Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Contents: 2 3 4 5 8 9 16 17 2 0 21 25 26 30 32 33 34 35 36 37 38 39 40 41 43 Chairmans Message Purpose & Values Board of Directors CEOs Message Description of the Companys Activities Description of Activities of the Companys Affiliates Plans and Future Growth Projects Under Development Risks Related to Company and Affiliates Business Financial Statements The Internal Audit The Board of Directors Board Committees Board of Directors Declaration Issue of Islamic Sukuk The General Assemblies Dividends Distribution Policy Corporate Governance Communication with Shareholders Human Resources Special Employees Programs Corporate Social Responsibility Responsible Care Consolidated Financial Statements and Auditors Report for the year ended 31 December 2010
Success can only come with hard work, dedication and a commitment to maintain the highest standards of excellence. A conviction, that human resources are the most important assets of an organization. Pursuing such a conviction is translated into assembling a cadre of employees with a wealth of experience, devotion and loyalty, that inspire motivation and growth.
Chairmans Message
It gives me great pleasure to present to you a brief on the events and Chairmans Message achievements leading up to the financial results of the Saudi International Petrochemical Company (Sipchem) and its affiliates for the year ended 31 December 2010.
At the outset, I wish to congratulate every employee, on behalf of my colleagues and Members of the Board, for their valuable contribution to making the year extremely exciting and profitable. We not only registered a 168% increase in our net profits, but most importantly, we surpassed some of the stiffest challenges posed to us, both on the production and operations fronts. Considering the current global market trends, I can say with confidence that the year 2010 will go down as one of the most satisfying and memorable year in Sipchems history. Even as we dwell upon our achievements, we are proud to remain committed to the highest quality and excellence standards that recognized us as having one of the best Saudi working environment for three consecutive years. This year, we also received the Responsible Care Accreditation to become the first petrochemical company to be conferred with this prestigious award. I thank everyone involved for this remarkable achievement. Zero accidents and Zero incidents is our ultimate aim and we continue to stress upon promoting a culture of safety, both on and off the job site. I call upon every employee to recognize and commit themselves to their safety and of their coworkers. Our recently launched Home Ownership Program and Savings Plan is also progressing on schedule and I am confident, that our employees will benefit immensely. It is the least we can do to improve the lifestyles of our fellow citizens. Even as I speak, our new 100,000 MT Ethyl Acetate Plant in Jubail continues to stride towards reality. When completed in 2013, it will integrate our current product portfolio and satisfy all local needs in addition to meeting the demand of the international markets for Ethyl Acetate (EA). Thanks to a vast improvement in performance, our methanol and Butanediol plants recorded strong growth to boost total sales to over SR 1990 million and I am sure that we will maintain this trend in the years to come. I would like to express my thanks and gratitude to the shareholders for the confidence they entrusted in us and in additions to their unlimited support. I wish the company all the progress and success under the support of the Government of the Custodian of the Two Holy Mosques and his Crown Prince.
Purpose To be a responsible, innovative and globally recognised petrochemical company providing competitive and quality products to satisfy our customers, motivate our employees and meet Shareholders expectations. Values dhering to highest ethical standards, embracing integrity, A trust and taking responsibility for Sipchems actions. triving for operation excellence in delivering products and services. S mbracing innovation and adapting to changing conditions. E aring for the well being of Sipchems Employees, C Community and Environment.
Board of Directors
1 2 3 4 5 6 7 8 9
Dr. Abdurrahman A. Al-Zamil Mr. Abdurrahman A. Al-Turki H.E. Eng. Abdulaziz A. Al-Zamil Dr. Abdulaziz A. Al-Gwaiz Dr. Sami M. Zaidan Mr. Fahad S. Al-Rajhi Mr. Abdulaziz A. Al-Khamis Eng. Reyadh S. Ahmed Eng. Ahmad A. Al-Ohali
Member Member Chairman Member Member Member Member Member Member and CEO Member Member
1 2 3 4 5 6 7 8 9 10 11
CEOs Message
The year 2010 represents a glowing milestone in Sipchems success and growth. Coming as it does on the heels of a massive downturn in global industrial output and a nervous economic scenario, it is the character and strength of the Sipchem team that has seen us overcome these challenges.
Despite these uncertain times, Sipchem has posted unprecedented financial results coupled with a number of major production achievements, along with a continuous emphasis on creating a safer environment. 2010 also marks a year of much excitement and hope for the future. It is commendable that Sipchem has achieved a net profit of SR 378 million (a 168% increase over the previous year) and I would like to congratulate every individual who contributed to making the year very satisfying. Such success can only come with hard work, dedication and a commitment to maintain the highest standards of excellence. As an organization blessed with the visionary leadership of the Board of Directors Sipchems success is an inevitable consequence. Another major factor behind the success of Sipchems is its conviction that human resources are the most important assets of an organization. Pursuing such conviction was translated into assembling a cadre of employees with a wealth of experience, oceans of devotion and loyalty, resulting in a management team and systems that inspire motivation, appreciation and harmony. This annual report is a testimony of our resolve and commitment to bring out the best in us, working as a team and directing our collective efforts towards making Sipchem the most profitable and the finest organization to work with. In this context, it is noteworthy that we were chosen for the third year running for the Saudi organization with the best working environment award. This award belongs to all of us, to every employee and shareholders, whose initiatives and vision have led us to the highest altars of recognition. Recently, we were also awarded the Responsible Care Accreditation in recognition of our safety standards and production processes. The year witnessed a big improvement in the performance and productivity of the plants, especially Methanol and Butanediol that enabled sales to top SR 1,993 million compared to SR 830 million in 2009. Our operating profit also grew to SR 764 million against SR 168 million a year ago resulting in an EPS of SR 1.13. It is also notable that sale prices of Sipchems produce recorded a higher price in the international market to add to the healthy bottom line. The commercial operations of the Acetyl complex with its three plants began during the year. In order to continue its planned expansion in new projects, Sipchem has initiated diversification of project financing through the issuance of Islamic Sukuks. I would like to express my thanks and gratitude to the Shareholders, Chairman and Board of Directors for all the support extended to my team. I wish the company all the progress and success under the support of the Government of the Custodian of the Two Holy Mosques and his Crown Prince. Eng. Ahmad A. Al-Ohali Chief Executive Officer
The Saudi International Petrochemical Company (Sipchem) is considered one of the major and pioneer shareholding public companies that provide the markets with high quality basic and intermediary Petrochemical products. Sipchem was established late in the year 1999 as a Saudi closed joint stock company and in the year 2006 it became a public shareholding Company. The list of the company founders includes a good number of reputable and outstanding private sector investors (individuals and companies) from the Kingdom and GCC Countries. Through the production of significant and high quality and ready to export products, Sipchem is playing an important role in the utilization of the Kingdoms huge natural resources of hydrocarbons and utilizing them for the benefit of national economy, the companys shareholders, employees and the community in general.
