Paints&ch.gdr Regulatory News (PCLD)

15 Feb 2007 11:13

Paints and Chemical Industries Co.15 February 2007 Paints and Chemical Industries Company S.A.E. The Consolidated Financial StatementsTogether with Auditor's ReportAs of December 31, 2006 Review Report to the Board of Director of Paints and Chemical Industries CompanyS.A.E. We have reviewed the accompanying consolidated balance sheet of Paints andChemical Industries Company as at 31 December 2006, and the related statementsof consolidated income, cash flows and change in equity for the period thenended. These financial statements are the responsibility of the company'smanagement. Our responsibility is to issue a report on these financialstatements based on our review. We conducted our review in accordance with the Egyptian Standard on Auditingapplicable to review engagements. This standard requires that we plan andperform the review to obtain moderate assurance that the financial statementsare free of material misstatement. A review is limited primarily to inquiries ofcompany personal and analytical procedures applied to financial data and thusprovides 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 believethat the accompanying consolidated financial statements do not give a true andfair view in all material respects in accordance with Egyptian AccountingStandards. Cairo, February 13, 2007 Kamel M. Saleh ACA F.E.S.A.A (RAA 8510) SBA-DELOITTE PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Consolidated Balance SheetAs of December 31, 2006 Consolidated Pachin Notes 31/12/2006 30/6/2006 31/12/2006 30/6/2006 EGP EGP EGP EGPLong-Term AssetsFixed Assets(Net) (2b, 4) 178 644 815 181 488 215 18 215 776 18 800 526 Projects underconstruction (2c, 5) 24 898 394 19 126 833 977 442 806 754 Other Long-Term Assets Investment insubsidiarycompanies (2e, 6) -- -- 212 395 000 212 395 000 Otherlong-terminvestments (7) 774 906 774 906 774 906 774 906Other longterm assets (8) 16 016 000 -- 16 016 000 -- ---------- --------- ----------- --------- TotalLong-TermAssets 220 334 115 201 389 954 248 379 124 232 777 186 ----------- ----------- ----------- ----------- Current AssetsInventories(Net) (2f, 9) 175 114 072 112 453 338 80 471 177 58 676 842Letters ofCredit 4 718 812 2 398 273 2 803 359 1 766 906Accountsreceivable(Net) (2g, 10) 41 534 440 33 086 939 31 586 427 26 056 374Notesreceivable(Net) (11) 27 265 299 33 357 692 278 116 5 693 332Due fromsubsidiarycompanies (12) -- -- 374 003 6 284 784Other debitbalances (13) 43 498 643 45 147 260 64 305 545 109 958 191Short-terminvestments (2h, 14) 10 188 778 78 861 641 188 837 33 025 289Cash and cashequivalents (2i, 15) 80 352 043 60 739 676 33 866 789 24 877 121 ---------- ---------- ---------- ----------Total CurrentAssets 382 672 087 366 044 819 213 874 253 266 338 839 ----------- ----------- ----------- ----------- Current LiabilitiesProvisions (16 A) 35 235 309 33 235 309 32 854 702 30 854 702Banks -overdraft (17) 19 111 454 6 122 191 8 082 718 1 451 380Accounts andnotes payable (18) 70 967 999 31 732 920 15 012 398 10 124 190Dividendspayable -- 257 986 -- 257 986Due tosubsidiarycompanies (19) -- -- 19 433 325 --Other creditbalances (20) 27 252 921 34 038 814 16 361 447 20 169 177 ---------- ---------- ---------- ----------Total CurrentLiabilities 152 567 683 105 387 220 91 744 590 62 857 435 ---------- ----------- ---------- ----------Working Capital 230 104 404 260 657 599 122 129 663 203 481 404 ---------- ----------- ----------- -----------TotalInvestments 450 438 519 462 047 553 370 508 787 436 258 590 =========== =========== =========== ===========Share Capital and ReservesShare capital (21) 200 000 000 200 000 000 200 000 000 200 000 000Reserves (22) 182 311 140 174 508 002 166 415 698 162 610 049Retainedearnings 6 824 028 3 063 605 2 308 840 1 043 740Profit for theperiod / year 58 164 739 81 328 926 1 416 864 72 237 416 ----------- ----------- --------- ---------Total ShareCapital andReserves 447 299 907 458 900 533 370 141 402 435 891 205 ----------- ----------- ----------- -----------MinorityInterest 143 591 151 999 -- --Long-termliabilities (23) 2 995 021 2 995 021 