Last checked at 19 May 2008 08:27
Paints and Chemical Industries Company "Pachin"
S.A.E.
The Consolidated Financial Statements
Together with the Auditor's Report
For the Period Ended March 31, 2008
Review Report
To: The Board of Directors of Paints and Chemical Industries Company "Pachin"
We have reviewed the accompanying consolidated balance sheet of Paints and Chemical Industries Company as of March 31, 2008, and the related statements of consolidated income, cash flows and change in equity for the period then ended. These financial statements are the responsibility of the company's management. Our responsibility is to issue a report on these financial statements based on our review.
The attached financial statements have been prepared to be presented to the General Authority for Capital Market and the Financial Securities for Stock Market, in execution of Law No. 95 for 1992 and its executive regulation and the General Authority for Capital Market Decree concerning this issue.
We conducted our review in accordance with the Egyptian Standard on Auditing applicable to review engagements. This standard requires that we plan and perform the review to obtain moderate assurance that the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personal and an analytical procedure applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not give a true and fair view in all material respects in accordance with Egyptian Accounting Standards.
Cairo, May 13, 2008
Kamel M. Saleh ACA
F.E.S.A.A (RAA 8510)
| PAINTS AND CHEMICAL INDUSTRIES COMPANY "PACHIN" S.A.E. | |||||||||
| Consolidated Balance Sheet | |||||||||
| As of March 31, 2008 | |||||||||
| Consolidated | Pachin | ||||||||
| Notes | 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | |||||
| EGP | EGP | EGP | EGP | ||||||
| Non-Current Assets | |||||||||
| Property, plant and equipment (Net) | (2b, 4) | 185 428 006 | 185 757 691 | 18 099 963 | 17 872 853 | ||||
| Projects under construction | (2c, 5) | 70 169 466 | 23 895 711 | 1 124 397 | 1 355 538 | ||||
| Investment in subsidiary companies | (2f, 6) | -- | -- | 232 387 000 | 222 391 000 | ||||
| Available for sales investments | (2f, 7) | 774 906 | 774 906 | 774 906 | 774 906 | ||||
| Other non-current assets | (2d, 8) | 16 016 000 | 16 016 000 | 16 016 000 | 16 016 000 | ||||
| Total Non-Current Assets | 272 388 378 | 226 444 308 | 268 402 266 | 258 410 297 | |||||
|
| |||||||||
| Current Assets | |||||||||
| Inventories (Net) | (2g, 9, 16b) | 172 607 205 | 161 531 134 | 86 705 312 | 78 992 347 | ||||
| Letters of Credit | 5 883 571 | 2 079 372 | 1 366 322 | 2 006 017 | |||||
| Accounts receivable (Net) | (2h, 10, 16b) | 42 388 551 | 40 084 836 | 33 593 561 | 33 107 914 | ||||
| Notes receivable (Net) | (11, 16b) | 20 123 604 | 25 475 311 | 5 419 411 | 5 948 740 | ||||
| Due from subsidiary companies | (12) | -- | -- | 1 093 441 | 403 144 | ||||
| Other debit balances | (13) | 53 641 164 | 43 728 069 | 44 987 651 | 119 873 308 | ||||
| Investments for trading | (2i, 14) | 23 195 929 | 28 992 814 | 300 117 | 354 899 | ||||
| Cash and cash equivalents | (2j, 15) | 72 775 748 | 85 611 100 | 23 847 197 | 30 065 484 | ||||
| Total Current Assets | 390 615 772 | 387 502 636 | 197 313 012 | 270 751 853 | |||||
| Current Liabilities | |||||||||
| Provisions | (16,a) | 37 740 505 | 39 735 309 | 36 048 593 | 37 354 702 | ||||
| Banks - overdraft | (17) | 41 598 968 | 7 996 320 | 14 082 055 | 1 811 282 | ||||
| Accounts and notes payable | (2l, 18) | 38 079 433 | 35 241 518 | 8 643 525 | 9 852 408 | ||||
| Due to El-Obour for Paint | (19) | -- | -- | 12 758 223 | 7 832 869 | ||||
| Other credit balances | (20) | 47 735 282 | 37 017 363 | 16 736 599 | 18 451 483 | ||||
| Total Current Liabilities | 165 154 188 | 119 990 510 | 88 268 995 | 75 302 744 | |||||
| Working Capital | 225 461 584 | 267 512 126 | 109 044 017 | 195 449 109 | |||||
| Total Investment finianced by : | 497 849 962 | 493 956 434 | 377 446 283 | 453 859 406 | |||||
| Share Capital | |||||||||
| Share capital | (21) | 200 000 000 | 200 000 000 | 200 000 000 | 200 000 000 | ||||
| Reserves | (22) | 191 420 791 | 182 311 140 | 170 627 297 | 166 415 698 | ||||
| Retained earnings | 16 838 942 | 6 824 029 | 3 951 441 | 2 308 839 | |||||
| Profit for the period / year | 85 753 827 | 100 884 170 | 1 964 655 | 84 231 979 | |||||
| Total Share Capital | 494 013 560 | 490 019 339 | 376 543 393 | 452 956 516 | |||||
| Minority Interest | 171 913 | 168 045 | -- | -- | |||||
