Annual Report

Annual Report
2012
Gulf Pharmaceutical Industries
Annual Report 2012
3
Gulf Pharmaceutical Industries
Gulf Pharmaceutical Industries
4
www.julphar.net
A
B
Section A
Section B
Julphar Business core
Business Overview
Message from Chairman
CEO Review
About Julphar
Global Reach
2012 Growth Strategy
Julphar Training Centre - Courses completed in 2012
Responsibility
2012 Highlights
Organisation
Production and Product
Julphar Diabetes
Julphar Ethiopia
Overview of Global Healthcare Market
Industry Forecast Scenario
Overview of Julphar’s Major Markets
Other Markets (GCC and Levant)
Annual Report 2012
C
Section C
Annual Financial Results
Business & Financial Overview
Independent Auditor’s Report
Consolidated Statement of Financial Position
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Cash Flows
Consolidated Statement of Changes in Shareholders’ Equity
Notes to the Consolidated Financial Statements
5
6
www.julphar.net
A
Annual Report 2012
7
Annual Report
Section A
Julphar Business Core
Message from Chairman
CEO Review
About Julphar
Global Reach
2012 Growth Strategy
Julphar Training Centre - Courses completed in 2012
Responsibility
2012 Highlights
Organisation
Production and Product
Julphar Diabetes
Julphar Ethiopia
8
www.julphar.net
Message
Messagefrom
fromChairman
Chairman
I am pleased to announce that Julphar has
closed the year at AED1.18 billion, producing
overall steady results, with a year on year
growth of 15.3% over sales from 2011.
Maintaining stable financial growth and
delivering sustainable healthcare is a
key priority of the board. I would like to
acknowledge and congratulate the Julphar
Executive team for their contribution to our
increase in sales and leadership abilities.
Our determination to succeed is evident
in our healthy balance sheet. We continue
to uphold our positioning, concentrating
on strategic investment into new markets,
as well as continuing to build on long-term
relationships with our clients, partners and
stakeholders.
Our overall performance has been measured
by various key indicators, which keep us
aligned with our long term strategy and
vision. This year, the Board of Directors have
focussed on a setting a solid foundation for
the future and working towards our ambitious
long-term plans.
The launch of both local and global facilities,
teamed with an emphasis on difficult
markets has taken the forefront of our overall
strategy. This is evidently paying off, with
our biotechnology sector showing excellent
performance.
Julphar is a true reflection of Ras al Khaimah’s
significant development and continues to
lead as one of the UAE’s most influential local
businesses making an impact on the global
stage.
HH Sheikh Faisal bin Saqr Al Qasimi,
Chairman
Julphar's top 5 markets
5.9%
6.7%
Saudi Arabia
Iraq
9.7%
32.0%
U.A.E.
Libya
12.6%
Egypt
Annual Report 2012
9
CEO Review
In 2012, Julphar has delivered another
year of strong operational and financial
performance, reflecting the hard work
and dedication of our associates. Our
strengths lie in sustaining and growing
business in emerging and difficult markets,
despite facing regional challenges such as
humanitarian crisis’ and unstable political
environments.
I would like to express my sincere gratitude
to the Julphar team for continuing to strive
for excellence and establishing ourselves as
a leader in our field. Our ability to overcome
challenges and deliver on our promise to
clients is evident.
Providing a competitive advantage through
expanding our core business has contributed
to a strong overall performance. The
launch of Julphar Diabetes was a significant
milestone, highlighting our ability to shift
from a local company to a top global player
and enabling us to become one of the largest
producers of insulin in the world.
The decision to move into local API
production hasn’t stopped with insulin.
This year, we have also invested further in
biotechnology to tackle regional health
issues such as Chronic Kidney Disease (CKD).
Focussing on biosimilars and continued
investment in our biotechnology capabilities
strengthen our long term strategy of value
added growth drivers.
This year we launched 96 strategic new
products across various therapeutic
segments, bringing our total number of
registered products to 3483, across 5
continents.
Other areas of focus included the creation
of our first regional manufacturing facility in
Addis Ababa, Ethiopia. This 40,000 square
foot facility will produce solid dosage
and liquid dosage forms of medicines.
The capacities of this facility will allow
production of 25 million bottles per year of
suspension and syrup, 500 million tablets
per year and 170 million capsules per year.
In order to ensure our standards meet
and exceed international regulations, we
also appointed a new Director of Quality
Assurance, who implemented new programs
and initiatives throughout our staff and
facilities.
By reaching our financial goal of AED1.180
billion in sales this year, we are set to take
on 2013 with transparency, integrity and the
determination to succeed.
Dr Ayman Sahli,
CEO
Yearly sales (AED)
0.92
bn
2010
1.02
bn
2011
1.18
bn
2012
10
www.julphar.net
About Julphar
COMPANY PROFILE
Julphar is a true reflection of Ras Al Khaimah’s significant development.
Established in 1980 under the guidance of H.H Sheikh Saqr Bin Mohammed Al
Qasimi, we have established ourselves as a leader in production and distribution
of pharmaceutical products.
Our goal is to create high-quality medicines whilst maintaining a competitive
cost. We achieve this through a network of twelve world-class manufacturing
plants (with further expansion planned) and a reliable logistics network.
We maintain a diverse product portfolio which target major therapeutic segments
including endocrinology, anti-infective, cardiovascular and gastroenterology,
over-the-counter, nephrology, dermatology, respiratory, metabolic and burn
and wound management.
Highlighting our commitment to diabetes management in the region, we have
also become the only company in the Middle East to produce the raw material
needed to make insulin through our division dedicated to Diabetes.
With over 800 products in various dosage forms and more in the pipeline,
Julphar is an example of one of the UAE’s local businesses making an impact on
the global stage.
Essence: Sustaining Health
Vision: Adding value to our communities through
healthcare
Mission: We strive to sustainably meet the
medicinal requirements of our communities
through the production of the highest quality
medicine, whilst ensuring their continued
availability and accessibility.
Values: Respect / Commitment / Ethics / Passion
Purpose: We believe healthy people create
healthy homes and build healthy communities.
We bring health to people in need.
As an enabler
of well-being in
our communities,
it is our ethical
responsibility
to facilitate the
availability and
accessibility
of required
medicines. This
Annual Report 2012
11
Global Reach
Top 5 Performing Products
Levant & Iraq
Saudi Arabia
ADOL
JULMENTIN
MEBO
RISEK
TRIAXONE
ADOL
JULMENTIN
MEBO
RISEK
TRIAXONE
North Africa
DIALON
EPOTIN
FOLICUM
JUSLINE
MEBO
East Africa &
Nigeria
EPOTIN
GINSAVIT
JULMENTIN
TRIAXONE
VANCOLON
Commonwealth
of Independent
States & Far East
CALVITALIS
JULMENTIN
JULPHAMOX
PROFINAL
TRIAXONE
Egypt, Sudan &
Lebanon
ADOL
JUSPRIN81
MEBO
RISEK
TRIAXONE
GCC
(exclude KSA)
ADOL
JULMENTIN
MEBO
RISEK
TRIAXONE
Julphar Offices
Afghanistan
Algeria
Bahrain
China
Ecuador
Egypt
Ethiopia
Indonesia
Iraq
Jordan
Kenya
Kuwait
Lebanon
Libya
Mauritius
Morocco
Nigeria
Oman
Philippines
Qatar
Saudi Arabia
Senegal
South Africa
Sudan
Syria
Tajikistan
Tanzania
Uganda
United Arab Emirates (H.Q.)
Yemen
12
www.julphar.net
2012 Growth Strategy
In 2012, our approach to sustaining both
short and long term growth has included
a focus on expanding our facilities
internationally, raw material API
production and increasing our presence
in high potential markets.
Raw Material Production
In 2012, Julphar launched a division entirely
dedicated to the manufacturing and
commercialization of diabetes products.
The Julphar Diabetes manufacturing plant
is built in accordance with the latest EMEA
regulations and utilizes the best available
technologies in the market. Production
capacity is expected to be 1,500 kgs of
human insuln API, that could yield abuot
40 million vials of insulin per year, enough
to supply the entire region and beyond.
API Production is a key area of growth
for Julphar. Diabetes is a global pandemic
and is on the rise in the MENA region and
other countries where detection is poor
and insulin is not always available.
Continuing its focus on biotechnology,
Julphar is currently the only company
in the Middle East with an in-house
facility dedicated to producing the raw
material needed to make erythropoietin.
The Julphar product comes from the
Annual Report 2012
originator of the raw material, ensuring
that the quality of its erythropoietin
product is uncompromised. Current
production levels of erythropoietin in the
Julphar facility amount to approximately
10 million vials per year.
High-potential markets
MENA markets offer a tremendous area
for growth, particularly with Julphar’s
vast presence in KSA, Libya and Iraq.
Julphar has focused on building and
maintaining relationships, and has the
ability to recognise high potential markets
through our long-term presence in these
countries.
Julphar has a proven record to remain
strong in difficult markets amidst political
instability and humanitarian crisis. This is
attributed to a long term presence and
a logistics division which enable rapid
delivery of products to areas which need
it the most.
