Paints&ch.gdr Regulatory News (PCLD)

17 Nov 2008 08:59

Paints and Chemical Industries Company "Pachin"

S.A.E.

The Consolidated Financial Statements

And Auditor's Report

For the Financial Year Ended June 30, 2008

AUDITOR'S REPORT

To: The Board of Directors of Paints and Chemical Industries Company "Pachin"

We have audited the accompanying consolidated balance sheet of Paints and Chemical Industries Company "Pachin" S.A.E. as of June 30, 2008, and the related statements of consolidated income, cash flows and statement of changes in shareholders' equity for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the Egyptian Auditing Standards and in the light of prevailing Egyptian laws. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides reasonable basis for our opinion. We have obtained all information and explanations, which we considered necessary for our audit.

In our opinion, the financial statements referred to above present fairly in all material respects, the consolidated financial position of Paints and Chemical Industries Company "Pachin" as of June 30, 2008 and the result of its operation and cash flows for the year then ended in conformity with the Egyptian Accounting Standards and in the light of prevailing Egyptian laws.

Cairo, November 9, 2008

Kamel M. Saleh ACA 

F.E.S.A.A (RAA 8510)

Original (1) of (3)

Paints and Chemical Industries Company "Pachin" S.A.E.
Consolidated Balance Sheet
As of June 30, 2008
	Notes		30/6/2008		30/6/2007		30/6/2008		30/6/2007
			Consolidated				Pachin
			EGP		EGP		EGP		EGP
Non - current Assets
Property, plant and equipment (Net)	(2b, 4)		215 924 576		185 757 691		17 853 224		17 872 853
Projects under construction	(2c, 5)		48 658 552		22 359 091		1 888 146		1 355 538
Other non - current Assets
Investment in subsidiaries	(2f, 6)		--		--		232 387 000		222 391 000
Available for sale investments	(2f, 7)		774 906		774 906		774 906		774 906
Other long-term assets	(2d, 8)		16 016 000		16 016 000		16 016 000		16 016 000
Total Long-Term Assets			281 374 034		224 907 688		268 919 276		258 410 297
Current Assets
Inventories (Net)	(2g, 9, 16b)		165 409 576		161 531 134		78 739 794		78 992 347
Letters of Credit			7 363 465		3 615 992		2 034 087		2 006 017
Debtors and Accounts Receivable
Accounts receivable (Net)	(2h, 10, 16b)		36 603 351		40 084 836		30 990 136		33 107 914
Notes receivable (Net)	(11, 16b)		10 558 224		25 475 311		5 766 840		5 948 740
Due from subsidiaries	(12)		--		--		5 820 758		403 144
Other debit balances	(13)		51 202 108		43 728 069		139 070 065		119 873 308
Trading Investments	(2i, 14)		75 772 987		28 992 814		317 727		354 899
Cash and cash equivalents	(2j, 15)		61 850 705		85 611 100		18 824 940		30 065 484
Total Current Assets			408 760 416		389 039 256		281 564 347		270 751 853
Current Liabilities
Provisions	(16 a)		38 928 731		39 735 309		35 836 819		37 354 702
Banks - overdraft	(17)		41 609 365		7 996 320		1 249 091		1 811 282
Accounts and notes payable	(2l, 18)		44 198 257		35 241 518		10 836 767		9 852 408
Due to El-Obour for Paint	(19)		--		--		10 957 576		7 832 869
Other credit balances	(20)		40 469 301		37 017 363		17 939 534		18 451 483
Total Current Liabilities			165 205 654		119 990 510		76 819 787		75 302 744
Working Capital			243 554 762		269 048 746		204 744 560		195 449 109
Total Investment finianced by :			524 928 796		493 956 434		473 663 836		453 859 406
Share Capital
Paid-up 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 year			107 917 721		100 884 170		98 633 564		84 231 979
Total Share Capital			516 177 454		490 019 339		473 212 302		452 956 516
Minority Interest			182 398		168 045		--		--
Total Sharholders Equity and Minority Interest			516 359 852		490 187 384		473 212 302		452 956 516
Long-term liabilities	(23)		8 568 944		3 769 050		451 534		902 890
Total Financing of Working Capital and Long-Term Assets			524 928 796		493 956 434		473 663 836		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 until June 30, 2008
			30/6/2008		30/6/2007		30/6/2008		30/6/2007
			Consolidated				Pachin
	Notes		EGP		EGP		EGP		EGP
Sales (net)	(3)		598 488 087		522 182 002		172 602 144		156 607 704
Cost of sales			(476 767 023)		(411 409 184)		(162 372 511)		(146 011 168)
Gross Profit			121 721 064		110 772 818		10 229 633		10 596 536
General and administrative expenses			(14 318 041)		(13 289 416)		(7 333 014)		(7 934 407)
Provision used			(4 400 000)		(8 631 861)		(1 000 000)		(8 000 000)
Allowance for attending the Board of Directors			( 283 000)		( 207 100)		( 144 000)		( 113 000)
Profit from Operations			102 720 023		88 644 441		1 752 619		(5 450 871)
Interest expenses			(2 824 249)		(2 884 020)		( 926 661)		(1 093 946)
Investment income in subsidiaries companies			--		--		94 952 500		79 960 000
Profit on sale of investments			1 539 861		2 802 353		814 302		958 278
Gain on revaluation of trading investment			1 734 075		289 973		178 086		--
Investment income			44 732		284 489		44 732		36 967
Interest income			2 990 966		3 270 224		956 007		1 429 523
Capital gain			1 828 114		266 136		231 700		250 886
Other income			1 261 553		1 860 572		1 810 816		2 790 681
Provisions no longer required			8 500 000		8 500 000		--		6 000 000
Losses from foreign currency translation exchange			(3 579 048)		( 497 509)		( 977 987)		( 114 034)
Profit before Taxes and Minority Interest			114 216 027		102 536 659		98 836 114		84 767 484
Income tax			(1 060 898)		( 368 139)		( 653 906)		--
Deferred taxes			(5 184 883)		(1 235 505)		451 356		( 535 505)
Profit after Tax and before Minority Interest			107 970 246		100 933 015		98 633 564		84 231 979
Minority interest			( 52 525)		( 48 845)		--		--
Profit after Tax and Minority Interest			107 917 721		100 884 170		98 633 564		84 231 979
- The accompanying notes from (1) to (27), form an integral part of the financial statements.
Financial Controller		Managing Director					Chairman of the Board

