Qafco annual report 2005

Transcription

Annual Repor t 2005
2005 …ƒ`` ` ` ` `æ°ùdG ô`` ` ` ` ` ` ` `jô`` ` �` `àdG
2005 …ƒ`` ` ` `æ°ùdG ô`` ` ` `jô`` `�` `àdG
õ`` `«` ` ` ` ` ªà``dG
enriched
per for mance
(ƒµaÉb) ájhÉª«µdG Ióª°SCÓd ô£b ácô°T
Qatar Fertiliser Company (SAQ)
IOƒ÷G á«dÉY ÉjQƒ«�d èàæe ÈcCG
Annual Repor t 2005
AGOB’G ‘
(ƒµaÉb) ájhÉª«µdG Ióª°SCÓd ô£b ácô°T
Qatar Fertiliser Company (SAQ)
Largest Quality Urea Producer
Contents
•
Board of Directors
3
•
QAFCO Policy
5
•
Chairman’s Statement
7
•
Management Report
9
•
Auditor’s Report
20
Consolidated Balance Sheet
21
Consolidated Statement of Income
22
Consolidated Statement of Shareholders Equity
23
Consolidated Statement of Cash Flows
24
Notes to the Consolidated Financial Statements
25
BOARD OF DIRECTORS
3
Mr. Abdulla H. Salatt
Mr. Faisal M. Al-Suwaidi
Chairman
Vice Chairman
Mr. Daniel Clauw
Mr. Misnad A. Al-Misnad
Mr. Ahmed Sultan Al-Kuwari
Director
Director
Director
Mr. Edward Cavazuti
Mr. Jassim Mohamed Nama
Mr. Khalifa Abdulla Al-Sowaidi
Director
Director
Managing Director
4
Mission:
We shall operate the plants Efficiently, Safely and Environmentally Responsibly
to Produce and Supply Ammonia and Urea at the Quality required by our Customers
and to carry out investments to Maximize Shareholders Returns.
Vision:
Largest Quality Urea Producer
Our Main Objectives Are To:
• Achieve highest possible production at comparatively low cost
• Operate the plants with maximum online factor
• Operate the plants safely and in an environmentally responsible manner
• Meet customer’s expectations with regard to Quality and Timely Delivery
We Are Committed Through Our Occupational Health & Safety, Environmental And
Quality Management Systems To:
• Increase the competency of personnel and use of adequate technology to enhance
Customer Satisfaction, environmental and safety performance
• Control of operational risks and prevention of pollution
• Implement Occupational Health & Safety, Environmental and Quality Management
Systems as a prime line responsibility at all levels of our organization and continually
improve their performance and effectiveness
• Comply with all relevant Qatari Legislations, Regulations and Standards adopted by
the Company
• Involve and consult with, our employees on matters related to our Occupational
Health and Safety System
• Communicate this Policy to our employees and contractors and make it available
to interested parties and the public
• Monitor, study and record the environmental impact of our operations caused by
discharges to the sea and emmissions to air for possible reductions
• Encourage re-use and recycling, and manage our solid waste to reduce environmental
impact
• Conduct regular reviews of relevant Occupational Health and Safety, Environmental
and Quality activities for compliance with the adopted Standards
• Open information and communication with all parties affected by or interested in
our activities
planning for
extraordinary yield
6
C H A I R M A N ’ S S TAT E M E N T
The year 2005 for QAFCO witnessed continued growth and
Driven by these proud accomplishments, QAFCO strives to
outstanding achievements. Twofold variables influenced that
maintain the leading position it has reached in over four
performance, namely the doubling of the plant’s production
decades of operation as a world class producer and exporter
capacity due to the commissioning of QAFCO-4, and the
of fertilizers. Thus, in harmony with the accelerated industrial
firm prices of urea and ammonia, concomitant with and
development currently underway, and with the aim of
driven by the rise in oil prices. It was this combination that
maximizing the utilization of the nation's ample gas supplies
provided QAFCO in 2005 with substantial gains in revenues
and their potential added value, and in response to
and net earnings.
demand from a growing network of clients, QAFCO has started
preparations to embark on its fifth production train
Thanks to sincere efforts of QAFCO Management and staff,
QAFCO-5, which is scheduled for completion in 2010. When
all of the Company's production lines in 2005 exceeded their
fully operational, the new expansion will reinforce QAFCO's
set targets and by far outstripped the previous year's figures.
position as the world's largest single producer of urea. A plan
Meanwhile, on the marketing front, even though the year
is also under study to revamp QAFCO-1 plant and raise its
saw a sharp rise in the prices of QAFCO products, the
production capacity by 20%. On the other hand, a study is
Company stepped up its drive to carve inroads into new
underway to set up a melamine plant which will take advantage
markets. Consequently, its sales graph again significantly
of readily available supply of high urea quality as feedstock.
outpaced the 2004 exports figures.
In conclusion, and on behalf of the Board of Directors and
In another development, QAFCO Management has been
the entire staff of our company, I wish to extend our grateful
according special importance to Qatarization in the context
thanks and appreciation to HH the Emir, Sheikh Hamad Bin
of a nationwide strategy to attract suitably qualified nationals
Khalifa Al-Thani and HH Heir Apparent, Sheikh Tamim Bin
from various disciplines and to provide them with adequate
Hamad Al-Thani for their sustained care and support. I would
training and/or education both locally and abroad. The efforts
like also to convey our sincere gratitude to HE Abdullah Bin
made in this regard have proved quite rewarding, with a
Hamad Al-Attiya, the second Deputy Prime Minister and
significant proportion of the key positions now held by Qatari
Minister of Energy & Industry, for his continued support of
nationals running their respective sections and units with a
the QAFCO’s plans and projects. My thanks are due also to
high level of proficiency.
the board members and to the shareholders IQ and Yara,
for their initiatives and sincere efforts to advance the
As a result of the superior performance in 2005, QAFCO
Company's goals to put its ambitious projects into effect.
ended the year with a strong financial standing as revenues
Finally, I would like to convey our deepest thanks to the
reached more than 2 billion Qatari Riyals (QAR
management and staff of QAFCO for their dedication and
2,054,696,825), exceeding last year’s figure by 72%. Total
commitment, which have been instrumental towards the
assets grew by 12% to more than 5 billion Qatari Riyals
proud accomplishments highlighted above.
