracted and retained. 2. Work Environment The Company continuously strives to improve its operations to ensure a safe working environment. The Company maintains a high standard of hygiene in all its premises through sanitation practices and the regular fumigation exercises have been further strengthened by the installation of pest and rodent control gadgets. Safety and environment workshops have been organized for all senior employees with a broad focus on good house-keeping to ensure good and safe working environment. Nutritionally balanced meals are provided in staff canteens at fully subsidized prices. 3. Employee Development Local and overseas training and development programmes have been organized to meet the need of the Company’s modernization, automation strategy implementation. The Company continues to place premium on its human capital development arising from the fact that this would ensure improved efficiency of the business and maintain strategic advantage over competition. Report of the Directors cont’d for the Year Ended 31 December, 2008
  10. 10. 10 DA N G OT E F L O U R M I L LS P L C 16. AUDIT COMMITTEE Pursuant to Section 359(3) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004, the Company has put in place an Audit Committee comprising of 3 Shareholders and 3 Directors as follows: 1. Mr. Alex Adio — Shareholder/Chairman 2. Alhaji Kasimu Ibrahim — Shareholder 3. Chief M. O. Mbonu — Shareholder 4. Alhaji Abdullahi Mahmoud — Director 5. Mr. Asue Ighodalo — Director 6. Mr. Olakunle Alake — Director The functions of the Audit Committee are as laid down in Section 357(2) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004. 17. AUDITORS Messrs Akintola Williams Deloitte (Chartered Accountants) have indicated their willingness to continue in office as the Company’s Auditors in accordance with Section 357(2) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria, 2004. A resolution will be proposed authorizing the Directors to fix their remuneration. BY ORDER OF THE BOARD A. A. SAMUEL, Esq. Ag Company Secretary Dangote Flour Mills Plc 8, Rycroft Road, Apapa, Lagos, Nigeria. Dated this 3rd day of November, 2009 Report of the Directors cont’d for the Year Ended 31 December, 2008
  11. 11. 11DA N G OT E F L O U R M I L LS P L C DANGOTE FLOUR MILLS PLC is committed to the best practice and procedures in corporate governance. Overseen by the Board of Directors, corporate governance practices are constantly under review, in line with the dynamics of the business environment. The Corporate Governance policies adopted by the Board of Directors are designed to ensure that the Company’s business is conducted in a fair, honest and transparent manner which conforms to high ethical standards. The Board delegates the day-to-day running of the Company’s affairs to the Managing Director/Chief Executive. The Managing Director/Chief Executive is supported in this task by an Executive Management Committee. The Board consists of 10 members, the Chairman, Managing Director, 1 Executive Director and 7 Non-Executive Directors. FREQUENCY OF MEETINGS The Board of Directors holds at least four (4) meetings a year, to consider important corporate events and actions such as approval of Corporate Strategy, Annual Corporate Plan, review of internal risk management and control systems, review performance and direct the affairs of the Company, its operations, finances and formulate growth strategies. It may however, convene a meeting if the need arises. During the year under review, the Board had a total of four (4) meetings. Attendance at Directors meetings is impressive. In line with provisions of Section 258(2) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004, the record of Directors attendance at Board meetings is available for inspection at the Annual General Meeting. RESPONSIBILITIES OF THE BOARD OF DIRECTORS It is the responsibility of the Board of Dangote Flour Mills Plc to: • Ensure that the Company’s operations are conducted in a fair and transparent manner that conforms to high ethical standards; • Ensure integrity of the Company’s financial and internal control policies; • Ensure the accuracy, adequacy and timely rendition of the statutory returns and financial reporting to the regulatory authorities (NSE, CAC, SEC) and Shareholders; • Ensure value creation for the Shareholders, employees and other stakeholders; • Review and approve corporate policies, strategy, annual budget and business plan; • Monitor implementation of policies and the strategic direction of the Company; • Set performance objectives, monitor implementation and corporate performance; • Review and approve all major and capital expenditure of the Company; • Ensure that the statutory rights of all Shareholders are protected at all times. The Board carries out some of the above responsibilities through the Board Committees whose terms of reference set out clearly their roles, responsibilities, scope of authority and procedure for reporting to the Board. Each Committee is presided over by a Non-Executive Director to ensure strict compliance with the principles of good Corporate Governance practice; while the Audit Committee has a representative of the Shareholders as its Chairman. In compliance with the practices of good Corporate Governance, the Chairman of the Board is not a member of any of the Committees. Corporate Governance Report