Diversification into other
markets
2012 marked the realisation of Julphar’s
differentiated strategy of diversification
and
expansion
into
emerging
markets. Building its first international
manufacturing facility was a milestone.
As commerce in Ethiopia continues
to grow, along with factors facilitating
trade, Julphar recognised Ethiopia as a
promising environment.
The facility will serve to encourage
Ethiopia’s technical Industry, enriching
the expertise and skills of its people.
13
Local staff recruitment began across
key functional areas such as Quality
Assurance, Quality Control, Regulatory
Affairs, Production and Engineering,
along with various Administrative roles.
“In the Middle East, the
number of people with
diabetes is expected
to grow to 39 million
by 2025, from 22
million today. In Africa,
the numbers more than
double from 7 million
to 15 million in 2025”
Joe Saldahna
General Manager, Julphar Diabetes
14
www.julphar.net
Julphar Training Centre - Courses
completed in 2012
1. Customer Care & Service Excellence
Date: 15th – 18th January 2012
Venue: Julphar Training Center / JTC
No. of Participants: 12 – 2 attend from RAK
Immigration & 1 from RAK Airport
9. Sharjah University Student’s Biosimilar
Training
Date: 9th December 2012
Venue: Julphar Training Center
No. of Participants: 40
2. RAKMHSU CPD Conference Date: 25th May 2012
No. of Participants: 100
10. Pharmacy Student’s Industrial Training
3. RAKMHSU Career Fair JTC speaker &
exhibition participation
Date: 22nd October 2012
4. Sharjah University Soft Skills Training
JTC speaker & exhibition participation
Date: 29th April 2012
5. World Pharmacist Day
Date: 25th Sept. 2012
Venue: Sharjah University
No. of Participants: 10
6. Leadership Training
Planned Date: December 2012, for three
days
Venue: Ministry of Interior, RAK
No. of Participants: 20
7. Customer Care & Service Excellence for
Ministry of Interior - RAK
Planned Date: Jan. 2013, for two days
Venue: Ministry of Interior, RAK
No. of Participants: 20
8. National Spirit Seminar for Julphar &
other RAK Government authorities
Planned Date: Jan. 2013
10a. Ajman University of Science & Technology Date: 22nd Jan. to 2nd Feb. 2012
Duration: two weeks
No. of Students: 65
10b. Ajman University of Science & Technology
Date: 23rd Jan. to 5th Feb. 2012
Duration: two weeks
No. of Students: 17
10c. University of Findlay – USA
Date: 20th – 24th May 2012
Duration: one week
No. of Students: 9
10d. Ajman University of Science & Technology
Date: 24th June to 7th July 2012
Duration: two weeks
No. of Students: 28
10e. Nizwa University – Oman
Date: 26th August – 6th September, 2012
Duration: two weeks
No. of Students: 15
10f. RAK Medical Health & Sciences University (RAKMHSU) Date: 16th Sept. to 11th Oct. 2012
Duration: four weeks
Annual Report 2012
15
Responsibility
Under the patronage of our Chairman HH Sheikh Faisal Bin Saqr Al Qasimi in
coordination of our CEO, Dr. Ayman Sahli.
Julphar Training Center / JTC has announced
“Sheikh Faisal Leadership Program”
specially designed for our Local Staff to
grow Emirati leaders encouraging them to
be active sharing the decision making and to
fuel their career advancement.
The program will cover the following
Training Courses: Communication Skills,
Management and Leadership Skills,
Human Resources Management, Finance
Management, Presentation Skills, Quality
and Excellence Management and English.
The turnout was excellent on the program,
but the choice was difficult as there were
specific criteria for nomination. The number
of applicants was 60 employees, but was
accepted only 45 employees who met the
selection criteria via an ability test and
individual interviews.
The program will start with English test to
specify the level of English language for
each of the accepted employees and will
be continued with the above mentioned
training courses.
As the largest local
pharmaceutical
company, Julphar
places great
importance on
Emiratisation and aims
to play a significant role
in the development
of our national
staff, students and
professionals.
HH Sheikh Faisal Bin Saqr Al Qasimi
Chairman
16
2012 Highlights
January
Jusprin new pack launched in Egypt
Julphar announces 2011 sales revenue of Dh1.024bn
February
Julphar announces the provision of 5 scholarships and AED100K annually
to The American University Of Ras Al Khaimah
Julphar Sponsors Global Financial Markets Forum in UAE
MEBO Scar Launched in KSA, Lebanon and UAE
Julphar announces 10% increase in localization
March
Julphar announces 11% growth for Q1
Julphar sponsors Diabetes Camp for Kids (image 2)
Julphar Sponsors Duphat
Julphar hosts annual cGMP update conference
Julphar hosts Risek Update
Calyptus launched in UAE
Effervescent Multivitamins launched in UAE
Miran launched in UAE
April
UAE Minister of Economy, H.E. Mr. Sultan Bin Saeed Al Mansoori visits
Julphar (image 3)
May
Julphar sponsors Africa Health Exhibition in South Africa
Julphar sponsors World Cardiac Conference in UAE
MEBO Scar launched in Qatar
June
Julphar announces 13.5% growth for Q2
Julphar CEO secures place in Arabian Business’ ‘Worlds most Influential
Arabs’
Julphar Launches MSD Partnership (image 4)
www.julphar.net
Annual Report 2012
July
Feromax launched in Jordan
September
Julphar announces 14% growth for Q3
Julphar launches Julphar Diabetes and hosts Julphar Diabetes Official
Scientific Opening in UAE (image 4,5)
Julphar wins 2012 CEO of the Year Award
Sheikh Faisal Leadership Programme launched
October
Julphar launches Julphar Updates for Medical Practitioners (JUMP)
program
November
Julphar Diabetes official Scientific Opening in Algeria
Julphar Diabetes lights up in blue to honour World Diabetes Day
African Delegates visit Julphar in preparation for launch of Julphar’s
Ethiopian manufacturing facility (image 8)
MEBO Scar launched in Kuwait
Feromax launched in KSA
Lipigard launched in Libya
December
Julphar announces 15.3% growth for Q4
MEBO Dressing launched in KSA
17
18
www.julphar.net
Organisation
Chairman, Board of Directors and CEO
SUPPORT DIVISIONS
Finance
Regulatory Affairs
Medical Affairs
Human Resources
Quality Affairs
Quality Control
OPERATION DIVISIONS
CLIENT DIVISIONS
Production
Material Management
Product Development Lab.
Maintenance
Sales
Marketing
Tender
Distribution Agents
EXECUTIVE SUPPORT
CEO Office
Legal Counsel
Julphar Diabetes
Chairman of the Board Board of Directors
CEO Head Office
Founded
Julphar Facilities
Planned Facilities
Strategic Partnerships
Subsidiaries
Web site address 2012 Sales Number of employees 2012 Corporate Development
Business Affairs
MenaCool
Corporate Communications
Julphar Training Centre
HH. Sheikh Faisal bin Saqr Al Qasimi
HE Hassan Ahmed Al Akim (Vice Chairman)
Sheikh Ahmed Bin Saqr Al Qasimi
Sheikh Saqr Bin Humaid Al Qasimi
Mr. Ahmed Essa Al Naem
Mr. Nawaf Ghobash Ahmed Saeed
Mr. Mohamed Jamaluddin Al Saati
Dr. Ali Hussein Al Zawawi
Mr. Ahmed Salim Al Hosni
Dr Ayman Sahli
Ras Al Khaimah, United Arab Emirates
March 30, 1980
11 operational plants in Ras Al Khaimah
KSA Plant, Ethiopia Plant
International Diabetes Federation
American University (RAK) – Scholarships
MSD
Menacool FZE
Julphar Pharmaceuticals PLC, Ethiopia
www.julphar.net
Approximately AED 1.18 billion
Over 2500 worldwide
Annual Report 2012
19
Production and Products
Plant
Annual Capacities
JI
5000 Million Tablets, 500 Million Capsules, 5 million
Powder Pro-Suspension
JII
30 Million Ampoules, 6 Million Lyophilized Vials,
5 Million Pre-filled Syringes
JIII
600 Million tablets and capsules, 5 Million antibiotic powders
for suspension
JIV
300 Million tablets and capsules, 5 Million of Antibiotic Powder
Pro-suspension
JV
Packaging Plant (as needed)
JVI
94 Million bottles Syrup, Suspensions and Drops
JVII
200 Grams erythropoietin, equalling 8 Million vials
JVIII
50 Million Units
JIX
30 Million Units
JX
60 Million Tubes of Creams and Ointments,
200 Million suppositories
JXI
1,500 kg. of human insulin API
Pipeline
From Jan-Dec 2012:
96 Product Approvals
Registrations
3483 registration certificates
211 Julphar brands
“Julphar Regulatory affairs
department has tactfully
focused on pipeline
development. In 2012,
we have had 96 product
approvals – a remarkable
achievement.”