367 385 367 385 --------- --------- --------- ---------TotalFinancing ofWorkingCapital andLong-TermAssets 450 438 519 462 047 553 370 508 787 436 258 590 =========== =========== =========== =========== - The accompanying notes from (1) to (28), form an integral part of the financial statements. Financial Controller The Managing Director Chairman of the Board - Auditors' Report attached. PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E.Consolidated Income StatementFor the Period Ended December 31, 2006 Consolidated Pachin Notes 31/12/2006 31/12/2005 31/12/2006 31/12/2005 EGP EGP EGP EGP Net sales (3) 263 701 436 228 497 630 73 952 081 67 469 219Cost of sales (202 245 401) (177 991 904) (69 222 163) (62 874 552) ---------- ---------- --------- ---------Gross Profit 61 456 035 50 505 726 4 729 918 4 594 667 ---------- ---------- --------- --------- General andadministrativeexpenses (6 151 832) (5 361 421) (4 767 351) (4 433 115)Allowance forattending theBoard ofDirectors ( 141 200) ( 100 000) ( 77 000) ( 45 000) ---------- ---------- --------- ---------Profit (loss)fromOperations 55 163 003 45 044 305 ( 114 433) 116 552Interestexpenses (1 330 834) (1 987 953) ( 455 450) (1 069 659)Profit on saleof investments 2 680 263 1 049 328 971 532 1 049 328Investmentincome 100 013 1 829 888 -- 1 590 163Interest income 1 694 313 862 042 836 412 476 949Capital gain 73 050 33 000 73 050 --Other income 181 479 20 776 178 998 18 045Losses fromforeigncurrencytranslation ( 368 157) ( 350 851) ( 73 245) ( 130 269) ---------- ---------- --------- ---------ProfitbeforeTaxes 58 193 130 46 500 535 1 416 864 2 051 109Income taxes -- -- -- --Deferred taxes -- -- -- -- ---------- ---------- --------- ---------Profit afterTax 58 193 130 46 500 535 1 416 864 2 051 109Minorityinterest ( 28 391) ( 22 220) -- -- ---------- ---------- --------- ---------Profit afterTax andMinorityInterest 58 164 739 46 478 315 1 416 864 2 051 109Employees' andDirectors'bonus (4 772 222) (4 266 667) (1 736 111) (1 627 778) ---------- ---------- --------- ---------ProfitAttributabletoShareholders 53,392,517 42 211 649 ( 319 247) 423 331 ========== ========== ========= =========Earnings pershare 2.67 2.11 -0.02 0.02 Financial Controller The Managing Director Chairman of the Board PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E. Consolidated Cash flows StatementFor the Period Ended December 31, 2006 Consolidated Pachin 31/12/2006 31/12/2005 31/12/2006 31/12/2005 EGP EGP EGP EGPCash Flows from Operating Activities Net Profitbefore Tax 58 193 130 46 500 535 1 416 864 2 051 109 Adjustments to Reconcile Net Profitto NetCash Provided from OperatingActivitiesDepreciation 4 701 925 4 512 789 1 023 462 1 079 822Net provisionsformed and(utilized) -- ( 326 596) -- ( 41 832)Profit on thesale ofinvestments (2 680 263) (1 049 328) ( 971 532) (1 049 328) ----------- ---------- ---------- ----------OperatingProfit beforeWorkingCapitalChanges 60 214 792 49 637 400 1 468 794 2 039 771 (Increase)decrease inreceivablesand otherdebit balances 1 266 416 (4 031 162) 53 448 590 26 806 264Decrease(increase) ininventories (64 981 273) 3 852 235 (22 830 788) 5 106 023 (Decrease)increase increditors 32 438 721 (6 206 833) 20 253 755 (2 800 281) ----------- ---------- ---------- ----------Net CashProvided fromOperatingActivities 28 938 656 43 251 640 52 340 351 31 151 777 ----------- ---------- ---------- ---------- Cash Flows from Investing ActivitiesPurchase ofinvestments (143 624 406) (73 872 404) (36 832 925) (57 456 824) Proceeds fromthe sale ofinvestments 214 977 532 93 738 637 70 640 909 88 847 087Purchase ofinvestments insubsidiary(Pachin forInks) -- -- -- (7 497 000)Purchase ofinvestments insubsidiary(Obour) -- -- -- (14 992 500) Purchase offixed assetsand otherlong-termassets (23 661 337) (5 035 929) (16 625 400) ( 937 880) Proceed fromfixed assetsdisposal 15 250 -- -- -- ----------- ---------- ---------- ----------Net Cash Usedin InvestingActivities 47 707 039 14 830 304 17 182 584 7 962 883 ----------- ---------- ---------- ---------- Cash Flows from Financing ActivitiesDividends paid (70 022 591) (65 497 846) (67 164 605) (63 