The official registered office is in Riyadh and its main investment activity is in basic and intermediary petrochemical, chemical and hydrocarbon industries through the ownership, construction, operation and management of industrial projects for the production of chemical products that are used in the manufacturing of various products. Sipchem is holding a number of strategic alliances with international partners from the biggest international companies that own the latest international technologies and are having the highest marketing standing. Sipchem is committed to the highest quality standards in all its activities whether in its products or maintaining the integrity of the surrounding environment or the safety of its employees. Sipchem has set up future plans to achieve more development and growth on all aspects with the objective of becoming one of the biggest private sector companies in the Middle East Region.
Sipchem operations have been designed to utilize the available natural gas and other petrochemical raw materials in the Kingdom in a way that renders Sipchem products of competitive prices compared with the local and international markets. By the use of Sipchem chemical products as production inputs for the production of chemical product of higher value, Sipchem is aiming at maintaining this feature to climb up the petrochemical value ladder. Sipchem was able to make savings in costs and ensure the supply of materials through the operation of complementary petrochemical materials. Sipchem adopts the strategy of continued investment through marketing opportunities and adopting the use of raw materials produced by the company through its current operations by adopting the use of raw materials produced by the company through its current operations. Sipchem owns the majority stakes in all of its affiliates. The following table shows those share percentages:
Affiliate Companies
Ownership percentage
International Methanol Company (IMC) International Diol Company (IDC) International Gases Company (IGC) International Acetyl Company (IAC) International Vinyl Acetate Company (IVC) International Polymers Company (IPC) International Utilities Company (IUC) Sipchem Marketing and Services Company (SMSC)
10
12
14
Sipchem performs its business according to the strategic plans designed by the Board of Directors in all its expansions and operational processes. Sipchem also strives to create new business opportunities so as to raise up the actual value of its shareholders and to participate in the development of the national economy of the Kingdom. Sipchem also concentrates on creating new projects that have high added value to be added to the current company products through the production of derivative products. Sipchem is currently carrying out feasibility studies for several new industrial projects which are expected to be announced in the year 2011.
16
As part of third expansion program, Sipchem is currently working on the construction and operation of an Ethyl Acetate / Butyl Acetate plant with a production capacity of 100,000 metric tons in Jubail Industrial City, Kingdom of Saudi Arabia. Sipchem has signed agreements with the French company Rhodia on August 4, 2010. This includes the use of its technology, the marketing agreement and an Ethanol supply agreement. Through the use of Rhodia technology and their experience in this field. Sipchem plans to achieve significant gains in the quality of the product and reduction of the cost of the plant production that parallels or exceeds the international levels. The plant will be designed in a way to allow the production of another material, Butyl Acetate (BA). The plant will be located in Jubail Industrial City, Kingdom of Saudi Arabia.
Sipchem awarded the engineering, design and construction (LSTK) contracts for its Ethyl Acetate Plant to eTEC Engineering & Construction Company, Korea on 8 January 2011. This plant comes as a part of Sipchems growth in comprehensive downstream products in full integration with current products portfolio. The Ethyl Acetate plant is expected to start production during the first quarter of the year 2013. It is worth noting that the raw materials for the production of Ethyl Acetate such as Acetic Acid will be obtained from the international Acetyl Company (one of Sipchem Affiliates) and Ethanol will be imported from international markets. The initial estimates for the project is around SR 350 million and it will be owned wholly by Sipchem and will be financed by Sipchem as a capital in addition to loans from several other financing agencies yet to be determined.
18
Sipchem is building a corporate Product & Application Development Center [PADC] on a plot of 15,000 m2 at Dhahran Techno Valley of King Fahd University of Petroleum and Minerals [KFUPM], in the Eastern Province of Kingdom of Saudi Arabia. The PADC will be operational in mid-2012. The estimated cost of this center is in excess of SR 100 million. The PADC will have the latest Instruments and equipment for polymerization, compounding, moulding, testing, analysis, processing, and application development.
The project engineering designs are completed. The award of the construction contracts is expected during the first quarter of the year 2011. This technical center will be a new focus of polymer technology in the Kingdom; it is mandated to develop the downstream polymer converting industry in the Kingdom; it will assist Sipchem Marketing in achieving their commercial targets by new product development, competitive analysis, technical services to customers and technical market development activities; and it will improve the processes of international Polymer Company (IPC) through process optimization and polymerization research.
Risk of Prices Fluctuation: Risk of chemical, petrochemical products and shipping prices fluctuations. Risks of Financing: Including the availability of financing, the fluctuations of currency prices and the financial situation of the affiliated companies which are mostly dependent on financing. Plants Operation Risks: Including the general operation risks. Risks of the non-availability of the basic supply items (feedstock) Environmental Risks: The possibility of imposing more aggressive environmental regulations or any other general regulations. Market Related Risks: Competition and prices risks related to products produced by Sipchem affiliated companies.
20
Financial Statements
The improvement in the operational performance of the plants resulted in the increase of production quantities and the development of the sales of the Methanol and Butanediol plants in addition to the increase of the prices of these products. This consequently led to the increase of the profit margins, improvement of work capability and productivity and reduction of costs. Sipchem has previously announced the commercial operation of the acetyl complex in the middle of the year. The reduction in the prices of the Acetic acid and the Vinyl Acetate during the year impacted the company profits. There is a minor improvement in these prices during the months of November and December 2010. Below are the financial indicators of the year 2010 compared with previous year: 1. he total profit for the year 2010 was SR 861.3 million compared with SR 235.7 million for the previous year with T 265.4% increase. 2. he operational profit for the year 2010 was SR 764.1 million compared with SR 168.3 million for the year 2009 with T 354% increase. 3. he net profit for the year 2010 was SR 378.1 million compared with SR 140.9 million for the previous year with T 168.3% increase. 4. he Earnings Per Share (EPS) was SR 1.13 compared with SR 0.42 for the previous year. T 5. The total assets for the year 2010 were SR 12 billion compared with SR 11.8 billion for the previous year with 1.7% increase.