Paint and Chemical Industires Company "Pachin" S.A.E.
Consolidated Cash Flows Statement
From July 1, 2007 till June 30, 2008
		30/06/2008		30/6/2007		30/06/2008		30/06/2007
		Consolidated				Pachin
	Notes	EGP		EGP		EGP		EGP
Cash Flows from Operating Activities
Net Profit before Taxes and minoirty interst		114 216 027		102 536 659		98 836 114		84 767 484
Adjustments to Reconcile Net Profit to Net  Cash Provided from Operating Activities
Depreciation of fixed assets		11 753 265		11 869 230		2 122 870		1 981 889
Capital gain		(1 734 075)		( 289 973)		( 178 086)		--
Gain on revaluation of trading investment		(1 828 114)		( 266 136)		( 231 700)		( 250 886)
Profit on the sale of investments		(1 539 861)		(2 802 353)		( 814 302)		( 958 278)
Provision utilized during the period		4 400 000		8 631 861		1 000 000		8 000 000
Provisions no longer required		(8 500 000)		(9 300 000)		--		(6 800 000)
Provision utilized		(2 235 889)		( 166 320)		(1 547 194)		( 166 320)
Operating Profit before Working Capital Changes		114 531 353		110 212 968		99 187 702		86 573 889
Decrease (Increase) in receivables and other debit balances		16 436 279		8 815 563		(23 302 947)		(6 673 798)
(Increase) in inventories and letter of credit		(7 608 350)		(49 472 944)		242 048		(19 754 619)
Increase in creditors and other credit balances		10 962 790		5 623 974		2 940 400		5 585 409
Net Cash Provided from Operating Activities		134 322 072		75 179 561		79 067 203		65 730 881
Cash Flows from Investing Activities
Purchase of trading investments		(205 857 716)		(160 797 825)		(77 477 841)		(34 858 405)
Proceeds from the sale of trading investments		162 351 479		213 758 978		78 507 401		68 486 765
Purchase of fixed assets and other non-current assets		(68 239 496)		(35 404 041)		(2 653 917)		(17 625 734)
Proceeds from the sale of fixed assets		1 847 999		283 213		249 768		257 619
Purchase of investments in subsidiary (Pachin for Inks)		--		--		(9 996 000)		(9 996 000)
Net Cash (used in) Provided from Investing Activities		(109 897 734)		17 840 325		(11 370 589)		6 264 245
Cash Flows from Financing Activities
Proceeds ( payments) of banks - overdraft		33 613 045		1 874 129		( 562 191)		359 902
Dividends paid		(81 797 778)		(70 022 591)		(78 374 967)		(67 166 665)
Net Cash (used in) Financing Activities		(48 184 733)		(68 148 462)		(78 937 158)		(66 806 763)
Net (decrease) Increrse in cash and cash equivalents during the Year		(23 760 395)		24 871 424		(11 240 544)		5 188 363
Net cash and cash equivalents at beginning of the Year		85 611 100		60 739 676		30 065 484		24 877 121
Net cash and cash equivalents at end of the Year	(15)	61 850 705		85 611 100		18 824 940		30 065 484
- The accompanying notes from (1) to (27), form an integral part of the financial statements.
Financial Controller	Managing Director					Chairman of the Board