Dr. Emad Aly
Medical and Regulatory Affairs Director
20
www.julphar.net
Julphar Diabetes
General Manager’s Message
2012 was a breakthrough year for Julphar
Diabetes; we were able to build a strong
foundation which will serves us well over
the long term. After establishing our own
identity to focus on diabetes under the
Julphar umbrella, we were able to position
Julphar Diabetes as a strategic diabetes
partner offering patients “ Quality Accessible
Care’’ through a comprehensive portfolio of
oral anti-diabetic products and insulin.
As we celebrate our success in 2012,
I wish to thank our core team without
whose dedications and tireless efforts this
would not have been possible. Success
was achieved through the strong support
of our matrix organization. Our heartfelt
gratitude goes out to each one of them.
Many of our partners from other functions
offer us their best on a daily basis. They
work in anonymity without the recognition
and appreciation they deserve. This is our
chance to say “Thank You“on behalf of the
Julphar Diabetes team.
Financial
We more than doubled our revenue in 2012
versus 2011, and plan to double revenue
again in 2013. Based on the foundation we
have established, we will see exponential
growth in both our oral and insulin
businesses in 2014 and beyond. This growth
will be achieved through new product when
loss of exclusivity occurs, delivery and
monitoring devices, and line extensions of
currents products.
Milestones
Focus on the UAE
We have now a dedicated team to serve
our HCP’s in the UAE. These include a PM,
KAM and 3 DSR, with focus on the home
country, through whom we were able to
engage HCP’s at all levels. This has led to
the awareness and support of Julphar and
our products. We aspire have a dominant
presence in the UAE over the next 5 years.
Market Access
In line with our philosophy of offering
“Quality Accessible Care” we were able to
access second and third tier cities and towns
which were underserved and had limited
access to these critical medications. We
entered the markets in Iraq, KSA and Algeria.
We are now establishing a presence in Libya.
New product launches were prosecuted in
KSA for Glypride, Algeria for Jusline and we
continue to build our strong presence in
Iraq.
Scientific Knowledge
One of our key strategic pillars is bringing
cutting edge science to the HCPs in our
region through Global Key Opinion Leaders.
During our Scientific Symposium for the
launch of Julphar Diabetes, Mary Angeline
Bethel, MD from Oxford University in the
UK spoke about relationship between
Diabetes and Cardiovascular Disease. Jay
Skyler, MD of Diabetes Research Institute in
Miami spoke about the Future of Diabetes
Annual Report 2012
to 100 KOL’s representing our region. They
were able to share their experiences and
best practices with the audience. This is the
first time Global KOLs at the highest level
conducted a symposium of this magnitude
in the UAE. We have Enduring materials
from these programs will be shared with
HCPs who were unable to attend. Given the
excellent feedback we received and demand
for such events, we will be conducting
similar programs in the UAE, Istanbul and
Barcelona in 2013.
We participated at major regional
conventions such us Lebanese Society
of Endocrinology Diabetes and Lipids
(EDL) in Lebanon, Excellence in Diabetes
Endocrinology Congress (EDE) in Abu Dhabi,
Emirates Diabetes Endocrine Congress
(EDEC) in Dubai and the International
Diabetic Foot Conference (IDFC) in Dubai.
We also sponsored Endocrine Club Meetings
as well as HPCs attendance to the American
Diabetes Association- Middle East (ADA-ME)
in Dubai. We had a strong presence at each
event and we will continue to do so in 2013.
As part of our partnership with the IDF, we
conducted a “Kids Camp “inviting 60 children
with Type 1 diabetes coming from across the
GCC to offer them advice and guidance on
coping with diabetes in their day to day lives.
To mark the 21st World Diabetes Day on
November 14th, and in collaboration with
Diabetes & Endocrine local associations we
organized a number of internal and external
diabetes awareness events such walkathon
and screening campaigns across UAE, KSA,
Lebanon, Tunisia and Algeria in to spread
education and awareness about Diabetes.
Insulin API
The Grand opening of ’Julphar Diabetes ‘ was
performed in September 2012. In addition
to the scientific session, delegates were
able to tour the new facilities. API is now
in production and Merck Millipore signed a
strategic supply agreement with us. As the
first company-in the region to supply API of
21
the highest quality, we are now in discussion
with several insulin providers around the
world to satisfy their API needs. It is our goal
to have Jusline finished product produced
with Julphar API.
Communication
As part of our corporate social responsibility,
we are committed to spreading awareness
about diabetes epidemic in our region
and more importantly how to prevent its
complications. In 2012 we took our role
seriously in spearheading education thru
various media channels and we will continue
to do so in 2013.
Joe Saldahna, GM Julphar Diabetes
22
www.julphar.net
Julphar Ethiopia
Pharmaceuticals PLC
The resurgence of Africa as an increasingly
powerful global and economic force
combined with the continent’s ambitious
growth plans and rapidly growing population
mean that the demand for quality healthcare
is greater than ever.
Recognising the importance of the African
market, Julphar decided to launch its first
African manufacturing facility in the Gerji
Jakros region of the Ethiopian capital, Addis
Ababa. Covering an area of 40,000 square
feet, the facility produces solid dosage and
liquid dosage forms of medicines.
During 2012, the design and construction of
the plant took place. Julphar worked in close
consultation with international regulatory
bodies to ensure that its facility meets
International Accreditation and cGMP
compliance.
The opening of its first African facility in
Ethiopia not only demonstrates Julphar’s
commitment to the development of world
class healthcare across this dynamic and
vast continent but also emphasises its longterm desire to become a key investor in its
economic development.
About the Facility
Facility Size
40,000 square foot
Staff
200 staff required (for initial phase)
Complete Packaging Line
Syrup and suspension - Capping Machines,
Labelling Machine,
Carton Machine, Shrink wrap machine
Capsules and tablets - Packing Machine,
Blistering Machine
Machines
Production – tablets and capsules
Fulid Bed Dryer (Glatt, Germany)
Granulator (Lodge, Germany)
Bionic Bender blender (Olsa, Italy)
Steralization Oven (Olsa, Italy)
Tablet Compression Machine (BWI Manesty)
Capsule Filling Machine (Bosch, Germany)
Packing
Blistering Machine (Bosch, Germany)
Blistering Machine (Ima, Italy)
Annual Report 2012
Julphar recognises
that Ethiopia, now
more than ever, is an
extremely interesting,
dynamic and important
market
opportunity. As
commerce across the
continent continues to
grow, the demand for
quality, affordable
healthcare is greater
than ever.
23
Capacities
Production - syrup and suspension
Bottles – 25 million bottles per year
Tablets – 500 million tablets per year
Capsules– 170 million capsules per year
24
www.julphar.net
B
Annual Report 2012
25
Annual Report
Section B
Business Overview
Overview of Global Healthcare Market
Industry Forecast Scenario
Overview of Julphar’s Major Markets
Other Markets (GCC and Levant)
26
www.julphar.net
Overview of Global Healthcare
Market
Healthcare is a large and growing sector
worldwide. Emerging markets in the Middle
East and North Africa (MENA) region
continue to show growth. Demographics,
Regulatory Framework and Economic
Factors affect this.
Globally, the financial market has seen
an increase in stability compared to
2011, however concerns still remain. The
weakness of the Euro, consumer confidence
and unemployment rates in the US continue
to affect the overall market.
According to “Global Pharmaceutical
Market Forecast to 2012”, global pharma
industry is projected to grow at a CAGR of
around 6.5% during 2011-2013. The growth
will be driven by low cost factor, increasing
prevalence of diseases worldwide, and
rising per capita income of consumers. Our
research identifies that sales of generic
drugs will emerge as the most prominent
segment of the pharma market during
the forecast period, indicating large
opportunities for generics manufacturers
to tap. (source - BMI)
Decline in global
pharma market was
largely due to the
economic slowdown,
and further aggravated
by patent expiry
of key blockbusters
together with
saturation in key
pharma markets, such
as the US and Western
Europe.
Annual Report 2012
27
Industry Forecast Scenario
Pharmaceutical Market Forecast 2007-2021
4.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
3.5
3.0
2.5
2.0
1.5
1.0
2021f
2020f
2019f
2018f
2017f
2016f
2015f
2014f
2013f
2012f
2011
2009
2008
2007
0.0
2010
0.5
Pharmaceutical sales at CER (US$bn), LHS
Pharmaceutical sales (US$bn), LHS
Pharmaceutical sales, % of GDP, RHS
Source: BMI
Table: Pharmaceutical Sales Indicators, 2008-2016
2008
2009
2010
2011e
2012f
2013f
2014f
2015f
2016f
Pharmaceutical sales
(US$bn)
1.175
1.337
1.463
1.51
1.56
1.686
1.847
2.024
2.22
Pharmaceutical sales
(US$bn), % chg y-o-y
25.2
13.8
9.4
3.5
2.9
8.2
9.5
9.6
9.6
Pharmaceutical sales
(AEDbn)
4.316
4.911
5.373
5.563
5.720
6.188
6.778
7.430
8.15
25.2
13.8
9.4
3.5
2.8
8.2
9.5
9.6
9.6
1.175
1.337
1.463
1.515
1.557
1.685
1.845
2.023
2.218
189.3
192.7
194.7
191.9
192.3
205.4
223.1
241.8
260.8
Pharmaceutical sales, %
of GDP
0.37
0.49
0.48
0.47
0.45
0.46
0.46
0.46
0.46
Pharmaceutical sales, %
of health expenditure
12.40
11.31
13.43
12.4
11.29
10.94
10.73
10.54
10.44
Pharmaceutical sales
(AEDbn), % chg y-o-y
Pharmaceutical sales at
constant exchange rate
(US$bn)
Pharmaceutical sales,
per capita (US$)
Source: BMI
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Overview of Julphar’s Major Markets
United Arab Emirates (UAE)
KSA
Julphar expects the UAE will remain one
of the strongest and most stable markets
in the region and recognize the UAE as
large growth potential, both short and
long term. This is attributed to a growing
affluence of expatriate population, high
income and an increasing prevalence of
lifestyle diseases across the country.
