SUEZ CEMENT COMPANY S.A.E AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS. 31 DECEMBER 201224 ERNST & YOUNG saree es kn INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF SUEZ CEMENT. COMPANY S.A.E. We have audited the accompanying consolidated financial statements of Suez Cement Company S.A.E and its Subsidiaries (the “Group”),which comprise the consolidated statement of financial position as at 31 December 2012, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and feir presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management termines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Intemational Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and Fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financia! position of the Group as at ember 2012, and of its financial performance and its cash flows for the year then ended in sand BEES SiooesSuez Cement Company $.A.E and its Subsidiaries CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For The Year Ended 31 December 2012 Notes Revenue c tof sales OSS PROFIT Other operating income 4 Selling and distribution cost General and administrative expenses Other operating expenses 5 OPERATING PROFITS Finance expenses 6 Finance income 7 Gain (loss) from foreign exchange rate ‘Change in the present value of purchase commitments on nnon-controliing interests 20 Share of profit of an associate B Dividends from available-for-sle investments PROFIT BEFORE INCOME TAX Income tax expenses 8 PROFIT FOR THE YEAR Other comprehensive income Net unreatized gain on available-for-sale investments Exchange differences on translation of foreign operations OTHER COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX ‘TOTAL COMPREHENSIVE INCOME FOR THE YEAR Profit attributable to: Equity holders of the parent Non-contralling interests Total comprehensive income attributable to Equity holders of the parent ‘Non-controlling interests Basie and diluted earnings per share attributable to the equity holders of the parent (expressed in EGP per share) 9 = The attached notes from 1 to 26 are an integ 2012 2011 EGP EGP. 4,596,985,679 _4,820,438,094 (3,724,074,999)_(3,720,398,173) 872,910,680” 1,100,039,931 274517277 220,582, (91,063,225) (100,911, (333,860,867) (393,114,202) (125,967,456) _ (95,309,246) 16,536,409 731287973 @,401,144) 39,598,150 48,744,733, 91,152,670 72,045,902 3,936,272 5,157,738 443,720 5,718,889, Fis 010810 926,853,836 (207,825,574) _ (330,207,243) 70,185,236 596,645,503, (724,115) 873,073 35,625,164 29,779,444 34,901,049 308.086,288 524,991,802 547,665,448 45,193,434 48,980,145 570,185,236 537,474,449 563,307,854 67,611,836 63,990,256 605,086,285 627,298,110 2.89 3.01 part of these consolidated financial statementsSuez Cement Company .A.E and its Subsid es CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2012 ASSETS. Non-current assets Property, plant and equipment Goodwill Advance payment for investments acquisition Investment in an associate Available-for-sale investments Deferred tax assets Current assets Inventories Accounts receivable and prepayments Current tax assets Bank balances and cash TOTAL ASS ETS EQUITY AND LIABILITIES Equity Share capital Reserves Retained earnings Available-for-sale fair value reserve Foreign currency translation reserve Purchase commitments on nan-contolling interests Equity attributable to equity holders of the parent Non-controlling interests Total equity Liabilities Non-current liabilities Term loans Other liabilities Deferred tax liabilities Current liabilities Bank overdrafts Current portion of term loans Current portion of other liabilities Accounts payable and accruals Current tax liabilities Provisions Total liabilities TOTAL EQUITY & LIABILITIES Gas M Wits, SaRean Rucukoule” (Chief Financial Officer) = The attack 1s 16 0 18 18 20 Notes 2012 EGP 3,823,992,126 2,706,684,021 43,194,289 29,021,780 12,189,520 326,070 6,615,407, 806 801,864,193 581,510,691 20,998,019 1,622,317,094 3,026,689,997 9,642,097,803, 909,282,535 2,668,267,927 3,391,601,746 2,626,680 45,494,457 (109,439,098) 6,908 834,247 384,387,213 7,459,221,460 56,754,837 6,169,508 181,372,689 244,297,034 267,178 37,275,309 152,883,231 1,056,279,851 209,752,209 482,121,531 1,938,579,309 2,182,876,343 9,642,097,803, “he 2011 EGP. 3,930,723,233 2,701,187,927 3,635 521 asia 37,198,492 1,497,869,987 2,957,336,693 9,877,988,562 909,282,535 2,661,330,532 3,456,565, 100 3,350,795 32,287,695 (200,591,831) 6,863,224,826 579,020,406 Fas, 245,232 51318226 6.085 708 193357388 24,496,765 248,190,182 976,961,517 230,239,136 476,093,412 1,955,981,012 Bruno Michel Carré (Managing Director) notes from } to 26 are an integral part of these consolidated financial statements,P ‘SWUOWOIES JO} Ptepiosuos asayt jo ped postu ue ase 97 Corecess eITustyss — Lycrew rosy ead'Ger ool) LSrFOrSr DeODLT “HL VONTETE TeLTS97 THOZ Aqua 16 IW eco 1pe'98s) (699'rrz'Z6) (OLD Let boy) > = = COLo'Ler'bor) = ba =pUsplas a im 7 7 a 7 (S6c'Le6" SOCLEOE r i 7 EEL TSG cr - (eee'est'le) a 7 “or! go stouaatuoo 250491 430 anyea uasaid aya ur oft, (seeR9e) (o9e) (gto'89¢) 7 cI 7 - = Aaetpase 40 pedeo uy 25000 S8T'980'S09 GbP PLY LES 5 eoL‘oor'el (ST T'beL) cos I66P~S —~ 7 swoouy eo. sroeere TOF . 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SONITHTHO'L —EBS'OIS'ODY — TII'SON'ERE'D CEELLE'TLE) TOR'BISLT —CAL'LLE'ZIE'TET'SOO'E OIOIFCID0' _ScS'zRT'606 Moz Saenwee | aoa doa 49d. dg aoa doa aoa aoa 49g SIsasaTUy pasasa 7 Buyposyuoy parser sou “ onnysunay s8yys sate en Lm ee " soumnunos — 2 ap0s-s0f uSjoa0y asmyung “amyosy TTT Bi JO STOO, AIT HOT OF STOTT” T10¢ s9quias9q [¢ papug ma, ayy 0g ALINOA NI SADNVHO AO LNSWALVIS GALVAIIOS NOD SOIpISANS SI pur ZV" AurpdwtO- rola ZangSuez Cement Company S.A.E and its Subsidiaries ‘CONSOLIDATED STATEMENT OF CASH FLOWS For The Year Ended 31 December 2012 OPERATING ACTIVITIES Profit before income tax Non-cash adjustment to reconcile profit before tax to net cash ows: Depreciation of propery, plant and equipment Net (gain) loss on disposal of property, plant and equipment Impairment losses reversed on receivables Impairment losses recognized on receivables ‘Change in the present value of purchase commitments on non-conirolling interests ‘Movements in provistons Finance expenses Finance income Share of profit of an associate working capital adjustments: (increase) in inventories Decrease (increase) in accounts receivable and prepayments (Decrease) increase in accounts payable and accruals (Decrease) in other liabilities Cash from operations Interest received Tax paid Net cash flows from operating activities INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Dividends received from an associate company Advance payments for investments acquisition Net cash flows used in investing activities FINANCING ACTIVITIES Dividends paid to equity holders of the parent Dividends paid to non-controlling interest Proceeds from borrowings Repayment of borrowings Decrease in capital of a subsidiary Interest paid Net cash flows used in financing act s NET (DECREASE) INCREASE IN CASH AND CASH. EQUIVALENTS. Net foreign exchange difference Cash and cash equivalent at 1 January CASH AND CASH EQUIVALENT AT31 DECEMBER Notes 16 16 19 19 7 2012 EGP 778,010,810 348,584,670 (3,101,743) 8,395,976 (91,152,670) (6,028,119) 2,401,144 (39,598,150) (3,936,272) 993,575,646 (196,161,678) 81,261,899 102,805,220 95,306,951 1,076,788,038 39,598,150 (227,654,873) 888,731,315 (136,957,836) 12,580,644 7,801,756 100,000 1687536) (494,497,010) (02,249,669) 3,039,693 (14,824,538) (368,378) (2,401,144) (601,301,046) 170,584,833 3,625,096 147,869,987 1,633,089,916 ~ The attached notes from 1 to 26 are an integral part of these consolidated financial statements. 2011 EGP 926,852,836 361,267,095 (3,739,770) (85,705) 7,385,140 (72,045,902) (62,387,830) 1,988,275 (122,034,685) (5,157,738) 1,063,041,716 (40,768,106) 26,194.62 (440,915) (22,499,804) 122,248,373 (386,466,281) 760,309,610 (328,573,734) 7,200,610 13,663,394 (307,709,7: (684,117,003) (145,486,077) 72,126,669 8,217,171) (71,493) (1,988,275) (767,753,350) 615,183,470) 17,799,580 1,47 869,98Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At3I December 2012 1 ACTIVITIES AND CORPORATE INFORMATION Suez Cement Company S.A.E. (the “Company”) was established in 1977 under Law 43 of 1974 which was Superseded by Law 230 of 1989 which was replaced by the investments Guarantees and Incentives Law 8 of 1997, The Company was registered in the Commercial register on 11 April 1979 under no. 181 ltalcementi Group (through Cimenis Francais) acquired with consortium of other investors 80.8 % of the company's shares starting from 24 March 2005. The main objective of the Company is to produce all types of cement and other products stemming from the cement industry and related thereto and the production of other building materials and construction requirements and trading thereia, utilization of mines and quarries except sand and gravels. The Company may have an interest or participate in any manner in entities carrying out activities which are similar to the Company's activities, or which may contribute to the fulfilment of the Company's objectives in Egypt or abroad. The Company may also be merged in any of the aforementioned entities, or may buy or have them as subsidiary to the Company, subject to the approval of the General Authority for Investment and Free Zones. These Group consolidated financial statements of Suez Cement Company 8.A.E, and its subsidiaries (the “Group” ‘were authorised for issue by the Group management on 21 February 2013 Alll the Group operations are located in Egypt except for Hilal Cement Company (K.S.C.C.) ~ which is located in Kuwait ‘The following is the direct and indirect equity interest of Suez Cement Company S.A.E. in its subsidiaries: Equity interest % Country of Incorporation 2012 201 | -Egyptian Torah Portand Cement Company §.A.