743 012) ----------- ---------- ---------- ----------Net Cash (usedin) FinancingActivities (70 022 591) (65 497 846) (67 164 605) (63 743 012) ----------- ---------- ---------- ---------- Net increaseor (decrease)in cash andcashequivalents 6 623 104 (7 415 902) 2 358 330 (24 628 352) Net cash andcashequivalents atbeginning ofthe period 54 617 485 25 979 525 23 425 741 23 560 966 ----------- ---------- ---------- ----------Net cash andcashequivalents atend of theperiod 61 240 589 18 563 623 25 784 071 (1 067 386) =========== ========== ========== ========== Financial Controller The Managing Director Chairman of the Board PAINTS AND CHEMICAL INDUSTRIES COMPANY S.A.E. Cosolidated Changes in Shareholders' Equity StatementFor the Period Ended December 31, 2006 Share Legal Retained Profit Total Capital Reserve Earnings For the Year EGP EGP EGP EGP EGPBalance as ofJune 30, 2005 200 000 000 167 657 277 1 781 129 73 702 171 443 140 577 Transferred toreserves -- 6 850 725 -- (6 850 725) --Transferred toretainedearnings -- -- 1 282 476 (1 282 476) --Dividends -- -- -- (65 568 970) (65 568 970)Net profit asof June 30,2006 -- -- -- 81 328 926 81 328 926 --------- --------- -------- --------- ---------Balance as ofJune 30, 2006 200 000 000 174 508 002 3 063 605 81 328 926 458 900 533 Transferred toreserves -- 7 803 138 -- (7 803 138) --Transferred toretainedearnings -- -- 3 760 423 (3 760 423) --Dividends -- -- -- (69 765 365) (69 765 365)Net profit asof December31, 2006 -- -- -- 58 164 739 58 164 739 --------- --------- -------- --------- ---------Balance as ofDecember 31,2006 200 000 000 182 311 140 6 824 028 58 164 739 447 299 907 =========== =========== ========= ========== =========== Financial Controller The Managing Director Chairman of the Board Paints and Chemical Industries Company "Pachin" (S.A.E.) Notes to the Financial Statements For the Period Ended December 31, 2006 1. The Group's Background Paints and Chemical Industries Company "Pachin" (SAE): The Company is anEgyptian Joint Stock Company. The Company was established according to theMinisterial Decree No. 751 for 1958. Following the Chemical Industries' sale ofpart of its share via a GDR offer, its share was reduced to less than 50 %, andthe Company became subject to the Companies Law No. 159 for 1981. The objective of the Company is to manufacture various kinds of paints,varnishes, printing inks, animal extract products and related products, inaddition 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 is anEgyptian Joint Stock Company established according to the General Investment andFree Zone Organization Decree No. 78 for 1999 and Law No. 8 for 1997 and itsexecutive regulation. The Company was registered at the Commercial Register onJanuary 14, 1999. On September 19, 2006, the Extraordinary General Assembly agreed to amendArticle (2) of the Company's Articles of Incorporation by adding the trademarkof "Pachin" to the Company's name. Therefore, the Company's name became El Abourfor Paints and Chemical Industries Company "Pachin" The objective of the Company is to manufacture various kinds of paints,varnishes, printing inks, animal extract products and related products, and alsoto manufacture other chemical products and special packages for the Company'sproducts. Pachin for Inks: The Company is an Egyptian Joint Stock Company establishedaccording to the General Investment and Free Zone Organization Decree No. 2654for 2005, and Law No. 8 for 1997 and its executive regulation. The Company wasregistered at the Commercial Register on April 27, 2005. The objective of the Company is to manufacture and pack printing inks, andrelated products, and also to manufacture other chemical products and specialpackages for the Company's products. 