| Total Sharholders Equity and minority intrest | 494 185 473 | 490 187 384 | 376 543 393 | 452 956 516 | |||||
| Long-term liabilities | (23) | 3 664 489 | 3 769 050 | 902 890 | 902 890 | ||||
| Total Financing of Working Capital and Non-Current Assets | 497 849 962 | 493 956 434 | 377 446 283 | 453 859 406 | |||||
| - The accompanying notes from (1) to (27), form an integral part of the financial statements. | |||||||||
| Financial Controller | Managing Director | Chairman of the Board | |||||||
| - Auditor's Report attached. | |||||||||
| PAINTS AND CHEMICAL INDUSTRIES COMPANY "PACHIN" S.A.E. |
| Consolidated Income Statement |
| From July 1, 2007 till March 31, 2008 |
| | | | Consolidated | | Pachin | ||||||||||||
| | Notes | | Period fom 1/1/2008 to 31/3/2008 | | Period fom 1/7/2007 to 31/3/2008 | | Period fom 1/1/2007 to 31/3/2007 | | Period fom 1/7/2006 to 31/3/2007 | | Period fom 1/1/2008 to 31/3/2008 | | Period fom 1/7/2007 to 31/3/2008 | | Period fom 1/1/2007 to 31/3/2007 | | Period fom 1/7/2006 to 31/3/2007 |
| | | | EGP | | EGP | | EGP | | EGP | | EGP | | EGP | | EGP | | EGP |
| Net sales | (3) | | 135 629 375 | | 434 921 801 | | 112 752 201 | | 376 453 637 | | 42 799 092 | | 127 435 501 | | 35 817 700 | | 109 769 781 |
| Cost of sales | | | (111 998 143) | | (341 474 331) | | (91 949 145) | | (294 194 546) | | (40 434 864) | | (119 665 611) | | (35 159 314) | | (104 381 477) |
| Gross Profit | | | 23 631 232 | | 93 447 470 | | 20 803 056 | | 82 259 091 | | 2 364 228 | | 7 769 890 | | 658 386 | | 5 388 304 |
| | | | | | | | | | | | | | | | | | |
| General and administrative expenses | | | (3 783 991) | | (10 028 159) | | (2 617 195) | | (8 769 027) | | (2 856 172) | | (7 423 166) | | (1 902 094) | | (6 669 445) |
| Provision used | | | -- | | -- | | (3 000 000) | | (3 000 000) | | -- | | -- | | (3 000 000) | | (3 000 000) |
| Allowance for attending the Board of Directors | | | ( 63 500) | | ( 200 000) | | ( 20 000) | | ( 161 200) | | ( 42 500) | | ( 96 000) | | ( 9 000) | | ( 86 000) |
| Profit from Operations | | | 19 783 741 | | 83 219 311 | | 15 165 861 | | 70 328 864 | | ( 534 444) | | 250 724 | | (4 252 708) | | (4 367 141) |
| Interest expenses | | | ( 735 013) | | (1 497 599) | | ( 799 795) | | (2 130 629) | | ( 251 493) | | ( 624 465) | | ( 333 756) | | ( 789 206) |
| Profit on sale of investments | | | ( 44 553) | | 1 254 943 | | 413 730 | | 3 093 993 | | ( 44 553) | | 814 302 | | 6 781 | | 978 313 |
| Gain on revaluation of trading investment | | | 161 200 | | 1 139 748 | | -- | | -- | | 6 780 | | 20 341 | | -- | | -- |
| Investment income | | | 6 780 | | 20 341 | | ( 79 673) | | 20 340 | | 1 940 | | 178 086 | | -- | | -- |
| Interest income | | | 715 349 | | 2 610 012 | | 326 006 | | 2 020 319 | | 228 730 | | 822 124 | | 151 875 | | 988 287 |
| Capital gain | | | 26 750 | | 26 750 | | -- | | 73 050 | | 26 750 | | 26 750 | | -- | | 73 050 |
| Other income | | | 447 967 | | 1 262 485 | | 114 889 | | 296 368 | | 356 426 | | 1 007 656 | | 104 688 | | 283 686 |
| Provisions no longer required | | | -- | | -- | | 3 000 000 | | 3 000 000 | | -- | | | | 3 000 000 | | 3 000 000 |
| Losses from foreign currency translation exchange | | ( 100 028) | | (2 240 124) | | ( 60 940) | | ( 429 097) | | 81 675 | | ( 530 863) | | ( 15 903) | | ( 89 148) | |
| Profit before taxes | | | 20 262 193 | | 85 795 867 | | 18 080 078 | | 76 273 208 | | ( 128 189) | | 1 964 655 | | (1 339 023) | | 77 841 |
| Income tax | | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
| Deferred taxes | | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- |
| Profit after Tax | | | 20 262 193 | | 85 795 867 | | 18 080 078 | | 76 273 208 | | ( 128 189) | | 1 964 655 | | (1 339 023) | | 77 841 |
| Minority interest | | | ( 10 276) | | ( 42 040) | | ( 9 713) | | ( 38 104) | | -- | | -- | | -- | | -- |
| Profit after tax and minority interest | | | 20 251 917 | | 85 753 827 | | 18 070 365 | | 76 235 104 | | ( 128 189) | | 1 964 655 | | (1 339 023) | | 77 841 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| - The accompanying notes rom (1) to (27), form an integral part of the financial statements. | | | | | | | | | | | | | |||||
| PAINTS AND CHEMICAL INDUSTRIES COMPANY "PACHIN" S.A.E. | ||||||||
| Consolidated Cash Flows Statement | ||||||||
| From July 1, 2007 till March 31, 2008 | ||||||||
| Consolidated | Pachin | |||||||
| 31/03/2008 | 31/3/2007 | 31/03/2008 | 31/3/2007 | |||||
| Notes | EGP | EGP | EGP | EGP | ||||