£. Egypt 66.12 66.12 2-Suez Bags Company S.A.E. Egypt 3631 5631 3-HHelwan Cement Company S.A. Egypt 99.84 99.47 4-Suez Transport and Trade Company S.A.E. ~ a 55% subsidiary of Helwan Cement Company S.A.E. Egypt 9638 96.32 5-Ready Mix Production (RMP) $.A.E. Egypt - 32 6- “Universal for Ready Mix Production (RMPU) S.A.E. Egypt - s 7- Ready Mix Concrete El ~ Alamya (RMCA) S.A.E, Egypt 2 - §:Development and Construction Material Company (DECOM) S.4.E.~ tigoh 7 99% subsidiary of Ready Mix Concrete El ~ Alamya (RMCA) S.A.E s 32 52 9-Hilal Cement Company (K.8.C.C.) ~ Kuwait Kuwait 4 SI 10-Suez Lime Company $.A.E. Egypt 49.66 49.62 N1-Axim for Industries Company S.A.E, Egypt 98.28 98.28 12-Development for Industries Company S.A.E. Egypt 98.28 98.28 13-Suez for Import and Export Company S.A.B. Egypt 97.89 97.89Suez Cement Company 8.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 1 ACTIVITIES AND CORPORATE INFORMATION - continued The corporate information of the Group as follows: 1 Egyptian Torak Pordiand Cement Company SAE Egyptian Torah Portland Cement Company S.A.E, was established on 23 June 1927.The legal structure of the Company changed from being a publie sector entity to a public enterprise entity according to Law 203 of 1991 ‘On 26 Jamiary 2000 the Holding Company for Mining and Refractory sold 81.4% of its shares in the company Accordingly, the company became subject to the Law 189 of 1981 rather than Law 203 of 1991 and its executive regulation, On 12 March 2000 the company’s General Assembly meeting decided to amend its status to comply with Law 159 of 1981 and its executive regulation, The main objectives of the company are manufacturing all kinds of cement, lime, construction materials and related products. On 26 January 2000, Suez Cement Company S.A.E acquired 66.12% of Egyptian Torah Portland Cement Company's share capita 2: Suez Bags Company SAE Suez Bags Company S.A.B. was established on 6 December 1988 under investment Law 43 of 1974 and its ‘amendments, which was superseded by Law 230 of 1989 which were replaced by the investments Guarantees and Incentives Law 8 of 1997, The main objectives of the company are manufacturing all kinds of bags used in packing cement, gypsum, milk, Iices, food products, chemicals and other paper products ‘Cement Company S.A.E. contributed in establishing the company by $6.31 % of share capital. 3+ Helwan Cement Company S.4.E Helwan Cement Company $.A.B. ~ (Previously: ASEC Cement Company S.A.E.) was established as a Joint Stock Company under Law No. 159 of [981 under the name of El Abram Cement Company on 26 December 1999, and recorded at the commercial register under No, 4451 on 26 December 1999. ‘The main objectives of the company are manufacturing cement and construction materials and extracts of quarries, related products and by other companies and market them in Egypt, and also to export them and manufacture bags of craft paper, or other paper to pack cement and construction materials, On 25 August 2005, Suez Cement Company S.A.E, acquired 116,151,662 shares of Helwan Cement Company S.A.E. ‘which represented 98.69 % of the capital, As at 31 December 2012, Suez Cement Company S.A.E, share is 99-54 &,Suez Cement Company S.A.E and its Subsidiaries _ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012, 1 ACTIVITIES AND CORPORATE INFORMATION - continued + Suez Transport and Trade Company SAE Suez Transport and Trade Company S.A.E. was established as a S.A.E. company under the law 159 for the year 1981 The main objectives of the company are managing the operations of transporting, trading cement and construction ‘materials and acquiring the vehicles needed for these activities. On 28 October 2007, Helwan Cement Company S.A.E. contributed in establishing Suez Transport and Trade Company S.A.E by 55% of the share capital, in addition to the contribution of Suez Cement Company S.A.E and Egyptian Torah Portland Cement Company S.A.E, by 35% and 10% respectively. Accordingly, the direct and indirect share of Suez Cement Company S.A.E. in the capital of Suez Transport and Trade Company S.A.E. is 96.36%. S- Ready Mix Production (RMP) S.A.E ~ (Previously: Ready Mix Beton Ready Mix Production (RMP) S.A.£, ~ (Previously: Ready Mix Beton $.A.E.) was established on 16 March 1986 as a Joint Stock Company under Law 159 of 1981 AB) ‘The main objectives of the company are manufacturing cement and construction materials specially manufacture ready mix, On | October 2006, Suez Cement Company S.A.E. acquired 52% of Ready Mix Baton Company's share capital 6- Universal For Ready Mix Production (RMPU) S.A.E ~ (Previously: Ready Mix Beton ~ Egypt Company S.A.E) Universal For Ready Mix Production (RMPU) S.A.E. ~ Previously: Ready Mix Beton ~ Egypt Company $.A.E.) ‘was established on 14 April 1996 as a Joint Stock Company under investments Guarantees and Incentives Law 8 of 1997, ‘The main objectives of the company are manufacturing cement and construction materials specially manufacture ready mix On 1 October 2006, Suez Cement Company S.A.E. acquired $2% of Ready Mix Beton ~ Egypt Company's share capital 7- Ready Mix Concrete El Alamya (RMCA) SAE ‘Universal for Ready Mix Concrete S.A.E was established under the law 8 of 1997 on 21 February 2012 by mean of the merge took Place between Universal for Ready Mix Production S.A. “Subsidiary” and Ready Mix Production S.A. “Subsidiary” (On 26 February 2012, the extra-ordinary assembly meeting decided the change of the Company's name to become “Ready Mix Concrete El ~ Alamya (RMCA) S.A. ‘The objective of the company is manufacturing and construction building materials especially ready mix. (On 31 December 2009, the merge took place by mean of revaluing the assets and liabilities of the merged companies, taking into consideration the changes occurred om the financial position till she establishment date as of 21 February 2012 8 Development and Construction Material Company (DECOM) S.A.E Development and Construction Material Company (DECOM) S.A.E. was established on 3 August 1996 as a Joint Stock Company under Law 95 of 1992. The main objectives of the company are manufacturing cement and construction materials On $ July 2007, Universal For Ready Mix Production (RMPU) S.A.E. acquired 99.99% of Development and Construction Material Company"s share capital, Accordingly, the indirect share of Suez Cement Company S.A.E. in Development and Construction Material Company (DECOM) S.A.E. is 52%,Suez Cement Company S.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 1 ACTIVITIES AND CORPORATE INFORMATION - continued 9 Hilal Cement Company (K.8.C.C) ~ Kuwait Hilal Cement Company (K.S.C.C.) ~ Kuwait was established on 19 January 1984 as a closed Joint Stock Kuwaiti Company The main objectives of the company are importing, storing and distributing of cement and other bulk materials. 2007, Suez Cement Company S.A.E. acquired 51% of Hilal Cement Company's share capital On 19 September The company’s financial statements are prepared in Kuwaiti Dinar and are translated into Egyptian pound using the translation procedures mentionecl in note 2 for purposes of inclusion in the consolidated financial statements of the Group, The Company's share ofthe cumulative foreign currency translation differences resulting from the translation amounted t© EGP 45,494,457 as at 31 December 2012 (2011: 32,287,695) and has been presented separately in the consolidated statement of changes equity 10- Suez Lime Company SAE Suez Lime Company $.A.E. was established on 2 October 2007 as a Joint Stock Company under Law 159 of 1981 The main objectives of the company ate producing and trading lime with all its different types inside and outside Arab Republic of Ezypt. On 2 October 2007, Suez Cement Company S.A.E. contributed in establishing the company by 49% of the capital share, in addition to the contribution of Egyptian Torah Portland Cement Company S.A.E. by 1%. Accordingly. the rect and indirect share of Suez Cement Company §.A.E. in Suez Lime Company S.A.E is 49.66%, The Group management considered Suez Lime Company S.A.E as a subsidiary because Suez Cement Company S.AE had the power to cast the majority of votes at meetings of the board of directors and control the company’s activities and policies. 11- Axim for Industries Company SAE Axim For Industries Company was established in 2007 under Corporate Law 159 of 198. The objectives ofthe company are Investing in all types of industries fields and its commercializaion, Establishing plant for the purpose of manufacturing construction materials Importing ail materials, products and equipments necessary for helping the Company to achieve its purpose. Buy aid grind liquid at intensive figure, store and mitigate and distributed for use for grinding cement. On 19 August 2007, Suez Cement Company S.A.E. contributed in establishing the company by 90% in the share capital, in addition to the contribution of Torah Portland Cement Company S.A.E by 5%, and Helwan Cement Company S.A.E contribution by 58, Accordingly, the total direct and indirect share of Suez Cement Company S.A.E is 98.28)Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 1 ACTIVITIES AND CORPORATE INFORMATION ~ continued 12 Development for Industries Company SAE Development for Industries Company was established in 2007 under Corporate Law 159 of 1981 The objectives ofthe company are 2 Investing in ail types of industries fields and its commercialization. 