Total Current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total shareholders equity and minority interest Total liabilities, shareholders equity and minority rights Net Profit Earnings Per Share (EPS) Weighted Average Number of Outstanding Shares
1,824,070,534 3,438,135,912 5,262,206,446 601,236,845 1,700,962,210 2,960,007,391 5,262,206,446 493,693,293 3.29 150,000,000
1,994,751,478 5,755,301,075 7,750,052,553 2,163,553,911 1,694,328,522 3,892,170,120 7,750,052,553 593,972,141 2.97 200,000,000
2,841,623,155 7,991,765,122 10,833,388,277 1,009,403,414 3,965,717,244 5,858,267,619 10,833,388,277 536,782,148 1.66 323,498,419
2,217,676,762 9,600,526,773 11,818,203,535 903,102,522 5,083,145,195 5,831,955,818 11,818,203,535 140,879,515 0.42 333,333,333
2,425,569,371 9,600,976,473 12,026,545,844 856,510,238 5,156,140,356 6,013,895,250 12,026,545,844 378,079,252 1.13 333,333,333
2. Development of sales, income from operations and net profit for the past five years:
(Million Saudi Riyals)
1993 944 830 537 764 168 2009 141 2010
1334
1528
773
896
494
594
1709
2006 Sales
3. Total Assets and Shareholders Equity for the past five years:
(Billion Saudi Riyals)
5.3
7.8
10.8
5.0
11.8
4.9
2006
Assets
2.4
2007
Shareholders Equity
3.0
2008
22
378
625,616,369
265.5% 354%
168.3%
595,819,599
237,199,737
The main reason for the increase in the financial results for the year 2010 compared with the year 2009 was mainly due to the improvement in the operational performance of the plants which resulted in the increase in production and sales quantities in Methanol and Butanediol plants. In addition, the year witnessed an increase in the global sale prices of these products and also an improvement of the work efficiency, productivity, and overall cost reduction.
International Methanol Company International Diol Company International Acetyl Company International Vinyl Acetate Company International Gases Company
Zakat & Income Department General Organization for Social Insurance (GOSI)
48,937,352 16,054,487
24
The company Internal Audit Committee periodically and regularly reviews the internal audit system for the different departments of the company. This audit is based on annual plans approved by the audit committee so as to make sure of the effectiveness this system and its capability of protecting company assets and ensure the competence and integrity of procedures, financial and non-financial operations and commitment of company employees with the regulations issued by the different government agencies and related regularity bodies in addition to the commitment to the companys approved internal policies and systems. The Audit Committee Continuously supervises the works of the internal audit committee and regularly reviews its reports. The scope of the internal audit department includes the following: 1. Prepare the annual strategic plan for the work of internal audit committee. 2. Auditing and periodic examinations on all administrative and operational departments and notifying their officials of the results. 3. valuating the procedures and the solutions provided by the departments E to ensure suitability and affectivity of the proposed procedures. 4. Submit reports on the auditing results and recommendations in addition to the later follow up of these results to ensure their application by the concerned departments. In addition to the above, the companys external auditor, as part of his responsibility in auditing the companys annual statement, takes an overall review of the companys internal audit system and its electronic and computer systems to ensure the availability of suitable separation between functions, control systems and strict control on company operations. The internal audit committee has not discovered any violation or any integral weakness in the companys internal audit system or different operations in the year 2010,
Annual Report 2010 I 25
1 2 3 4 5 6 7 8 9 10 11
H.E. Eng. Abdulaziz A. Al-Zamil Dr. Abdulaziz A. Al-Gwaiz Mr. Fahd S. Al-Rajhi Eng. Reyadh S. Ahmed Dr. Sami M. Zaidan Mr. Abdulaziz A. Al-Khamis Dr. Saleh H. Al-Humaidan Dr. Abdurrahman A. Al-Zamil Mr. Abdurrahman A. Al-Turki Eng. Mohammed A. Al-Ghurair Eng. Ahmad A. Al-Ohali
Chairman Member Member Member Member Member Member Member Member Member Member / CEO
Non-executive Non-executive Non-executive Non-executive Non-executive Non-executive Independent Independent Independent Independent Executive
Membership in other joint stock companies - Sahara Petrochemical Company (Pubic Joint Stock-KSA) - Alinma Bank (Public Joint Stock- KSA) - Al-Zamil Group Holding Company (Closed Joint Stock-KSA) - Al-Khaleeg Training & Education Co. (Pubic Joint Stock-KSA) - Al-Saqr Cooperative Insurance Co. (Pubic Joint Stock-KSA) - Investcorp Co. (Pubic Shareholding-Bahrain) - Golden Pyramids Plaza Co. (Pubic Joint Stock-Egypt) - Sahara Petrochemical Company (Pubic Joint Stock-KSA) - Al-Zamil Industrial Investment company (Pubic Joint Stock-KSA) - Al-Zamil Group Holding Company (Closed Joint Stock-KSA) - Taqa National Company (Closed Joint Stock-KSA) - Saudi Investment Bank (Pubic Joint Stock-KSA) - National Petrochemical Company (Closed Joint Stock-KSA) - Privatization Holding Company (Closed Joint Stock-Kuwait) - Gas and Oil Fields Company (Closed Joint Stock-Kuwait) - Ikarus Petroleum Industries Company (Closed Joint Stock-Kuwait) - Middle East Complex for Industrial, Engineering, Electronic and Heavy Industries (Closed Joint Stock-Jordon)
2 3
5 6
26
7 8 9 10 11
Eng. Mohammed A. Al-Ghurair Dr. Saleh H. Al-Humaidan Mr. Fahd S. Al-Rajhi Dr. Sami M. Zaidan Eng. Ahmad A. Al-Ohali
- National Cement Company(Pubic Joint Stock-UAE) - Al-Mashreq Bank (Pubic Joint Stock-UAE) N/A N/A N/A N/A
1 2 3 4 5 6 7 8 9 10 11 12 13
H.E. Eng. Abdulaziz A. Al-Zamil Dr. Abdulaziz A. Al-Gwaiz Eng. Mohammed A. Al-Ghurair Eng. Reyadh S. Ahmed Dr. Saleh H. Al-Humaidan Mr. Abdurrahman A. Al-Turki Eng. Ahmad A. Al-Ohali Dr. Abdurrahman A. Al-Zamil Mr. Fahd S. Al-Rajhi Mr. Abdullah S. Bahamdan* Mr. Ibrahim M. Al-Humaidan* Dr. Sami M. Zaidan Mr. Abdulaziz A. Al-Khamis x x x x x
4 4 4 4 4 4 4 3 3 2 1 1 1
4. Description of any benefits for board members, their wives and children below eighteen years in shares or debt instruments in Sipchem:
Shares on 01 Jan.2010 Shares on 31Dec.2010 First class relatives ownership and changes
Name
No.
No.