Julphar expects Saudi Arabia to remain
the largest pharmaceutical market in the
Middle East and Africa region, growing
from SAR16.69bn (US$4.46bn) in 2011 to
SAR18.93bn (US$5.05bn) in 2012. In the
forthcoming years, the Saudi pharmaceutical
market is set to experience steady growth
due to 120 Hospitals coming to completion
and Healthcare infrastructural changes from
the Government.
The government is increasing private
healthcare expenditure and the demand
for innovative drugs continues to increase.
Plans for new healthcare facilities will
boost future demand for medicines. Local
API production manufacturing is increasing
through Julphars’ newest facility, based in
Ras Al Khaimah.
Headline Expenditure Projections:
•
Pharmaceuticals:
AED5.56bn
(US$1.51bn) in 2011 to AED5.72bn
(US$1.56bn) in 2012; +2.9% in local
currency and US dollar terms. Forecast
unchanged from Q 4 12.
• Healthcare: AED46.44bn (US$12.64bn)
in 2011 to AED52.13bn (US$14.20bn)
in 2012; +12.2% in local currency terms
and +12.3% in US dollar terms. Forecast
broadly unchanged from Q 4 12.
In an effort to promote social stability, the
Government announced its initiative to
invest US$3.2bn in healthcare projects
across Saudi Arabia. This will increase access
to healthcare and contribute to long term
growth in the healthcare sector.
Headline Expenditure Projections:
(Source: BMI)
•
Pharmaceuticals:
SAR16.69bn
(US$4.46bn) in 2011 to SAR18.93bn
(US$5.05bn) in 2012; +13.4% in both local
currency and US dollar terms. Forecast
broadly unchanged from Q 4 12.
• Healthcare: SAR78.98bn (US$21.09bn)
in 2011 to SAR91.53bn (US$24.44bn) in
2012; +15.9% in both local currency and US
dollar terms. Forecast broadly unchanged
from Q 4 12.
Annual Report 2012
Iraq
Iraq is a significant market for Julphar,
making up 12.6% of total sales. The
healthcare market remains challenging
due to lack of infrastructure and
underinvestment. Julphar expects the
Iraq market will remain this way for the
forthcoming years.
Healthcare facilities are slowly improving;
plans for two specialist hospitals are
underway for the forthcoming years.
Import and Exports restrictions and
counterfeit medicines contribute to
challenges.
29
Headline Expenditure Projections:
(Source: BMI)
•
Pharmaceuticals:
EGP14.99bn
(US$2.48bn) in 2012 to EGP17.01bn
(US$2.70bn) in 2013; +13.4% in local
currency terms and +8.9% in US dollar
terms. Local currency forecast slightly
higher in relation to Q113 , despite
downward revision of historical figures .
• Healthcare: EGP66.59bn (US$11.01bn)
in 2012 to EGP74.85bn (US$11.88bn) in
2013; +12.4% in local currency terms and
+7.9% in US dollar terms. Local currency
broadly in line with Q113.
Headline Expenditure Projections:
(Source: BMI)
Algeria
•
Pharmaceuticals:
IQD1,239bn
(US$1.06mn) in 2011 to IQD1,476bn
(US$1.26bn) in 2012; +19.1% in local
currency and +19.0% in US dollar terms.
Forecast broadly unchanged from Q 4 12.
Julphar recognises Algeria as an important
market which will present long term
opportunities and as such has commenced
construction of a new facility, planned for
launch over the next 3-5 years.
• Healthcare: IQD9,439bn (US$8.07bn) in
2011 to IQD11,532bn (US$9.86bn) in 2012;
+22.1% in local currency and +22.1% in US
dollar terms. Forecast broadly unchanged
from Q412.
Egypt
Julphar expects Egypt will remain a large
and important player due to steady growth
in the pharmaceutical market, as well as an
increasing population; however political
instability and lack of regulatory governing
make Egypt high risk for international
pharmaceutical companies.
According to BMI, the downsides to the
country’s state of political and economic
flux, are: the patent cliff, pricing, higher
domestic drug production output and
a diversification of drugs available at
competitive prices in the generic drug
sector.
Julphar expects the pharmaceutical market
will see growth over the foreseeable
future, largely due to an increase in
market demand, as well as healthcare
sector modernization initiatives by the
government.
Headline Expenditure Projections:
(Source: BMI)
•
Pharmaceuticals:
DZD241.11bn
(US$3.21bn) in 2012 to DZD264.51bn
(US$3.53bn) in 2013; +9.7% in both local
currency and US dollar terms. Forecast
broadly unchanged from Q113.
• Healthcare: DZD686.53bn (US$9.15bn)
in 2012 to DZD749.86bn (US$10.00bn) in
2013; +9.2% in both local currency and US
dollar terms. Forecast broadly unchanged
from Q113 , although historical data revised
upwards.
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Other Markets
(GCC and Levant)
Kuwait
• Pharmaceuticals: KWD204mn (US$737mn) in 2011 to KWD219mn (US$781mn) in 2012;
+7.4% in local currency terms and +6.0% in US dollar terms. Forecast raised from Q 4 12 .
• Healthcare: KWD1.10bn (US$3.96bn) in 2011 to KWD1.20bn (US$4.30bn) in 2012; +10.0%
in local currency terms and +8.5% in US dollar terms. Forecast raised from Q 3 12 .
Oman
• Pharmaceuticals: OMR166mn (US$431mn) in 2011 to OMR181mn (US$476mn) in 2012;
+8.9% in local currency terms and +10.4% in US dollar terms. Forecast broadly in line with
Q412.
• Healthcare: OMR728mn (US$1.89bn) in 2012 to OMR796mn (US$2.10bn) in 2012;
+9.3% in local currency terms and +10.8 in US dollar terms. Forecast revised downwards
due to modifications to historical figures.
Qatar
• Pharmaceuticals: QAR1.32bn (US$362mn) in 2011 to QAR1.38bn (US$379mn) in 2012;
+4.7% in local currency and US dollar terms. Historical figures adjusted to reflect new
import data.
• Healthcare: QAR10.54bn (US$2.89bn) in 2011 to QAR11.40bn (US$3.13bn) in 2012;
+8.2% in local currency and US dollar terms. Forecast slightly lower from Q412 on account
of macroeconomic factors.
Annual Report 2012
Bahrain
• Pharmaceuticals: BHD90mn (US$240mn) in 2011 to BHD100mn (US$260mn) in 2012;
+6.12% in both local currency and US dollar terms. Forecast unchanged from Q412.
• Healthcare: BHD420mn (US$1.1bn) in 2011 to BHD500mn (US$1.2bn); +7.3% in both
local currency and US dollar terms. Forecast unchanged from Q412.
Lebanon
• Pharmaceuticals: LBP1,959bn (US$1.30bn) in 2011 to LBP2,061bn (US$1.37bn) in 2012;
+8.6% in local currency terms and +9.2% in US dollar terms. Forecast revised upwards from
Q412 due to modifications to historical figures.
• Healthcare: LBP4,495bn (US$2.99bn) in 2011 to LBP4,750bn (US$3.15bn) in 2012; +5.7%
in local currency terms and +5.6% in US dollar terms. Forecast revised upwards from Q412
due to modifications to historical figures.
Jordan
Pharmaceuticals: JOD463mn (US$653mn) in 2011 to JOD501mn (US$707mn) in 2012;
+8.1% in local currency terms and +8.1% in US dollar terms. Forecast unchanged from Q412.
• Healthcare: JOD1.73bn (US$2.45bn) in 2011 to JOD1.87bn (US$2.65bn) in 2012; +8.0% in
local currency terms and +8.1% in US dollar terms. Forecast unchanged from Q412.
Source: BMI
31
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C
Annual Report 2012
33
Annual Report
Section C
Annual Financial Results
Business & Financial Overview
Independent Auditor’s Report
Consolidated Statement of Financial Position
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Cash Flows
Consolidated Statement of Changes in Shareholders’ Equity
Notes to the Consolidated Financial Statements
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Business & Financial Overview
Operational Performance Overview
Revenues from Sales
The company registered sales revenue of AED 1,180.6 million during the year 2012, a year-onyear (yoy) growth of 15.3% over sales of AED 1,024.1 million in the previous year.
Private Market vs. Tender Market Sales
Private market sales of AED 842.5 million saw a yoy growth of 12.9% and contributed 71.4% of
the total sales, as against 72.8% in the previous year. As against this, the tender market sales
of AED 338.1 million increased by 21.6% yoy, contributing 28.6% of the total sales, as against
27.2% during the previous year.