Paints and Chemical Industries Company "Pachin" S.A.E.
Consolidated Statement of Changes in Shareholders' Equity
From July 1, 2007 till June 30, 2008
	Paid-up		Reserves		Retained		Profit for the		Minority Interest		Total
	Capital				Earnings		Year
	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 June 30, 2008	--		--		--		107 917 721		52 525		107 970 246
Balance as of June 30, 2008	200 000 000		191 420 791		16 838 942		107 917 721		182 398		516 359 852
- The accompanying notes from (1) to (27), form an integral part of the financial statements.
Financial Controller	Managing Director					Chairman of the Board

Paints and Chemical Industries Company "Pachin"

(S.A.E.)

Notes to the Financial Statements

As of June 30, 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 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:

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 (except for inventory), 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.

 

g. 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.

 

h. 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.

 

i. 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. 

 

j. Cash and Cash Equivalents

Cash and cash equivalents represent cash on hand and at banks. 

 

k. 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.  

 

l. Accounts Payable 

Accounts payable are recorded at their fair value.

 

m. 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.

 

n. Revenue Recognition

Revenue is recognized on an accrual basis upon delivery of goods to customers and the issuance of the sales invoice. Interest income is recognized on an accrual basis.

 

o. Borrowing Cost

Borrowing cost is recorded in the income statement in the period it was incurred as financing expenses. 

 

p. 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. 

 

q. 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 on the 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.

 

r. 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.

 

s. Use of Estimates

 

The preparation of financial statements in conformity with the 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	67 091	531 283	10 645	106 803
Inks	2 842	62 712	2 774	61 306
Animal Extract Product	956	4 493	956	4 493
		598 488		172 602