Change %
H.E. Eng. Abdulaziz A. Al-Zamil Mr. Abdurrahman A. Al-Turki Mr. Fahd S. Al-Rajhi Eng. Mohammed A. Al-Ghurair Dr. Abdulaziz A. Al-Gwaiz Dr. Abdurrahman A. Al-Zamil Dr. Saleh H. Al-Humaidan Eng. Ahmad A .Al-Ohali Eng. Reyadh S. Ahmed Mr. Abdulaziz A. Al-Khamis Dr. Sami M. Zaidan
N/A 7,550,000 5,459,216 2,787,400 30,000 1,147,333 3,000 461,313 N/A N/A N/A
N/A 7,550,000 5,340,000 2,788,400 30,000 1,140,000 3,000 202,521 N/A N/A N/A
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
5. Description of any benefits to senior executive management, their wives and children below 18 years in shares or debt instruments in Sipchem:
Shares on 01 Jan.2010 Shares on 31Dec.2010 First class relatives ownership and changes
Name
No.
No.
Change %
Eng. Abdul Rahman A. Al-Saif Eng. Abdullah S. Al-Saadoon Dr. Abdullatif M. Bhairi Mr. Kevin J. Hayes Mr. Khaled S. Al-Dossary Mr. Rashid M. Al-Dossari Ali H. Al-Irq
0.00 0.00
0.00 0.00
N/A N/A N/A N/A N/A N/A His wife owns 2 shares N/A
2,630
0.001
N/A
- 0.001
28
Name
No.
No.
Net Changes
change %
National Industrial Holding Group (Kuwait) Ikarus Petrochemical Holding Company (Kuwait)
27,746,282 N/A
8.3% 0
N/A 27,746,282
0 8.3%
-100% 100%
7. Rewards and compensations for the board members and senior executives:
The below schedule shows the rewards and compensations (salaries, benefits, etc.) paid to the board members and senior executives who have received the highest rewards and compensations from the company including the CEO and the General Manager of Finance during the year 2010: (Saudi Riyals)
Non - executive Board members/Independent Five of the senior executives who received the highest rewards and compensations.
Detail
Salaries and compensations Allowances Periodic and annual rewards Incentive plans Any other compensations and any other benefits of kind paid monthly or annually
14,500 200,000 -
155,232 2,000,000 -
7,596,958 2,098,096 -
Board Committees
Committee Chairman-Board Member Committee Member-Al-Zamil Holding Co. Committee Member-Public Pension Agency
H.E. Eng. Abdulaziz A. Al-Zamil Dr. Abdulaziz A. Al-Gwaiz Mr. Saleh H. Al-Humaidan Mr. Fahd S. Al-Rajhi Dr. Sami M. Zaidan
Committee Chairman Committee Member Committee Member Committee Member Committee Member
30
H.E. Eng. Abdulaziz A. Al-Zamil Dr. Abdulaziz A. Al-Gwaiz Mr. Fahd S. Al-Rajhi Eng. Ahmad A. Al-Ohali Eng. Reyadh S. Ahmed
Committee Chairman Committee Member Committee Member Committee Member Committee Member
The Board of Directors confirms the following: hat the accounts register has been prepared in the correct format and T according to the Generally Accepted Accounting Principles (GAAP). hat the internal control system has been prepared on sound basis and is T being implemented effectively. hat there are no doubts about the companys ability to go ahead with the T performance of its activities. hat the unified financial statements have been prepared according to the T standards and the accounting systems issued by the Saudi Committee for Saudi Chartered Accountants and according to the related requirements of the Companies regulations and statute of the company with regard to the preparation and publication of financial details. hat the company has not issued any bonds and consequently has not T recovered or purchased or canceled any recoverable debt instruments. hat the company does not have any transfer rights or any subscriptions T based on debt transferable instruments to shares or selection rights or subscription rights memoranda or similar rights issued or given by the company during the year 2010. hat there is no contract to which the company is a party and that there T is or has been any substantial benefit in it to any board member or the Chief Executive Officer or the General Manager of Finance or to any person related to any one of them. hat there are no arrangements or agreements through which any of the T board members or any of the senior executive waives any salary or any compensation. hat there are no arrangements or agreements through which any of the T companys shareholders waives any profit rights.
32
Based on a recommendation from the Board of Directors of the Saudi International Petrochemical Company (Sipchem) during the Extra-ordinary General Assembly Meeting held on 27/11/2010 approved the amendment of article fifteen of the company by-laws to allow the company to issue negotiable debt instruments including Sukuk or bonds and approved the companys issuance of negotiable debt instruments and authorized the Board of Directors, in as far as not conflicting with the by-laws to issue debt instruments such as bonds or Sukuks inside the Kingdom of Saudi Arabia or outside it according to the systems, laws and regulations in place. Through the issuance of Islamic Sukuk, Sipchem intends to finance the companys new capital expansion projects. Sipchem always strives to diversify its financial recourses and debt instruments through the investment in all possible alternatives for the benefit of the company and its shareholders. It is expected that the issuance of Sukuk will reach SR 1.5 billion subject to increase. The Sukuk issuance is expected during the first quarter of the year 2011.
Sipchem held three successful General Assembly meetings during the year 2010 as shown below. The company has advertized the dates of these General Assembly meetings in the Capital Market Authority (CMA) website, company website, the official newspaper and the local newspapers at least twenty five days prior to the scheduled day of the meeting. The advertisements showed the time, location and the agenda for these meetings. The company also gave the shareholders the chance to effectively participate and vote on the issues included in the agenda and informed them of the regulations that govern those meetings, the voting procedures through calling the General Assembly, the distribution of well prepared files containing enough information that enables the shareholders to take up their decisions. The company also notified the CMA about the results of these meetings immediately after their conclusions. The shareholders were also enabled to view the minutes of the meetings at the company offices or through the company website. No 1 Assembly Meeting 27/03/2010 Ordinary General Assembly Attendance % 64% Resolutions adopted 1. Approval of board report for fiscal year 2009. 2. atification of financial statement and profits and losses R account of the company as of 31/12/2009. 3. Discharge of board members for the previous year 2009. 4. pproval of the accounts auditor nominated by the audit A committee for the audit of company accounts for the fiscal year 2010. 5. pproval of the board recommendation for cash A distribution of dividends to company shareholders for year 2009 with a total amount of SR 333,333,333 with a rate of SR 1 (one) per share which represents 10% of the company capital priority in profit distribution of these shares shall be to the shareholders who are registered in the registry by the end of the Tadawl at the end of the assembly meeting. 2 28/09/2010 Ordinary General Assembly 65% 1. lection of (11) eleven members for the board E membership of Saudi International Petrochemical company (Sipchem) for the new term which extends for three years starting from 04/01/1432H corresponding to 10/12/2010 according to the By-laws of the company. 1. mendment of article fifteen of the company by-laws A by adding to paragraph (b) as regards Suluks and bonds 2. he approval of company issuing negotiable debt T instruments including Sukuk or bonds and authorize the Board of Directors, in as much not conflicting with the terms of the regulations, to issue any type of negotiable debt instruments such as bonds or Sukuk inside the Kingdom of Saudi Arabia or outside it according to the systems, laws and regulations in place.