(QAR 5,109,922,509), while shareholders equity went up
41% to reach more than 4 billion Qatari Riyals (QAR
4,067,330,698). By the year end, QAFCO achieved a net
profit of around QAR 1.8 billion, which tops the previous
year ’s profit by 82%. Thus, the Board of Directors
recommended the distribution of one billion Qatari Riyals as
7
cash dividends to the shareholders compared to QAR 600
Abdullah Hussein Salatt
million in 2004.
Chairman of QAFCO Board of Directors
focus on
achieving more
8
MANAGEMENT REPORT
The performance of Qatar Fertliser Company (QAFCO)
Production
during 2005 has been not only exceptional, but by far the
The year 2005 saw a notable growth in the Company’s overall
most prosperous in the Company’s history. A substantial rise
was recorded in total production, exports and net earnings.
production of ammonia and urea, due primarily to the
commissioning of QAFCO-4 expansion in June 2004 and the
subsequent operation of Ammonia-4 and Urea-4 at full capacity.
This reflects the strategy pursued by QAFCO in expanding
Furthermore, the regular maintenance and maximum uptime
the production capacity, enhancing performance and ensuring
throughout 2005 also contributed to excellent performance
that characterized our operations in the year under review.
Most of QAFCO plants kept up a long-standing tradition of
exceeding the design capacities and breaking existing records.
Although records in new units are easier to achieve, QAFCO
is specifically proud of superseding earlier achievements also
in the older units both due to continuously increasing plant
availability as well as liberating reserves in daily performance.
Ammonia
The ammonia production for 2005 was 2,133,800 MT, i.e.
3.9% above the budget plan and 22.8% in excess of the
corresponding figure for 2004.
Ammonia-1 and Ammonia-4 plants have set new daily
production records. Ammonia-1 set new daily production
record of 1,242.7 MT and Ammonia-4 set new daily
customer satisfaction. The efforts put in by the Company to
improve performance efficiency covered all its facilities and
production record of 2,255 MT, while Ammonia-2 achieved
new yearly production record of 425,058 MT crossing its
2004 record which was 418,842 MT.
involved implementation of successful marketing plans along
with continuous cost cutting measures. Results for the current
Urea
year ending 31/12/2005 put net profits at QAR 1.8 billion,
A total urea production of 2,978,800 MT was attained for
which outstrips the budget target by 88.6%, and the previous
2005, which was 7.5% above budget and 33% larger than
year’s figure by 82%.The robust energy market coupled with
urea production in 2004.
strong demand for our products have significantly contributed
Urea-4 set a new daily production record of 3,638 MT whereas
to the excellent results achieved this year.
Urea-3 achieved new yearly production record of 861,473
MT crossing its previous highest production record which
was 850,810 MT.
AMMONIA & UREA PRODUCTION 2001 - 2005
3000
Ammonia
Urea
1000MT
2500
2000
1500
1000
9
2005
2004
2003
2002
0
2001
500
MANAGEMENT REPORT (CONT’D)
Maintenance and Online Factors
unforeseen difficulties in the Ammonia-1 Converter, the
The QAFCO plants were generally running with a high reliability
downtime became 29.5 days, 5 days more than planned.
throughout the year. The average time out of production due
The total downtime for Urea-1 was 19 days, compared with
to unforeseen shutdown was 2.1% during 2005. Inclusive of
budgeted 21 days. Safety records showed no first aid
the planned shutdowns, the total average downtime was 5.1%.
accidents for QAFCO employees and 6 minor first aid
accidents for contractors.
DAYS
S H U T D OW N S 2 0 0 5
The
second
planned
35
shutdown was in Urea-2 in
30
May. The main job was
25
to
20
Pressure Urea Reactor. The
15
shutdown was completed in
10
19 days, 3 days better than
5
planned. Again, there were
0
Ammonia 1
Ammonia 2
Planned Shutdon (Budget)
Unscheduled S.D (Budget)
Ammonia 3 Ammonia 4
Urea 1
Urea 2
Planned Shutdown (Actual)
Unscheduled S.D (Actual)
Urea 3
Urea 4
replace
the
High
no accidents for QAFCO
employees,
and
two
minor first aid accidents
for contractors.
QAFCO-4 had its first full production year. The plant was
Marketing
running steady with an average unforeseen downtime of 4%.
The fertilizer markets, especially in the ammonia and urea
This can be compared with unforeseen downtime of the old
niche, are known for their frequent spells of sluggish trade.
plants that was 1.5% for the same period. There were no
To counter such conditions, which have dominated the
major maintenance problems. However it was decided to stop
markets on several occasions over the last few years.
Ammonia-4 in October to clear off some operational limitations.
QAFCO was careful to adopt a policy of attracting new
The plant was down for 5.5 days. The downtime was better
customers while forging ties with new ones. This enabled
than budgeted for both Ammonia-4 and Urea-4.
the company to conclude new marketing deals and to
renew existing ones, thus retaining a large network of
During 2005, two planned shutdowns were made. The
distributors and ensuring that all are satisfied with the
QAFCO-1 shutdown was completed during March. Due to
quality of QAFCO’s products and services and with the
Company’s level of commitment.