| Cash Flows from Operating Activities | ||||||||
| Net Profit before Tax and minoirty interst | 85 753 827 | 76 273 208 | 1 964 655 | 77 841 | ||||
| Adjustments to Reconcile Net Profit to Net Cash Provided from Operating Activities | ||||||||
| Depreciation | 7 133 428 | 7 058 781 | 1 574 644 | 1 533 503 | ||||
| Capital gain | ( 26 750) | ( 73 050) | ( 26 750) | ( 73 050) | ||||
| Gain on revaluation of trading investment | (1 139 748) | -- | ( 178 086) | -- | ||||
| Profit on the sale of investments | (1 254 943) | (3 093 993) | ( 814 302) | ( 957 973) | ||||
| Provision utilized during the period | (2 006 550) | (3 000 000) | (1 317 855) | (3 000 000) | ||||
| Provision used | -- | 3 000 000 | -- | 3 000 000 | ||||
| Operating Profit before Working Capital Changes | 88 459 264 | 80 164 946 | 1 202 306 | 580 321 | ||||
| (Increase) decrease in receivables and other debit balances | (5 775 565) | (5 661 807) | 74 360 353 | 61 113 495 | ||||
| (Increase) in inventories and letter of credit | (15 925 718) | (78 320 348) | (7 073 270) | (29 535 105) | ||||
| Increase in creditors and other credit balances | 13 460 969 | 20 738 572 | 1 998 776 | 11 124 093 | ||||
| Net Cash Provided from Operating Activities | 80 218 950 | 16 921 363 | 70 488 165 | 43 282 804 | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of investments for trading | (145 950 867) | (142 977 137) | (79 470 490) | (34 858 405) | ||||
| Proceeds from the sale of investments for trading | 154 142 443 | 213 416 741 | 80 408 095 | 68 652 827 | ||||
| Purchase of fixed assets and other long-term assets | (53 190 773) | (26 126 849) | (1 647 343) | (16 998 130) | ||||
| Purchase of investments in subsidiary (Pachin for Inks) | -- | -- | (9 996 000) | -- | ||||
| Proceeds from the sale of fixed assets | 140 025 | 90 097 | 103 480 | 74 847 | ||||
| Net Cash (used in) Provided from Investing Activities | (44 859 172) | 44 402 852 | (10 602 258) | 16 871 139 | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds of banks overdraft | 33 602 648 | -- | 12 270 773 | -- | ||||
| Dividends paid | (81 797 778) | (70 022 591) | (78 374 967) | (67 164 605) | ||||
| Net Cash (used in) Financing Activities | (48 195 130) | (70 022 591) | (66 104 194) | (67 164 605) | ||||
| Net (decrease) in cash and cash equivalents during the period | (12 835 352) | (8 698 376) | (6 218 287) | (7 010 662) | ||||
| Net cash and cash equivalents at beginning of the period | (15) | 85 611 100 | 54 617 485 | 30 065 484 | 23 425 741 | |||
| Net cash and cash equivalents at end of the period | (15) | 72 775 748 | 45 919 109 | 23 847 197 | 16 415 079 | |||
| - The accompanying notes from (1) to (27), form an integral part of the financial statements. | ||||||||
| PAINTS AND CHEMICAL INDUSTRIES COMPANY "PACHIN" S.A.E. | ||||||||||
| Cosolidated Changes in Shareholders' Equity Statement | ||||||||||
| From July 1, 2007 till March 31, 2008 | ||||||||||
| | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Share | | Reserves | | Retained | | Profit for the | | Minority Interest | | Total |
| | Capital | | | | Earnings | | Year / Period | | | | |
| | EGP | | EGP | | EGP | | EGP | | EGP | | EGP |
| Balance as of June 30, 2006 | 200 000 000 | | 174 508 002 | | 3 063 605 | | 81 328 926 | | 151 999 | | 459 052 532 |
| Transferred to reserves | -- | | 7 803 138 | | -- | | (7 803 138) | | -- | | -- |
| Transferred to retained earnings | -- | | -- | | 3 760 424 | | (3 760 424) | | -- | | -- |
| Dividends | -- | | -- | | -- | | (69 765 364) | | ( 32 799) | | (69 798 163) |
| Net profit as of June 30, 2007 | -- | | -- | | -- | | 100 884 170 | | 48 845 | | 100 933 015 |
| Balance as of June 30, 2007 | 200 000 000 | | 182 311 140 | | 6 824 029 | | 100 884 170 | | 168 045 | | 490 187 384 |
| Transferred to reserves | -- | | 9 109 651 | | -- | | (9 109 651) | | -- | | -- |
| Transferred to retained earnings | -- | | -- | | 10 014 913 | | (10 014 913) | | -- | | -- |
| Dividends | -- | | -- | | -- | | (81 759 606) | | ( 38 172) | | (81 797 778) |
| Net profit as of March 31, 2008 | -- | | -- | | -- | | 85 753 827 | | 42 040 | | 85 795 867 |
| Balance as of March 31, 2008 | 200 000 000 | | 191 420 791 | | 16 838 942 | | 85 753 827 | | 171 913 | | 494 185 473 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| - The accompanying notes from (1) to (27), form an integral part of the financial statements. | | | | | | | |||||
| | | | | | | | | | | | |
Paints and Chemical Industries Company "Pachin"
(S.A.E.)