2. Significant Accounting Policies The consolidated financial statements have been prepared according to theEgyptian Accounting Standards and applicable laws and regulations. The EgyptianAccounting Standards require referral to the International Financial ReportingStandards "IFRS", when no Egyptian Accounting Standards or legal requirementsexist to address certain types of transactions and their treatment. The principal accounting policies adopted in the preparation of the financialstatements are set out below: a. Basis for Consolidation The consolidated financial statements include the subsidiary companies under thecontrol of the parent company (Paints and Chemical Industries Company (SAE)"Pachin". The subsidiaries are represented in El-Obour for Paints and ChemicalIndustries Company where the Parent Company's share is 99.95% and Pachin forInks where the Parent Company's shareis 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. Fixed Assets Fixed assets are recorded at historical cost and are depreciated over theirestimated useful life on a straight line basis at the rates stated below:Type of Asset Depreciation RateBuildings 2 - 5 %Machinery and equipments 4.9 - 7.5 %Vehicles 10 - 20 %Tools 7.5 %Furniture and office equipments 10 % c. Projects under Construction Project under construction are carried at cost, less any recognized impairmentloss. Costs include all costs associated with acquiring the asset and bringingit to ready for use condition. Depreciation for these assets, follow the samebasis of similar fixed assets, commences when the assets become ready for theirintended use. The amounts paid as advances for purchasing fixed assets are recorded asconstruction in- progress. Upon receiving the fixed assets and bringing them toready for use - condition, they are reclassified to fixed assets and depreciatedon the same basis as the similar fixed assets. d. Impairment of Assets Property, plant and equipment and other non-current assets are reviewed forimpairment losses whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognized for theamount by which the carrying amount of the asset exceeds its recoverable amount,(the higher of an asset's net selling price and recoverable amount). For thepurposes of assessing impairment, assets are grouped at the lowest level, atwhich there are separate identifiable cash flows. e. Long-Term Investments Long-term investments are stated at cost, investments are reduced according tothe temporary reduction in its value. f. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is calculated as follows: • Raw materials, packaging, spare parts and fuel Cost is calculated using the moving average method. • Work in-progress The cost includes direct and indirect manufacturing costs of partially completedstages. • Goods available for sale Goods available for sale are stated at cost. • Consignment goods Consignment goods 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 appropriateallowances for estimated irrecoverable amounts. Provision for accountsreceivable is formed when there is evidence that the Company will not be able torecover the amounts due according to the original terms of receivables. Theprovision represents the difference between the carrying amounts due and therecoverable amounts, which is represented in the expected cash flows. h. Short-Term Investments Short-term investments, which represent the treasury bills are, stated at theirface value less any returns that are not accrued at the balance sheet date. Theissuance premium of governmental bonds will be amortized within 3 years and willbe adjusted with the revenue. 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 as a resultof past events and that it is probable that an outflow of economic resourceswill be required to settle the obligation, with the possibility of providing areliable estimate for the obligation amount. Provisions are reviewed at the consolidated balance sheet date and amended torepresent the best estimate. When the effect of the time value of money ismaterial, the amount of a provision shall be the present value of expectedexpenditures, required to settle these obligations. k. Accounts Payable Accounts payable are stated at the nominal value. l. Foreign Currencies Translations Financial statements are presented in Egyptian pounds .Transactions incurrencies other than the Egyptian Pound, are recorded at the rates of exchangeprevailing on the dates of transactions. At the financial statement preparationdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Gains andlosses arising on exchange are included in the income statement for the period. m. Revenue Recognition Revenue is recognized on an accrual basis upon delivery of goods to customersand the issuance of the sales invoice. Interest income is accrued on an accrual basis, by reference to the principaloutstanding and the effective interest rate applicable. n. Borrowing Cost Borrowing cost is recorded in the income statement in the period it occurred. o. Cash Flow Statement The cash flow statement is prepared using the indirect method. For the purposeof preparing the cash flows statement, cash and cash equivalents are comprisedof cash on hand and at banks, less banks overdraft. p. Taxation Corporate tax is calculated based on the taxable profit, which may differ fromthe profit as per income statement. The Company's tax is calculated based on the prevailing tax laws and regulationsin Egypt; a provision is formed for tax liabilities after performing sufficientstudies and in light of the tax assessments. The release of the new Egyptian Tax Law on June 2005 and its executiveregulations on December 2005 resulted in the recognition of deferred tax assetsand liabilities according to the International Financial Reporting Standard(IFRS), No. (12), which represents the tax impacts of the temporary differencesbetween the assets and liabilities tax basis set by the new tax law, and theirreported amounts per the accounting principles used in the preparation of thefinancial statements. Accordingly, the income statement for the reporting periodis to be charged by the tax burden represented by the current tax (calculated ontaxable profit based on local tax laws, regulations, instructions and tax ratesruling at the date of the financial statements), as well as the deferred tax. Generally, the recognized deferred tax liabilities on taxable temporarydifferences are reported as long-term liabilities, whereas deferred tax assetsreported as long-term assets shall not be recognized for deductible temporarydifferences except to the extent that it is probable that taxable profits willbe available against which deductible temporary differences can be utilized orthere is convincing evidence that sufficient taxable profit will be available inthe future. q. Financial Instruments The financial instruments are used in the balance sheet when the Company isengaged in a contract or agreement with others. The financial instruments arerepresented as follows: • Financial Assets: (Cash on hand and at banks, accounts and notes receivable, and certain other debit balances). • Financial Liabilities: (Banks overdraft, accounts and notes payable, and certain other credit balances). • Accounts and Notes Receivable: (Stated at their nominal values after deducting bad debts). • Banks Overdraft: (Recorded when received and the interests are charged on accrual basis). • Trade Creditors and Notes Payable: (Stated at their nominal values). 3. Sales Analysis Consolidated Pachin Quantity (Ton) Amount '000 Quantity (Ton) Amount '000 Paints 30,643 236 094 5,097 46 345Inks 1,271 26 607 1,271 26 607Animal ExtractProducts 224 1,000 224 1 000 ---------- --------- 263 701 73 952 ========= ========= 4. Fixed Assets, Net Fixed assets as of December 31, 2006, are comprised of the following; Consolidated Land Buildings Machinery Vehicles Tools Furniture Total and and Office Equipments Equipments EGP EGP EGP EGP EGP EGP EGPCost1 July 2006 40 149 216 80 156 228 102 053 917 12 886 372 11 742 780 11 604 566 258 593 079 Additions / Transfers -- 71 523 744 292 614 394 140 070 303 496 1 873 775Disposals -- -- ( 4 810) ( 86 405) -- ( 85) ( 91 300) 31 December 2006 40 149 216 80 227 751 102 793 399 13 414 361 11 882 850 11 907 977 260 375 554 AccumulatedDepreciation1 July 2006 -- (16 097 369) (39 484 380) (8 933 257) (5 573 044) (7 016 814) (77 104 864) Depreciation Charge -- (1 021 243) (2 211 052) ( 660 086) ( 389 312) ( 420 232) (4 701 925)Disposals -- -- 4 810 71 155 -- 85 76 050 31 December 2006 -- (17 118 612) (41 690 622) (9 522 188) (5 962 356) (7 436 961) (81 730 739) NBV @ 31 December 40 149 216 63 