  12. 12. 12 DA N G OT E F L O U R M I L LS P L C THE FINANCE AND INVESTMENT COMMITTEE 1. Alhaji Mahmoud Abdullahi — Chairman 2. Brigadier Gen. S. L. Teidi (Rtd) — Member 3. Mr. Olakunle Alake — Member THE NOMINATION AND REMUNERATION COMMITTEE 1. Mr. Asue Ighodalo — Chairman 2. Mr. Uzoma Nwankwo — Member 3. Alhaji Abdu Dantata — Member THE AUDIT COMMITTEE The Audit Committee is made up of six (6) members, three representatives of the Shareholders and three members of the Board of Directors. Members of the Audit Committee are elected at the General Meetings. The Committee in compliance with the requirement of Corporate Governance practice is chaired by a Shareholder. The Committee met two (2) times during the year under review. Members of the Committee are: 1. Mr. Alex Adio — Shareholder/Chairman 2. Chief M. O. Mbonu — Shareholder 3. Alhaji Kasimu Ibrahim — Shareholder 4. Mr. Asue Ighodalo — Director 5. Mr. Olakunle Alake — Director 6. Alhaji Mahmoud Abdullahi — Director In addition to its responsibility to review the scope, independence and objectivity of the Audit, the Audit Committee carries out all such matters as are reserved to the Audit Committee by the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria, 2004. • Review adequacy and effectiveness of Dangote Flour Mills Plc internal control policies prior to endorsement by the Board. • Direct and supervise investigations on matters within the scope, such as evaluations of the effectiveness of Dangote Flour Mills Plc internal controls, cases of employee, business partner and client misconduct or conflict of interest. Corporate Governance Report cont’d
  13. 13. 13DA N G OT E F L O U R M I L LS P L C TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act , 1990, we have examined the Auditors’ report for the year ended 31st December, 2008. We have obtained all the information and explanations we required. In our opinion, the Auditors’ report is consistent with our review of the scope and planning of the audit. We are also satisfied that the accounting policies of the Company are in accordance with the legal requirements and agreed ethical practices. Having reviewed the Auditors’ findings and recommendations on Management matters, we are satisfied with Management’s response therein. Mr. Alex Adio Chairman, Audit Committee Dated this 5th day of November, 2009 Members of the Committee Chief M. O. Mbonu Mr. Asue Ighodalo Alhaji Abdullahi Mahmoud Mr. Olakunle Alake Alhaji Kasimu Ibrahim Report of the Audit Committee
  14. 14. 14 DA N G OT E F L O U R M I L LS P L C TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC We have audited the accompanying consolidated financial statements of Dangote Flour Mills Plc, as at 31 December 2008, set out on pages 15 to 32 which have been prepared on the basis of the significant accounting policies on pages 15 and 16 and other explanatory notes on pages 20 to 30. 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. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ 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 as to 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 auditors’ 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 control 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 Group and the Company have kept proper accounting records and the financial statements are in agreement with the records in all material respects and give in the prescribed manner, information required by the Companies and Allied Matters Act, CAP C20, LFN 2004. The consolidated financial statements give a true and fair view of the financial position of Dangote Flour Mills Plc as at 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with the Statements of Accounting Standards issued by the Nigerian Accounting Standards Board. Chartered Accountants Lagos, Nigeria 29th October, 2009 Akintola Williams Deloitte 235 Ikorodu Road, Ilupeju P.O. Box 965, Marina Lagos, Nigeria Tel: +234 1 2717800 Fax: +234 1 2717801 www.deloitte.com/ng Report of the Independent Auditors
  15. 15. 15DA N G OT E F L O U R M I L LS P L C The following are the significant accounting policies which have been adopted. 1. Basis of accounting The consolidated financial statements are prepared on the historical cost basis. Adjustment has not been made to reflect the impact of specific price changes or changes in the general level of prices on the financial statements. 2. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries which are Dangote Pasta Limited and Dangote Agro Sacks Limited whose financial statements are equally made up to 31 December. All inter-company transactions and balances are eliminated in full on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. 3. Turnover Turnover represents the net value of goods and services sold to third parties during the year less discounts. 4. Fixed assets Fixed assets are stated at cost less accumulated depreciation. 5. Depreciation Depreciation is calculated to write off the cost of fixed assets on a straight line basis over their expected useful lives. The principal annual rates used for this purpose are: % Leasehold land and buildings — 2 Plant and machinery — 6 Motor vehicles — 25 Tools and equipment — 20 Furniture and fittings — 20 Computer equipment and softwares — 33 6. Stocks and work-in-progress Stocks and work-in-progress are stated at the lower of cost based on FIFO and net realisable value while goods in transit are stated at the invoice price. Cost of stocks includes purchase cost, conversion cost (materials, labour and overhead) and other costs incurred to bring inventory to its present location and condition. 7. Foreign currencies Transactions in foreign currencies are recorded in Naira at the rates of exchange ruling at the time they arise. Assets and liabilities existing in foreign currencies are converted to Naira at the rates of exchange ruling at the balance sheet date. Gains or losses arising therefrom are included in the profit and loss account. 8. Debtors Debtors are stated after deduction of specific provisions for debts considered doubtful of recovery. 9. Taxation (i) Companies income tax Income tax and education tax are provided by applying the current statutory rate on the taxable profit and adjusted profit respectively. (ii) Deferred taxation Deferred taxation is provided using the liability method at the current rate of income tax on all timing differences between the treatment of certain items for accounting purposes and their treatment for taxation in accordance with SAS 19. Statement of Significant Accounting Policies for the Year Ended 31 December, 2008 2 – 3 1 – 3