Notes to the Financial Statements
As of March 31, 2008
The Group's Background
Paints and Chemical Industries Company "Pachin" (SAE):
The Company was established according to the Ministerial Decree No. 751 for 1958. On October 3, 1997, the Extraordinary General Assembly agreed to circulate 27% of its share via GDR offer in the Stock Markets of London and New York accordingly, the Holding Company's share was reduced to less than 50 %, and the Company became subject to the Companies Law No. 159 for 1981 and its executive regulation. The Commercial Register was issued after this modification on October 15, 1997. On October 31, 2000, the Extraordinary General Assembly agreed to amend some articles in the Articles of Incorporation.
The Company's objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products, in addition to purchasing and dividing land for the purpose of using or reselling, and performing specialized construction works.
El-Obour for Paints and Chemicals Industries Company (SAE):
The Company was established according to the General Authority for Investment and Free Zones Decree No. 78 for 1999 and Law No. 8 for 1997 and its executive regulation. The Company was registered at the Commercial Register on January 14, 1999. On September 19, 2006, the Extraordinary General Assembly agreed to amend Article No. (2) of the Company's Articles of Incorporation by adding the trademark of "Pachin" to the Company's name. Therefore, the Company's name became El Abour for Paints and Chemical Industries Company "Pachin"
The Company's objective is to manufacture various kinds of paints, varnishes, printing inks, animal extract products and related products and also, to manufacture other chemical products and special packages for the Company's products.
Pachin for Inks:
The Company was established according to the General Authority for Investment and Free Zones Decree No. 13623 for 2005, and Law No. 8 for 1997 and its executive regulation. The Company was registered at the Commercial Register on April 27, 2005.
The Company's objective is to manufacture and pack printing inks, and related products and also, to manufacture other chemical products and special packages for the Company's products.
2. Significant Accounting Policies
The consolidated financial statements have been prepared according to the Egyptian Accounting Standards and applicable laws and regulations. The Egyptian Accounting Standards require referral to the International Financial Reporting Standards "IFRS", when no Egyptian Accounting Standard or legal requirement exist to address certain types of transactions and their treatment.
The principal accounting policies adopted in the preparation of the financial statements are set out below:
a. Basis for Preparing the Consolidated Financial Statements
The consolidated financial statements incorporate the financial statements of the subsidiary companies under the control of the Holding Company (Paints and Chemical Industries Company "Pachin"(SAE). The subsidiaries are represented in El-Obour for Paints and Chemical Industries Company where the Holding Company's share is 99.95%, and Pachin for Inks where the Holding Company's share is 99.96%
The consolidated financial statements are prepared on the following basis:
All inter-company transactions and balances are eliminated.
The unrealized profits resulting from the inter-company transactions are eliminated.
The cost method is used to account for the ownership in subsidiaries.
The consolidated income statement includes the results of operation for all subsidiary companies starting from the date of ownership, and the minority interest is eliminated.
b. Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost and are depreciated over their estimated useful life on a straight-line basis at the rates stated below:
| Type of Asset | Depreciation Rate |
| Buildings and constructions | 2 - 5 % |
| Machinery and equipments | 4.9 - 7.5 % |
| Vehicles | 10 - 20 % |
| Tools | 7.5 % |
| Furniture and office equipments | 10 % |
c. Projects under Construction
Projects under construction are carried at cost, less any recognized impairment loss. Costs include all costs associated with acquiring the asset and bringing it to ready for use condition. The depreciation of these assets follows the same basis of similar fixed assets. The projects under construction are charged with the costs of new projects, and the purchased equipments that are not used yet.