(AED mn)
FY 2012
FY 2011
YoY Change
Sales
1,180.6
1,024.1
15.3%
Pvt. Mkt. Sales
Share
842.5
71.4%
746.0
72.8%
12.9%
Tender Sales
Share
338.1
28.6%
278.1
27.2%
21.6%
Country-wise Sales
Saudi Arabia, with a contribution of (32.0%) continued to be the leading market for Julphar’s
products during the year. It was followed by Iraq (12.6%), UAE (9.7%), Libya (6.7%), Egypt
(5.9%), Afghanistan (5.0%) and Lebanon (4.3%). The top-7 markets, thus, accounted for about
71.8% of the total sales for the year.
Annual Report 2012
35
Country-wise Sales
Saudi Arabia, with a contribution of (32.0%) continued to be the leading market for Julphar’s
products during the year. It was followed by Iraq (12.6%), UAE (9.7%), Libya (6.7%), Egypt
(5.9%), Afghanistan (5.0%) and Lebanon (4.3%). The top-7 markets, thus, accounted for about
71.8% of the total sales for the year.
Julphar - Country-wise Sales Year 2012
3%
2%
2%
1%
6%
32%
Saudi Arabia,
Iraq
UAE
Libya
3%
Egypt
3%
Afghanistan
Lebanon
4%
Kuwait
Jordan
4%
Yemen
Oman
5%
Algeria
Sudan
Ethiopia
6%
12%
7%
Others
10%
Significant gains continued to be registered in all our leading markets during the year under
review.
Therapeutic Segment-wise Sales
Anti-infectives continued to be Julphar’s leading products. Products sold in this segment alone
accounted for about a third of the company’s sales for the year. This was followed by oral cavity
& gastrointestinal tract (16.5% share), skin (12.4%), nutrition & blood (11.4%) and respiratory
system (7.5%), respectively. The top-5 segments collectively accounted for about 79% of the
total sales for the year.
The company saw gains in most of its major therapeutic segments. Product sales in
central nervous system, endocrine system, musculoskeletal & joint diseases, oral cavity &
gastrointestinal tract, respiratory system and cardiovascular system witnessed strong growth
during the year.
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JJulphar - Therapeutic Segment-wise Sales - Year 2012
12.4%
30.8%
Anti-Infective &
Antibacterial Durgs
7.5%
Cardiovascular System
Central Nervous System
Endocrine System
Immunosuppressants
Local Anaesthetics
Musculoskeletal &
Joint Disease
Nutrition & Blood
16.5%
3.8%
Oral Cavity &
Gastrointestinal Tract
Respiratory System
7.0%
11.4%
5.9%
Skin
4.1%
0.3%
0.1%
Order Book
Total Orders
The company continued to have a healthy order book at the end of the year, constituting both
the private market and tender market orders.
Financial Performance Overview
The financial performance of Julphar during the year under review was as under:
Sales
Julphar registered sales revenue of AED 1,180.6 million during the year 2012, a yoy growth of
15.3% over sales of AED 1,024.1 million in the previous year.
Sales during the period were driven by the tender market sales which saw a yoy growth of
21.6%, while the private market sales grew by 12.9% yoy.
Cost of Sales
The cost of sales for the year was AED 483.1 million, up 21.9% yoy. As a share of sales revenues,
the overall direct costs increased to 40.9% from 38.7% in the previous year. There was a sharp
increase in the cost of packaging materials during the year.
Gross Profit
Gross Profit for the year was AED 697.4 million vs. AED 627.6 million in the previous year, up
11.1% yoy. The GPM was 59.1%, as against 61.3% in the previous year.
Annual Report 2012
37
(AED mn)
FY 2012
FY 2011
YoY Change
Sales
1,180.6
1,024.1
15.3%
483.1
697.4
59.1%
217.2
18.4%
200.2
17.0%
396.4
627.6
61.3%
200.0
19.5%
170.2
16.6%
21.9%
11.1%
Cost of Sales
Gross Profit
GPM
Operating Profit
OPM
Profit
PM
8.6%
17.6%
Operating Profit
The marketing and distribution expenses were AED 415.5 million during the year – 35.2% of
revenues, 6.8% higher yoy. General & administrative expenses, on the other hand, were AED
70.3 million – 6.0% of revenues, 33.6% higher yoy. The Operating Profit for the year was AED
217.2 million vs. AED 200.0 million in the previous year, up 8.6% yoy. The OPM this year was
18.4% vs. 19.5% last year.
Finance Cost
The finance cost for the year was AED 23.0 million compared with AED 20.1 million during the
previous year. The increase is due to higher average debt levels during the year.
Profit
Profit of Julphar for the year was AED 200.2 million vs. AED 170.2 million in the previous year,
up a strong 17.6% yoy. The PM this year was 17.0% vs. 16.6% the previous year.
Earnings Per Share
Basic earnings per share for the year was 26 fils, as against 22 fils in the previous year.
Dividend for the Year
The Board has recommended a cash dividend of 10% (10 fils per share) and stock dividend of
10% for 2012, as against a cash dividend of 10% (10 fils per share) and stock dividend of 10%
paid out for 2011.
The proposed dividend will be paid out subject to approval in the Annual General Meeting.
Capital Structure
The paid-up capital of the company at the end of December 2012 was AED 784.7 million, as
against AED 713.4 million at the end of the previous year. Shareholders’ equity stood at AED
1.71 billion, up 8.9% from end of 2011.
Non-current debt stood at AED 169.7 million, while current debt stood at AED 398.1 million at
the end of the year. Total Debt-Equity ratio at the end of the year was 0.33.
The current ratio of the company was 1.9 at the end of December 2012.
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Outlook
Given the prevailing economic conditions, we are expecting company revenues to grow at a healthy rate, with a fairly
steady gross margin likely in 2013. This will likely be driven mainly by the expected organic growth of the company.
With a large share of sales being generated in the MENA region, the company is likely to continue to benefit from the
growth in the region’s pharmaceutical market, which is expected to remain much higher than that in the global market.
Our share of the MENA market is also likely to continue to increase as we consolidate our position in our existing markets,
while expanding into new markets with our growing portfolio of products. With new products and new markets, we see
considerable scope for us to grow our business, in the MENA region and beyond.
Our solid balance sheet, low gearing and continued focus on operating cash flow generation is likely to continue to give
us the financial flexibility to pursue growth opportunities, including strategic acquisitions that could supplement our
strong organic growth. We are confident that the proven strength of Julphar’s business model will likely enable us to
deliver a strong performance in 2013 and beyond.
Basis of Preparation and Forward-looking Statements
This Business and Financial review has been prepared solely to provide additional information to shareholders to assess
the company’s strategies and the potential for those strategies to succeed, and should not be relied on by any other
party or for any other purpose. The World Bank’s classification for MENA region has been relied on for our analysis of
and outlook for the region. Certain statements in the above review are forward-looking statements – using words such
as “intends”, “believes”, “anticipates”, “likely” and “expects”. Where included, these have been made by the company
management in good faith based on the information available to them up to the time of their approval of this report.
By their nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties
that could cause actual results or events to differ materially from those expressed or implied by the forward-looking
statements, and should be treated with caution. These risks, uncertainties or assumptions could adversely affect the
outcome and financial effects of the plans and events described in this review. Statements contained in this review
regarding past trends or activities should not be taken as a representation of perceived trends or activities in the future.
Undue reliance should not be placed on forward-looking statements, which are valid only on the date of the approval
of this report.
Except as required by law, the company is under no obligation to update or keep current the forward-looking statements
contained in this review, or to correct any inaccuracies which may become apparent in such forward-looking statements.
Annual Report 2012
39
INDEPENDENT AUDITOR'S REPORT
The Shareholders
Gulf Pharmaceutical lndustries P.S.C.
Ras AI Khaimah
United Arab Emirates
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Gulf Pharmaceutical Industries P.S.C. (the "Company")
and its Subsidiaries (the "Group”), which comprise the consolidated statement of financial position as at 31 December 2012, and
the consolidated Income statement,consolidated statement of comprehensive Income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and
other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit Involves preforming procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of
Gulf Pharmaceutical Industries P.S.C. and its subsidiaries as at 31 December 2012, and their consolidated financial performance
and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.
Report on Other Legal and Regulatory Requirements
Also, in our opinion, the Group has maintained proper books of account and the physical inventory was properly conducted. The
information contained in the directors' report relating to the consolidated financial statements is in agreement with the books. We
obtained all the information which we considered necessary for our audit. According to the Information available to us, there were
no contraventions during the year of the U.A.E. Federal Commercial Companies law No.8 of 1984, as amended,or the Articles of
Association of the Company which might have materially affected consolidated the financial position of the Group or its
consolidated financial performance.
Deloitte & Touche (M.E.)
21 February 2013
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Annual Report 2012
41
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Annual Report 2012
43
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Notes to the Consolidated Financial Statements
(For the year ended December 31, 2012)
1.