66%
34
The net annual profit of the company is distributed according to article (41) of the company by-laws after the deduction of all the general expenses and other costs as follows: 1. ut aside (10%) of the net profit as a legal reserve. The normal General P Assembly may stop setting aside of such amount once these reserves reach 50% of the capital. 2. The General Assembly may, based on a proposal to the Board of Directors, set aside a certain percentage of the net profits, to establish an agreed reserve and allocate it for a special purpose or purposes. 3. rom the remaining amount and after a first payment to the shareholder F equivalent to 5% of the paid-up capital. 4. After the above, an amount not exceeding (10%) of the remaining amount shall be assigned as a compensation to the Board members taking into consideration the regulations and the instructions issued by the Ministry of Commerce in this regard. The remaining amount after that shall be distributed to the shareholders as an additional portion of the profit. On 12 April 2010 Sipchem distributed cash profits to company shareholders for the year 2009 which totaled SR 333,333,333 at the rate of SR 1 for each share which represents 10% of the companys capital. This is distributed to company shareholders who are registered in the official register of the shareholders at the end of the General Assembly meeting held on 27/03/2010. Also the Board recommended in its meeting on 20 December 2010 the increase of the companys capital by 10% from SR 3,333,333,330 to SR 3,666,666,660 through the granting one free share for every ten shares owned by the shareholders who are registered on the company register at the depositary centers of the financial papers on the Tadawul day of the Extra-Ordinary meeting of the General Assembly which will be held during the first quarter of the year 2011. The proposed increase in the capital will be covered by the transfer of SR 333, 333,330 from the retained profits as of 30/09/2010 after company acquiring the required approvals from the official entities. The reasons for the capital increase are for financing some parts of company future projects.
Annual Report 2010 I 35
Corporate Governance
Sipchem has applied all the mandatory regulations as included in the Corporate Governance list issued by the Capital Market Authority (CMA), particularly the commitment to the best practices that protect the shareholders rights and reinforce the companys commitment to declaration and transparency standards including the establishment of a company data base through its electronic site that enables its eligible shareholders, who have not received their dividends for the previous years, to know the details of their dividends. For more information about the shareholders and their dividends details, please visit the following link: http://www.sipchem.com/ar/shares.asp As part of Sipchems commitment to set up the best practices in the field of corporate governance and the development of the related standards and principles, a code of conduct has been developed and applied to all company employees during the year 2010. This code aims at the commitment to the highest moral standards in practicing all company activities. The code of conduct covers a wide range of professional practices and provides the required professional education to all company employees and reinforces the understanding and commitment to these codes to avoid any breaches that subject them to legal responsibilities. Communication sessions have been held with all company employees to explain the requirements of these codes of conduct and all company employees have signed commitment and understanding certificates. Sipchem has prepared its governance regulations according to the requirements of Article (10) paragraph (C) of the Corporate Governance Regulations issued by the Capital Market Authority and in compliance with the listing and inclusion regulations and the company by-laws. For more information about the current Corporate Governance Regulations, please visit the following link: http://www.sipchem.com/ar/Government.htm The company has applied all articles of the Corporate Governance Regulations issued by Capital Market Authority with the exception of the article below: Article (6) Voting Rights Paragraph (b) Action Do the by-laws of the company indicate that the voting method in the item for the selection of the board member in the General Assembly shall be by the cumulative voting? Reasons and details The by-laws of the company do not include the cumulative voting. The company is currently applying the normal voting system according to the Companys by-laws.
36
Sipchem gives the utmost attention to the Communication with shareholders. It has taken many measures to guarantee the shareholders rights to obtain information through the CMA Tadawul website and the company site www.sipchem.com. Sipchem provides comprehensive information about company activities and business through the Annual Report, periodic financial statements and dividends distribution procedures. The company is also keen to communicate with its shareholders, answer all their queries and provide them the requested information in a timely manner.
Human Resources
Sipchem believes that its human resources play the basic role in the development of its operations and investments. The company has a clearcut strategy to attract, develop and improve human skills and capabilities and motivate its human resources. Sipchem and its affiliates strive to raise up the leadership, administrative and technical skills and capabilities of all levels of its employees. This is achieved through the internal and external training plans and programs. This is in addition to the on-the-job training which is considered as the basic company and its affiliates priorities. The Saudization programs are of particular importance to Sipchem and its Affiliates.
These programs resulted in the attainment of very good Suadization levels. Highly qualified Saudi employees are currently occupying most of the top and administrative positions. The number of the company employees by the end of the year 2010 was 729 and the percentage of Saudis was 70%. Sipchem has organized its third service award for its employees who completed five and ten years of continuous service in November 2010 where 42 employees were honored. Sipchem has organized a number of training courses during the year 2010 in cooperation with some outside training entities. The objective of these programs was to raise up and reinforce the capabilities of the administrative and technical employees. A total of 507 employees have been trained through 163 internal and external training programs on various administrative and technical areas.
38
Sipchem has announced in the Initial Public Offer (IPO) in the year 2006 and the offering of shares priority rights in the year 2008, the allocation of these shares to the Sipchem employees incentive program where Al Zamil Holding Group, being one of the founders of Sipchem, and a guarantor for the Sipchem shares allocated the program as per the agreement signed between Sipchem and al Zamil Group, till Sipchem is able to complete the necessary procedures to start special portfolio for the program. On 20 December 2010 a total of 1,536,697 shares have been transferred from a portfolio under the name of Al Zamil Holding Group to a portfolio under the name of Sipchem Employee Incentive program at Al-Bilad Investment Company. The shares were transferred to the Sipchem Employee Incentive Program after the completion of the necessary procedures to open a portfolio for the program and the approval of the Capital Market Authority of the shares transfer.
In continuation of its social responsibility which aims at reinforcing the companys participation in the community service and development, Sipchem continued performing its obligation towards the community. Sipchem supports community social causes through annual funding as well as through active participation in activities such as the sponsorship of the second symposium of the charitable societies, organizing a blood donation campaign by company employees, supporting the Eastern Province peoples festivals and honoring outstanding orphan students. Sipchem takes its participation and responsibilities towards its community so seriously, that its Board of Directors have allocated 1% of its total net annual profit to charity, in order to support its social responsibility programs.