The amounts paid as advances for purchasing property, plant and equipment are recorded as projects under construction. When the asset is received and is ready for use, it is transferred to fixed asset and is depreciated on the same basis as similar fixed assets.
d. Long-Term Assets
The other long term assets (Patent) are recognized according acquisition cost. On the balance sheet date, the book value of assets is reviewed and in the case that there are indications that the recoverable amounts of these assets is lower than their book value, then the carrying value of assets will be reduced to its recoverable amount, and the impairment loss is recognized immediately and charged to the income statement.
e. Impairment of Assets
On the balance sheet date, the book value of assets owned by the company is reviewed, and in the case that there are indications that the recoverable amounts of these assets is lower than their book value, then the carrying value of assets will be reduced to its recoverable amount, and an impairment loss is recognized immediately and charged to the income statement.
On the balance sheet date, the company's management periodically revaluates, the existence of indications of impairment in the losses value, which were previously recognized resulting from the impairment of the assets' book value in the previous periods. In case of existence of these indications, this impairment is revaluated and reflected so that the book value of these assets does not exceed the original net book value before recording the impairment loss.
f. Investments in Subsidiaries and Available for Sale Investments
- Investments in subsidiary companies and long-term investments are stated at cost. The company assesses whether there is any indication that the value of each investment is impaired. If such indication exists, the value of the related investment is reduced by the impairment loss and this loss is charged to the income statement, for each investment separately.
- The available for sale financial investments, with no reliable fair value, are recognized according to all its related costs, less the impairment losses of its value. These losses are charged to the income statement.
f. Inventories
Inventories are stated at the lower of cost or net realizable value as follows:
Raw Materials, Packaging, Spare Parts and Fuel
Cost is calculated using the perpetual weighted average method.
Work in-Progress
The cost includes direct and indirect manufacturing costs of partially completed stages in addition to the material, direct wages costs of the completed production stage.
Goods Available for Sale
Goods available for sale are stated at cost.
Consignment Goods
Consignment goods from finished product are stated at manufacturing cost.
Finished goods
Finished goods are stated at manufacturing cost.
g. Accounts Receivable
Accounts receivable are carried at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Allowances for accounts receivable are formed when there is evidence that the Company will not be able to recover the amounts due according to the original terms of receivables. The provision represents the difference between the book value and the recoverable as stated in the expected cash flows.
h. Investments for Trading:
Investments for trading which are issued by banks are stated at fair value, representing its recoverable value as of evaluation date. The resulting differences are stated in the income statement, while the investment certificates are evaluated at their nominal value.
i. Cash and Cash Equivalents
Cash and cash equivalents are stated in the balance sheet at nominal value.
j. Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of past events and that it is probable that an outflow of economic resources will be required to settle the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date. When the effect of the time value of money is material, the amount of a provision shall be the present value of expected expenditures, required to settle the obligation.
k. Accounts Payable
Accounts payable, stated at the nominal value, are recorded with the value of goods and services provided by others and the invoice.
l. Foreign Currencies Transactions
The company maintains its accounts in Egyptian pound. Transactions denominated in foreign currencies are recorded using the exchange rates prevailing at the transaction date. On the financial statements date, balances of monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing on that date. Differences arising from revaluation are stated in the income statement.
m. Revenue Recognition
n. Borrowing Cost
Borrowing cost is recorded in the income statement in the period it was incurred.
o. Cash Flows Statement
The cash flows statement is prepared using the indirect method. For the purpose of preparing the cash flows statement, cash and cash equivalents are comprised of cash on hand and at banks and checks under collection.
p. Taxation
The company's tax is calculated based on the prevailing tax laws and regulations in Egypt; a provision is formed for tax liabilities after performing sufficient studies and in light of the tax assessments.
Deferred tax is recognized due to temporary differences between the assets and liabilities tax bases set by the new Egyptian tax law, and their reported amounts per the accounting principles used in the preparation of the financial statements. Accordingly, the income statement for the reporting period is to be charged by the tax burden represented by the current tax (calculated on taxable profit based on local tax laws, regulations, instructions and tax rates ruling at the date of the financial statements), as well as the deferred tax.
Generally, the recognized deferred tax liabilities on taxable temporary differences are reported as long-term liabilities, whereas deferred tax assets reported as long-term assets shall not be recognized for deductible temporary differences except to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized or there is convincing evidence that sufficient taxable profit will be available in the future.
q. Financial Instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. Financial assets and liabilities are recognized on the company's balance sheet when the company becomes a party to the contractual rights and obligations of the financial instrument.
Financial Assets: are represented in cash on hand and at banks, accounts and notes receivable, and certain other debit balances.
Financial Liabilities: are represented in short-term loans, accounts and notes payable and certain other credit balances.
r. Accounting Estimates
The preparation of financial statements in conformity with Egyptian Accounting Standards requires the company's management to make estimates and assumptions about the carrying amounts of assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from those estimates used in the preparation of the financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis.