3 Establishing plant for the purpose of manufacturing construction materials On 19 August 2007, Suez Cement Company $.A.E. contributed in establishing the company by 90% of the share capital in addition to the contribution of Torah Portland Cement Company S.A.E by 5%, and Helwan Cement Company S.A.E contribution by 5%, Accordingly, the total direct and indirect share of Suez Cement Company S.A.E is 98.28%, 13- Suez for Import and Export Company SA.E. Suez for Import and Export Company was established on 8 July 2009 under Corporate Law 159 of 1981 ‘The main objectives of the company are importing & exporting cement and all kind of building materials On 08 July 2009, Axim industries Company S.A.E contributed in establishing the company by 40% in the share capital, in addition to tne contribution of Development for Industries Company S.A.E by 40% and Suez Transport and ‘Trade Company S.A.E contribution by 20%, accordingly, the total indirect share of Suez Cement Company S.A.E is 97.89%, ‘The financial year end for each of the entities in the Group is 31 December.Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 December 2012 2.1 BASIS OF PREPARATION ‘The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the Intemational Accounting Standards Board (IASB). ‘The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets. The consolidated financial statements are presented in Egyptian Pound (EGP). Tae preparation of financial statements in conformity with IFRS requites the use of certain critical accounting estimates. [also requires management to exercise its judgement in the process of applying the Group's accounting Policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed, Management believes that the underlying assumptions are appropriate, The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 2.3,Suez Cement Company §.A. and its Subsidiaries 7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At3T December 2012 22 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation he consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2012. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, ‘and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Ail intra- group balances, transactions, unrealised gains and losses resulting ftom intra-group transactions and dividends are eliminated in full Total comprehensive income within a subsidiary is attributed fo the non-controlling interest even if that results in a deficit balance, A change in the ownership interest of a subsidiary, without a loss of contra, is accounted for as an equity transaction. Ifthe Group loses control over a subsidiary, it Derecognises the assets including goodwill) and liabilities ofthe subsidiary Derecognises the carrying amount of any non-controlling interest Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the considcration received Recognises the fait value of any investment retained Recognises any surplus or deficit in profit or loss Reclassfies the parent's share of components previously recognised in other comprehensive income to profit or loss or retsined earnings, as appropriate. Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the ageregate of the consideration transferred, measured at acquisition date fair value and the amount of any non- controlling interest inthe acquire. For each business combination, the Group recognises any non-contralling interest i the acquire on an acquisition-by-acquisition basis at fair value, Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate Classification and designation in accordance with the contractual terms, economic circumstances and pertinent Conditions as at the acquisition date, This includes the separation of embedded derivatives in host contracts by the acquire. Uf the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is vemeasured to fair value atthe acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition dete. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. ‘Subsequent seitlement is accounted for within equity. In instances where the contingent consideration does Not fall within the scope of LAS 39, itis measured in accordance with the appropriate IFRS, Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed, If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or fassSuez Cement Company S.A.F and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Business combinations and goodwill - continued After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impaicment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irespective of whether other assets oF liabilities ofthe acquire are assigned to those units Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or foss on disposal of the operation. Goodwill disposed of in this circumstance is measured based om the relative values ofthe operation disposed of and the portion of the cash-genetating unit retained. Purchase commitments on non-controlling interests A put option granted to non-controlling interests of a company controlled by the Group is initially recognized by recording the acquisition amount as a liability and the corresponding reduction is recognized in another component of equity attributable to the parent “purchase commitments on non-controlling interests". Subsequent changes in liabilities due to the re-measurement of the present value of purchase commitment liabilities are recognized in the parent's profit or iss, The non-controlling interest continues to be recognized within equity until the put is exercised, The carrying amount ‘of non-controlfing interest changes due to allocations of profit or oss and change in equity and dividends declared f the reporting period. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights, Investments in associates are accounted for using the "equity method of accounting. Under the equity method, the investment is initially recognised at cost, andthe carrying ‘amount is inereased or decreased to recognise the investor’s share of the profit ot loss of the investee after the date of acquisition. The Group's investment in associates includes goodwill identified on acquisition IW the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate ‘Tae Group's share of post-acquisition profit ot loss is recognised in the income statement, and its share of poste acquisition movements in other comprehensive income is recognised in other comprehensive income with @ corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals oF exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. Ifthis is the case, the Group calculates the amount of impairment as the difference between the Fecoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit (loss) of an associate” in the income statement. Segment reporting Operating activities are managed and organized as one segment only. Strategic decisions are taken at Group level considered as a whole, Foreign currency translation The functional currency of Suez Cement Company and of its subsidiaries located in Egypt is the Egyptian pound. The functional currency of the operations located outside Egypt is the focal curreney. The presentation currency of Suez ‘Cement consolidated financial statements is the Egyptian pound,Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At3I December 2012 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICH continued Transactions in currencies other than the functlonal currency Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates atthe date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange atthe reporting date. All differences arising on settlement or translation of monetary items are taken t0 the income statement Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions, Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates atthe date when the fir value is determined Translation of the financial statements of foreign operations On consolidation the assets and liabilities of forcign operations are translated into Egyptian Pounds at the rate of exchange prevailing at the reporting date and their income statements are translated at the average exchange rates of the period unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the ‘ransaction dates, in which case income and expenses are translated at the rate on the dates of the transactions. The exchange differences arising on translation for consolidation are recognized in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particuler foreign ‘operation is recognized in the income statement. Property plant and equipment Property, plant and equipment are stated at cost net of accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing par of the plant and equipment when that cost is incurred, ifthe recognition criteria are met, Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the Plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the restoration of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Depreciation of an asset begins when it is in the location and condition necessary for it to be capable of operating in the manner intended by management, and is computed using the straight-line method according to the estimated useful life of the asset as follows: Years Buildings, constructions, infrastructure and roads 61020 Machinery, equipment and Tools 51020 Motor Vehicles 3 Furniture and office equipment Sto10 Lands are not depreciated. Projects under construction are not depreciated until they are complete and ready for use ‘An item of property, plant and equipment and any significant part initially recognized is derecognised upon disposal ‘oF when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included inthe statement of income when the asset is derecognized, ‘The asset's residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, ifappropriate,Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~ continued Impairment of non-financial assets Assets that have an indefinite useful life ~ for example, goodwill or intangible assets not ready to use ~ are not subject ‘0 amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable An impairment foss is recognised for the amount by which the assei’s carrying amount exceeds its recoverable amount, The recoverable amount is the higher of an asset's fair value less costs t0 sell and value in use, For the Purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or “Group's of CGUs, that is expected to benefit from the synergies of the combination. Each unit or Group of units {o which the goodwill is allocated represents the fowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fai value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed Financial assets Classification ‘The Group classifies its nancial assets in the following categories: at fair value through profit or loss, loans and receivables, available for sale, and hieldto-maturty investments. The classification depends on the purpose for which the financial assets were acquired, Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in ‘an active market, They are included in current assets, except for maturities greater than 12 months afer the end of the ‘reporting period. These are classified as non-current assets. The Group's loans and receivables comprise ‘accounts receivable’ and ‘bank balances and cash in the consolidated statement of financial position {notes 16 & 17). Avaitable-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 2 months of the end of the reporting period. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date ~ the date on which the Group commits to purchase or sell the asset, Investments are initially recognised at fair value plus transaction costs for all financial assets not cartied at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership, Available-for- sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value, Loans and receivables are subsequently carried at amortised cost using the effective interest method. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in ther comprehensive income, When securities classified as available for sale are sold or impaired, the’ accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’ in other operating expenses’ income,Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~ continued Financial assets - continued Recognition and measurem ued 60 Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other operating income. Dividends on available-for-sale equity instruments ate recognised in the icome statement as part of other operating income when the Group's right to receive payments is established. Off-setting of financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is @ legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis of realise the asset and settle the liability simultaneously, Impairment of financial assets (a) Assets carried at amortized cost The Group assesses atthe end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaited. A financial asset ar a Group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition ofthe asset (a ‘Toss event’) and that loss event (or events) has an impact on the estimated finure cash flows of the financial asset or Group of financial assets that can be reliably estimated Evidence of impairment may include indications that the debtors or a Group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and she present value of estimated future cash flows (excluding future credit losses thet have not been incurred) discounted at the Financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment joss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’ fair value using an observable market price. Hf, im a subsequent period, the amount ofthe impairment loss decreases and the deercase can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal ofthe previously recognised impairment loss is recognised inthe consolidated income statement. (b) Assets classified as available for sale ‘The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a Group of financial assets is impaired. For debt securities, the Group uses the criteria referred to in (a) above. In the ease of equity investments classified as available for sale, a 9 profonged decline inthe far value of the security below its cost is also evidence thatthe assets arc impaired. If any such evidence exists for available-for- sale financial assets, the cumulative loss ~ measured as the difference between the acquisition cost and the current fait valu, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If in a subsequent period, the fair value of @ debt instrument classified as available for sale increases and the increase can be objectively related to an event Occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated income statement.Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: At31 December 2012 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~ continued Inventory {Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method, The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net reslisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains/losses on qualifying cash flow hedges purchases of raw materials Trade receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business, If collection is expected in one year of less (arin the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade payables Trade payables are obligations to pay for goods ot services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. ‘Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, and itis probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount has been reliably estimated, Provisions are not recognized for future operating losses Where there are a number of similar obligations; the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with Fespect to any one item included in the same class of obligations may be small Ifthe effect ofthe time value of money is material, provisions are discounted using a current pre-tax rate that reflects ‘current market assessments of time value of money and the risks specific to the obligation, Where discounting is used, the increase in the provision due tothe passage of time is recognized as a finance cost. Borrowings Borrowings are recognized initially at fair value, net of transaction cost incurred, Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is Fecognised in the income statement over the period of the borrowings using the effective interest method, Fees paid on the establishment of oan facilities are recognised as transaction costs of the loan to the extent that itis probable that some or all ofthe faciity will be drawn down. In this ease, the fee is deferred until the draw-down occurs To the extent there is no evidence that it is probable that some or all of the facility will be drawn dowa, the fee is ‘capitalised asa pre-payment fr liquidity services and amortised over the period ofthe Facility to which it relates. Borrowing costs General and specific borrowing costs directly atributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time ¢o get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income eared on the temporary investment of specific borrowings pending their expenditure on ‘qualifying assets is deducted from the borrowing costs eligible for capitalisation All other borrowing casts are recognised in profit or loss in the period in which they are incurred,Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMEN At3I December 2012 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Current and deferred income taxes The tax expense for the period comprises current and deferred tax, Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly inequity, respectively The current income tax charge is calculated on the basis of the tax laws enacted o substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income Management periodically evaluates positions taken in tax retumns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise From the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor raxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date ‘and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, ‘Current and deferred income taxes - continued Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and itis probable that the temporary difference will nat reverse in the foresceable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net bass. Employee benefits For defined contribution plans, the Group pays contributions to the General Organization for Social Insurance (GOS!) as a percentage of the employees" salaries, The Company's obligation is limited to these contributions which are expensed when due Hilal Cement Company K.S.C.C ~ Kuwait ~ A subsidiary provides end of service benefits to its expatriate employees in accordance with Kuwait Labour Law. ‘The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment, Revenue recognition a) Sale of goods Revenue from sales of goods is recognized when all the following conditions have been satisfied (D The company has transferred to the buyer the significant risks and rewards of ownership of the sales; (ii) The company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective contrat over the goods sold: (Gii) The amount of revenue can be measured reliably i) Its probable that the economic benefits associated with the transaction will flow to the company; end (v) the costs incurred or to be incurred in respect ofthe transaction can be measured reliablySuez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: At31 December 2012, 2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Revenue recognition - continued ) Interest income Interest income is recognised as interest accrues using the effective interest method, Interest finance income in the statement of income. income is included in ©) Dividends Revenue is recognised when the Group's right to receive the payment is established 4) Rental income Rental income arising from operating leases is accounted far on a straight line basis over the lease terms. Expenses All expenses including operating expenses, general and administrative expenses and other expenses are recognised and charged to the statement of income in the financial year in which these expenses were incurred Dividend distribution Dividend distribution to the company’s shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the company’s shareholders. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease, ‘The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially alf the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the ‘minimum lease payments, Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period, The propery, plant and equipment acquired under finance leases is depreciated over she shorter of the useful life ofthe asset and the lease term, Statement of cash flows The statement of cash flows is prepared using the indirect method, Cash and cash equivatent {ms the consolidated statement of cash flows, cash and cash equivalent includes cash in hand, current accounts with banks and deposits held at cal! with banks and time deposits maturing within three months less bank overdrafis. In the consolidated balance sheet bank overdrafts are shown in current liabilities,Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AU3I December 2012 2.3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future, The resulting accounting estimates will, by definition, seldom equal the telated actual results ‘The preparation of the consolidated financial statements, in conformity with IFRS, requires the Group's management to take into account @ number of estimates and assumptions that have an impact on assets and liabilities and on the income and expense within the statement of comprehensive income, such as depreciation and provisions referred to in the notes, ‘These estimates are determined on an ongoing basis using data available at the time of their preparation. They serve as basis for the exereise of judgment relating (© the book values of some assets and liabilities. These estimates. and assumptions are reviewed at each reporting date; however the actual results may differ. These estimates and assumptions are determined in considering the current economic crisis making it difficult to make any economic forecast. They can be particularly sensitive in terms of impeirment tests on goodwill widely based upon future cash flow forecasts and estimates of discount and growth rate, in tems of provisions (note 22) and in terms of valuation of available-for-sale investments (note 14 & 23) Egypt is experiencing unprecedented political developments resulting in tensions and uncertainties in the economic environment resulting in an increase in salaries and people preservation costs, and sometimes temporary production interruptions. However, medium-term cement needs remain high in Egypt. ‘The estimates and assumptions that have @ significant risk of causing a material adjustment tothe carrying amounts of assets and liabilities within the next financial year are addressed below (a) Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in (note 2.2), The recoverable atiounts of eash-generating units have been determined based on value-in-ise calculations. These calculations require the use the following key assumption as follows Growth rate 5.4%, rate of terminal value 8.3 %, acualization rate (WACC) 13.7 % Impact on Actualization rate due {0 inflation 5.4 % Discount rate before tex 15.8 %, No impairment charge during the course of the 2012 year resulting in the carrying amount of the CGU being written down to its recoverable amount. (b) Income taxes The Group is subject to income taxes in the jurisdictions where it operates. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain, The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were intially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made, Were the actual final outcome (on the judgement areas) of expected cash flows to differ by 10% from management's estimates, the Group would need to: inerease the income tax liability as provision by EGP 19,545,395 and the deferred tax licbility by EGP 2,954,119, if unfavourable; or + decrease the income tax liability as provision by EGP 19,545,395 and the deferred tax liability by EGP 2,954,119 if favourable.Suez Cement Company S.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: At31 December 2012 2.4 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012 and not early adopted: ‘The accounting policies adopted are consistent with those ofthe previous financial year, except forthe following amendments to IFRS effective as of 1 lanuary 2012: IAS 12 Income Taxes (Amendment) ~ Deferred Taxes: Recovery of Underlying Assets ~IERS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) ~ Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters ~ IFRS 7 Financial Instruments (Amendment): Disclosures — Enhanced Derecognition Disclosure Requirements. ‘The adoption of the standards or interpretations is described below: IAS 12 Income Taxes (Amendment) — Deferred Taxes: Recovery of Underlying Assets The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets that art measured using the revaluation model in IAS 16 should always be measured on a sale basis. The amendment is effective for annual periods beginning on or after 1 January 2012 and has been no effect on the Group's financial position, performance or its disclosures. IFRS 1 First-Time Adoption of International Financial Reporting Standards (Amendment) ~ Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters ‘The TASB provided guidance on how an entity should resume presenting IFRS financial statements when its functional currency ceases to be subject to hyperinflation, The amendment is effective for annual periods beginning on or after | July 2011. The amendment had no impact to the Group. isclosures — Enhanced Derecognition Disclosure Requirements IPRS 7 Financial Instruments (Amendment): ‘The amendment requites additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group's financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about the entity's continuing involvement in derecognised assets to enable the users to evaluate the nature of, and risks associated with, such involvement, The amendment is effective for annual periods beginning on or after 1 July 2011. The Group does not have any assets with these characteristics so there has been no effect on the presentation of ts financial statements, ‘There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected fo have a material impact on the Group,Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 201 3. EXPENSES BY NATURE ‘Changes in inventories of finished goods and work in progress Raw materials and consumables used Oil & Gas Bags Maintenance Electricity Employee salaries & benefits Depreciation of property, plant and equipment ‘Transportation expenses ( Freight, Goods) “Advertising costs Bank charges Operating lease payments Other expenses ‘Total cost of sates, selling and distribution costs and general and administrative expenses 4. OTHER OPERATING INCOME, Clay development contribution fees * nagement fees Insurance Compensation Income fiom safe of industrial waste Unused amounts reversed from provisions (note 22) Impairment losses reversed on receivables (note 16) Gain on disposal of property, plant and equipment Other operating income 2012 EGP 71,246,221 804,085,462 906,295,786 218,077,926 297,437,313 387,931,330 628,144,095, 348,584,670 97,490,780 1,599,076 2,337,340 16,089,240 369,679, 4,148,999,091 2012 EGP 127,608510 6,501,962 79,650,700 5,838,239 4,116,088, 3,101,743 47,700,038, 374,517,277 2011 EGP 23,826,329 1178,944,775 740,831,720, 226,248,025 310,784,216 36 19 361,104,437 361,267,095 81,325,670 1,846,480 3,456,275, 8,884,955 349,608,276 4.214,423,872 11,518,376, 6745.370 85,705, 3,739,770 * This amount represents cash settlement ofthe clay development contribution fees for the period tll 31 December 2012 based on a decision of the Egyptian Cabinet of Ministers to apply the clay fees to be EGP 9 per ton retrospectively. instead of EGP 15 per ton, OTHER OPERATING EXPENSES Loss on disposal of inventories Provisions charged during the year (nate 22) [Impairment losses recognized on receivables (note 16) Other operating expenses 2012 EGP 22414324 65,005,714 8,395,976 30,151,442 125,967,456 2018 GP 7,420,143,Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 December 2012 6, FINANCE EXPENSES & INCOME 2012 EGP Interest on borrowings 2,401,144 2,401,144 7. FINANCE INCOME 2012 EGP Interest income on time deposits 39,598,150 39,598,150 8 INCOME TAX Income tax recognised in profit or loss: 2012 EGP (Current tax expense in respect ofthe current year 209,752,209 Adjustment recognized in the current year in respect of the current year income tax of prior years Origination and reversal of temporary differences - Deferred income tax (12,075,248) Adjustment to deferred tax attributable to changes in income tax rate from : 20% to 25% (12,075,248) Income tax expense recog: ed in profit or loss 207,825,574 2011 EGP. 122,034,685 123,034,685 2011 EGP 230,239,136 48,598,152 278,837,368 25,640,114 25,729,861 1.369.975 302075853 The curren income tax expense for the year can be reconciled to the accounting profit as follows: 2012 EGP Profit before income tax 778,010,810 Income tax expense calculated at 25% (201 1:25%) 194,502,703 Effect of income that is exempt from taxation (111,248,384) Effect of expenses that are not deductible in determining 126,497,890 taxable profit Too 209,752,209 Adjustment recognized in the current year in relation to the current tax of prior years 10,148,613, Current income tax expense recognised in profit or loss 219,900,822 Bre 2011 EGP 231,713,209 (137,127,864) 135, 230,239,136 48,598,132 278,837,268Suez Cement Company §.