  16. 16. 16 DA N G OT E F L O U R M I L LS P L C 10. Employees retirement benefit scheme The Company makes provision for retirement benefits in accordance with the Pension Reform Act of 2004. The contribution of the employer is 7.5% while that of the employee is 7.5% of relevant emoluments. The Company also operates a gratuity scheme for its permanent Nigerian staff, the benefits under which are related to employees’ length of service and remuneration. The provision for liability in respect thereof based on actuarial valuation is made in full in the financial statements. 11. Investments Investments are stated at cost after specific provision for diminution in value. 12. Provisions Provision is recognized when the Company has a present obligation whether legal or constructive, as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation in accordance with the Statement of Accounting Standards (SAS) 23. 13. Segment reporting The Company’s business segments are presented by products that are subject to similar risks and returns. 14. Earnings per share The Group presents basic earnings per share (EPS) for its ordinary shares. Basic (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of shares outstanding during the year. 15. Dividend Proposed dividend for the year is recognised as a liability only when declared and approved by shareholders at the Annual General Meeting. Statement of Significant Accounting Policies cont’d for the Year Ended 31 December, 2008
  17. 17. 17DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 Note N=’000 N=’000 N=’000 N=’000 Turnover 2 47,927,300 42,153,272 30,109,610 31,303,845 Cost of sales (38,288,106) (37,417,176) (24,078,077) (28,011,379) Gross profit 9,639,194 4,736,096 6,031,533 3,292,466 Distribution and administrative expenses (5,182,564) (3,579,936) (3,271,788) (2,412,845) Operating profit 4,456,630 1,156,160 2,759,745 879,621 Other income 3 1,109,614 174,421 955,745 120,269 Profit before interest payable 5,566,244 1,330,581 3,715,490 999,890 Interest payable and similar charges (2,398,619) (654,878) (1,957,353) (624,239) Profit before taxation 4 3,167,625 675,703 1,758,137 375,651 Taxation 5 (178,066) (114,144) (54,045) (85,316) Profit after taxation 2,989,559 561,559 1,704,092 290,335 Attributable to: Equity holders — parent 2,947,448 524,710 1,704,092 290,335 Non-controlling interest 42,111 36,849 — — 2,989,559 561,559 1,704,092 290,335 Earnings per share — Basic (kobo) 60 11 34 6 The accounting policies on pages 15 and 16 and other explanatory notes on pages 20 to 30 form part of these financial statements. Consolidated Profit and Loss Account for the Year Ended 31 December, 2008
  18. 18. 18 DA N G OT E F L O U R M I L LS P L C Consolidated Balance Sheet as at 31 December, 2008 The Group The Company 2008 2007 2008 2007 Note N=’000 N=’000 N=’000 N=’000 FIXED ASSETS 6 32,449,283 27,070,733 15,732,534 13,375,453 INVESTMENTS 7 601,900 286,922 8,065,537 7,750,559 CURRENT ASSETS Stocks 8 9,910,531 11,427,343 5,397,449 8,386,006 Trade debtors 9 7,410,110 5,132,810 6,118,790 4,583,207 Other debtors and prepayments 10 8,466,004 2,976,372 7,758,905 2,185,785 Due from subsidiaries 25 — — 12,116,069 10,967,799 Due from related companies 25 8,263,988 9,545,549 2,370,221 4,419,375 Bank and cash balances 1,648,773 1,680,060 371,632 776,551 35,699,406 30,762,134 34,133,066 31,318,723 CREDITORS: Amounts falling due within one year Bank loans and overdrafts 11 20,595,334 20,231,117 15,214,170 18,004,827 Trade creditors 4,387,431 2,754,271 3,173,701 1,539,797 Other creditors and accruals 12 14,171,804 7,841,147 11,982,203 6,267,950 Taxation 5 423,248 245,182 139,361 85,316 Due to related companies 25 3,960,932 4,326,524 3,887,582 4,326,524 43,538,749 35,398,241 34,397,016 30,224,414 NET CURRENT LIABILITIES (7,839,343) (4,636,107) (263,950) 1,094,309 TOTAL ASSETS LESS CURRENT LIABILITIES 25,211,841 22,721,548 23,534,221 22,220,321 CREDITORS: Amounts falling due after more than one year Term loan 14 — (187,012) — — PROVISION FOR LIABILITIES AND CHARGES Gratuity 15 (582,037) (389,402) (376,362) (312,829) NET ASSETS 24,629,803 22,145,134 23,157,859 21,907,492 CAPITAL AND RESERVES Share capital 16 2,500,000 2,500,000 2,500,000 2,500,000 Share premium 17 11,806,537 11,806,537 11,806,537 11,806,537 Reserves 18 10,046,072 7,679,170 8,851,322 7,600,955 Shareholders’ fund — attributable to equity holders 24,352,609 21,985,707 23,157,859 21,907,492 Non-controlling interest 19 277,194 159,427 — — 24,629,803 22,145,134 23,157,859 21,907,492 The financial statements on pages 17 to 32 were approved by the Board of Directors on 29th of October, 2009 and signed on its behalf by: Alhaji Aliko Dangote Olakunle Alake The accounting policies on pages 15 and 16 and other explanatory notes on pages 20 to 30 form part of these financial statements. }Directors