Four main ammonia and urea marketing deals were signed
in 2005, including a deal with the Jordan’s Phosphate
Mines Company under which QAFCO will supply the
Jordanian company with 130,000 MT of ammonia yearly
for 5 years.
As for urea marketing, an agreement was concluded with
the Australian company Incitec Pivot Ltd. for the export of
500,000 MT of urea per annum to East Australia, thus
enabling QAFCO to capture a 43% share of the Australia’s
urea imports. Another deal was signed with Yara Asia Ltd.
10
markets as a result of variations in supply and demand.
By the end of 2005, QAFCO was on track to achieve
record-breaking exports of urea. A fitting end to a buoyant
year for our products in terms of prices and demand
levels. It is worth noting that there has been a marked
rise in the prices of ammonia and urea since the beginning
of the current year, reflecting in a way the rise in oil
prices. Forecasts suggest that this upward trend will
continue hand in hand with oil prices and the rising
demand for fertilizers.
for the marketing of 100,000 MT of urea annually during
Ammonia Exports
2005 and 2006, in the New Zealand market with the quantity
QAFCO’s ammonia exports by the end of 2005 were 465,000
gradually rising thereafter to 240,000 MT of urea per year
tons. Although it was less than the budget by 1.6%, it topped
over the period 2007 – 2009, bringing QAFCO’s share of
the 2004 figure by 0.23%. It is to be noted also that during
New Zealand’s market to 42% and making QAFCO the largest
the year under review, ammonia prices saw a moderate
supplier to New Zealand’s market. The fourth agreement in
rise, trading at an average of $254 per ton, compared to
2005 was signed with Yara Belgium Ltd. for the distribution
$242 per ton in 2004. This was largely due to increased
of 100,000 MT of urea annually in the markets of France,
demand from India and the closure of some ammonia plants
Spain and Italy. It constitutes QAFCO’s first deal for the
due to higher gas prices in the US, thereby favoring ammonia
marketing of its products in Europe — a qualitative leap in
imports. The period under review also witnessed fluctuations
our marketing activities. Again the quantities supplied under
in ammonia production in several regions across the world,
the said contract will increase gradually to 200,000 MT of
coupled with rising demand from neighbouring markets
urea yearly over the next few years.
such as Jordan.
These deals helped to stabilize our exports and protect
The main markets of QAFCO ammonia in 2005 were:
them from the pressures influencing the global fertilizer
India 65%, Jordan 23%, USA 6% and South Korea 6%.
AMMONIA SALES REGIONAL DISTRIBUTION 2005
USA
6%
S. Korea
6%
Jordan
23%
11
India 65%
creating
outstanding results
12
A M M O N I A & U R E A E X P O R T S 2 0 01 - 2 0 0 5
Urea Exports
QAFCO’s urea exports for 2005 hit 2,960,260 tons, i.e.
3000
2500
last year ’s figure. Urea prices posted a marked rise in
2000
Urea
1500
1000
500
to this trend, including diminished exports from China
2005
2001
review; the rise in gas prices in the US, triggering
2004
0
and Indonesia throughout the first half of the year under
2003
of $184 per ton in 200. Several factors have contributed
Ammonia
2002
2005, hovering around $233 per ton, against an average
1000MT
7.2% above the budget target and 38.9% in excess of
demand in the US; the stronger demand in traditional
AMMONIA & UREA PRICES
Asian markets, namely India, Pakistan, Bangladesh and
300
operations in a number of fertilizer plants in Europe.
250
28%, Australia 17%, Thailand 9%, South Africa 8%,
Ammonia
Urea
200
150
100
2005
2004
2003
0
Zealand 3%, South Korea 3%, France 2%, Sudan 2%,
2002
50
Philippines 5%, India 5%, Japan 4%, Vietnam 4%, New
2001
The main importers of QAFCO urea in 2005 were: USA
US$/MT
Iran; and growing European imports owing to shutdown
2 0 01 - 2 0 0 5
Pakistan 2%,other countries 8%.
Profits
The rebounding of the fertilizer prices in 2005 enabled
QAFCO to post a net profit of QAR 1.8 billion, which
UREA EXPORTS REGIONAL DIS TRIBUTION 2004
Pakistan 2 %
S. Korea 3 %
France 2 %
Others 8 %
outstrips the budget target by 88.6%, and the previous
year ’s figure by 82%. Besides favourable market
conditions, and larger production and exports, the
company’s successful cost cutting measures also count
among the factors that contributed to the increased
earnings by the end of the year.
Sudan 2 %
Australia 17 %
Thailand 9 %
USA 28 %
13
2005
South Africa 8 %
2004
Philippines 5 %
2 0 01 - 2 0 0 5
2003
India 5 %
MQAR
Japan 4 %
1800
1600
1400
1200
1000
800
600
400
200
0
2001
Vietnam 4 %
2002
NET PROFITS
N. Zealand 3 %
Human Resources
have also been upgraded to join training programmes
QAFCO has always has placed special emphasis on the
as developees.
development and upgrading of its human resources. In
this respect, QAFCO is fully committed to the Qatarization
Environment, Occupational Health and Safety
policy and adopts a systematic approach to put the
The Environment
elements of this policy into effect, characterized by
Out of a deep sense of responsibility and the desire to
professional recruitment methods to select nationals of
contribute towards protection of the environment, QAFCO
pursued its set environmental policy and successfully
implemented a number of projects aiming to limit the
various emissions and discharges from QAFCO plants.