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 8 INCOME TAX - continued Income tax recognised in other comprehensive income: There is no income tax recognised in other comprehensive income (201: Nil). The following is the analysis of current tax assets (liabilities) presented in the consolidated balance sheet: 2012 2011 EGP BGP Current tax assets Withholding tax 20,998,019 37,198,492, 20,998,019 37,198,492 Current tay tiabil Income tax payal (209,752,209) (230,239,136) (209,752,309) (230,239,136) (188,754,190) (193,040,644) The following is the analysis of deferred tax assets (Hiabilties) presented in the consolidated balance sheet: 2011 EGP Delerred tax asses, 235,521 Deferred tax (liabilities) 57,388) (281,046,619) (193,121,867) The deferred tax labilities comprise the following types of temporary differences: 2012 2011 EGP EGP Provisions 137,357,428 131,679,255 Property and equipment (318,$04,047) (324,801, 12: (81,046,619) The movement in the current and deferred tax provisions (net) were as follows: 2012 201 2012 2011 EGP EOP EGP EGP Current tax Deferred tax At | Janvary (193,040,644) (300,869,657) (193,121,867) (141,751,892) Paid during the year 227,654,873 386,465,281 : - Income tas expense recognised in profit or loss. 219,900,822) (278,837,268) 12,075,248 (51,369,975 At31 December 185,286,593) __ (193,040,644) (181,046,619) _(193.121,867)Suez Cement Company S.A.E and its Subsi iaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 8 INCOME TAX ~ continued ‘Tax Status of the Group ‘The tax situation of the Group is as follows: The following companies enjoy income fax holidays on revenues derived fram their operaling activities: ‘+ Hilal Cement Company (K $.C.C.) ~ Kuwait The following companies submitted their income tax returns regularly and have not yet received any notice from the Tax Authority regarding their income tax inspection Axim for industries Company $.A.E Development for industries Company S.A.E Suez Import & Export Company S.A.E Suez transport & Trade Company S.A.E Suez for Lime Company $.A.E 8 INCOME TAX — continued ‘Tax Status of the Group ~ continued + The following companies were inspected by the tax authority for certain yeurs and the taxes due were setled and paid. The companies submitted their income tax returns regularly and have not yet received any notice from the Tax Authority regarding their income tax inspection after the last year of inspection until 2012. Suez Cement Company S.A.E (inspected by the tax authority from inception until 2007). Egyptian Torah Portland Cement Company S.A.E (inspected by the tax authority from inception until 2006). Helwan Portland Cement Company S.A.E (inspected by the tax authority from inception until 2007). Ready mix Production S.A. (inspected by the tax authority from inception until 2008). Universal Ready mix Production $.A.E (inspected by the tax authority from inception until 2005). ‘Suez Bags Company S.A.E (inspected by the tax authority from inception until 2005), Development & Construction material Co. $.A.E (inspected by the tax authority from inception until 2004),‘Suez, Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At3} December 2012 9. EARNINGS PER SHARE Basic eamings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are caleulated by dividing the net profit atributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of al the dilutive potential ordinary shares into ordinary shares 2012 2011 EGP EGP Profit attributable to ordinary equity holders of the parent 524,991,802 547,665,448 Weighted average number of ordinary shares outstanding during the year 181.8 181,856,507 301 No figure for dilutive earnings per share has been given as the company has not issued any instruments that might be potentially dituted, Dividends Dividends paid in 2012, 2011, and 2010 were EGP 494,497,010 (EGP 2.72 per share) and EGP 684,117,003 (EGP 3.76 per share) and EGP 881,386,263 (EGP 4.48 per share) respectively. A dividend in respect of the year ended 31 December 2012 of EGP 2.65 per share, amounting to a total dividend of EGP 481,919,744 declared by the annual general meeting on 2] February 2013, These financial statements do not reflect this dividend payableTHz sequisaed 1g 1 selteseese RSTOLE SFr STORE woe ODH'9E IST LEP OSTT LES TLOFED ASETEE GOT Satinoure Suy6sae9 oN, Ciscoe = senor) GrorosesiD Teeter = Toc 1equsooq 1¢1¥ 9re'P96°91 ose : psc > syesodsic, (ous'vas'ere) (isp) (€16'264's) Coor'tvr'or)§—gotyor'ss) 94 a4) 40) Bho woHE Daud co, . nn 7 suonerado wta49j jo wone|sut (oiz0rz's) . (use'101) (ec'ec (ezr'e0e") (cee269'9) Cee ere eee Gisroroy) —- (ahl'est's8) ——OSs'80I'TZ)—_(ESs'ERN'V68'D) —GOsc‘oxs'608)—- zie een iy oudag Try LSePLIR S9TSLOOIE soryesrer TiS ore'Ist sr So9%EFSGSTNETDAT PSCC oor TlOz soquios9¢ 1¢ Jo sy Goi'ero'se) - (ose'06) evzi) —— (oeo'ece'zi) (10 992) - syesodsiq (zLore'yr 0z0'810'S bz9'cr0'e 9LE06E'SOT 666°CEE'RL A 7 sooezt ose Perce’ cee seo a GPO'SPLPFO'L THOPIL'LOE 67E69S'6I1 eoR'Es: pOO'COS ET's LOS‘ POC‘TLEL aoa a9 493 aoa ant aon 493 : (pun ainusny Ww ‘taauuyoopy oe SINGINSLVIS TVIONY) ANGWdINO A ANY LNV1d ‘ALAM OU loz saquieseqT | ¢ ELVGVIOSNOD FHL OL SALON SSHEIpISqng sit pur gPy"s Auwdwio> waUa,y Zan0% pave|o4 pu slA 3 ut poisnuysuoa Sutog (CEz‘s8z"Obb dO “O10T - ZrG'b9L‘L9C ADA ‘1 102) E99'SLO‘DLE ADA Astudwoa Surew ZZ Joquare( 43 LOZ ~ LIP'I8H*L dD =1102) 966" 19p'9 da ‘.s9[¥s Jo 1S09,, 01 paBseYD W929 Sey (ZOL‘689'8Ob dD3 A He) aT Jo Suoneurxoudde afqeuoseas axe wouudinbs pur yuyjd “kuodosd jo anyea Buide ay)» shasse 5 ‘010z Jose pur jenb uo (cp6'ps9'Rt dO 20102 L81'8R6'r dO “1102) 5 puez [oz #834 atp Sump swuowdenbs pur rund “ 120 days. 81,878,930, Total 81,878,930, 17, BANK BALANCES AND CASH 2012 2011 EGP EGP Cash on hand 736,510 Cash at banks 160,322,427 Short-term deposits ___-1460,990,979_1,245,272,534 1,622,049,916 447,869,987 For the purpose of the statement of Cash flows, cash and cash equivalents comprise the following at 31 December: 2012 2011 EGP EGP Cash on hand 736,510 Cash at banks 160,589,608 Short-term deposits 41,460,990,979 1,623,317,094 1,497, 869,987 Bank overdrafts * (267,178) . 1,632,049,916 1 447,869,987 * A bank overdrafts granted to the Group is based on the commercial reputation of the Group and beat market interest rates, caSuez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 18, SHARE CAPITAL AND RESERVES SHARE CAPITAL As at 31 December 2004, the authorized capital of Suez Cement Company $.A.E amounted to EGP 1,000 million, white the Company's issued and paid up capital amounted 10 EGP 640 million divided over 64000000 shares of par value EGP 10 each, Based on the Extraordinary General Assembly Meeting approval dated 17 April 2005, the Company's shares was split to (1:2), consequently, the Company’s shares reached 128000000 shares of par value EGP 5 each. Based on the Extraordinary General Assembly Meeting approval dated 10 November 2005, the authorized capital Was increased from EGP 1,000 million to EGP 1,300 million, and the issued capital was increased from EGP 640,000,000 to EGP 909,282,535 divided over 181856507 shares of par value EGP 5 each paid in full RESERVES 2012 2011 EGP GP Legal reserve 454,641,267 454,641,267 Special reserve ~ Share premium 2,013,865,903 2,013,865,903 Capital reserve 10,907,410 6,970,015 Special reserve 185,853,347 185,853,347 2, 668,267,927 72,661,330,552 Available-for-sale fair value reserve 2,626,680, 3,350,795 Foreign currencies translation reserve 45,494,457 32,287,695 3713,389,068 2,696,969.022 Legal reserve ‘As required by the Egyptian corporate law 159 of 1981 and the articles of Association of the Egyptian companies of the Group, 5% of the net profits of the year is transferred to the legal reserve until this reserve reaches 50 % of the issued capital. As required by the Egyptian comporate law 159 of 1981, the reserve may be used upon a decision from the general assembly meeting based on the proposal of the board of directors ‘Special reserve — Share premium ‘The special reserve ~ Share premium represents the amount collected in excess of the par value of the shares related to the Company's share capital increase done in 2005. As required by the Egyptian corporate law 159 of 1981, the reserve is used upon a decision from the general assembly meeting based on the proposal ofthe board of directors. Capital reserve ‘The capital reserve represents optional reserve approved by the general assembly meetings of Suez Cement Company S.AE based on the proposal of the board of directors. AS required by the Egyptian corporate law 159 of 1981, the reserve is used upon a decision from the general assembly meeting based on the proposal of the board of directors, Special reserve The special reserve represents profits transferred in accordance with the resolutions of the general assembly meetings of Suez Cement Company 8.A.E. until year 200. As required by the Egyptian corporate law 159 of 1981, the reserve is used upon a decision from the general assembly mecting based on the proposal of the board of directors Available ~for-sale fair value reserve This reserve records fair value changes on available-for-sale investments, Foreign currencies translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. i‘Suez Cement Company S.A.E and its Subsidiaties ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 19. TERM LOANS 2012 2011 EGP EGP Less than ene year 37,275,309 24,496,765 Between one and five years 36,754,837 81,318,226 94,030,146 105,814,991 Analysed as follows: 2012 2011 EGP EGP Loan 1 : Audi Bank ~Egypt Loan : 3,100,552 Loan 2 : National Bank of Egypt Loan 80,025,080 87,941,066 Loan 3 : National Bank of Egypt Loan 7,616,000, 11,424,000 Loan 