Establishment and operations
Gulf Pharmaceutical Industries is a public share holding company “the Company” domiciled in Digdaga - Ras Al
Khaimah. It was incorporated by the Emiri decree No.5/80 issued by H.H. The Ruler of the Emirate of Ras Al Khaimah
and its dependencies on March 30, 1980 and the Emiri decree No.9/80 on May 4, 1980. The Group comprises Gulf
Pharmaceutical Industries (Public Shareholding Company) and its subsidiaries “the Group” (Note 3).
The Company’s ordinary shares are listed on the Abu Dhabi Securities Exchange.
The Company’s registered office address is P.O. Box. 997 Ras Al Khaimah, United Arab Emirates.
The main activities of the Group are manufacturing and selling of medicines, drugs and various other types of
pharmaceutical and medical compounds in addition to cosmetic compounds. The Company commenced its commercial
activities effective from November 1984.
2.
Adoption of new and revised International Financial Reporting Standards (IFRSs)
2.1
New and revised IFRSs applied with no material effect on the consolidated financial statements
The following new and revised IFRSs have been adopted in these consolidated financial statements. The adoption of
these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years
but may affect the accounting for future transactions or arrangements.
• Amendments to IFRS 1 Removal of Fixed Dates for First-Time Adopter.
The amendments regarding the removal of the fixed dates provide the relief to the first-time adopters of IFRSs from
reconstructing transactions that occurred before their date of transition to IFRS. The amendments are effective for
annual periods beginning on or after 1 July 2011 with retrospective application.
• Amendments to IFRS 1 Severe Hyperinflation
The amendments regarding severe hyperinflation provide guidance for entities emerging from severe hyperinflation
either to resume presenting IFRS financial statements or to present IFRS financial statements for first time. The
amendments are effective for annual periods beginning on or after 1 July
2011 with retrospective application.
• Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of Underlying Assets
The amendments provide an exception to the general principles of IAS 12 for investment property measured using the
fair value model in IAS 40 Investment Property by the introduction of a rebuttable presumption that the carrying amount
of the investment property will be recovered entirely through sale. The amendments are effective for annual periods
beginning on or after 1 January 2012 with retrospective application.
Annual Report 2012
45
• Amendments to IFRS 7 Disclosures Transfers of Financial Assets
The amendments increase the disclosure requirements for transactions involving transfers of financial assets. These
amendments are intended to provide greater transparency around risk exposures of transactions when a financial asset
is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require
disclosures where transfers of financial assets are not evenly distributed throughout the period. The amendments are
effective for annual periods beginning on or after 1 July 2011. Entities need not provide the disclosures required by the
amendments for any period presented that begins before the date of the initial application of the amendments.
2. Adoption of new and revised International Financial Reporting Standards (IFRSs) (continued)
2.2
New and revised International Financial Reporting Standards (IFRSs) in issue but not yet effective and not early adopted
The Group has not early applied the following new standards, amendments and interpretations that have been issued
but not yet effective:
New and revised IFRSs
Effective for annual periods beginning on or after
• Amendments to IFRS 1 Government Loans provide relief to first-time adopters of IFRSs 1 January 2013
by amending IFRS 1 to allow prospective application of IAS 39 or IFRS 9 and paragraph 10A
of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
to government loans outstanding at the date of transition to IFRSs.
• Amendments to IFRS 7 Financial Instruments: Disclosures relating to disclosures about 1 January 2015
(or otherwise
the initial application of IFRS.
when IFRS 9 is
first applied)
• Amendments to IFRS 7 Financial Instruments: Disclosures enhancing disclosures about 1 January 2013
offsetting of financial assets and liabilities.
• IFRS 9 Financial Instruments issued in November 2009 introduces new requirements for 1 January 2015
the classification and measurement of financial assets. IFRS 9 amended in October
2010 includes the requirements for the classification and measurement of financial
liabilities and for derecognition.
Key requirements of IFRS 9 are described as follows:
• IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial
Instruments: Recognition and Measurement to be subsequently measured at amortised
cost or fair value. Specifically, debt investments that are held within a business model
whose objective is to collect the contractual cash flows, and that have contractual cash
flows that are solely payments of principal and interest on the principal outstanding are
generally measured at amortised cost at the end of subsequent accounting periods. All
other debt investments and equity investments are measured at their fair values at the end
of subsequent accounting periods.
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Key requirements of IFRS 9 are described as follows (continued):
ƒƒ The most significant effect of IFRS 9 regarding the classification and measurement of
financial liabilities relates to the accounting for changes in the fair value of a financial liability
(designated as at fair value through profit or loss) attributable to changes in the credit risk
of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as
at fair value through profit or loss, the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the effects of changes in the liability’s
credit risk in other comprehensive income would create or enlarge an accounting mismatch
in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not
subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of
the change in the fair value of the financial liability designated as at fair value through profit
or loss was presented in profit or loss.
• IFRS 10 Consolidated Financial Statements* uses control as the single basis for 1 January 2013
consolidation, irrespective of the nature of the investee. IFRS 10 requires retrospective
application subject to certain transitional provisions providing an alternative treatment
in certain circumstances. Accordingly, IAS 27 Separate Financial Statements* and IAS
28 Investments in Associates and Joint Ventures* have been amended for the issuance
of IFRS 10.
• IFRS 11 Joint Arrangements* establishes two types of joint arrangements: Joint operations 1 January 2013
and joint ventures. The two types of joint arrangements are distinguished by the rights and
obligations of those parties to the joint arrangement. Accordingly, IAS 28 Investments in
Associates and Joint Ventures has been amended for the issuance of IFRS 11.
• IFRS 12 Disclosure of Interests in Other Entities* combines the disclosure requirements for 1 January 2013
an entity’s interests in subsidiaries, joint arrangements, associates and structured entities
into one comprehensive disclosure standard.
• IFRS 13 Fair Value Measurement issued in May 2011 establishes a single framework for 1 January 2013
measuring fair value and is applicable for both financial and non-financial items.
• Amendments to IAS 1 – Presentation of Other Comprehensive Income. The amendments 1 July 2012
retain the option to present profit or loss and other comprehensive income
in either a single statement or in two separate statements. However, items of other
comprehensive income are required to be grouped into those that will and will not
subsequently be reclassified to profit or loss with tax on items of other comprehensive
income required to be allocated on the same basis.
•
Amendments to IAS 19 Employee Benefits eliminate the “corridor approach” and 1 January 2013
therefore require an entity to recognise changes in defined benefit plan obligations and
plan assets when they occur.
•
Amendments to IAS 32 Financial Instruments: Presentation relating to application 1 January 2014
guidance on the offsetting of financial assets and financial liabilities.
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine.
1 January 2013
Annual Report 2012
47
• Annual Improvements to IFRSs 2009 – 2011 Cycle
The annual improvements include the amendments to five IFRSs which have been
summarized below:
ƒƒ
ƒƒ
•
•
•
•
IFRS 1 First Time Adoption of International Financial Reporting Standards –
Repeated application of IFRS 1.
IFRS 1 First Time Adoption of International Financial Reporting Standards –
Borrowing costs.
IAS 1 Presentation of Financial Statements – Clarification of the requirements for
comparative information.
IAS 16 Property, Plant and Equipment – Classification of serving equipment.
IAS 32 Financial Instruments: Presentation - Tax effect of the distribution to the
holders of equity instruments.
IAS 34 Interim Financial Reporting - Interim financial reporting and segment
information for total assets and liabilities.
• Amendments to IFRS 10, IFRS 12 and IAS 27 – Guidance on Investment Entities
1 January 2014
On 31 October 2012, the IASB published a final standard on investment entities, which
amends IFRS 10, IFRS 12, and IAS 27 and introduces the concept of an investment entity in
IFRSs. The amendments establish an exception to IFRS 10’s general consolidation principle
for investment entities, requiring them to “measure particular subsidiaries at fair value
through profit or loss, rather than consolidate them.” In addition, the amendments outline
required disclosures for reporting entities that meet the definition of an investment entity.
*In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued,
including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). In June 2012, the
amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the application of
these IFRSs for the first time. These five standards are effective for annual periods beginning on or after 1 January 2013.
Earlier application is permitted provided that all of these five standards are applied early at the same time.
Management anticipates that these amendments will be adopted in the Group’s consolidated financial statements
for the period beginning 1 January 2013 or as and when they are applicable and adoption of these standards and
interpretations may have no material impact on the consolidated financial statements of the Group in the period of
initial application.
3.
Significant accounting policies
3.1
Statement of compliance
The consolidated financial statements have been prepared in accordance with the International Financial Reporting
Standards (IFRS).
3.2
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis, except for financial instruments
and investment property, which were presented at fair value. The principal accounting policies adopted are set
out below.
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3.3
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Basis of consolidation
The consolidated financial statements of Gulf Pharmaceutical Industries P.S.C. and its Subsidiaries (the “Group”)
incorporate the financial statements of the Company and entities controlled by the Company (its Subsidiaries).
Control is achieved where the Company has the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the profit and loss from the
effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of Group companies to bring their accounting
policies in line with those used by other members of the Group.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or
at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets.