Prominent among these is the sewage treatment plant at
the Company’s industrial site, designed and installed by
Austria’s PVS at a cost of QAR 4.065 million. The plant is
equipped with chlorination and UV units. The water treated
by the plant is potentially usable for irrigation purposes in
future. QAFCO maintained its policy of responsible disposal
of catalysts, lead acid batteries, used oils, waste tyres, by
sending such materials to suppliers for recycling.
to the prospective holder of any given job and the future
career path envisaged for him or her.
Generated
Working towards the 50% Qatarization target set out
Sent for Recycling
2005
QAFCO, the functions and responsibilities to be assigned
2004
are taken into account, such as the work requirements at
Liters
implementing the Qatarization process, a variety of factors
2003
their training and development. In the course of
450
400
350
300
250
200
150
100
50
0
2001
the right calibre, and carefully planned programmes for
2002
R E C YC L I N G O F S P E N T C ATA LY S T
Waiting for Recycling
under Qatar Petroleum’s plans in this regard, QAFCO
R E C YC L I N G O F U S E D L E A D AC I D B AT T E R I E S
presses on with its efforts to attract Qatari nationals and
600
administrative disciplines. In this context, 22 Qatari nationals
500
completion of their training programmes. Fourteen nationals
Collected
Sent for Recycling
2005
0
2004
100
programmes. During 2005, 24 trainees have been
2003
200
Training Center, while 35 are doing on-the-job-training
appointed to established positions after successful
14
300
2002
38 are engaged in various training programmes at the QP
400
2001
are currently doing their degree courses locally and abroad,
Quantity
provide them with appropriate training in technical and
Temporary Stored
Collected
15
In another project that attests to QAFCO’s commitment
to environment protection, QAFCO embarked on a project
implemented in collaboration with Qatar University. The
project involves installing 50-100 reefballs at two
locations off the Mesaieed shoreline. The balls will help
in the restoration and protection for a wide variety of
Sent back to Supplier
2005
2004
2003
marine life forms from the surrounding threats.
2002
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2001
Liters
M A N AG E M E N T O F U S E D O I L
Temporary Stored
maximizing
business potential
16
Occupational Health and Safety
production volume record of 30,129 MT, topping the
In spite of the Company’s continued efforts to reduce
budget target by 5.4% and last year ’s figure by 23%.
lost days and lost-time accidents, QAFCO’s safety data
Out of the total production, 25,039 MT of urea
for the year 2005 reflects that we fell short on our
formaldehyde was used by QAFCO plants, while the
m e a s u r e s f o r s a f e t y p e r f o r m a n c e . O u r L o s t Ti m e
surplus which amounted to 5,090 MT was shipped by
Accidents were 5 against a budget of 1, and The Lost
tanker trucks to importers in neighbouring countries.
Days were 26 against a target of 5. This imposed us to
strictly demonstrate the application of the safety rules
The profit generated by the plant reached QAR
and procedures, the continual upgradation they are
10,085,000 by the end of 2005. The product makes Qatar
F e r t i l i s e r C o m p a n y ( Q A F C O ) s e l f s u ff i c i e n t i n u r e a
SAFET Y RECORD
96 - 2005
formaldehyde (UFC-85), which used to be imported from
abroad. UFC-85 is an anti-caking agent with which urea
35
is treated to prevent lumping, improve the product
30
hardness and ensure that it is free flowing. It also has
25
several other industrial uses.
20
Lost Time Accidents
2005
2004
2003
protection. It has virtually no adverse impact on the
2002
0
2001
relevant standards of safety and environmental
2000
5
1999
art plant that operates in perfect conformity with the
1998
10
1997
It is worth noting also that the UFC-85 is a state-of-the
1996
15
Lost Days
subjected to and the regular training of staff to put such
plans and procedures into effect properly to minimize
the number of Lost Time Accidents and the Days Lost.
This initiative will enable our company to keep up with
the highest standards of safety. In this regard 3,327
contractor personnel working at QAFCO sites received
safety training in 2005.
Urea Formaldehyde-85 (UFC-85) Plant
Since the commissioning of the plant in September 2003,
it has been operating with high efficiency. In 2005 the
Urea Formaldehyde plant achieved new best year
17
environment, thus ensuring compliance with the local
and international requirements in this regard.
QAFCO-5 Expansion Project
urea plant both with a daily production capacity of 3,500
As we look forword to a brighter future with renewed
MT, and a number of support utilities. The project is
confidence, clear vision, we realize the need to adapt to
scheduled for completion in 2010.
constantly changing conditions, and invest these variables
to enhance our production capacity and reinforce QAFCO’s
QAFCO-5 is set to bolster QAFCO’s position as world-
position as a key player in the international fertilizer market
class producer of fertilizer and the world’s largest single
and maximize our shareholders’ earnings.
site urea producer. The planned expansion will add 1.1
million MT of ammonia and 1.1 million MT of urea to
In this context, a Letter of Intent has been signed
t h e C o m p a n y ’ s a n n u a l p r o d u c t i o n c a p a c i t y, t h u s
between Qatar Petroleum (QP), Yara International and
boosting ammonia production by 55% to 3.1 million
Qatar Fertiliser Company (QAFCO) for construction of
MT per annum and urea production 40% to 4 million
a fifth production train QAFCO-5. The project is set to
MT annually.
be a quantum leap in terms of production volume as well
as technology.
The estimated project cost is $600 million, reflecting the
sharp rise in the price of steel and high demand for
QAFCO-5 facilities will include an ammonia plant and a
18
construction materials.