3. Sales Analysis
| Consolidated | Pachin | |||
| | Quantity (Ton) | Amount’000 | Quantity (Ton) | Amount’000 |
| Paints | 49 519 | 386 894 | 8 160 | 79 408 |
| Inks | 2 076 | 44 829 | 2 076 | 44 829 |
| Animal Extract Product | 666 | 3 198 | 666 | 3 198 |
| | | 434 921 | | 127 435 |
4. Property, Plant and Equipment
Consolidated
| | Land | Buildings | Machinery and Equipments | Vehicles | Tools | Furniture and Office Equipments | Total |
| | EGP | EGP | EGP | EGP | EGP | EGP | EGP |
| Cost | | | | | | | |
| July 1, 2007 | 40 149 216 | 80 453 994 | 114 946 493 | 13 979 727 | 12 476 271 | 12 214 191 | 274 219 892 |
| Additions | -- | 161 549 | 3 562 675 | 1 183 277 | 1 097 961 | 911 555 | 6 917 017 |
| Disposals | -- | -- | (83 257) | (591 636) | (101 960) | (27 545) | (804 398) |
| Cost as of March 31, 2008 | 40149 216 | 80 615 543 | 118 425 911 | 14 571 368 | 13 472 272 | 13 098 201 | 280 332 511 |
| Accumulated Depreciation | | | | | | | |
| July 1, 2007 | -- | (18 143 464) | (527 298 46) | (628 777 9) | (6 371 368) | (214 871 7) | (201 462 88) |
| Depreciation charge | -- | (1 544 567) | (3 343 609) | (936 984) | (638 898) | (669 370) | (7 133 428) |
| Disposals | -- | -- | 71 056 | 591 578 | 3 572 | 24 918 | 691 124 |
| As of March 31, 2008 | -- | (19 688 031) | (49 571 080) | (10 123 034) | (7 006 694) | (8 515 666) | (94 904 505) |
| NBV @ March 31, 2008 | 40 149 216 | 60 927 512 | 68 854 831 | 4 448 334 | 6 465 578 | 4 582 535 | 185 428 006 |
| NBV @ June 30, 2007 | 40 149 216 | 62 310 530 | 68 647 966 | 4 202 099 | 6 104 903 | 4 342 977 | 185 757 691 |
Pachin Company
| Land | Building | Machinery and Equipments | Vehicles | Tools | Furniture & office equipment | Total | |
| EGP | EGP | EGP | EGP | EGP | EGP | EGP | |
| Cost | |||||||
| July 1, 2007 | 173 143 | 19 694 750 | 29 131 798 | 6 254 515 | 4 591 171 | 6 532 271 | 66 377 648 |
| Additions | -- | 93 584 | 427 907 | 340 155 | 700 267 | 316 570 | 1 878 483 |
| Disposals | -- | -- | (83 257) | (498 078) | (66 980) | (25 792) | (674 107) |
| Cost of March 31, 2008 | 173 143 | 19 788 334 | 29 476 448 | 6 096 592 | 5 224 458 | 6 823 049 | 67 582 024 |
| Accumulated Depreciation | |||||||
| July 1, 2007 | -- | (9 510 605) | (24 930 814) | (5 500 796) | (3 425 760) | (5 136 820) | (48 504 795) |
| Depreciation charge | -- | (383 731) | (542 772) | (231 777) | (184 394) | (231 970) | (1 574 644) |
| Disposals | -- | -- | 71 056 | 498 078 | 3 572 | 24 672 | 597 378 |
| As of March 31, 2008 | -- | (9 894 336) | (25 402 530) | (5 234 495) | (3 606 582) | (5 344 118) | (49 482 061) |
| NBV @ March 31, 2008 | 143 173 | 9 893 998 | 4 073 918 | 862 097 | 1 617 876 | 1 478 931 | 18 099 963 |
| NBV @ June 30, 2007 | 173 143 | 10 184 145 | 4 200 984 | 753 719 | 1 165 411 | 1 395 451 | 17 872 853 |
5. Projects under Construction
| | Consolidated | | Pachin | ||||
| | 31/3/2008 | | 30/6/2007 | | 31/3/2008 | | 30/6/2007 |
| | EGP | | EGP | | EGP | | EGP |
| Machinery and equipments | 2 713 541 | | 1 982 429 | | 770 481 | | 888 659 |
| Buildings | 44 508 487 | | 11 611 533 | | -- | | 63 469 |
| Tools and equipments | 468 280 | | 226 987 | | 234 780 | | 226 987 |
| Furniture | 9 920 | | 80 605 | | -- | | 70 685 |
| Vehicles | 3 676 | | 3 732 | | -- | | -- |
| Software and programs | 2 803 315 | | 2 797 815 | | 44 500 | | 44 500 |
| Assets under construction | 50 507 219 | | 16 703 101 | | 1 049 761 | | 1 294 300 |
| Letter of credit | 15 777 161 | | 1 536 620 | | -- | | -- |
| Capital expenditure | 3 885 086 | | 5 655 990 | | 74 636 | | 61 238 |
| Total | 70 169 466 | | 23 895 711 | | 1 124 397 | | 1 355 538 |
6. Investment in Subsidiary Companies
| Company Name | Capital EGP | Ownership % | Ownership amount | Paid % | 31/3/2008 Paid amount EGP | 30/6/2007 Paid amount EGP |
| Obour for Paints and Chemical Industries | 200 000 000 | 99. 95% | 199 900 000 | 100% | 199 900 000 | 199 900 000 |
| Pachin for Inks | 50 000 000 | 99. 66% | 49 980 000 | 65% | 32 487 000 | 22 491 000 |
| 232 387 000 | 222 391 000 |
These companies are not listed in the stock market.