4 : National Bank of Egypt Loan 6,389,066 3,349,373 94,030,146, 105,814,991 Loan 1: Audi Bank ~ Egypt Loan On 31 July 2006, a long-term loan contract signed between Universal For Ready Mix Production (RMPU) S.A.E (@ subsidiary) and Audi Bank ~ Egypt with an amount of EGP 25 Millions to finance purchasing property and equipments. On 14 December 2006, Audi Bank ~ Egypt approved to increase the loan to EGP 28 millions with the same terms and guarantees, This loan was repayable in 60 monthly instalments stating fiom 31 July 2007 and ended (on 30 June 2012. ‘Loan 2: National Bank of Egypt Loan On December 2009, a medium-term lean contract was signed between Egyptian Torah Portland Cement S.A. (a subsidiary) and National Bank of Egypt with an amount of USD 15 million or equivalent in Egyptian pound. The Joan was provided in the frame work of industrial pollution control project Phase 2 EPAPIL The loan bears an interest rate of 1,5% above medium corridor rate with a minimum of 11.5% for Egyptian pound and 2% above Libor at the six month rate and is repayable on 10 equal quarterly instalments starting from 30 September 2012 and ending on December 2014, Loan 3: National Bank of Egypt Loan On 17 March 2010, a medium-term loan contract signed between Helwan Cement Company SAE (a subsidiary) and National bank of Egypt with an amount of EGP 14.28 million, The loan was provided in the frame work of industrial pollution control project Phase 2 EPAPIL ‘The loan bears an interest rate of 1.5% above medium corridor rate with a minimum of 11.5% and is repayable in 12 equal monthly instalments starting from 30 June 2011 and ending on 31 May 2 #Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 19 TERM LOANS - continued, Loan 4: National Bank of Egypt Loan On May 2011, a medium-term foan contract signed between Helwan Cement Company SAE (a subsidiary) and National bank of Egypt with an amount of EGP 12.39 milfion for a grace period 20 years. The loan bears an interest rate of 1.5% above medium corrider rate with a minimum of 10.5% and is repayable in 12 equal monthly instalments starting from 30 June 2013 and ending on 31 May 2014, ~ The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. ~ The carrying amounts of the Group’s borrowings are denominated in the following currencies: 2012 2012 2011 2011 Amountin Equivalent Amount in — ‘Equivalent in original in EGP original EGP currency currency oa : - 3,100,552 3,100,552 Loan2-8GP 1,440,753 1,440,783 1,715,182 1,715,182 Loan2-USD 12,346,320 7815841327 14.258,105 86.225 884 Loan3-EGP 7,616,000 7,616,000 11,824,000 11,424,000 Loan4-EGP 6,389,066 6,389,066. 3,349,373 33349373 94,030,146 20. OTHER LIABILITIES 2012 2011 EGP EGP Purchase commitments liability * 152,883,231 244,035,964 Petroleum Cooperative Association : 4.154218 Less than one year 152,883,231 Creditors of land purchasing 1,515,726 Production lines sales tax 961,049 Gazelle Ltd. Ine, : Employees” end of service benefit 3,692,733 Petroleum Cooperative Association - : Between one and five years 6,169,508 6,086,708 276,886 150,082,739Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 20 OTHER LIABILITIES — continued. * Purchase commitments lability represents the present value of the put option agreement dated 13. April 2006 telated to 489% of the capital shares owned by the shareholders of Ready Mix Production (RMP) S.A.E (a 52% subsidiary) and Universal For Ready Mix Production (RMPU) S.A.E (a 52% subsidiary). Its merged to for Ready Mix concrete” RMCA” A put option granted to non-controlling interests of a company controlled by the Group is initially recognized by recording the acquisition amount as a liability, since the amount in question is the present value of the put option exercise price 2012 2011 EGP EGP Beginning balance 244,035,964 316,081,866 Change in the present value of purchase commitments on non-controlling interests (01,152,733) 72.045,902) Ending balance 152,883,231 244,035,964 21, ACCOUNTS PAYABLE AND ACCRUALS 2012 2011 rGP EGP Trade payables 542,420224 441,986,346 ier payables 27,270,419 84,840,755, Employees" profit share 102,176,967 102,019,445, Duc to related partes (note 23) 96,955,240 34,256,703, ‘Advances from customers 165,662,710 214,617,459 ‘Accrued taxes ~ Sales tax and other taxes and duties 42,316,934 26,024,222 Deposits from others 12,431,949 10,184,342 Accrued salaries 1384017 16,999,105 ‘Accrued expenses 65,661,391 45,133,140 1,056,279,851 976,961,517 ‘Term and conditions of the above financial liabilities: ~ Trade payables are non-interest bearing and are normally settled on 60 days terms. - Other payables are non-interest bearing and have an average term of six months.se Ziv E60 oer ‘oo'G00 TS ¥e8 L668 SUs'0L PSO LOSEP _—-S6DLEPECI 90S E8F BLT “ShL9) : {o00"000'9)—ox's8p) ; (oou'o9) (opt'e0c'es) —~ (sse'torcl) §—isperr') —eor'tee's)—- “8ce'Rs) 990'996"s ‘o00'000'8 c0'1se'e cous 6L'805'6 OLL9E8'62 ze 186805 (000'000'¢» our ses'ez eeO'sreIL —LEL'bYS'8Y OS BIG'ETT Se9'L02 rzsr O00 ODUTS 895699 S16E0999 ostHOFoR Due For TET ‘000s ELT F cov 7 - - (Los'198'vs) Gers) (ze - (sse'66s'se) P1L's00's9 I osv'ash': ch'eLe'e zor‘e90"s Z6u"006'EE ZIP e60'OLF ov" 000s O6z'LsV0L —FEOLES EY BON'LZ ETL 99s'€88 doa aoa 497 doa @ 0) pe, nods Supmposs aosopduey sNd z10z SININSLVIS TYIDNVNId GALVAMOSNOD SOMBIDISGS SII pur yW's A‘Suez Cement Company S.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 22 PROVISIONS - continued a) Tax claims The tax claims provision reflects provision for fiscal risks deemed probable as a result of tax audits and ‘adjustments to tax returns. The provision of EGP 2,500,000 at 31 December 2012 is expected to be fully utilised during the first half of 2013 b) Employee training support According to Labour law 12 of year 2003, the” Group” should pay @ donation to the Ministry of Labour for the Labour fund or the Group can be exempted from paying this donation ifit can prove to the court that the Group has a strong in-house training program. The provision is estimated based on 1% approximately from the net profit before tax after deducting dividends income according to the instruction of Labour law 12 of year 2003. The Group filed a case in the court on 4 July 2005 in order to prove that the Group has a strong in-house training program and the case is still in progress, ©) Environmental claims The amounts represent a provision for certain environmental claims resulting from the old clay quarried and historical Bypass Dust of Tourah Plant and Helwan Plant. In the directors’ opinion, after teking appropriate legal advice, the outcome of these environmental claims will not give rise to any significant loss beyond the amounts provided at 31 December 2012. 4) Judicial disputes ‘The amount represents a provision for legal claims brought against the Group by several parties. In the directors’ opinion, after taking appropriate legal advice, the outcome of these legal claims will not give rise to any significant toss beyond the amounts provided at 31 December 2012. ©) Early retirement plan AS part of the Group's restructuring plan, The Group paid an amount of EGP 6,131,088 to the employees who applied for the early retirement plan and actually left the Group during the year ended 31 December 2012 During the year ended 31 December 2011 and according to the Group’s recent study’ formed by Human resources department and approved by HR Director, a re-assessment has been made to the eatly retirement provision so an amount of EGP 7,606,228 had been provided during the year ended 31 December 2012. The provision of EGP 9,669,568 at 31 December 2012 is expected be fully uilised during the year 2013, 1) Gas claims for Tourah plant Gas claims for Tourah Plant provision is provided to cover a claim from Petroleum Company ageiast Torah Portland Cement S,A.E (a subsidiary) and related to unused minimum consumption of as doring years 2008 and 2008Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 23. RELATED PARTY DISCLOSURES The financial statements include the financial statements of the Suez Cement Company $,A.E and its subsidiaries listed in (note!). The Group hold a 452 -quity interest in Techno Gravel For Quarries Egypt S.A.E. (note 13) The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year. For Information regarding the outstanding balances at 31 December 2012 and 2011, refer to Notes 16 and 21 Related Parties Shareholders Ciments Francais/ITC 2012 2011 Associates: company- ‘Techno Gravel For Quarries Egypt SAE 2012 2011 Affiliated ‘companies: 2012 2011 Balance 2012 Balance 2011 ‘Compensation of key management personnel of the Group Salaries and short-term benefits Employees” end of service benefits Sates 10 Relared Parties EGP 124,413,544 146.289,586 ‘Total compensation paid to key management personnel Purchases from Rated PH To Relaed Parties EGP Eap 7968128 $3,137,628 68.995.653 | 27881.388 : 634.900 su7t17 63,662,050, 43,182,712 65834405 5.868238 34256,703 202 Ear 8,340,755 ___ 209,940 8,550,695 Due From Related Parties EGP 38,621,736 13,346,649 38,621,736 13,346,649 2011 EGP 6,950,628 191,617Suez Cement Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 24. COMMITMENTS AND CONTINGENCIES, COMMITMENTS (2) Capital commitments Capital expenditure contracted for atthe end of the reporting period but not yet incurred is as follows: 2012 2011 EGP EGP Property. plant and equipment 74418430 _ 59,198,000 74,418,430 (b) Operating lease commitments ~ Group companies as lessee: ‘The Group leases quarries under non-cancellable operating lease agreements ‘The lease terms are between 5 and 10 years, and the majority of lease agreements are renewable at the end of the lease period at market rate ‘The future aggregate minimum lease payments under non-cancellable operating leases are as follows: 2012 2011 EGP EGP No later than | year 73,888,990 66,201,687 73,888,990 66,201,687 CONTINGENT LIABILITIES ‘The Group contingent liabilities represent letter of guarantees and letters of credit issued by the banks of the Group as follows: 2012 2011 EGP BGP Suez Cement Company S.A. 1,841,550 1,680,350 Egyptian Torah Portland Cement Company S.A.E, 10,009,000 16,009,000 Suez Bags Company S.A.E, 59,341,521 13,158,156 Helwan Cement Company S.A.E. 4,592,180 31,800,769 Hilal Cement Company 29,803,988 4,406,500 (KS.CC)= Kuwait 105,588,239 61,054,775 WTSuez Cement Company $.