The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the
carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the noncontrolling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to noncontrolling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity
transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which
the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised
directly in equity and attributed to equity holders of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets and liabilities of the subsidiary and any non- controlling interests.
All significant intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Details of the Company’s subsidiaries as of 31 December 2012 were as follows:
Name of subsidiary
Place of
incorporation
Percentage
and operation
of ownership
Principal activity
Mena Cool F.Z.E
Ras Al Khaimah-
100%
Transportation
UAE
Julphar Pharmaceuticals P.L.C
Ethiopia
55%
Manufacturing of medicines, wrapping and packing materials
Julphar Pharma GMBH
Germany
100%
Manufacturing of medical supplies – Discontinued
Annual Report 2012
3.4
49
Net investment in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an
interest in a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these consolidated financial statements
using the equity method of accounting, except when the investment is classified as held for sale, in which case
it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Under the equity method, an investment in associates is initially recognised in the consolidated statement of
financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other
comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s
interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net
investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on
behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities
and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which
is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value
of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is
recognised immediately in profit or loss.
The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment
loss with respect to the Group’s investment in associates. When necessary, the entire carrying amount of
the investment is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by
comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying
amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of
that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the
investment subsequently increases.
When a Group entity transacts with its associate, profits and losses resulting from the transactions with the
associate are recognised in the Group’ consolidated financial statements only to the extent of interests in the
associate that are not related to the Group.
3.5
Revenue recognition
3.5.1
Sale of goods
• Sales are measured at the fair value of the consideration received or receivable against these sales. Sales are
reduced for estimated customer returns, rebates and other similar allowances.
• Sale of goods are recognised when all the following conditions are satisfied:
• The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• The Group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the Group;
and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
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3.5.2
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Interest income
Interest on fixed deposits is recognised when it is probable that the economic benefits will flow to the
Group and the amount of income can be measured reliably.
Interest on fixed deposits are accrued on a time basis, by reference to the principal outstanding and the profit
rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life
of the financial asset to the asset’s net carrying amount on initial recognition.
3.5.3
Dividends
Dividend revenue from investments is recognized when the Company’s right to receive payment has been
established.
3.6
The Group as a lessee
All of the Group’s lease contracts are of an operating lease nature and are accounted for as operating leases.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Contingent
rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a
straight-line basis, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed.
3.7
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group entity are expressed in Arab Emirates Dirhams
(“AED”), which is the functional currency of the Group and the presentation currency for the consolidated
financial statements.
In preparing the consolidated financial statements, transactions in currencies other than the functional currency
(foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each
reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at
the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the year in which they arise.
3.8
Borrowing costs
Borrowing costs directly attributable to the acquisition and construction of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of
those assets, until such time as the assets are substantially ready for their intended use.
Annual Report 2012
51
Where applicable, investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the year in which they are incurred.
3.9
Property, plant and equipment
Land is stated at cost less impairment loss (if any).
Capital work in progress is stated at cost, less any recognised impairment loss. Depreciation of these assets, on
the same basis as other property assets, commences when the assets are ready for their intended use.
Other property, plant and equipment are carried at cost less accumulated depreciation and any identified
impairment loss.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. All other repairs and maintenance expenses are charged to the profit
or loss in the period in which they are incurred.
Depreciation is charged so as to write off the cost of assets, other than land and capital work in progress, over
their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and
depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on
a prospective basis.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit
or loss.
Depreciation is provided on the straight-line method based on the anticipated useful lives, as follows:
%
Buildings
2-10
Plant and machinery 6-33
Installations
4-25
Motor Vehicles
10-33
Furniture and fixture 10-25
Tools and equipment
10-33
Land improvements 4-10
3.10
Investment property
Investment property, which is property held to earn rentals and/ or for capital appreciation, is stated at its fair
value at the reporting date. Gains or losses arising from changes in the fair value of investment property are
included in the profit or loss in the period in which they arise.
Investment property is derecognized upon disposal or when the investment property is permanently withdrawn
from use and no future economic benefits are expected. Any gain or loss arising on derecognition of the property
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included
in profit or loss in the period in which the property is derecognised.
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3.11
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Inventories
Inventories of finished and semi finished products are valued at the lower of average production costs or net
realisable value. Production costs include materials, labour, direct expenses and production overheads. Inventories
of raw material, packing materials, spare parts and other consumables are valued at the lower of First In First Out
basis cost or net realisable value. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs necessary to make the sale.
3.12
Impairment of tangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis
can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit
or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss
is treated as a revaluation reserve increase.
3.13
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable
that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where
a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows.
Annual Report 2012
3.14
53
Employee benefits
3.14.1 Defined contribution plan
UAE national employees of the Group are members of the Government-managed retirement pension and social
security benefit scheme pursuant to U.A.E. labour law no. 7 of 1999. The Group is required to contribute 12.5%
of the “contribution calculation salary” of payroll costs to the retirement benefit scheme to fund the benefits. The
employees and the Government contribute 5% and 2.5% of the “contribution calculation salary” respectively, to
the scheme. The only obligation of the Group with respect to the retirement pension and social security scheme
is to make the specified contributions. The contributions are charged to profit or loss.
3.14.2 Annual leave and leave passage
An accrual is made for the estimated liability for employees’ entitlement to annual leave and leave passage as a
result of services rendered by eligible employees up to the end of the year.
3.14.3 Provision for employee s’ end of service benefits
Provision is also made for the full amount of end of service benefit due to non-UAE national employees in
accordance with the UAE Labour Law and is based on current remuneration and their period of service at the end
of the reporting period. Provisions for employees’ end of service benefit due to employees working with entities
domiciled in other countries are made in accordance with local laws and regulations applicable.
The accrual relating to annual leave and leave passage is disclosed as a current liability, while the provision
relating to end of service benefit is disclosed as a non-current liability.
3.15
Financial assets
All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset
is under a contract whose terms require delivery of the financial asset within the timeframe established by the
market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets
classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets of the Group are classified into the following specified categories: bank balances and cash,
financial assets ‘at fair value through profit or loss’ (FVTPL), ‘available-for-sale’ (AFS) financial assets and ‘loans
and receivables’. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period to
the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for financial assets other than those financial assets classified
as at FVTPL.
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the
dividends is established.
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The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency
and translated at the spot rate at the reporting date. The change in fair value attributable to translation differences
that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are
recognised in other comprehensive income.
3.15.1 Loans and receivables
Loans and receivables are initially measured at fair value plus transaction costs and subsequently measured
at amortised cost using the effective interest method, less any impairment. Interest income is recognised by
applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial.
3.15.2 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting
period. Financial assets are impaired where there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have
been affected.
For listed and unlisted equity investments classified as AFS equity investments, a significant or prolonged decline
in the fair value of the security below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
•
•
•
•
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for
a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the
number of delayed payments in the portfolio past the average credit period, as well as observable changes in
national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate. For financial assets carried at cost, the amount of the impairment loss is measured as
the difference between the asset’s carrying amount and the present value of the estimated future cash flows
discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be
reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in profit or loss.
Annual Report 2012
55
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit or loss in the period.
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount
of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have
been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other
comprehensive income.
3.153 Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire;
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability
for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognise the financial asset.
3.16
Financial liabilities and equity instruments issued by the Company
3.16.1 Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
3.16.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Group entities are recorded at the proceeds received, net of
direct issue costs.
3.16.3 Financial liabilities
The Group has classified the following financial liabilities as ‘other financial liabilities’: trade payables and accruals,
unclaimed dividends and bank borrowings and are initially measured at fair value, net of transaction costs and
subsequently measured at amortised cost using the effective interest method, with interest expense recognised
on an effective yield basis except for short term payable when the recognition of interest would be immaterial.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period
to the net carrying amount on initial recognition.
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3.16.4 Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged,
cancelled or they expire.
3.16.5 Dividend distribution
Dividend distribution to the Shareholders is recognised as a liability in the Group’s consolidated financial
statements in the period in which the dividends are approved by the Shareholders.
4.
Critical accounting judgments and key sources of estimation uncertainty
While applying the accounting policies as stated in Note 3, management of the Group has made certain
judgments, estimates and assumptions that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period of the revision in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
4.1
Critical judgments in applying accounting policies
The following are the critical judgements, apart from those involving estimations (see 4.2 below), that the
management have made in the process of applying the Group’s accounting policies and that have the most
significant effect on the amounts recognized in the consolidated financial statements.
4.1.1
Revenue recognition
Management has considered the detailed criteria for the recognition of revenue from the sale of goods set out
in International Accounting Standard 18: Revenue, and in particular whether the Company had transferred risks
and rewards of ownership of the goods. Based on the acceptance by the customer of the liability for the goods
sold, management is satisfied that the significant risks and rewards have been transferred and the recognition of
the revenue is appropriate.
4.1.2
Allowance for doubtful debts
Allowance for doubtful debts is determined using a combination of factors to ensure that the receivables are
not overstated due to uncollectibility. The allowance for doubtful debts for all customers is based on a variety of
factors, including the overall quality and aging of the receivables, continuing credit evaluation of the customers’
financial conditions and collateral requirements from customers in certain circumstances. Also, specific
provisions for individual accounts are recorded when the Group becomes aware of the customer’s inability to
meet its financial obligations.