  19. 19. 19DA N G OT E F L O U R M I L LS P L C Consolidated Statement of Cash Flows for the Year Ended 31 December, 2008 The Group The Company 2008 2007 2008 2007 Note N=’000 N=’000 N=’000 N=’000 Cash flows from operating activities Cash receipts from customers 45,993,302 38,463,811 28,917,530 32,410,139 Cash payments to suppliers and employees (36,404,326) (51,041,658) (20,985,026) (45,226,557) Net cash provided by operating activities 20 9,588,976 (12,577,847) 7,932,504 (12,816,418) Cash flows from investing activities Proceeds from disposal of fixed assets 138 — 138 — Purchase of fixed assets 6 (7,181,130) (5,643,822) (3,289,943) (2,154,794) Deposit for investments 7 (314,978) — (314,978) — Net cash provided by investing activities (7,495,970) (5,643,822) (3,604,783) (2,154,794) Cash flows from financing activities Interest income 3 97,121 15,713 15,370 11,675 Term loan: — Obtained 244,000 2,505,801 — — — Repaid (1,094,490) (1,048,683) — — Interest paid (2,398,619) (654,878) (1,957,353) (624,239) Net cash provided by financing activities (3,151,988) 817,953 (1,941,983) (612,564) Net (decrease)/increase in cash and cash equivalents (1,058,982) (17,403,716) 2,385,738 (15,583,776) Cash and cash equivalents at 1 January (17,403,716) — (17,228,276) (1,644,500) Cash and cash equivalents at 31 December 21 (18,462,698) (17,403,716) (14,842,538) (17,228,276)
  20. 20. 20 DA N G OT E F L O U R M I L LS P L C 1. THE COMPANY 1.1 Legal form The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated as public limited liability company on 1 January 2006, commenced operations on the same date and was quoted on the Nigerian Stock Exchange on 4 February 2008. In 2007, the Company acquired controlling interests in Dangote Pasta Limited and Dangote Agrosacks Limited. Particulars of these subsidiaries are: Subsidiaries Percentage held Principal Activities Dangote Pasta Limited 99 Manufacture of Spaghetti, Macaroni Dangote Agrosacks Limited 99 Manufacture of packaging materials. It holds 75% equity in Obajana Agrosacks Limited 1.2 Principal activities Its principal activity is the milling, processing and marketing of branded flour. 2. ANALYSIS OF TURNOVER AND COST OF SALES Analysis by: Turnover Cost of sales Gross profit Activity N=’000 N=’000 N=’000 The Group Flour 26,269,299 21,746,622 4,522,677 Bran 1,996,365 419,821 1,576,544 Danvita and Semolina 2,401,532 1,911,634 489,898 Sacks 8,422,720 6,774,998 1,667,722 Spaghetti 8,456,424 7,435,031 1,021,393 Macaroni 360,960 — 360,960 47,927,300 38,288,106 9,639,194 The Company Flour 26,269,299 21,746,622 4,522,677 Bran 1,438,779 419,821 1,018,958 Danvita and Semolina 2,401,532 1,911,634 489,898 30,109,610 24,078,077 6,031,533 The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 3. OTHER INCOME Interest income 97,121 15,713 15,370 11,675 Sale of scraps 100,689 15,426 100,689 15,426 Provision no longer required 839,686 77,585 839,686 77,585 Export grants — 15,583 — 15,583 Exchange gain — 16,398 — — Sundry income 71,118 33,716 — — 1,109,614 174,421 955,745 120,269 Notes to the Consolidated Financial Statements for the Year Ended 31 December, 2008
  21. 21. 21DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 4. PROFIT BEFORE TAXATION This is arrived at after charging/(crediting): Directors’ emoluments: — Fees 15,900 — 2,100 — — Salaries and allowances 186,984 60,822 20,450 36,316 Audit fee 45,500 36,420 27,500 22,500 Depreciation 1,801,832 1,489,666 932,014 904,849 Exchange gain — (16,398) — (16,398) Management fee (Note 26) 176,348 155,763 — — 5. TAXATION Profit and loss account Tax based on the profit for the year Income tax 67,407 — — — Education tax 110,659 114,144 54,045 85,316 178,066 114,144 54,045 85,316 178,066 114,144 54,045 85,316 Balance sheet As per profit and loss account 178,066 114,144 54,045 85,316 At the beginning of the year 245,182 — 85,316 — Transfer from subsidiaries — 131,038 — — Payments during the year — — — — At the end of the year 423,248 245,182 139,361 85,316 The charges for taxation in these financial statements were based on the provisions of the Companies Income Taxation Act, CAP C21, LFN 2004 as amended and the Education Tax Act, CAP E 4, LFN 2004. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  22. 22. 22 DA N G OT E F L O U R M I L LS P L C 6. FIXED ASSETS (a) The Group Computer Leasehold equipment Furniture Assets land and Plant and Tools and and and Motor under buildings machinery equipment softwares fittings vehicles construction Total N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 Cost At 1 January 2,481,470 18,387,650 561,363 54,555 146,066 241,875 9,466,092 31,339,071 Additions 24,493 1,379,171 48,690 17,490 22,728 81,598 5,606,960 7,181,130 Disposals — — — (204) — — — (204) Adjustment/transfer (97) — (712) — — — 185 (624) Reclassification 225,716 6,346,482 — — — — (6,572,198) — At 31 December 2,731,582 26,113,303 609,341 71,841 168,794 323,472 8,501,039 38,519,373 Depreciation At 1 January 127,695 3,730,906 222,426 29,507 65,618 92,186 — 4,268,338 Charge for the year 50,608 1,521,794 114,340 17,290 27,456 70,344 — 1,801,832 Disposals — — — (11) — — — (11) Adjustment/transfer (1) — (68) — — — — (69) At 31 December 178,302 5,252,700 336,698 46,786 93,074 162,530 — 6,070,090 Net book value At 31 December 2008 2,553,280 20,860,603 272,643 25,055 75,720 160,942 8,501,039 32,449,283 At 31 December 2007 2,353,775 14,656,744 338,937 25,048 80,448 149,689 9,466,092 27,070,733 (b) The Company Computer Leasehold equipment Furniture Assets land and Plant and Tools and and and Motor under buildings machinery equipment softwares fittings vehicles construction Total N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 Cost At 1 January 1,843,454 10,529,572 388,800 36,210 72,177 111,428 2,203,636 15,185,277 Additions 1,542 11,900 27,437 11,260 5,806 1,955 3,230,043 3,289,943 Disposals — — — (204) — — — (204) Adjustment/transfer (97) — (712) — — — 185 (624) Reclassification — — — — — — — — At 31 December 1,844,899 10,541,472 415,525 47,266 77,983 113,383 5,433,864 18,474,392 Depreciation At 1 January 72,468 1,523,189 132,312 15,953 24,084 41,818 — 1,809,824 Charge for the year 36,856 761,627 76,963 13,421 15,000 28,147 — 932,014 Disposals — — — (11) — — — (11) Adjustment/transfer (1) — (68) — — — — (69) At 31 December 109,323 2,284,816 209,207 29,363 39,084 69,965 — 2,741,758 Net book value At 31 December 2008 1,735,576 8,256,656 206,318 17,903 38,899 43,418 5,433,864 15,732,634 At 31 December 2007 1,770,986 9,006,383 256,488 20,257 48,093 69,610 2,203,636 13,375,453 Assets under construction comprise of capacity expansion projects in flour production mills Apapa, Ilorin and Calabar. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  23. 23. 23DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008 The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 7. INVESTMENTS (UNQUOTED) Dangote Pasta Limited 49,500,000 ordinary shares of N=1 each in Dangote Pasta Limited — — 2,507,637 2,507,637 Dangote Agrosacks Limited 84,150,000 ordinary shares of N=1 each in Dangote Agrosacks Limited — — 4,956,000 4,956,000 — — 7,463,637 7,463,637 Deposits for investments At 1 January 286,922 — 286,922 — Additions 314,978 286,922 314,978 286,922 At 31 December 601,900 286,922 601,900 286,922 At 31 December, 2008 601,900 286,922 8,065,537 7,750,559 Deposit for investments relates to expenditure incurred on noodles project, a new subsidiary company under construction. The shares are yet to be allotted as at 31 December, 2008. The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 8. STOCKS Raw materials and work-in-progress 5,747,680 7,319,939 3,766,420 5,781,707 Finished goods 2,321,381 2,824,121 501,985 1,532,318 Engineering spares and other stocks 821,709 1,198,611 109,283 987,309 Goods-in-transit 1,019,761 84,672 1,019,761 84,672 9,910,531 11,427,343 5,397,449 8,386,006 9. TRADE DEBTORS Trade debtors 9,616,719 7,051,481 8,223,263 6,246,803 Provision for bad and doubtful debts (2,206,609) (1,918,671) (2,104,473) (1,663,596) 7,410,110 5,132,810 6,118,790 4,583,207 10. OTHER DEBTORS AND PREPAYMENTS Other debtors 7,799,981 2,285,220 7,704,937 2,093,974 Deposit for stocks 600,334 577,846 — — Prepayments 65,689 113,306 53,968 91,811 8,466,004 2,976,372 7,758,905 2,185,785
  24. 24. 24 DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 11. BANK LOANS AND OVERDRAFTS Bank overdrafts 9,536,663 14,519,654 7,801,362 13,440,705 Short-term loans 10,574,808 4,564,122 7,412,808 4,564,122 Term loan (Note 14) 483,863 1,147,341 — — 20,595,334 20,231,117 15,214,170 18,004,827 12. OTHER CREDITORS AND ACCRUALS Customers’ deposits 1,069,176 1,284,641 680,712 823,858 Rebate received in advance — 1,603,927 — 1,603,927 Accruals 1,552,827 1,974,672 1,119,969 1,787,920 Other creditors 11,549,801 2,977,907 10,181,522 2,052,245 14,171,804 7,841,147 11,982,203 6,267,950 13. DEFERRED TAXATION Deferred tax computation in the current year resulted in deferred tax assets of N=873,247,757 and N=2,969,881,066 for the Company and Group respectively. These have not been adjusted in these financial statements. The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 14. TERM LOAN At 31 January 1,334,353 — — — Transfer from subsidiaries — 2,505,801 — — Repayment during the year (1,094,490) (1,048,683) — — Exchange equalisation — (122,765) — — Loan obtained during the year 244,000 — — — At 31 December 483,863 1,334,353 — — Due within one year (Note 11) (483,863) (1,147,341) — — Due after more than one year — 187,012 — — The loan amount of $19.8 million which was obtained in prior year was granted the Company by Commerzbank Germany for the Flour Mills and Pasta line expansion projects. The loan amount is repayable in 3 years with $9.87 million payable in 2008 and $1.61 million payable in 2009. The interest rate is 9.029%. The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 15. GRATUITY At 1 January 389,402 266,657 312,829 266,657 Transfer from subsidiaries — 65,367 — — Provision for the year 267,415 65,719 114,419 48,936 Payments during the year (74,780) (8,341) (50,886) (2,764) At 31 December 582,037 389,402 376,362 312,829 Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  25. 25. 25DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 16. SHARE CAPITAL Authorised 6,000,000,000 ordinary shares of 50k each 3,000,000 3,000,000 3,000,000 3,000,000 Issued and fully paid 5,000,000,000 ordinary shares of 50k each 2,500,000 2,500,000 2,500,000 2,500,000 17. SHARE PREMIUM At 1 January 11,806,537 11,931,537 11,806,537 11,931,537 Applied for bonus issue — (125,000) — (125,000) At 31 December 11,806,537 11,806,537 11,806,537 11,806,537 Exchange Conso- equali- 2008 2007 Revenue lidation sation Capital Total Total N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 18. RESERVES The Group At 1 January 1,246,693 (278,925) 122,765 6,588,637 7,679,170 721,983 On acquisition of subsidiaries (Note 7) — — — — — 7,463,637 Nominal value of shares issued in exchange (Note 16) — — — — — (875,000) Exchange equalisation (Note 14) — — — — — 122,765 On consolidation — — — (76,168) (76,168) (278,925) Prior year adjustment (504,378) — — — (504,378) — Transferred from profit and loss account 2,947,448 — — — 2,947,448 524,710 At 31 December 3,689,763 (278,925) 122,765 6,512,469 10,046,072 7,679,170 The Company At 1 January 7,600,955 721,983 Dangote Pasta and Dangote Agrosacks Limited transferred (Note 7) — 7,463,637 Nominal value of shares issued in exchange — (875,000) Prior year adjustment (453,725) — Transferred from profit and loss account 1,704,092 290,335 At 31 December 8,851,322 7,600,955 Prior year adjustment relates to 2006 sales debited twice to a customer account which was corrected in 2008. The Directors proposed that a dividend of 20 kobo per ordinary share will be paid to the shareholders. The total dividend payable of N=1 billion is subject to approval by shareholders at the Annual General Meeting and deductions of withholding tax at the appropriate rate; consequently, it has not been included as a liability in these financial statements. Dividend to shareholders are now accounted for on the date of declaration as they do not meet the criteria for present obligation in Statement of Accounting Standard (SAS) 23 on Accounting for Provisions, Contingent Liabilities and Contingent Assets. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  26. 26. 26 DA N G OT E F L O U R M I L LS P L C Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008 The Group 2008 2007 N=’000 N=’000 19. NON-CONTROLLING INTEREST Profit and loss account At 1 January On acquisition of Obajana Agrosacks 29,552 34,482 Share of profit in Dangote Agrosacks 4,759 7,239 Share of profit/(loss) in Dangote Pasta 7,800 (4,872) At 31 December 42,111 36,849 Balance sheet At 1 January 159,427 — On acquisition of Obajana Agrosacks 29,552 84,482 Share of profit/(loss): Dangote Agrosacks Limited 4,759 7,239 Dangote Pasta Limited 7,800 (4,872) Share capital and reserves — Dangote Agrosacks 51,092 43,853 Share capital and reserves — Dangote Pasta 25,076 28,725 Prior year item (512) — At 31 December 277,194 159,427
  27. 27. 27DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 20. RECONCILIATION OF PROFIT AFTER TAX TO NET CASH PROVIDED BY OPERATING ACTIVITIES Profit after taxation and extraordinary items 2,989,559 561,559 1,704,092 290,335 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 1,801,832 1,489,666 932,014 904,849 Interest income (97,121) (15,713) (15,370) (11,675) Interest expenses 2,398,619 654,878 1,957,353 624,239 Prior year adjustment (504,378) — — — Fixed assets adjustment/transfer 555 1,415,917 555 952,805 Net fixed assets from subsidiaries — (11,254,181) — — Adjustment for opening net fixed assets — (13,365,235) — — Adjustment for opening revenue reserve — 721,983 — — Adjustment for minority interest (42,111) (36,849) — — Adjustment for goodwill written off on consolidation — (278,925) — — Loss on disposal of fixed assets 55 — 55 — Changes in assets and liabilities Decrease/(increase) in stocks 1,516,812 (11,427,343) 2,988,557 (4,096,775) (Increase)/decrease in trade debtors (2,277,300) (5,132,810) (1,989,308) 454,778 Increase in other debtors and prepayments (5,489,632) (2,976,372) (5,573,120) (1,056,698) Increase in due from subsidiaries — — (1,148,270) (10,967,799) Decrease/(increase) in due from related companies 1,281,561 (9,545,549) 2,049,154 4,625,295 (Decrease)/increase in trade creditors 1,633,160 2,754,271 1,633,904 (4,287,207) Increase in other creditors and accruals 6,330,657 7,841,147 5,714,252 1,157,596 (Decrease)/increase in due to related companies (365,592) 4,326,524 (438,942) (1,549,496) Increase in taxation payable 178,066 245,182 54,045 85,316 Increase in gratuity provision 192,635 389,402 63,533 58,019 Increase in share capital — 2,500,000 — — Increase in share premium — 11,806,537 — — (Decrease)/increase in capital reserve (76,168) 6,588,637 — — Increase in minority interest 117,767 159,427 — — Total adjustments 6,599,417 (13,139,406) 6,228,412 (13,106,753) Net cash provided by operating activities 9,588,976 (12,577,847) 7,932,504 (12,816,418) 21. CASH AND CASH EQUIVALENTS Cash and bank balances 1,648,773 1,680,060 371,632 776,551 Short-term loans (10,574,808) (4,564,122) (7,412,808) (4,564,122) Bank overdrafts (9,536,663) (14,519,654) (7,801,362) (13,440,705) (18,462,698) (17,403,716) (14,842,538) (17,228,276) Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  28. 28. 28 DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 22. INFORMATION REGARDING DIRECTORS AND EMPLOYEES .1 Directors Directors’ emolument comprises: — Fees 2,100 — 2,100 — — Salaries and allowances 58,756 60,822 20,450 36,316 60,856 60,822 22,550 36,316 The number of Directors excluding the Chairman with gross emoluments within the bands stated below were: N=’000 N=’000 Number Number Number Number 0 — 4,000 1 — — — 10,000 — 15,000 1 2 — 1 15,000 and above 1 1 1 1 .2 Employees Average number of persons employed during the year: Management 157 133 106 90 Senior staff 500 846 364 387 Junior staff 1,657 2,622 375 461 2,314 3,601 845 938 N=’000 N=’000 N=’000 N=’000 Aggregate payroll costs: Wages, salaries, allowances and other benefits 1,565,636 1,500,768 604,458 872,416 Provision for gratuities 235,354 65,719 82,358 48,936 Pension cost 49,045 54,961 12,438 45,723 1,850,035 1,621,448 699,254 967,075 The number of employees with gross emoluments within the bands stated below are: N=’000 N=’000 Number Number Number Number 0 — 200 — 598 — — 200 — 400 2,444 1,880 324 371 401 — 600 369 532 220 232 601 — 800 178 187 50 51 801 — 1,000 137 167 100 108 1,001 — 2,000 190 163 102 120 2,000 and above 94 74 53 56 3,412 3,601 849 938 23. CONTINGENT LIABILITIES .1 There was no material contingent liability in respect of pending litigation against the Company. .2 The Directors are of the opinion that all known commitments and liabilities which are relevant in assessing the state of affairs of the Company have been taken into consideration in the preparation of these financial statements. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  29. 29. 29DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 24. CAPITAL COMMITMENTS Capital commitments 423,155 132,677 423,155 132,677 The capital commitments were made for capacity expansion projects in three of the four production mills (Apapa, Ilorin and Calabar). 