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012 25. FINANCIAL RISK MANAGEMENT 3.1 Financial risk factors The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programs focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. ‘The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non- derivative financial instruments, and investment of excess liquidity. (a) Market riste (@ Foreign exchange risk ‘The Group operates locally as well as exports the cement outside Egypt and is therefore exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Management has set up a policy to requite Group companies to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity's funetional curreney. The Group has one investment in foreign operations, whose net assets are exposed to foreign currency translation risk At31 December 2012, if the currency had weakened/strengthened by 11% against the US dollar with all other variables held constant, post-tax profit for the year would have been EGP 102,764,070 (201 1: EGP 82,024,289) highes/lower, mainly as a result of foreign exchange gainsilosses on translation of US dollar-denominated trade receivables, and foreign exchange losses/gains on translation of US dollar-denominated borrowings. At 31 December 2012, ifthe currency had weakened/strengthened by 4% against the Euro with all other variables held constant, posttax profit for the year would have been EGP 4,386,035 Q011: EGP 904,906) lowerhhigher, mainly as a result of foreign exchange gains/losses on translation of Euro-denominated trade receivables.Suez Cement Company $.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 31 December 2012 25 FINANCIAL RISK MANAGEMENT - continued (2) Market risk - continued (ii) Price risk The Group is not materially exposed to equity securities price risk ar commodity price risk. Cash flow and fair value interest rate ‘Tae Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash Now interest rate risk, which is partially offset by cash held at variable rates. Borrowings issued at fixed fates expose the Group to fair value interest rate risk. Group policy is to maintain approximately 5% of is borrowings in fixed rate instruments. During. 2012,2011, the Group's borrowings at variable rate were denominated in the Egyptian Currency and the US dollar. ‘The Group analyses its interest rate exposure on @ dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging, Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions Based on the simulations performed, the impact on post tax profit of a 0.1% shift would be a maximum increase of EGP 13,052 (2011: EGP 13,432) or decrease of EGP 13,052 (2011: EGP 13,432), respectively. At 31 December 2012, if interest rates on EGP-denominated borrowings had been 10 basis points highec/tower with all other variables held constant, post-tax profit for the year would have been EGP 13,052 QO1 1: EGP 13.432 - 2010: EGP 15,324) lowerhhigher, mainly as a result of higher/lower interest expense on floating rate borrowings. At 31 December 2012, if interest rates on US dollar - denominated borrowings at that date had been 0.5% higher/lawer with all other variables held constant, post- tax profit for the year would have been EGP 476,743 (2011: EGP 303,434) lowerthigher, mainly as a result of higher/lower interest expense on floating rate borrowings.Suez Cement Company At31 December 2012 Sue jentt Company S.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL RISK MANAGEMENT- continued (b) Credit Credit risk is managed on Group basi, except for credit risk relating to accou risk ts receivable balances. Each focal entity is responsible for managing and analyzing the eredit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a high rating ate accepted. For customers, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The utilization of eredit limits is regularly monitored. Sates to retail customers are setted in cash. No credit limits were exceeded during the reporting period, and management does not expect any losses fiom hnon- performance by these counterparties. (6) Liquidity risk Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance. ficient cash to meet operational needs while maintaining sufficient headroom on its undravn committed borrawing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group's debt financing plans, covenant Group finance monitors rolling forecasts of the Group's liquidity requirements to ensure it has 8 compliance, compliance with internal lance sheet ratio targets. Group invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-toom as determined by the above-mentioned forecasts. At the reporting date, the Group held liguid assets of EGP 1,622 million (2011; EGP 1,448 million) that are expected to readily generate cash inflows for managing liquidity risk ‘The table below analyses the Group's non-derivative financial liabilities into relevant maturity Groupings based con the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the undiscounted cash flows. Year Ended 31 December Accounts payable 2012 and accruals Current tax liabilities Other liabilities ‘Term loans Year Ended 31 December Accounts payable Total 2011 and accruals (Current tax liabilities Other abi ‘Term loans lities Total On Demand EGP 158,441,978 209,752,209 Less than 3 ‘months EGP 599,134,480 778,943 8,573,436 31012 Months EGP 298,703,393 1,700,833 28,701,873 10s years EGP 3,692,732 56,754,837 On Demand EGP 113,081,170 230,239,136 244,035,964 608,483,859 Less than 3 ‘months EGP 594,905, 3,115,668 2,292,293 600,313,679 329,106,099, 31012 Months EGP 262,559,453 285,802,479 60,447,569 105 pears EGP 6,086,704 81,318,226 Total EGP 1,056,279,851 209,752,209 159,052,739 94,030,146 1,519,114 945 Total EGP 970,546,345 230,239,136 254,276,886 105,814,991 1,360,8" 58 eSuez Cement Company $.A.E and its Subsidiaries OTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 FINANCIAL RISK MANAGEMENT - continued 3.2 Capital management The Group’s objectives when managing capital are to safeguard the Group's ability to continue as @ going concern in order t0 provide retums for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares ar sell assets to reduce debt, Consistent with others in the industry, the Group monitors capital based on the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and rnon- current borrowings’ as shown in the consolidated balance sheet), other non-current liabilities and accounts Payable and accruals less cash and short-term deposits. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt, During 2012, the Group's strategy, which was unchanged from 201 1, was to maintain the gearing ratio less than 1%. The gearing ratios at 31 December 2012 and 201 | were as follows: 2012 EGP Term loans (note 19) 94,030,146 105,814,991 Bank overdrafts 267,178 : Other non-current liabilities (note 20) 159,052,739 254,276,886 Accounts payable and accruals (nate 21) 1,086,279,851 976,961,517 Less: Cash and shortsterm deposits (note 17) 1,622,049,916 _1,447,869,987 Net financial position = - Total equity 7,459,221,460 1,245,282 Total capital 7,459,221,460 _7,441,245,232 Gearing ratio 0% o%Suez Cement Company $.A.E and its Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31 December 2012 25 FINANCIAL RISK MANAGEMENT - continued 3.3 Fair value estimation ‘The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly (that is, as prices) or indirectly (that is, derived from prices), Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. (that is, unobservable inputs). ‘The following table presents the Group's assets that are measured at fair value at 31 December 2012. 2012 Level Level Level Total ‘EGP ‘EGP P ‘EGP Assets Available-for-sale investment Un-quoted equity shares (note 14) - = 3,760,261 3,760,241 Total = = S16, 3700241 = There were no transfers between Level 1, 2 and 3 in the year. ‘The following table presents the Group's assets that are measured at fair value at 31 December 2011 2011 Tevel tevel? “Level 3 Toral EGP ‘EGP ‘BGP EGP Assets Available-for-sale investment Un-quoted equity shares (note 14) : = 4884356 4,484,356 Total 7 T4a84 356-4489 356 ~ There were na transfers between Level 1, 2 and 3 in the yearSuez Cement Company S.A.E and its Subsidiaries ‘NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 26 At3I December 2012 FINANCIAL RISK MANAGEMENT - con inued 3.3 Fair value estimation - continued The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry Group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques, These valuation techniques maximize the use of observable market data where it is available and rely as litle as possible on entity specific estimates. IF all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. Ione or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Specific valuation techniques used (o value financial instruments include: Quoted market prices or dealer quotes for similar instruments +Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instrumeet. CURRENT EVENTS ‘Some substantial events took place in Egypt that impacted the economic environment which in turn could expose the group to various risks including sustainability of revenues, growth of business, fluctuations in foreign currencies exchange rates and valuation / Impairment of assets, 7