109 139 61 102 777 3 892 173 5 920 494 4 471 016 178 644 8152006 NBV @ 30 June 2006 40 149 216 64 058 859 62 569 537 3 953 115 6 169 736 4 587 752 181 488 215 Pachin Company Land Building Machinery Vehicles Tools Furniture & Total and office Equipments equipment2006 EGP EGP EGP EGP EGP EGP EGPCost 1 July 2006 173 143 19 684 425 29 131 273 6 145 801 4 202 714 6 326 044 65 663 400Addition / Transfers -- 56 714 9 644 208 929 60 474 102 951 438 712Disposals -- -- ( 4 810) ( 71 155) -- ( 85) (76 050)December 31- -06 173 143 19 741 139 29 136 107 6 283 575 4 263 188 6 428 910 66 026 062Accumulated Depreciation1 July 2006 -- (9 006 574) (24 324 280) (5 496 180) (3 202 788) (4 833 052)(46 862 874) Depreciation Charge -- ( 251 648) ( 397 064) ( 112 213) ( 106 559) ( 155 978) (1 023 462) Disposals -- -- 4 810 71 155 -- 85 76 050December 31- -06 -- (9 258 222) (24 716 534) (5 537 238)(3 309 347) (4 988 945)(47 810 286) NBV @ 31 December 2006 173 143 10 482 917 4 419 573 746 337 953 841 1 439 965 18 215 776NBV @ 30 June 2006 173 143 10 677 851 4 806 993 649 621 999 926 1 492 992 18 800 526 5. Projects under Construction Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPMachinary and equipments 13 781 492 13 116 478 751 567 744 131Buildings 6 562 157 3 636 160 17 570 8 910Tools and equipments 34 262 -- 34 262 --Vehicles 103 397 -- 103 397 --Furniture 6 219 -- 3 578 --Software and programs 2 549 992 2 091 522 44 500 44 500Assets under construction 23 037 519 18 844 160 954 874 797 541Capital expenditure 1 860 875 282 673 22 568 9 213Total 24 898 394 19 126 833 977 442 806 754 6. Investment in Subsidiary Companies Company Name Capital Ownership Ownership Paid Paid % amount % amount Obour for Paints and 200 000 000 100% 199 900 000 100% 199 000 000 Chemical Industries Pachin for Inks 50 000 000 100% 49 980 000 25% 12 495 000 212 395 000These companies are not listed in the stock market. 7. Other Long-Term Investments Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPGovernmental Bonds Via National Investment Bank 774 906 774 906 774 906 774 906 8. Other Long-Term Assets Other long-term assets as of December 31, 2006 amounting to 16,016,000,equivalent to 2,200,000 Euro, represent the amount paid to, the Danish CompanyDeroup A/S for the final cession of the trade marks according to the contractdated December 4, 2006. 9. Inventories, Net Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPRaw materials, packaging materials and spare parts 147 056 149 87 194 756 68 407 810 47 348 705Work in-progress 5 220 600 3 501 530 2 406 433 1 518 362Finished products 21 480 246 19 449 593 8 581 212 8 011 418Scraps 484 522 887 369 203 167 378 267Consignment goods 872 555 1 180 140 872 555 1 180 140Inventories for the purpose of resale -- 239 950 -- 239 950 175 114 072 112 453 338 80 471 177 58 676 842 The above mentioned figures are net of provisions (Refer to Note No. 16). 10. Accounts Receivable Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPAccounts receivable 47 440 835 38 993 334 36 992 822 31 462 769Less:Provision for doubtful debts (5 906 395) (5 906 395) (5 406 395) (5 406 395) 41 534 440 33 086 939 31 586 427 26 056 374 11. Notes Receivable Notes receivable as of December 31, 2006 amounted to EGP 27 265 299, after thededuction of the provision amounting to EGP 16.4 million. Its maturity date isdue after one year. 12. Due from Subsidiary Pachin for Inks The Company was incorporated according to the Decree of the Investment Authoritydated April 27, 2005. The balance of this account amounted to EGP 374 003, whichrepresents the amounts paid by the Holding Company on behalf of the mentionedCompany. 