These contributions and participations are supervised and managed by Community Services Committee composed of representatives from various company departments. Sipchem has adopted an ambitious program to sponsor a number of orphans in the Eastern Province. This program is characterized by its comprehensive sponsorship of the orphans and their families, including their education, rehabilitation and follow-up until graduation from either a secondary school or from university. In appreciation of the companys commendable role in community service, a number of awards and plaques were presented by various entities.
40
Responsible Care
Sipchem continued the application of the highest international health and safety standards which are considered the basic values of the company in all its activities. Sipchem has achieved an outstanding record in the area of safety through the use of new standards. During 2010 Sipchem achieved very high levels that exceeded similar international companies. The company continued to maintain its safety achievements through the continuous planned training, preparation of periodic safety rehabilitation programs and the training symposia in all company plants. The company has applied the annual audit system, used in the plants, to manage the safety operations to ensure the continuous safety for employees, plants and the environment. This is in addition to the training and development programs that are implemented by specialized experts in these fields together with the continuous updating of the systems and procedures to cope up with the new requirements. These systems constitute the basic components for the achievement of best results in the safety field.
During the year 2010 Sipchem continued the application of the requirements of the Responsible Care and became one the pioneering companies that applied this international initiative. These efforts were crowned by considering Sipchem as one of the pioneering companies in the field of responsible care and being authorized to use the logo of the initiative as one of the first companies to have this privilege in the area. The responsible care initiate programs include the participation in various projects such as carbon dioxide emission, the application of product care, the improvement of safety management operations and enhance the industrial chemical awareness for all stakeholders in the area. The complete commitment to safety and environment standards ranks Sipchem in the frontier for future application of the responsible care initiative.
42
Consolidated Financial Statements and Auditors Report for the year ended 31 December 2010
Contents: 45 Auditors Report 46 Consolidated Balance Sheet 47 Consolidated Statement of Income 48 Consolidated Statement of Cash Flows 49 Consolidated Statement of Shareholders Equity 50 Notes to the Consolidated Financial Statements
44
Auditors Report
Note
2010 SR
2009 SR
ASSETS
Current assets Cash and cash equivalents Accounts receivable, prepayments and other receivables Inventories Total current assets Non-current assets Property, plant and equipment Projects development costs Intangible assets Total non-current assets TOTAL ASSETS 6 7 8 9,505,558,802 62,624,486 32,793,185 9,600,976,473 12,026,545,844 9,517,402,751 52,032,381 31,091,641 9,600,526,773 11,818,203,535 3 4 5 1,620,643,847 596,395,125 208,530,399 2,425,569,371 1,831,202,343 307,792,014 78,682,405 2,217,676,762
46
Note
2010 SR
2009 SR
1,992,536,014 (1,131,182,946) 861,353,068 20 (97,202,098) 764,150,970 7,533,339 (107,245,781) (957,717) (3,430,350) 660,050,461 (238,029,266) 422,021,195 21 (43,941,943) 378,079,252 1.13 2.29 333,333,333
830,402,833 (594,666,134) 235,736,699 (67,405,328) 168,331,371 14,725,539 (45,388,423) 75,000,000 (1,707,959) (558,597) 210,401,931 (29,164,027) 181,237,904 (40,358,389) 140,879,515 0.42 0.50 333,333,333
GROSS PROFIT
General and administrative expenses
Note
2010 SR
2009 SR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR SUPPLEMENTARY CASH FLOWS INFORMATION:
Non-cash transactions are as follows: Net change in fair value of interest rate swaps Reclassification of debt arrangement and acquisition cost and pre-operating cost from intangibles to property, plant and equipment Reclassification of project development cost to property, plant and equipment Transfer from property plant and equipment to inventory Transfer from property, plant and equipment to deferred turnaround cost
48
Share capital SR
Statutory reserve SR
General reserve SR
Retained earnings SR
Total SR
Balance at 1 January 2009 Results of sale of shares in subsidiaries (note 1) Net Income for the year Net change in fair value of interest rate swaps Dividends Transfer to statutory reserve Directors remuneration Balance at 31 December 2009 Balance at 1 January 2010 Results of sale of shares in subsidiaries (note 1 & 17) Net Income for the year Net change in fair value of interest rate swaps Dividends Transfer to statutory reserve Directors remuneration Balance at 31 December 2010
3,333,333,330
864,300,418
275,000,000
692,500,351
(200,539,418) 4,964,594,681
54,518,905 -
140,879,515 -
97,621,667 -
14,087,952
(333,333,333)
(14,087,952) (2,200,000)
(333,333,333)
(2,200,000)
3,333,333,330
878,388,370
275,000,000
54,518,905
483,758,581
(102,917,751) 4,922,081,435
3,333,333,330
878,388,370
275,000,000
54,518,905
483,758,581
(102,917,751) 4,922,081,435
37,807,925 -
(5,625,228) -
(37,515,755) -
3,333,333,330
916,196,295
275,000,000
48,893,677
488,496,575
(140,433,506) 4,921,486,371
International Methanol Company (IMC) International Diol Company (IDC) International Vinyl Acetate Company Ltd.(IVC) International Acetyl Company Ltd. (IAC) International Gases Company (IGC) Sipchem Marketing and Services Company (SMSC) International Utility Company Ltd (IUC) International Polymers Company (IPC)
The plants of the group are located at Jubail Industrial City, Kingdom of Saudi Arabia. On 25 January 2010, the company sold off 25% of its share in IPC to Hanwha Chemical Oversees Holdings Ltd., a South Korean company. The legal requirements for the transfer of shares to the new partner have been completed in April 2010. IAC and IGC commenced commercial operations on 5 June 2010 whereas IVC commenced commercial operations on 7 August 2010 following the successful commissioning, testing and acceptance formalities with the main contractors On 21 Dhu Al-Hijjah 1431H corresponding to 27 November 2010, the Extraordinary General Assembly has permitted the company to issue Islamic Bonds (Sukuk) so as to be compliant with Sharia Laws, for the purpose of financing the capital expansions of the companys new projects. The company is in the process of submitting a request to the Capital Market Authority for registration and listing. The companys Management expects the value of offered bonds (Sukuk) to be SR 1.5 billion and the offering process to be made during the first quarter of the year 2011. The Board of Directors of the company, at its meeting held on 14 Muharram 1432H corresponding to 20 December 2010, has recommended increasing the companys capital by %10 by way of capitalizing a part of the profits through the issuance of one bonus share for every ten shares held by the shareholder. As a result, the capital shall be increased from 3,333,333,330 to 3,666,666,660. The bonus shares shall be limited to the existing shareholders registered in the records of the company with (Tadawul) at the end of trading on the day of holding the Extraordinary General Assembly meeting which shall be determined later, following the necessary approvals of competent authorities.