7. Available for sales Investments
| Consolidated | Pachin | |||
| 31/3/2008 EGP | 30/6/2007 EGP | 31/3/2008 EGP | 30/6/2007 EGP | |
| Governmental Bonds at the National Investment Bank | 906 774 | 774 906 | 774 906 | 774 906 |
8. Other Long-Term Assets
Other long-term assets as of March 31, 2008 amounting to EGP 16 016 000, equivalent to Euro 2 200 000 represent the amount paid to the Danish Company Deroup A/S for the final cession of the trademarks according to the contract dated December 4, 2006.
9. Inventories
| Consolidated | Pachin | ||||||
| 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | ||||
| EGP | EGP | EGP | EGP | ||||
| Raw materials and packaging | 128 988 913 | 128 946 404 | 71 267 754 | 65 156 527 | |||
| Finished products | 26 956 044 | 19 202 648 | 7 620 953 | 7 032 009 | |||
| Fuel and spare parts | 7 561 301 | 7 181 957 | 3 658 784 | 3 716 106 | |||
| Work in-progress | 7 073 411 | 5 001 140 | 2 247 532 | 2 178 462 | |||
| Consignment goods | 1 078 640 | 568 823 | 1 078 640 | 568 823 | |||
| Inventories for the purpose of resale | 641 754 | 161 922 | 641 754 | 161 922 | |||
| Scrap | 307 142 | 468 240 | 189 895 | 178 498 | |||
| 172 607 205 | 161 531 134 | 86 705 312 | 78 992 347 | ||||
The above-mentioned figures are net of provisions (Refer to Note No. 16).
10. Accounts Receivable
| Consolidated | Pachin | ||||
| 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | ||
| EGP | EGP | EGP | EGP | ||
| Accounts receivable | 50 271 312 | 47 979 343 | 40 344 461 | 39 870 560 | |
| Less: | |||||
| Provision for doubtful debts | (7 882 761) | (7 894 507) | (6 750 900) | (6 762 646) | |
| 42 388 551 | 40 084 836 | 33 593 561 | 33 107 914 | ||
11. Notes Receivable
Notes receivable as of March 31, 2008 amounted to EGP 30 061 604 after the deduction of the provision amounting to EGP 9 938 000 its maturity date is due after one year.
12. Due from Subsidiary (Pachin for Inks)
The balance of this account amounted to EGP 1 093 441, which represents the amounts paid by the Holding Company on behalf of the mentioned Company.
13. Other Debit Balances
| | Consolidated | | Pachin | ||
| | 31/3/2008 | 30/6/2007 | | 31/3/2008 | 30/6/2007 |
| | EGP | EGP | | EGP | EGP |
| Accrued income | 427 207 | 483 449 | | 140 481 | 81 234 845 |
| Suppliers debit balances | 3 934 137 | 2 251 535 | | 2 352 609 | 1 060 510 |
| Employees loans | 754 580 | 1 495 720 | | 754 580 | 1 495 720 |
| Deposits with others | 2 172 433 | 1 976 505 | | 1 327 033 | 1 416 577 |
| Corporate tax* | 28 857 954 | 24 857 954 | | 954 857 28 | 24 857 954 |
| Withholding tax | 7 202 470 | 6 649 387 | | 7 059 212 | 6 506 128 |
| Other debit balances | 10 292 383 | 6 013 519 | | 4 495 782 | 3 301 574 |
| | 53 641 164 | 43 728 069 | | 44 987 651 | 119 873 308 |
* This balance represents:
14. Investments for Trading
| Consolidated | Pachin | ||||
| 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | ||
| EGP | EGP | EGP | EGP | ||
| Investment Certificates | 23 195 929 | 28 992 814 | 300 117 | 354 899 | |
| 23 195 929 | 28 992 814 | 300 117 | 354 899 | ||
15. Cash and Cash Equivalents
| Consolidated | Pachin | ||||
| 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | ||
| EGP | EGP | EGP | EGP | ||
| Cash on hand | 4 034 613 | 30 884 | 1 982 132 | -- | |
| Bank current accounts | 15 005 826 | 7 904 337 | 2 543 646 | 3 054 586 | |
| Bank time deposits | 48 071 970 | 71 662 114 | 17 313 330 | 23 598 040 | |
| Checks under collection* | 5 663 339 | 6 013 765 | 2 008 089 | 3 412 858 | |
| 72 775 748 | 85 611 100 | 23 847 197 | 30 065 484 | ||
* Represents outstanding checks with due dates before 31/3/2008, collected after this date.