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	40 149 215	80 453 995	114 946 493	13 979 727	12 476 271	12 214 191	274 219 892
Additions	--	18 026 344	18 417 944	1 780 368	2 286 339	1 429 040	41 940 035
Disposals	--	--	(4 209 111)	(591 578)	(489)	(65 498)	(4 866 676)
Cost as of June 30, 2008	40 149 215	98 480 339	129 155 326	15 168 517	14 762 121	13 577 733	311 293 251
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	--	(2 120 676)	(6 293 036)	(1 528 045)	(898 837)	(912 671)	(11 753 265)
Disposals	--	--	4 196 912	591 514	489	57 876	4 846 791
As of June 30, 2008	--	(20 264 140)	(48 394 651)	(10 714 159)	(7 269 716)	(8 726 009)	(95 368 675)
NBV @ June 30, 2008	40 149 215	78 216 199	80 760 675	4 454 358	7 492 405	4 851 724	215 924 576
NBV @ June 30, 2007	40 149 215	62 310 531	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 Equipments	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	--	93 583	369 527	340 155	973 150	344 894	2 121 309
Disposals	--	--	(83 531)	(498 078)	(489)	(63 745)	(645 843)
Cost of June 30, 2008	173 143	19 788 333	29 417 794	6 096 592	5 563 832	6 813 420	67 853 114
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	--	(513 454)	(716 721)	( 306 210)	( 273 259)	( 313 226)	( 2 122 870)
Disposals	--	--	71 332	498 078	489	57 876	627 775
As of  June 30, 2008	--	( 10 024 059)	( 25 576 203)	( 5 308 928)	( 3 698 530)	( 5 392 170)	( 49 999 890)
NBV @ June 30, 2008	173 143	9 764 274	3 841 591	787 664	1 865 302	1 421 250	17 853 224
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
	30/6/2008		30/6/2007		30/6/2008		30/6/2007
	EGP		EGP		EGP		EGP
Machinery and equipments	3 503 813		1 982 429		767 335		888 659
Buildings	35 171 400		11 611 533		--		63 469
Tools and equipments	109 259		226 987		--		226 987
Furniture	--		80 605		--		70 685
Vehicles	--		3 732		--		--
Software and programs	7 162 513		2 797 815		44500		44 500
Assets under construction	45 946 985		16 703 101		811 835		1 294 300
Letter of credit (Fixed Assets)	717 749		--		717 749		--
Capital expenditure	1 993 818		5 655 990		358 562		61 238
Balance	48 658 552		22 359 091		1 888 146		1 355 538

6. Investment in Subsidiaries

Company Name	Issued Capital EGP	Ownership %	Ownership Amount EGP	Paid %	30/6/2008 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. 96%	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 Sale Investments  

	Consolidated		Pachin
	30/6/2008 EGP	30/6/2007 EGP	30/6/2008 EGP	30/6/2007 EGP
Governmental bonds at the National Investment Bank	774 906	774 906	774 906	774 906

8. Other Long-Term Assets

Other long-term assets as of June 30, 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
	30/6/2008		30/6/2007		30/6/2008		30/6/2007
	EGP		EGP		EGP		EGP
Raw materials and packaging	125 802 830		129 464 365		60 996 178		65 674 488
Less: Provision for scrap materials	(500 396)		(517 961)		( 500 396)		(517 961)
	125 302 434		128 946 404		60 495 782		65 156 527
Finished products	25 448 613		20 001 297		11 039 635		7 830 658
Less: Provision for finished goods	(798 649)		(798 649)		(798 649)		(798 649)
	24 649 964		19 202 648		10 240 986		7 032 009
Fuel and spare parts	7 774 437		7 663 490		4 234 626		4 197 639
Less: Provision for spare parts	(481 533)		(481 533)		(481 533)		(481 533)
	7 292 904		7 181 957		3 753 093		3 716 106
Work in-progress	6 016 178		5 001 140		2 340 464		2 178 462
Consignment goods with others	1 301 893		568 823		1 301 893		568 823
Inventories for resale purpose	299 548		161 922		299 548		161 922
Scrap	546 655		468 240		308 028		178 498
	165 409 576		161 531 134		78 739 794		78 992 347

10. Accounts Receivable (net)

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Accounts receivable	47 486 112	47 979 343		38 741 036	39 870 560
Less:
Provision for doubtful debts	(10 882 761) 761)	(7 894 507)		(7 750 900)	(6 762 646)
	36 603 351	40 084 836		30 990 136	33 107 914

11. Notes Receivable (Net)

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Notes receivable *	11 996 224	35 413 311		6 204 840	6 386 740
Less:
Provision for doubtful debts	(1 438 000)	(9 938 000)		(438 000)	(438 000)
	10 558 224	25 475 311		5 766 840	5 948 740

* Including notes receivable with a maturity date after one year.