50
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year.
Revenue recognition
The group markets its products through marketers. Sales are made directly to final customers and also to the Marketers distribution platforms. The sales through the distribution platforms are recorded at provisional prices at the time of shipments, which are later adjusted based on actual selling prices received by the Marketers from their final customers, after deducting the cost of shipping, distribution and marketing. Adjustments are made as they become known to the group. Local and export sales are recognized at the time of delivery of the product at the loading terminals located at the plant and at the King Fahd Industrial Port in Jubail Industrial City.
Expenses
All the year expenses except for production costs, financial charges and net expenses of pre-operating activities are classified as general and administrative expenses.
Accounts receivable
Accounts receivable are stated at original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
Inventories
Inventories comprise of spare parts and finished goods and are stated at the lower of cost or market value. Costs of manufactured goods include raw materials, direct labor and manufacturing overheads. The cost of spare parts and finished goods are arrived at using the weighted average cost method. Appropriate provisions are made for slow moving and redundant inventories.
Intangible assets Intangible assets represent turnaround maintenance costs and other deferred charges. The planned turnaround costs are deferred and amortized over the year until the date of the next planned turnaround. Should an unexpected turnaround occur prior to the previously envisaged date of planned turnaround, then the previously unamortized deferred costs are immediately expensed and the new turnaround costs are amortized over the period likely to benefit from such costs. Other deferred charges are amortized over the period likely to benefit from such costs. Permanent impairment of non-current assets At the end of each fiscal year, the group reviews the carrying values of property, plant and equipment and other non-current assets to determine whether there is any indication that those assets have suffered impairment. If such indicators exist, the recoverable amount of the asset is estimated in order to determine the extent of impairment (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash generating unit to which the asset belongs. The carrying value of the asset (or generating unit) is reduced to the recoverable value when the recoverable value is below the carrying value. Impairment loss is recognized as expense when incurred. Where an impairment loss subsequently reverses, the carrying value of the asset (generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash generating unit) in prior years. The reversal of impairment loss is recognized as income once identified. Derivative financial instruments Derivative financial instruments are initially recorded at cost and are re-measured to fair value at subsequent reporting dates. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the consolidated statement of income as they arise. A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is already recognized in the consolidated balance sheet. The gain or loss from the change in the fair value of the hedging instrument is recognized immediately in the consolidated statement of income. At the same time, the carrying amount of the hedged item is adjusted for the corresponding gain or loss since the inception of the hedge, which is also immediately recognized in the consolidated statement of income.
52
A cash flow hedge is a hedge of the exposure to variability in cash flows relating to a recognized asset or liability, an unrecognized firm commitment or a forecasted transaction. To the extent that the hedge is effective, the portion of the gain or loss on the hedging instrument is recognized initially directly in equity. Subsequently, the amount is included in the consolidated statement of income in the same year or years during which the hedged item affects net profit or loss. For hedges of forecasted transactions, the gain or loss on the hedging instrument will adjust the recorded carrying amount of the acquired asset or liability. Foreign currency transactions Foreign currency transactions are translated into Saudi Riyals at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies at the consolidated balance sheet date are translated at the exchange rates prevailing at that date. Gains and losses from settlement and translation of foreign currency transactions are included in the consolidated statement of income. Employees terminal benefits Provision is made for amounts payable under the employment contracts applicable to employees accumulated years of service at the consolidated balance sheet date. Provision for obligations A provision is recognized when the company has a legal or constructive obligation as a result of a past event, and the settlement of such obligations is probable and can be measured reliably. Zakat The group is subject to zakat and income tax regulations in the Kingdom of Saudi Arabia. Zakat and income taxes are provided on an accrual basis. Any difference between the estimated zakat for the years and the zakat provision that is calculated based on the detailed zakat base at year end are accounted for at the end of the year. Additional amounts, if any, that may become due on finalization of an assessment are accounted for in the year in which assessment is finalized. The zakat charge in the consolidated financial statements represents the zakat for the company and the companys share of zakat in subsidiaries. The zakat charge and income tax, assessable on the minority shareholders, is included in minority interest. Statutory reserve In accordance with Saudi Arabian Regulations for Companies, the parent company must set aside 10% of its net income in each year until it has built up a reserve equal to one half of the capital. The reserve is not available for distribution. Reserve for the results of sale of shares in subsidiaries The gains or losses resulting from sale of shares in subsidiaries, when the company continues to exercise control over the respective subsidiary, are booked in the reserve for the results of sale of shares in subsidiaries. Leasing Leases are classified as capital leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under capital leases are recognized as assets of the Company at the lower of the present value of the minimum lease payments or the fair market value of the assets at the inception of the lease. Finance costs, which represent the difference between the total leasing commitments and the lower of the present value of the minimum lease payments or the fair market value of the assets at the inception of the lease, are charged to the consolidated statement of income over the term of the relevant lease in order to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Rentals payable under operating leases are charged to the consolidated income statement on a straight line basis over the term of the operating lease.
Trade receivables Accrued investment income Deposits, prepayments and other receivables
5. INVENTORIES
2010 SR 2009 SR
The spare parts inventory primarily relates to plant and machinery and, accordingly, this inventory is expected to be utilized over a period exceeding one year.