13. Other Debit Balances Other debit balances as of December 31, 2006, are comprised of the following: Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPAccrued income* 580 918 1 684 549 24 964 831 71 673 406Suppliers debit balances 3 208 833 2 226 531 1 856 709 1 077 619Employees loans 796 802 800 202 796 802 800 202Deposits with others 1 879 223 2 633 606 1 379 601 2 135 304Corporate tax** 24 857 954 24 857 954 24 857 954 24 857 954Withholding tax 6 269 692 5 837 458 6 126 432 5 733 591Other debit balances 5 905 221 7 106 960 4 323 216 3 680 115 43 498 643 45 147 260 64 305 545 109 958 191 * Includes the investment income from El-Obour for Paints and ChemicalIndustries Company amounting to EGP 24 664 500. ** This balance contains: • An amount of EGP 12.447 million, which represents the amount paid to theTax Authority for the years 1993 - 1997, according for the decisions of theInternal Committee and the Appeal Committee. This amount will be settled againstthe provision available for this objective upon receiving the court decision. • An amount of EGP 12.411 million, paid on the due tax account for the years1998 - 2001. (Refer to Note No. 28). 14. Short-Term Investments Consolidated Pachin Dec-2006 Jun-2006 Dec-2006 Jun-2006 EGP EGP EGP EGPTreasury bills 9 999 941 73 497 804 -- 27 661 452Investment certificates 188 837 188 837 188 837 188 837Governmental bonds (Dollars) -- 5 175 000 -- 5 175 000 10 188 778 78 861 641 188 837 33 025 289 15. Cash and Cash Equivalents Consolidated Pachin Dec-2006 Jun-2006 Dec-2006 Jun-2006 EGP EGP EGP EGPCash on hand 2 682 359 58 072 1 251 790 50 000Bank current accounts 10 138 966 3 975 878 2 783 788 1 216 698Bank time deposits 64 631 853 51 134 254 27 208 471 20 454 566Checks under collection* 2 898 865 5 571 472 2 622 740 3 155 857 80 352 043 60 739 676 33 866 789 24 877 121 * Represents outstanding checks with due dates before 31/12/2006, collectedafter this date. 16. Provisions Balance as of Provision Provision Balance as of 1 July 2006 Established Used 31 Dec. 06 EGP EGP EGP EGPA- Provisions-Current LiabilitiesProvision for tax disputes 25 649 283 -- -- 25 649 283Provision for claims 7 003 321 2 000 000 -- 9 003 321Other provisions 582 705 -- -- 582 705 Total provisions (Current Liabilities) 33 235 309 2 000 000 -- 35 235 309B- Provisions-Current AssetsAccounts receivable provision 5 906 395 -- -- 5 906 395Notes receivable provision 18 438 000 (2 000 000) -- 16 438 000Raw material provision 540 532 -- -- 540 532Finished goods provision 1 598 649 -- -- 1 598 649Slow moving and obsolete spare 481 533 -- -- 481 533 parts provisionTotal provisions (Current Assets) 60 200 418 -- -- 60 200 418 17. Banks Overdraft Represents credit facilities that the Company has obtained from various banks asof December 31, 2006 amounting to EGP 19.111 million. These facilities aresecured by time deposits. 18. Accounts and Notes Payable Accounts and notes payable as of December 31, 2006 are comprised of: Consolidated Pachin December-06 June -06 December-06 June -06 EGP EGP EGP EGPAccounts payable 65 496 481 26 598 563 14 117 180 8 764 468Notes payable 5 471 518 5 134 357 895 218 1 359 722 70 967 999 31 732 920 15 012 398 10 124 190 19. Due to Subsidiary El-Obour for Paints and Chemicals Industries Company The balance of this account amounting to EGP 19 433 325 represents the ordinaryoperations results between the two companies. 20. Other Credit Balances Consolidated Pachin Dec-2006 Jun-2006 Dec-2006 Jun-2006 EGP EGP EGP EGP Accounts receivable - credit 10 957 752 8 836 781 4 606 060 2 655 185balancesAccrued expenses 5 313 669 7 333 419 4 761 685 6 561 395Sales tax 557 525 6 071 902 -- 1 868 202Deposit withheld 2 581 634 2 281 797 859 074 743 158Employees share in profit 39 431 37 370 39 431 37 370Other employees benefits 4 082 371 4 082 371 4 082 371 4 082 371Fixed assets creditors 724 702 376 122 261 196 108 841Tax withheld 495 025 480 670 330 965 320 044Current portion of long- 161 366 428 658 -- -- term liabilities *Other creditors 2 339 446 4 109 724 1 420 665 3 792 611 27 252 921 34 038 814 16 361 447 20 169 177 * Refer to Note No. "23-A" 21. Share Capital The Company's authorized capital amounted to EGP 200 million, and the issued andpaid-up capital amounted to EGP 200 million, distributed among 20 million shareswith par value of EGP 10 each. 22. Reserves Consolidated Pachin December-06 Jun-2006 December-06 Jun-2006 EGP EGP EGP EGPLegal Reserve 103 702 327 96 092 967 87 806 885 84 195 014Reserve invested in Treasury Bills 774 905 774 905 774 905 774 905Fixed assets reserve 6 484 677 6 290 899 6 484 677 6 290 899Other Reserves 71 