16. Provisions
| Balance as of 1/7/2007 | Provision Established during the period | Provision No longer required during the period | Provision utilized during the period | Balance as of 31/3/2008 | |
|
| EGP | EGP | EGP | EGP | EGP |
| A- Provisions-Current Liabilities |
|
|
|
| |
| Provision for tax disputes | 32 149 283 | -- | -- | (1 068 322) | 31 080 961 |
| Provision for claims | 7 003 321 | -- | -- | (926 482) | 6 076 839 |
| Other provisions | 582 705 | -- | -- | -- | 582 705 |
| Total provisions (Current Liabilities) | 39 735 309 | -- | -- | (1 994 804) | 37 740 505 |
| B- Provisions-Current Assets |
|
| |||
| Accounts receivable provision | 7 894 507 | -- | -- | (11 746) | 7 882 761 |
| Notes receivable provision | 9 938 000 | -- | -- | -- | 9 938 000 |
| Raw material provision | 517 961 | -- | -- | -- | 517 961 |
| Finished goods provision | 798 649 | -- | -- | -- | 798 649 |
| Slow moving and obsolete spare parts provision | 481 533 | -- | -- | -- | 481 533 |
| 59 365 959 | -- | -- | (2 006 550) | 57 359 409 |
17. Banks Overdraft
Banks overdraft represent credit facilities that the group has obtained from various banks as of March 31, 2008 amounting to EGP 41 598 968. These facilities are secured by time deposits.
18. Accounts and Notes Payable
| Consolidated | Pachin | ||||
| 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 | ||
| EGP | EGP | EGP | EGP | ||
| Accounts payable | 34 707 698 | 30 778 933 | 8 131 998 | 8 814 390 | |
| Notes payable | 3 371 735 | 4 462 585 | 511 527 | 1 038 018 | |
| 38 079 433 | 35 241 518 | 8 643 525 | 9 852 408 | ||
19. Due to Subsidiary (El-Obour for Paints and Chemicals Industries Company)
The balance of this account amounting to EGP 12 758 223, represents the ordinary operations results between Paints and Chemicals Industries Company (Pachin) and El-Obour for Paints and Chemicals Industries Company.
20. Other Credit Balances
| | Consolidated | Pachin | ||
| | 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 |
| | EGP | EGP | EGP | EGP |
| Accrued expenses | 7 383 531 | 8 360 701 | 6 654 255 | 7 548 292 |
| Accounts receivable – credit balances | 19 273 371 | 11 584 415 | 3 539 253 | 3 219 161 |
| Sales tax | 1 401 984 | 5 915 594 | -- | 1 238 725 |
| Fixed assets - creditors | 6 238 635 | 845 708 | 90 687 | 80 835 |
| Deposit to others | 4 664 617 | 2 920 599 | 870 941 | 816 058 |
| Employees share in profit | 42 242 | 39 431 | 242 42 | 39 431 |
| Withholding tax | 462 964 | 430 943 | 204 452 | 239 944 |
| Current portion of long- Term liabilities * | 207 687 | 428 658 | -- | -- |
| Other employees benefits | 4 082 371 | 4 082 371 | 4 082 371 | 4 082 371 |
| Income tax | -- | 368 139 | -- | -- |
| Other creditors | 3 977 880 | 2 040 804 | 1 252 398 | 1 186 666 |
| | 47 735 282 | 37 017 363 | 16 736 599 | 18 451 483 |
* Refer to Note No. "23-A"
21. Capital
The Company's authorized capital amounted to EGP 200 million, and the issued and paid-up capital amounted to EGP 200 million, distributed among 20 million shares with par value of EGP 10 each.
22. Reserves
| | Consolidated | Pachin | ||
| | 31/3/2008 | 30/6/2007 | 31/3/2008 | 30/6/2007 |
| | EGP | EGP | EGP | EGP |
| Legal Reserve | 112 822 380 | 103 702 327 | 484 018 92 | 87 806 885 |
| Reserve invested in treasury bonds | 905 774 | 774 905 | 905 774 | 774 905 |
| Fixed assets reserve | 899 290 6 | 6 290 899 | 899 290 6 | 6 290 899 |
| Other Reserves | 71 532 607 | 71 543 009 | 009 543 71 | 71 543 009 |
| | 191 420 791 | 182 311 140 | 297 627 170 | 166 415 698 |
23. Long-Term Liabilities
The long-term liabilities are represented as follows:
The sales tax installment on the imported assets which amounted to EGP 428 658 (after deducting the current portion and recording it in other credit balances).
The deferred revenue related to the Company's granted assets which will be recorded revenue over the estimated useful lives of those assets with an amount of EGP 453 188.
The deferred tax liability amounting to EGP 2 782 643, resulted from the difference between the books depreciations rates and the tax depreciations rates (Refer to Note No. "2Q").
24. Contingent Liabilities
The uncovered portion of the Letters of Credit amounted to EGP 4 640 013 as of March 31, 2008.
25. Capital Commitments
26. Managing the Risks Related to Financial Instruments
27. Tax Position
Corporate Income Tax (Paints and Chemicals Industries Company)
Corporate Income Tax (El-Obour for Paints and Chemicals Industries Company)
Corporate Income Tax (Pachin for Inks)
The Company is subject to the provisions of Law No. 8 for 1997 and its executive regulations. The Company did not start its operation yet.