In conclusion, I would like to point out that the
unstinting support of the QAFCO Board of Directors,
accomplishments highlighted in the above report would
have been a major driving force towards the
not have materialized had it not been for the enlightened
aforementioned achievements.
leadership of HH the Emir, Sheikh Hamad Bin Khalifa
Al-Thani and HH Heir Apparent, Sheikh Tamim Bin Hamad
Lastly I wish to express my sincerest gratitude to
Al-Thani. It is to be added that the sustained care of
Q A F C O ’s e x e c u t i v e m a n a g e m e n t a n d s t a ff f o r t h e i r
Qatar Industries officials led by HE the Second
dedication and superb performance, which has been
Deputy Prime Minister and Minister of Energy &
crucial to the realization of the results highlighted in the
Industry, the continued cooperation with Yara and the
foregoing briefing.
Khalifa A. Al-Sowaidi
Managing Director
19
AUDITOR’S REPORT
To
The Shareholders
Qatar Fertiliser Company (S.A.Q.)
Doha, State of Qatar
We have audited the accompanying consolidated balance sheet of Qatar Fertiliser Company S.A.Q. ("the Company") and
its subsidiary (together referred to as “the Group”) as of 31 December 2005, and the related consolidated statements of
income, changes in shareholders’ equity and cash flows for the year then ended as set out on pages 21 to 34.
Respective responsibilities of the Directors and the Auditors
These consolidated financial statements are the responsibility of the Group’s directors. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Group as at 31 December 2005, the results of its operations, the changes in its equity and its cash flows for the year then
ended in accordance with International Financial Reporting Standards.
Other matters
In addition, in our opinion, the Group has maintained proper accounting records and the consolidated financial statements
are in agreement therewith and a physical count of the inventories was carried out in accordance with the established principles.
We are not aware of any violations of the provisions of Qatar Commercial Companies Law No. 5 of 2002, to the extent
applicable, or the terms of the Articles of Association of the Company and its subsidiary having occurred during the year that
might have had a material effect on the business of the Group or on its financial position as of 31 December 2005. Satisfactory
explanations and information have been provided to us by the management in response to all our requests.
Ahmed Hussain
KPMG
Qatar Auditors Registry No: 197
20
9 February 2006
Doha
State of Qatar
in Qatari Riyals
C O N S O L I D AT E D B A L A N C E S H E E T
As at 31 December 2005
ASSETS
Non-current assets
Property, plant and equipment
Catalysts
Current assets
Due from related parties
Inventories
Accounts receivable
Other receivables and prepayments
Cash and Bank
Note
2005
2004
Restated
3
4
2,397,999,132
13,978,914
2,580,702,521
10,437,243
2,411,978,046
2,591,139,764
324,344,712
248,112,148
185,234,613
59,308,566
1,880,944,424
326,307,575
207,511,710
153,482,881
41,272,713
1,213,504,645
2,697,944,463
1,942,079,524
5,109,922,509
4,533,219,288
759,600,000
153,782,123
3,138,312,206
15,636,369
759,600,000
152,773,591
1,954,115,818
14,560,773
4,067,330,698
2,881,050,182
48,919,827
1,039,438,400
49,358,482
48,919,827
1,088,796,882
228,789,168
184,899,776
579,983,040
160,181,302
277,829,322
125,361,600
993,671,984
563,372,224
5,109,922,509
4,533,219,288
5(a)
6
7
8
9
Total assets
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity (page 23)
Share capital
Legal reserve
Retained earnings
Minority interest
Non-current liabilities
Syndicated loan-non current portion
Employees’ end of service benefits
Current liabilities
Due to related parties
Accounts payable and accruals
Syndicated loan-current portion
Total shareholders’ equity and liabilities
10
11
12
13
5(b)
14
12
These financial statements were approved by the Board of Directors and signed on their behalf by the following
on 9 February 2006.
Abdulla Hussein Salatt
Chairman of the Board of Directors
Khalifa Abdullah Al-Sowaidi
Managing Director
The attached notes on pages 25 to 34 form an integral part of these financial statements.
21
in Qatari Riyals
C O N S O L I D AT E D S TAT E M E N T O F I N C O M E
For the year ended 31 December 2005
Note
2005
2004
Gross sales
Cost of sales
15
2,967,944,086
(994,753,106)
1,875,006,519
(723,715,696)
Gross profit
Other income
16
1,973,190,980
81,505,845
1,151,290,823
40,241,732
2,054,696,825
(63,201,686)
(2,529,988)
(168,787,564)
(31,947,071)
1,191,532,555
(63,433,305)
(2,442,683)
(161,174,456)
(19,701,866)
Net profit for the year
Attributable to minority shareholders
1,788,230,516
(3,025,596)
944,780,245
(2,343,643)
Attributable to equity shareholders
1,785,204,920
942,436,602
Selling expenses
Provision for pension obligation
General and administrative expenses
Finance expenses
17
18
22
in Qatari Riyals
C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y
Share capital
Legal reserve
Retained
earnings
Minority
Interest
Total
2004
Balance at 1 January 2004
Dividend paid for 2003
Transfer to legal reserve
759,600,000
-
151,992,377
781,214
1,512,460,430
(500,000,000)
942,436,602
(781,214)
12,217,130
2,343,643
-
2,436,269,937
(500,000,000)
944,780,245
-
Balance at
31 December 2004
759,600,000
152,773,591
1,954,115,818
14,560,773
2,881,050,182
759,600,000
-
152,773,591
-
1,954,115,818
(600,000,000)
14,560,773
-
2,881,050,182
(600,000,000)
-
1,008,532
1,785,204,920
(1,008,532)
(1,950,000)
3,025,596
-
(1,950,000)
1,788,230,516
-
759,600,000
153,782,123
3,138,312,206
15,636,369
4,067,330,698
2005
Balance at 1 January 2005
Dividend paid for 2004
Dividend paid to minority
shareholders
Transfer to legal reserve
Balance at
31 December 2005
Dividend
The Board of Directors have proposed to pay a dividend of QR 131.65 per share (2004: QR 78.98) amounting to
QR 1,000,000,000 (2004: QR 600,000,000) for the year 2005.