25. RELATED PARTY TRANSACTIONS During the year the Company had dealings with subsidiaries and related companies. The balances emanating from the transactions which have been disclosed in the balance sheet as due from subsidiaries and related companies as well as due to related companies are as analysed below: The Group The Company 2008 2007 2008 2007 N=’000 N=’000 N=’000 N=’000 Due from subsidiaries Dangote Pasta Limited — — 12,806,780 10,720,216 Dangote Agrosacks Nigeria Limited — — (690,711) 247,583 — — 12,116,069 10,967,799 Due from related companies Dangote Industries Limited 8,259,269 8,660,184 2,368,721 4,416,875 Dangote Sugar Refinery Plc — 634,638 — — Dangote Fisheries Nigeria Limited 1,500 1,500 1,500 1,500 Bluestar Shipping Company — 1,000 — 1,000 Dangote Flour Mills Plc 3,219 — — — Others — 248,187 — — 8,263,988 9,545,549 2,370,221 4,419,375 Due to related companies Dangote Transport Nigeria Limited 2,492,769 2,524,501 2,492,769 2,524,501 Dangote Sugar Refinery Plc 1,389,885 1,802,023 1,389,885 1,802,023 Bluestar Shipping Company 3,500 — 3,500 — Green View Development Nigeria Ltd. 1,428 — 1,428 — Dangote Flour Mills Plc — — — — Dangote Industries Limited 73,350 — — — 3,960,932 4,326,524 3,887,582 4,326,524 .1 Dangote Pasta Limited Dangote Pasta is a subsidiary company to Dangote Flour Mills Plc. During the year, the supply of wheat and pasta flour to Dangote Pasta amounting to N=6.67 billion. .2 Dangote Agrosacks Nigeria Limited Dangote Agrosacks Nigeria Limited is a subsidiary of Dangote Flour Mills. During the year, the Company had significant transactions amounting to N=491,431,071 for the supply of bags for packaging of Flour, Bran, Danvita, etc. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  30. 30. 30 DA N G OT E F L O U R M I L LS P L C .3 Dangote Industries Limited Dangote Industries Limited (DIL) is the parent company. DIL undertake payments for expansion projects, recommend external consultants, negotiate bank facilities and purchases of raw materials on behalf of the Company. The transactions during the year amounted to N=1.46 billion. .4 Dangote Transport Nigeria Limited Dangote Transport is a related company to Dangote Flour Mills Plc. The Company had transactions amounting to N=1,025,303,454 with respect to haulage of finished products to customers as well as raw wheat to other plants. .5 Dangote Sugar Plc Dangote Sugar Plc is a related company to Dangote Flour Mills Plc. Dangote Sugar supplies power to Dangote Flour Mills Plc. There is no trading relationship between the two companies. .6 Dangote Salt Nigeria Limited Dangote Salt is a related company to Dangote Flour Mills Plc. There was no material transactions between the two companies during the year. 26. MANAGEMENT FEE Dangote Pasta Limited and Dangote Agrosacks Limited entered into management and technical service agreement dated 2 January 2006 with Dangote Industries Limited (DIL). The agreement is for an initial period of five years with an option to renew for a further period of five years subject to termination by either party in accordance with the terms of the agreement. As consideration for the services provided, a sum equivalent to 2% of the net revenue from the Company’s sales for each month is payable to Dangote Industries Limited. Management fees for the financial year ended 31 December 2008 amounted to N=176.3 million (2007 — N=155.8 million). 27. ACQUISITION OF SUBSIDIARIES During the year, the Board of Directors of Dangote Flour Mills Plc at the Board Meeting held on 19 November, 2008 approved the investment of N=90 million to subscribe to 90% of the shares of Dangote Noodles Limited. Dangote Noodles has not commenced operations as at 31 December, 2008 and no accounts has been prepared as at that date for consolidation in the Group financial statements. 28. COMPARATIVE FIGURES Certain balances in prior year have been reclassified where necessary for more meaningful comparison. Notes to the Consolidated Financial Statements cont’d for the Year Ended 31 December, 2008
  31. 31. 31DA N G OT E F L O U R M I L LS P L C Consolidated Financial Summary for the Year Ended 31 December, 2008 The Group The Company 2008 2007 2006 2008 2007 2006 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 BALANCE SHEET Assets Fixed assets 32,449,283 27,070,733 — 15,732,634 13,375,453 13,365,235 Investments 601,900 286,922 — 8,065,537 7,750,559 — Net current (liabilities)/assets (7,839,343) (4,636,107) — (263,950) 1,094,309 1,043,095 25,211,841 22,721,548 — 23,534,221 22,220,321 14,408,330 Long-term liabilities — (187,012) — — — — Provision for liabilities and charges (582,037) (389,402) — (376,362) (312,829) (254,810) 24,629,803 22,145,134 — 23,157,859 21,907,492 14,153,520 CAPITAL AND RESERVES Share capital 2,500,000 2,500,000 — 2,500,000 2,500,000 1,500,000 Share premium 11,806,537 11,806,537 — 11,806,537 11,806,537 11,931,537 Revenue reserve 10,046,072 7,679,170 — 8,851,322 7,600,955 721,983 Minority interest 277,194 159,427 — — — — 24,629,803 22,145,134 — 23,157,859 21,907,492 14,153,520 PROFIT AND LOSS ACCOUNT Turnover 47,927,300 42,153,272 — 30,109,610 31,303,845 35,672,696 Profit before taxation 3,167,625 675,703 — 1,758,137 375,651 721,983 Taxation (178,066) (114,144) — (54,045) (85,316) — Minority interest (42,111) (36,849) — — — — Retained profit transferred to general reserve 2,947,448 524,710 — 1,704,092 290,335 721,983 Per share data — 50k ordinary share Earnings: — Basic (kobo) 60 11 — 34 6 24 — Diluted (kobo) — — — — — 14 Net assets (Naira) 5 4 — 5 4 5 Note: 1. Earnings per share are based on profit after taxation and the number of issued and fully paid ordinary shares at the end of each financial year. 2. Net assets per share are based on net assets and the issued and fully paid ordinary shares as at the end of each financial year.