4.1.3
Allowance for slow moving and obsolete inventories
Inventories are stated at the lower of cost or net realizable value. Adjustments to reduce the cost of inventory to
its net realizable value, if required, are made at the product level for estimated excess, obsolescence or impaired
balances. Factors influencing these adjustments include changes in demand, technological changes, physical
deterioration and quality issues. Based on the factors, management has identified inventory items as slow and
Annual Report 2012
57
non moving to calculate the allowance for slow moving and obsolete inventories. Revisions to the allowance for
slow moving inventories would be required if the outcome of these indicative factors differ from the estimates.
4.1.4
Classification of properties
In the process of classifying properties, management has made various judgments. Judgment is needed to
determine whether a property qualifies as an investment property, property, plant and equipment and/or property
held for resale. The Group develops criteria so that it can exercise that judgment consistently in accordance
with the definitions of investment property, property, plant and equipment and property held for resale. In
making its judgment, management considered the detailed criteria and related guidance for the classification of
properties as set out in IAS 2, IAS 16 and IAS 40, in particular, the intended usage of property as determined by
the management.
5.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity capital. The Group’s
overall strategy remains unchanged from 2011.
Capital gearing ratio
The Group reviews the capital structure on a quarterly basis. As part of this review, the Group considers the cost
of capital and the risks associated with capital.
The gearing ratio at the year end was as follows:
20122011
AED’000
AED’000
Debt (i)
Bank balances and cash
567,760 495,207
(82,686) (68,653)
Net debt
485,074
426,554
Equity (ii)
1,705,601
1,569,814
0.28
0.27
Net debt to equity ratio (times)
(i) Debt is defined as bank borrowings (see Note 18).
(ii)
Equity includes share capital, statutory reserve, voluntary reserve, foreign currency translation
reserve, cumulative changes on revaluation of investments and retained earnings.
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6.
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Financial instruments
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 3 to the consolidated financial statements.
Financial risk management objectives
The Group’s management observes domestic and international financial markets, monitors and manages the
financial risks relating to the operations of the Group through analysing risk exposures by degree and magnitude
of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit
risk, liquidity risk and cash flow interest rate risk.
The Group seeks to minimise the effects of risks related to financial instruments. The Group’s policies in this
regards are set and approved by the board of directors who draws the overall guidelines on foreign exchange risk,
interest rate risk, credit risk, and the investment of excess liquidity. Compliance with policies and exposure limits
is reviewed by the board of directors on regular basis.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and interest rates.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and
measures the risk.
Interest rate risk management
The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings.
The Group is also exposed to interest rate price risk with reference to its fixed rate time deposits with banks.
During the current year, interest on fixed deposits ranged from 1% to 2% per annum (2011: from
3% to 4% per annum).
If interest rates on bank borrowings had been 50 basis points higher/lower throughout the year and all other
variables were held constant, the Group’s profit for the year ended 31 December 2012 and equity as at 31
December 2012 would decrease/ increase by approximately AED 2.84 million (2011: AED 2.45 million).
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The
Group obtains information about counterparties credit worthiness from publicly available financial information
and its own trading records. The Group’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
Credit exposure is controlled by counterparty limits that are reviewed and approved periodically by the relevant
management in the Group and, where appropriate, letters of guarantee are obtained from customers.
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59
Credit risk is primarily related to the trade receivable balances which are presented in the consolidated statement
of financial position net of any applicable allowances for losses that were estimated by the Group’s management
based on prior experience and prevailing economic conditions. Current year’s sales include AED 377,324,000
being sales to one main customer (2011: AED 333,469,000 being sales to one main customer). Total trade
receivables due from the above main customer amounted to AED
226,257,000 as at 31 December 2012 (2011: AED 193,450,000).
Credit risk related to liquid funds is limited as the counterparties are banks with sound reputation.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment
losses, represents the Group’s maximum exposure to credit risk.
Equity price risk
Sensitivity analysis
At the reporting date if the prices of investments in equity instruments are 10% higher/lower as per the
assumptions mentioned below and all the other variables were held constant the Group’s:
• Profit/equity would have increased/decreased by AED 0.56 million (2011: AED 0.58 million) in the case of
investments held for trading.
• Equity would have increased/decreased by AED 3.14 million (2011: AED 2.81 million) in the case of availablefor-sale investments.
Method and assumptions for sensitivity analysis
• The sensitivity analysis has been done based on the exposure to equity price risk as at the reporting date.
• As at the reporting date, if the prices of investments in equity instruments are 10% higher/ lower on the
market value uniformly for all equities while all other variables are held constant, the impact on profit or loss
and equity has been shown above.
• A 10% change in the prices of investments in equity instruments has been used to give a realistic assessment
as a plausible event.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who has built an appropriate
liquidity risk management framework for the management of short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves by continuously
monitoring forecast and actual cash flows, dealing with financial institutions of good reputation and matching the
maturity profiles of financial assets and liabilities.
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• The fair value of financial assets and financial liabilities with standard terms and conditions and traded on
active liquid markets is determined with reference to quoted market prices;
60
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• The fair value of other financial assets and financial liabilities is determined in accordance with generally
accepted pricing models based on discounted cash flow analysis using prices from observable current market
transactions and dealer quotes for similar instruments.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange
rate fluctuations arise. There is no currency exchange risk related to transactions denominated in the US dollars
or currencies linked with it as the AED rate is fixed to the US dollar. The management undertakes suitable
procedures to minimise risks associated with transactions denominated in currencies other than AED and US$.
7.
Approval of consolidated financial statements
The consolidated financial statements were approved by the Board of Directors and authorized for issue on 21
February 2013.
Annual Report 2012
61
Julphar Brand Index
3V
Aceclofar
Adol
Adol Allergy Sinus
Adol Chewable Tablets
Adol Cold
Adol Compound
Adol Extra
Adol PM
Adol Sinus
Albenda
Alfacort
Alkasid
Amirone
Amlophar
Amydramine
Amydramine-II
Amydramine
Paediatric
Antiprotin
Asmafort
Atropulm
Azomycin
Bacitracin
Bcool
Beclohale
Becovit
Betasone Cream & Ointment
Betasone Tablets
Butalin Syrup and Tablets
Butalin 0.5% Solution for
Nebuliser
Butalin Inhaler CFC-Free
Calciphar
Calvitalis
Calyptus
Captophar
Cardilol
Cardiopine
Castor Oil
CD-Cal
Cefrin
Cefuzime
Cefuzime Injection
Cetralon
Chlorohistol
Chlorohistol Injection
Cimetag
Clamycin (Rithrocid)Clofen
Clofen Creamagel
Codaphed
Codaphed Plus
Cynovit
Gamavate
Gental
Ginsavit
Glycerin
Glynase
Glypride
Glyzide
Gupisone
Gyno-Mikozal
Famotec
Feromax
Fitzecalm
Flukit Syrup
Flukit Tablets
Flutin
Folicron
Folicum
Fosipril
Futasole
Futasone
Ecocaine
Epotin
Eromycin
Exedexe
Haemoproct (Supraproct)
Histaloc
Histaloc Injection
Histol
HRx
Indanorm
Intard
Iodine Tincture
Julmag
Julmentin
Julmentin
Injection
Julphacef
Julphacef Injection
Julphamox
Julphapen
Julvitalis
Jusline 30/70
Jusline N
Jusline R
Jusprin
Jusprin 81
62
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Julphar Brand Index
Kaptin
Kaptin II (Frodac)
Kdiron
Lanfast
Laxal
Laxocodyl
Laxolyne
Lidocaine
Lipigard
Lipitrol
Lisotec
Lomax
Loratin
Loratin Instantab
Lovrak
Maxinem
Mebo
Mebo Scar
Mebzol
Melophar
Mikacin
Mikostat
Mikostat Baby Ointment
Mikostat Suspension
Mikozal
Mini-Glynase
Miran
Mixavit Drops
Mixavit-M
Mixavit RDA Drops
Mixavit Syrup
Mixavit Tablets
Mododom
Moxal
Moxal II
Moxal Plus
Mucolyte
Mucum
Muscadol
Narapril
Nasivin
Negacef
Negafen
Negazole
New Bcool
New Mixavit
Normaline
Oramax
Oxytetracycline
Oxytetracycline Capsules
Panderm
Premosan
Primocef
Qpime
Radol
Rantag
Rantag 75
Recocef
Risek
Rothacin
Rubicalm
Salinal
Salurin
Salurin Injection
Sarf
Scopinal
Sedofan
Sedofan II
Sedofan DM
Sedofan-T
Sigmasporin Microral
Silvadiazin 1%
Simvast
Sonidar
Soolan
Sucralose
Supraproct-S
Tamophar
Tensotin
Tetracycline Capsules
Tetracycline Ointment
Theophar
Thiavit
Ticopar
Triaxone (Enoxirt)
Trimol
Trimol-A
Uroxin
Valopin
Vancolon
Vit A+D
Vit C (VC)
Vitamin B-Complex
Xylolin
Zordyl