349 231 71 349 231 71 349 231 71 349 231 182 311 140 174 508 002 166 415 698 162 610 049 23. Long-Term liabilities The long-term liabilities are represented as follows: A. The sales tax installment on the imported assets whichamounted to EGP 961 872 (after deducting the current portion and recording it inother credit balances). B. The deferred revenue related to the Company's donated assetswhich will be recorded revenue over the estimated useful lives of those assetswith an amount of EGP 486 010. C. The deferred tax liability amounting to EGP 1 547 139,resulted from the difference between the books depreciations rates and the taxlaw depreciations rates (Refer to Note No. "2N"). 24. Contingent Liabilities - The uncovered portion of the Letters of Credit amounted to EGP 4.277 millionas of December 31, 2006. 25. Cash and Cash Equivalents (Cash Flow Statement) Consolidated Pachin December-06 December -05 December-06 December -05 EGP EGP EGP EGP Cash and cash equivalents 80 352 043 54 879 561 33 866 789 22 769 241Less: Banks - overdrafts (19 111 454) (36 315 938) (8 082 718) (23 836 627) 61 240 589 18 563 623 25 784 071 (1 067 386) 26. Capital Commitments - Represents the unpaid portion of the Company's share in Pachin for Inks withan amount of EGP 37 485 000. - The capital commitment as of June 30, 2006, represents the unexecuted portionof the management building for El-Obour Paints and Chemicals Industries with anamount of EGP 0.5 million. - The capital commitment as of June, 30 2006, represents the unexecuted portionof the factory building for Pachin for Inks with an amount of EGP 29 million. 27. Managing the Risks Related to Financial Instruments (a) Foreign Exchange Risk Foreign currency risk represents the change in currency rates which affects thereceipts, disbursements and the translation of assets and liabilities in foreigncurrencies. The Company exerts all efforts to avoid having a net foreigncurrency open position. (b) Credit Risk This risk represents some customers' failure to pay their debts on time. TheCompany forms a provision for doubtful debts to meet this risk. (c) Interest Risk This risk represents the changing rates of interest which affects the operationsresults. The Company's management exerts all efforts to obtain the bestconditions in the market for banking facilities and performs periodic review onthe interest rates. (d) Fair Value The fair value of financial instrument does not differ from the book value as ofthe balance sheet date. 28. Tax Position Corporate Income Tax (Paints and Chemicals Industries Company) a. The Company is subject to corporate tax according to Law No. 11 for 2005issued in June 2005. The Company submits its tax returns in due time and paysthe taxes due. The Tax Authority inspected the Company's books and the taxeswere settled and paid for the years till June 30, 1993. b. The Tax Authority inspected and assessed the Company's books for years 1993/1994 till 1996/1997 and the disputed points were transferred to court. c. The Tax Authority inspected the Company's books for year 1997/1998 till 2000/2001. The Company objected the claim resulting from the inspection and thedisputed points were transferred to the Internal Committee. The tax claimsamounted to EGP 26.5 million. The disputed points were transferred to the AppealCommittee and the final resolution has not been determined yet. d. The Tax Authority inspected and assessed the Company's books for sales taxtill 31/3/2005. e. The Tax Authority inspected and assessed the Company's books for salary taxfrom 1999 till 2002. Corporate Income Tax (El-Obour for Paints and Chemicals Industries Company) The Company is enjoying a tax exemption starting from the first year ofoperation according to Law No. 8 for year 1997. This exemption will end on June30, 2011. Corporate Income Tax (Pachin for Inks) The Company is subject to the provisions of Law No. 8 for 1997 and its executiveregulations. The Company did not start its operation yet. Financial Controller The Managing Director Chairman of the Board This information is provided by RNS The company news service from the London Stock Exchange