  32. 32. 32 DA N G OT E F L O U R M I L LS P L C The Group The Company 2008 2007 2008 2007 N=’000 % N=’000 % N=’000 % N=’000 % Turnover 47,927,300 42,153,272 30,109,610 31,303,845 Other income 1,109,614 174,421 955,745 120,269 49,036,914 42,327,693 31,065,354 31,424,114 Less: Bought-in-materials and services — Imported (23,623,137) (33,518,001) (23,623,137) (25,650,487) — Local (16,195,666) (4,404,846) (2,095,460) (2,901,813) Value added 9,218,111 100 4,404,846 100 5,346,758 100 2,871,814 100 Applied as follows: To pay employees Salaries, wages and other benefits 1,850,035 20 1,621,448 37 699,254 13 967,075 34 To pay providers of capital Interest on loans and bank overdrafts 2,398,619 26 654,878 15 1,957,353 37 624,239 22 To pay government Taxation 178,066 2 114,144 2 54,045 1 85,316 3 To provide for enhancement of assets and growth Depreciation 1,801,832 20 1,489,666 34 932,014 17 904,849 31 Profit and loss account 2,989,559 32 524,710 12 1,704,092 32 290,335 10 9,218,111 100 4,404,846 100 5,346,758 100 2,871,814 100 “Value added” represents the additional wealth the Company has been able to create by its own and employees’ efforts. This statement shows the allocation of that wealth between employees, capital providers, government and that retained for future creation of more wealth. Consolidated Value Added Statement for the Year Ended 31 December, 2008
  33. 33. 33DA N G OT E F L O U R M I L LS P L C Notes
  34. 34. 34 DA N G OT E F L O U R M I L LS P L C Notes
  35. 35. DANGOTE FLOUR MILLS PLC 3RD ANNUAL GENERAL MEETING TO BE HELD AT 11.00 A.M. ON WEDNESDAY, 9TH DECEMBER, 2009 AT THE CIVIC CENTRE, OZUMBA MBADIWE ROAD, VICTORIA ISLAND, LAGOS. I/We*........................................................................................................ of ............................................................................................................... hereby appoint...................................................................................... ................................................................................................................... of ............................................................................................................... or failing him, the Chairman of the meeting, as my/our proxy to act and vote for me/us and on my/our behalf at the Third Annual General Meeting of the Company to be held at 11.00 a.m. on Wednesday, 9th December, 2009 and at any adjournment thereof. Dated this ................ day of .......................................... 200..... Signature ................................................................................................. NOTES 1. Please sign this proxy card and post it to reach the registered office of the Company not less than 48 hours before the time for holding the meeting. 2. If executed by a corporation, the proxy card should be sealed with the common seal. 3. This proxy card will be used both by show of hands and in the event of a poll being directed or demanded. 4. In the case of joint holders the signature of any one of them will suffice, but the names of all joint holders should be shown. Admission Card DANGOTE FLOUR MILLS PLC 3RD ANNUAL GENERAL MEETING TO BE HELD AT 11.00 A.M. ON WEDNESDAY, 9TH DECEMBER, 2009 AT THE CIVIC CENTRE, OZUMBA MBADIWE ROAD, VICTORIA ISLAND, LAGOS. Name of Shareholder* ........................................................................................................................................................................................ IF YOU ARE UNABLE TO ATTEND THE MEETING A member (shareholder) who is unable to attend Annual General Meeting is allowed by law to vote by proxy. A proxy need not be a member of the Company. The above proxy card has been prepared to enable you exercise your right to vote if you cannot personally attend. No. of Shares Name and Address of Shareholders IMPORTANT Please insert your name in BLOCK CAPITALS on both proxy and admission card where marked*. ✂ RESOLUTION FOR AGAINST 1. To receive the Audited Financial Statements for the year ended 31st December 2008 and the Directors’, Auditors’ and Audit Committee’s Reports thereon 2. To declare a dividend 3. To re-elect Directors 4. To re-appoint the Auditors 5. To authorise the Directors to fix the remuneration of the Auditors 6. To appoint members of the Audit Committee 7. To fix the remuneration of the Directors Please indicate with an “X” in the appropriate square how you wish your votes to be cast on resolutions set out above. Unless otherwise instructed, the proxy will vote or abstain from voting at his/her own discretion. Before posting the above form, please tear off this part and retain it for admission to the meeting. Proxy Form FLOUR Dangote Flour Mills Plc RC 501757
  36. 36. The Registrars Oceanic Registrars 154, Ikorodu Road, Onipanu, Shomolu, Lagos.

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