23
in Qatari Riyals
C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S
2005
2004
1,785,204,920
942,436,602
373,208,417
7,493,359
8,868,509
3,025,596
(90,000)
(46,570,008)
31,947,071
287,005,983
3,023,213
11,127,287
2,343,643
(167,100)
(23,109,877)
19,701,866
2,163,087,864
1,242,361,617
(31,751,732)
1,962,863
(40,600,438)
(18,035,842)
(92,929,546)
68,607,855
(9,307,164)
(59,066,560)
(139,233,758)
(39,622,603)
13,507,105
133,821,927
85,747,145
(6,962,076)
Net cash from operating activities
2,041,033,860
1,230,552,797
Investing activities
Purchase of property, plant and equipment
Additions to catalysts
Proceeds from sale of property, plant and equipment
Movement in fixed deposits maturing after 90 days
Interest income
(190,505,028)
(11,035,030)
90,000
(217,840,000)
46,570,008
(245,694,904)
(7,287,096)
167,100
234,300,000
23,109,877
Net cash (used in)/ from investing activities
(372,720,050)
4,594,977
Financing activities
Dividend paid
Decrease in syndicated loan
Interest expense
Dividend paid to minority shareholders
(600,000,000)
(584,816,960)
(31,947,071)
(1,950,000)
(500,000,000)
(247,520,000)
(19,701,866)
-
Net cash used in financing activities
(1,218,714,031)
(767,221,866)
449,599,779
467,925,908
Cash and cash equivalents, beginning of the year
1,104,304,645
636,378,737
Cash and cash equivalents, end of the year (Note 9)
1,553,904,424
1,104,304,645
Cash flows from operating activities
Adjustments to reconcile net profit to net cash provided by
operating activities:
Depreciation of property, plant and equipment
Amortization of catalysts
Provision for end-of-service benefits
Increase in minority interest
Profit on disposal of property, plant and equipment
Interest income
Interest expenses
Operating income before changes in working capital
Working capital changes
Increase in accounts receivable
Decrease/(increase) in due from related parties
Increase in inventories
(Increase)/decrease in other receivables and prepayments
(Decrease)/increase in accounts payable and accrued expenses
Increase in due to related parties
End-of-services benefits/loans against end-of-service benefits paid
Net increase in cash and cash equivalents
24
in Qatari Riyals
N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
1.
LEGAL STATUS AND PRINCIPAL ACTIVITIES
Qatar Fertiliser Company (S.A.Q.) (the “Company” or “QAFCO”) is a Qatari shareholding company with limited liability
incorporated in the State of Qatar. The Company has an authorized, issued and paid up capital of 7,596,000 shares
of Qatari Riyals 100 each. The Company is engaged in the production and sale of ammonia and urea. The shareholding
in the Company is as follows:
Industries Qatar
Fertilizer Holdings AS
Yara Nederland BV
Redeemable
Ordinary
Shares
Ordinary
Shares
Total
Shares
3,822,000
1,274,000
-
1,875,000
250,000
375,000
5,697,000
1,524,000
375,000
5,096,000
2,500,000
7,596,000
Norsk Hydro ASA and Norsk Hydro Holland BV have transferred their shareholdings in QAFCO to two companies
within the Hydro Agri Segment, Fertilizer Holdings AS and Yara Nederland BV. The Hydro Agri segment has been
demerged from Norsk Hydro ASA and since 25 March 2004 it is listed in several stock exchanges under the name,
Yara International ASA.
Pursuant to the Council of Ministers’ resolution no. (8) of 1994, the Company is exempted from income tax up to 2006.
Liability for Qatar Taxation which may accrue to the non-Qatari shareholders after the tax holiday period will be dealt
with directly by the non-Qatari shareholders.
The consolidated financial statements for the year ended 31 December 2005 comprise the Company and its subsidiary,
Gulf Formaldehyde Company (together referred to as the “Group”).
2.
SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied in the preparation of these consolidated
financial statements.
a) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards.
These consolidated financial statements have been prepared on the historical cost convention. The accounting
policies have been consistently applied by the Group and are consistent with those used in the previous year.
b) Basis of consolidation
The Company has an ownership interest of 70% in Gulf Formaldehyde Company (“GFC”), a Qatari shareholding
company incorporated in the State of Qatar. GFC is engaged in the production of Urea Formaldehyde Concentrate.
These consolidated financial statements include the assets, liabilities and results of operations of GFC where the
Company owns more than half of the equity capital and exercises control over the operations. All significant inter
company balances and transactions are eliminated.
The net income and equity attributable to the minority shareholders in GFC is disclosed separately in the income
statement and in the statement of changes in shareholders’ equity respectively.
25
N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( c o n t ’ d )
in Qatari Riyals
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less depreciation and impairment losses, if any
[refer accounting policy 2 (o)]. Depreciation is calculated using straight-line method over the estimated useful lives
of the assets as follows:
Buildings and foundations
Plant, machinery and equipment
Vehicles and mobile equipment
Years
13 - 20
5 - 10
3
Depreciation methods, useful lives and residual values of property, plant equipment are re-assessed annually.
Capital expenditures below QR. 200,000 are expensed. Capital work in progress is transferred to property,
plant and equipment on completion of work.