 

12. Due from Subsidiary (Pachin for Inks)

The balance of this account amounted to EGP 5 820 758 , represents the amounts paid by the Holding Company on behalf of the mentioned company. 

13. Other Debit Balances

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Accrued income *	299 370	483 449		95 100 698	81 234 845
Advanced to purchase investments **	1 147 650	--		1 147 650	--
Suppliers debit balances	2 930 257	2 251 535		1 567 929	1 060 510
Employees loans	804 711	1 495 720		804 711	1 495 720
Deposits with others	1 806 099	1 976 505		958 997	1 416 577
Corporate tax***	28 882 618	24 857 954		28 882 618	24 857 954
Withholding tax	7 409 913	6 649 387		7 232 623	6 506 128
Other debit balances	7 921 490	6 013 519		3 374 839	3 301 574
	51 202 108	43 728 069		139 070 065	119 873 308

* This balance in the stand alone balance sheet of paints and chemical company " Pachin" includes an amount of EGP 94 952 500 , of investment income in El obour for paints and chemical company "Pachin".

**  This balance represents advanced payments to purchase investments in Pachin - Lybia for Paints and Chemical Industries (under construction) with a percentage of 25% of the contribution value amounting to a million Liyban Dinar (50%) which was paid during the month June 2008.

*** This balance represents:

 

 

14. Trading Investments 

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Investment Certificates	75 772 987	28 992 814		317 727	354 899
	75 772 987	28 992 814		317 727	354 899

15. Cash and Cash Equivalents

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Cash on hand	--	30 884		--	--
Banks current accounts	13 083 020	7 904 337		3 596 031	3 054 586
Banks time deposits	42 046 799	71 662 114		12 676 673	23 598 040
Checks under collection*	6 720 886	6 013 765		2 552 236	3 412 858
	61 850 705	85 611 100		18 824 940	30 065 484

* Represents outstanding checks with due dates before 30/6/2008, 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  30/6/2008
	EGP	EGP	EGP	EGP	EGP
A- Provisions-Current Liabilities
Provision for tax disputes	32 149 283	--	--	--	32 149 283
Provision for claims	7 003 321	1 400 000	--	(2 206 578)	6 196 743
Other provisions	582 705	--	--	--	582 705
Total provisions (current liabilities)	39 735 309	1 400 000	--	(2 206 578)	38 928 731
B- Provisions-Current Assets
Accounts receivable provision	7 894 507	3 000 000	--	(11 746)	10 882 761
Notes receivable provision	9 938 000	--	(8 500 000)	--	1 438 000
Raw material provision	517 961	--	--	(17 565)	500 396
Finished goods provision	798 649	--	--	--	798 649
Slow moving and obsolete spare parts provision	481 533	--	--	--	481 533
	59 365 959	4 400 000	(8 500 000)	(2 235 889)	53 030 070

17. Banks Overdraft

Banks overdraft represent credit facilities that the group has obtained from various banks as of  June 30, 2008 amounting to EGP 41 609 365. These facilities are secured by time deposits.

18. Accounts and Notes Payable

	Consolidated			Pachin
	30/6/2008	30/6/2007		30/6/2008	30/6/2007
	EGP	EGP		EGP	EGP
Accounts payable	42 549 461	30 778 933		10 534 572	8 814 390
Notes payable	1 648 796	4 462 585		302 195	1 038 018
	44 198 257	35 241 518		10 836 767	9 852 408

 

19. Due to Subsidiary (El-Obour for Paints and Chemicals Industries Company)

The balance of this account amounting to EGP 10 957 576, 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
	30/6/2008	30/6/2007	30/6/2008	30/6/2007
	EGP	EGP	EGP	EGP
Accrued expenses	9 125 517	8 360 701	7 785 155	7 548 292
Accounts receivable - credit balances	10 056 260	11 584 415	2 454 789	3 219 161
Sales tax	2 862 528	5 915 594	1 057 193	1 238 725
Fixed assets - creditors	3 295 574	845 708	31 594	80 835
Deposit to others	5 366 255	2 920 599	915 840	816 058
Employees share in profit	1 523 624	39 431	42 242	39 431
Withholding tax	404 159	430 943	147 399	239 944
Current portion of long-term liabilities *	352 172	428 658	--	--
Salary tax	130 984	--	130 984	344 460
Other employees benefits	4 082 371	4 082 371	4 082 371	4 082 371
Income tax	1 060 898	368 139	653 906	--
Other creditors	2 208 959	2 040 804	638 061	842 206
	40 469 301	37 017 363	17 939 534	18 451 483