54
Total 2010 SR
Total 2009 SR
Cost: At the beginning of the year Additions Transfers At the end of the year Depreciation: At the beginning of the year Charge for the period Transfers At the end of the year Net book amounts: At 31 December 2010 At 31 December 2009 672,785,782 241,522,053 914,307,835 8,865,481,416 1,913,805,142 7,759,466 2,348,491 10,107,957 109,159,758 42,606,340 118,460,791 48,242,993 166,703,784 91,654,131 50,149,971 37,830,359 3,578,896 41,409,255 15,039,872 10,152,117 424,223,625 7,500,689,181 836,836,398 295,692,433 1,132,528,831 9,505,558,802 9,517,402,751 539,559,852 167,286,796 129,989,750 836,836,398 2,586,590,924 13,672,166 7,179,526,162 9,779,789,252 50,365,806 68,901,908 119,267,714 168,610,762 17,033,949 72,713,204 258,357,915 47,982,476 3,604,120 7,500,689,181 10,354,239,149 8,221,667,349 325,600,441 359,910,676 (76,062,192) 1,672,485,530 460,086,270
As at 31 December 2010, property, plant and equipment include plant and equipment held under capital lease obligations which have a cost of SR 535.1 million (2009: SR 535.1 million) and accumulated depreciation of SR 155.9 million (2009: SR 135.8 million). Construction work in progress mainly comprises of costs related to IPCs plant along with projects for improvement of the groups plants and the cost of constructing Sipchems head quarters in Al-Khobar city. The property, plant and equipment are constructed over a land in Jubail Industrial City leased from the Royal Commission for Jubail and Yanbu for 30 years commencing on 16 Muharram 1423H corresponding to 30 March 2002. The lease agreements are renewable upon the agreement between the two parties. Some of the companys property, plant and equipment are pledged as security against Saudi Industrial Development Fund loans, Public Investment Fund loans and commercial loans (note 12). Construction work in progress is stated at cost and is comprised of construction costs under various agreements and directly attributable costs to bring the asset for its intended use which also includes costs of testing to ensure the asset is functioning properly, and after deducting net proceeds from the sale of production generated during the testing phase. Directly attributable costs includes employee benefits, site preparation costs, installation costs, licensing fees, professional fees and borrowing costs. Financing costs related to the projects of IAC, IVC and IGC were capitalized during the year ended 31 December 2010 in construction work in progress amounted to SR 436.5 million (2009: SR 140.1 million). In 2010 the board of directors of the group resolved to change the estimated useful lives of the plants from 20 years to 25 years based on the technical opinion of the technology licensors and consultants to better reflect the estimated useful lives of these plants. The change in estimate was accounted for prospectively with effect from 1 January 2010. As a result, net income for the year ended 31 December 2010 was higher by SR 16 million compared to the results had the old estimate been used.
At the beginning of the year Additions during the year Provision for projects development cost no longer required Transferred to construction work in progress
During 2008, a provision of SR 77.6 million was made against the new projects development cost. The management of the company had not taken a decision to discontinue any ongoing projects. However, this provision was made on a conservative basis against any projects which may not be pursued further in the future at that time. Subsequently, the company successfully signed the license agreements for the projects it intends to undertake. In addition, the company entered into a joint venture agreement with other partners in which they have accepted the project development costs previously incurred by the company amounting to SR 165 million. Consequently, there was no need for the provision which the company has previously made. Therefore, the company reversed SR 75 million in 2009.
8. INTANGIBLE ASSETS
2010 SR 2009 SR
Cost: At the beginning of the year Additions Transfers from / to construction work in progress At the end of the year Amortization: At the beginning of the year Charge for the year Transfers At the end of the year Net book amount: At the end of the year 32,793,185 31,091,641 14,882,731 9,496,558 24,379,289 157,204,291 3,736,737 (146,058,297) 14,882,731 45,974,372 5,156,970 6,041,132 57,172,474 357,129,189 (311,154,817) 45,974,372
56
Accounts payable Retentions Accrued expenses Dividends payable Other payables Zakat provision
Saudi Industrial Development Fund loans (note a) Syndicated bank loans (note b) Public Investment Fund loans (note c)
363,900,902 4,201,964,502
58
Minimum lease payments (fixed and variable rental payments) Less: variable rental payments
Less: Payments made during the year Present value of minimum lease payments Less: current portion of obligation under capital lease
Future minimum lease payments: Within a year More than one year and less than five years More than five years 42,810,811 246,162,162 112,378,378 401,351,351 42,810,811 214,054,054 187,297,297 444,162,162
IMC entered into an Islamic lease agreement with a syndicate of financial institutions for the purpose of converting a commercial loan into an Islamic mode of financing. IMC has the right to purchase property and equipment leased for a nominal fee at the end of the leasing agreement. The companys commitment under the lease is secured by the lessors ownership of the leased assets.
At the beginning of the year Provision made during the year Payments made during the year At the end of the year
International Methanol Company International Diol Company International Acetyl Company Ltd. International Vinyl Acetate Company Ltd. International Gases Company International Polymers Company
Employee costs Expenses of board of directors and board meetings for the group Depreciation Others
60
21. ZAKAT
Zakat charge: The zakat charge consists of:
2010 SR 2009 SR
43,941,943
40,358,389
Current year zakat charge of the company Companys share in the zakat of subsidiaries Charge in consolidated statement of income
Movement in zakat provision The movement in the zakat provision was as follows:
2010 SR 2009 SR
At the beginning of the year Provision for the year Payments made during the year At the end of the year
Status of zakat assessments The company received zakat assessments for the years from 2001 through 2008 which showed an additional amount due of SR 24.3 million. The Company filed an appeal against the assessments received from the Department of Zakat and Income Tax (DZIT). The companys assessment for the year 2009 has not been raised by the DZIT yet. The zakat assessments for IGC have been agreed with the DZIT up to 2007. The assessments of the other subsidiaries for all years have not been raised by the DZIT yet.
2,165,207
2,165,207
The main leases are with the Royal Commission and the Port Authority. The lease with the Royal Commission is for an initial term of 30 Hijra years and is renewable upon the agreement of the two parties.
Less than one year Year two Year three Year four Year five More than five years Net minimum lease payments
23. DIVIDENDS
In April 2010, the Company distributed cash dividends in the amount of SR 333.3 million of SR 1/ share, which equals to 10% of the share capital for shareholders on records on 11 Rabih II 1431 H corresponding to 27 March 2010.
25. CONTINGENCIES
- Some Chinese companies filed a petition in respect of anti-dumping the Chinese market with Methanol products against companies in several countries including IMC, where the Chinese companies requested to impose anti-dumping duty. Recently, the Chinese Ministry of Commerce decided not to impose any protective duties on Saudi Methanol Exports. - Sipchem and Saudi Ethylene and Polyethylene Company (SEPC) have entered into an agreement for the supply of Ethylene to Sipchem. SEPC is claiming compensation for the failure by Sipchem to lift the annual contract quantity during the period from 1 March 2009 up to 31 December 2009, when the related plant was not yet operational. Sipchem management believes that SEPC will not be awarded any compensation.
62
Sipchem H.Q.
P.O.Box 130 Al-Khobar - 31952 Tel : 03 801 0111 Fax : 03 801 0222
Jubail
P.O.Box 12021 Jubail Industrial City - 31961 Tel : 03 359 9999 Fax : 03 358 8182
Riyadh
P.O.Box 251 Riyadh - 11411 Tel : 01 203 7736 Fax : 01 203 7738
www.sipchem.com