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for
separately is capitalized. Other subsequent expenditure is capitalized only when it increases the future economic
benefits embodied in the item of property, plant and equipment. All other expenditure is recognized in the statement
of income as an expense as incurred.
d) Catalysts
Catalysts are initially recorded at cost less amortization and impairment, if any. Catalysts are amortized over their
estimated useful life.
e) Inventories
Inventories are stated at the lower of cost and net realizable value. The cost of inventories is based on the average
cost method and includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. In the case of finished products, cost comprises direct materials, direct labour and include
an appropriate share of overheads based on normal operating capacity. Net realizable value is the estimated selling
price less any further costs expected to be incurred to make the sale. Provision is made for obsolete and slowmoving items based on management’s judgement.
f) Accounts receivable and other receivables
Accounts receivable and other receivables are stated at amortized cost net of provision for amounts estimated to
be doubtful as determined by the management.
g) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and balances with banks, including deposits, having a maturity
of less than 90 days.
h) Syndicated loan
The syndicated loan is carried on the balance sheet at its principal amount. All installments are due after a year
end have classified as non-current liability.
i) Borrowing costs
Borrowing costs attributable to acquisition or construction of property, plant and equipment are capitalized as part
of cost of the asset up to the date of the asset being put into use. Other borrowing costs are recognized as expenses
in the period in which they are incurred.
26
in Qatari Riyals
2.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
j) Provision for employees’ end-of-service benefits and pension obligation
The Company provides for employees’ end of service benefits determined in accordance with Company’s regulations
based on employees’ salaries and the number of years of service at the balance sheet date. Applicable benefits
are paid to employees on termination of employment with the Company. The Company has no expectation of settling
its employees’ terminal benefits obligation in the near term and have classified this as a non-current liability.
Under law no. 24 of 2002 on retirement and pension, the Company makes contribution to a government pension
scheme for existing and retired Qatari employees calculated as a percentage of the employees’ salaries. The
Company’s obligations are limited to the contributions which are expensed when due.
k) Accounts payable and accruals
Accounts payable and accruals are stated at amortized cost and recognized for amounts to be paid in future for
goods or services provided, whether or not billed by the supplier.
l) Provisions
Provisions are recognized when the Group has an obligation (legal or constructive) arising from a past event, and
the costs to settle the obligation are both probable and able to be reliably measured.
m) Foreign currency transactions
Transactions in foreign currencies are recorded at rates of exchange prevailing at the dates of the transactions.
Monetary assets and monetary liabilities denominated in foreign currencies at the balance sheet date are reported
at the exchange rates prevailing at that date. Realized and unrealized exchange differences arising from these are
recognized in the statement of income.
n) Revenue recognition
Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of
ownership have been transferred to the buyer.
Income from interest on bank deposits is recognized in the income statement as it accrues, taking into account the
agreed interest rate on deposits.
o) Impairment
The carrying amounts of the Group’s assets other than inventories (refer accounting policy Note 2.e), are reviewed
at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists,
the asset’s recoverable amount is estimated. An impairment loss is recognized in the statement of income, whenever
the carrying amount of an asset exceeds its recoverable amount.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had
been recognized.
p) Operating leases
Operating lease payments are recognized as an expense in the Income statement on a payment basis over the
lease term. Future commitments of such leases are disclosed as commitments.
27
in Qatari Riyals
3.
PROPERTY, PLANT AND EQUIPMENT
Description
Buildings and
foundations
Plant
machinery
and equipment
Vehicles
and mobile
equipment
Capital
work in
progress
Total
2005
Total
2004
Cost
At 1 January
Additions
Disposals
1,112,973,015
1,215,831
-
4,110,009,463
137,750,661
(4,738,502)
10,888,310
143,000
-
137,066,122
51,395,536
-
5,370,936,910 5,126,090,505
190,505,028
245,694,904
(4,738,502)
(848,499)
At 31 December
1,114,188,846
4,243,021,622
11,031,310
188,461,658
5,556,703,436 5,370,936,910
Depreciation
At 1 January
Charge for the year
Disposals
436,930,308
42,706,679
-
2,343,608,071
329,879,121
(4,738,502)
9,696,010
622,617
-
-
2,790,234,389 2,504,076,905
373,208,417
287,005,983
(4,738,502)
(848,499)
At 31 December
479,636,987
2,668,748,690
10,318,627
-
3,158,704,304 2,790,234,389
31 December 2005
634,551,859
1,574,272,932
712,683
188,461,658
31 December 2004
676,042,707
1,766,401,392
1,192,300
137,066,122
Net book value at
2,397,999,132

- 2,580,702,521
a) Buildings and foundations which include the industrial plant, office site and administrative facilities at Mesaieed are
erected on land owned by the Qatar Petroleum, except the staff housing complex, which is constructed on land leased
from the Industrial Development Technical Centre.
b) Fully depreciated assets as at 31 December 2005 amounted to QR 1,276,883,413 (31 December 2004: QR 1,267,671,317).
c) The depreciation charge has been allocated in the income statement as follows:
2005
2004
331,858,237
41,350,180
254,559,863
32,446,120
373,208,417
287,005,983
2005
2004
Balance as at the beginning of the year
Additions during the year
22,672,337
11,035,030
15,385,241
7,287,096
Balance as at the end of the year
33,707,367
22,672,337
Amortization
Balance as at the beginning of the year
Charge for the year
12,235,094
7,493,359
9,211,881
3,023,213
Balance as at the end of the year
19,728,453
12,235,094
Net book value
13,978,914
10,437,243
Cost of sales
General and administration expenses
4.