* Refer to Note No. "23-A"

21. Paid-up 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
	30/6/2008	30/6/2007	30/6/2008	30/6/2007
	EGP	EGP	EGP	EGP
Legal Reserve	112 811 978	103 702 327	92 018 484	87 806 885
Reserve invested in treasury bonds	774 905	774 905	774 905	774 905
Fixed assets reserve	6 290 899	6 290 899	6 290 899	6 290 899
Other reserves	71 543 009	71 543 009	71 543 009	71 543 009
	191 420 791	182 311 140	170 627 297	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 181 052 (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 420 365.

The deferred tax liability amounting to EGP 7 967 527, resulting 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  13 028 425 as of June 30, 2008.

 

25. Capital Commitments 

The capital commitments at 30 June 2008 are  represented in :- The capital commitment, represents the unexecuted portion of the factory building for Pachin for Inks amounting to EGP 1.7 million. The capital commitment represents the unpaid portion of the company's share in Pachin for Inks amounting to EGP 17 493 000. The capital commitment represents the unpaid portion of the company's share in Pachin - Libya for Paints and Chemical Industries amounting to 750 000 Libyan Dinar.

26. Managing the Risks Related to Financial Instruments 

 

a. Foreign Exchange Risk 

Foreign currency risk represents the change in currency rates which affects the receipts, disbursements and the translation of assets and liabilities in foreign currencies. The company exerts all efforts to avoid having a net foreign currency open position.

 

b. Credit Risk 

This risk represents some customers' failure to pay their debts on due dates. The company forms a provision for doubtful debts to meet this risk.

 

c. Interest rate Risk

This risk represents the changing of interest rates which affect the operations results. The company's management exerts all efforts to obtain the best conditions in the market for banking facilities and performs periodic review on the interest rates.

 

d. Fair Value

The fair value of financial instrument does not differ from the book value as of the balance sheet date.

 

27. Tax Position

 

Paints and Chemicals Industries Company

 

a. The company is subject to corporate tax according to Law No. 91 for 2005. The company submits its tax returns on due time and pays the due taxes. The Tax Authority inspected the company's books and the taxes were settled and paid for the years until June 30, 1993.

 

b. The Tax Authority inspected and assessed the company's books for years 1993/1994  until 1996/1997 and the disputed points were transferred to court.

 

c. The Tax Authority inspected the company's books for year 1997/1998 until 2000/2001. The company objected the claim resulting from the inspection and the disputed points were transferred to the Internal Committee. The tax claims amounted to EGP 26.5 million. The disputed points were transferred to the Appeal Committee and the final resolution has not been determined yet.

 

d. The Tax Authority inspected and assessed the company's books for years 2001/2002  until 2004/2005 and the company received a tax claim amounting to EGP 89 568 684 which the company objected, and the disputed points were transferred to the Internal Committee. The management believes that these claims will be greatly reduced. 

 

e. The Tax Authority inspected the company's books for sales tax until June 30, 2006. 

 

f. The Tax Authority inspected and assessed the company's books for salary tax until 2004.

 

El-Obour for Paints and Chemicals Industries Company

 

a. The company is enjoying a tax exemption starting from the first year of operation according to Law No. 8 for 1997. This exemption will end on June 30, 2011.

 

b. The Tax Authority inspected the company's books for sales tax until June 30, 2006 and the due tax was paid.

 

c. The company's books where not inspected for salary tax yet.

 

Pachin for Inks

The company is subject to the provisions of Law No. 8 for 1997 and its executive regulations. The company has started its operation on May 8, 2008.

Financial Controller

Managing Director

Chairman of the Board

ENDFR FFISAWSASEEF