CATALYSTS
Cost
28
in Qatari Riyals
5.
RELATED PARTIES
The Group in the normal course of its business carries out transactions with its ultimate holding company, Qatar Petroleum
(“QP”) and with its shareholder, Yara International ASA and their related companies.
Sales and marketing
A significant portion of the Company’s sales is carried out by Yara International ASA. The Company has entered into
marketing agreements with Yara International ASA, valid up to 26 November 2011, whereby the latter is required to market
the products of the Company in return for a marketing commission. Commission to Yara International ASA during 2005
included in the selling expenses amounted to QR 45,657,410 (2004: QR 31,788,161).
Technical services and supplies
The Company also entered into a 10 year Advisory and Technical Services agreement with Yara International ASA, valid
up to 26 November 2011, to render technical services and provide qualified management and operating personnel to the
Company in return for a lump sum fee. The fees due to Yara International ASA under the terms of the agreement for 2005
amounted to QR 4,000,000 (2004: QR 5,000,000).
Feed stock
The Company receives natural gas from Qatar Petroleum at rates, which are lower than the prevailing international rates
under an agreement signed on 18 June 1994 for an initial period of 25 years unless terminated earlier under the provisions
of this agreement. Natural gas purchases during 2005 amounted to QR 376,166,526 (2004: QR 246,861,974).
The transactions with related parties are summarized below:
Name of related party
Nature of relationship
Type of transaction
2005
2004
Qatar Petroleum and
its subsidiaries
Ultimate holding company Purchase of feedstock
376,166,526
Purchase of methanol
17,922,932
Land lease and staff accommodation
7,168,623
Training cost
10,893,183
Others
1,499,946
246,861,974
13,070,645
6,536,136
10,771,912
899,640
Yara International ASA
and its related parties
Shareholder
Sale of finished goods
Sales commission
Purchase of inventories
Technical services
Project management fees
Deposits
1,695,045,045 1,068,982,616
45,657,410
31,788,161
33,487,921
16,771,084
4,000,000
5,000,000
8,282,104
22,500,191
2,321,247
a) Due from related parties
Yara International ASA and its affiliates
Qatar Petroleum and subsidiaries
2005
2004
324,124,745
219,967
326,119,064
188,511
324,344,712
326,307,575
2005
2004
223,888,085
4,901,083
141,195,725
18,985,577
228,789,168
160,181,302
2005
5,947,000
2004
4,991,000
b) Due to related parties
Qatar Petroleum and subsidiaries
Yara International ASA and it’s affiliates
c) Compensation paid for key management personnel
29
in Qatari Riyals
6.
7.
INVENTORIES
2005
2004
Finished goods
Goods in transit
Chemicals and catalysts
Packing materials
Spare parts and supplies
62,068,393
6,689,279
16,542,256
8,514,617
176,244,814
54,209,508
7,621,196
9,225,875
6,928,092
149,629,965
Less : Provision for obsolete and slow moving spare parts and supplies
270,059,359
(21,947,211)
227,614,636
(20,102,926)
248,112,148
207,511,710
2005
2004
185,358,875
(124,262)
153,607,143
(124,262)
185,234,613
153,482,881
ACCOUNTS RECEIVABLE
Accounts receivable
Less: Impairment allowance
Receivable amounting to QR 136,644,982 (2004: QR 77,033,447) are to be settled through letters of credit.
8.
OTHER RECEIVABLES AND PREPAYMENTS
Employee loans and advances
Prepayments
Other receivables
9.
2005
2004
22,656,329
13,354,033
23,298,204
19,227,045
14,073,864
7,971,804
59,308,566
41,272,713
2005
2004
CASH AND BANK
Cash in hand
Balances with banks
110,053
151,208
1,880,834,371 1,213,353,437
Total cash and bank
Less: Fixed deposits maturing after 90 days
1,880,944,424 1,213,504,645
(327,040,000) (109,200,000)
Cash and cash equivalents
1,553,904,424 1,104,304,645
Bank balances include a target cash balance of QR 109.2 million (US$ 30 million) being maintained after the completion
of the design and construction of QAFCO IV project until the maturity date of the loan, in accordance with Article 10
of the loan facility agreement (refer note 12).
10. SHARE CAPITAL
Authorized and issued and paid up share capital
(7,596,000 ordinary shares of QR 100 each)
2005
2004
759,600,000
759,600,000
The shareholders at the 8th Extraordinary General Meeting of the Company held on 18 June 1994 resolved to increase
the capital of the Company by QR. 509,600,000. This was in accordance with the consortium agreement signed with the
30
in Qatari Riyals
10. SHARE CAPITAL (Continued)
various banks for financing the project. These shares are redeemable and the terms of redemption are to be decided by
the Shareholders of the Company after completion of the Qafco III Project. Further, in accordance with the Shareholders’
Support Agreement, such shares can be redeemed only after all liabilities to the banks arising from the main contract are
irrevocably discharged in full. The liabilities to the banks were discharged in full during 2001.
During 2005, the Board of Directors have decided to transfer the proceeds of these redeemable shares into retained
earnings. This decision is pending approval at the Extra-Ordinary General Meeting of the shareholders scheduled to be
held in February 2006.
11. LEGAL RESERVE
According to Article 89 (c) of the Articles of Association of the Company, a sum not exceeding 10% of the net profit of the
Company available for distribution in each year is required to be appropriated to the legal reserve until the balance in this
reserve account becomes equal to 20% of the paid up capital of the Company. No such transfer was made for the year,
since the balance in the reserve reached 20% of the paid up capital as of 31 December 2003. Balance in the reserve
account is not distributable except in the circumstances specified in the Articles of Association of the Company.
In the books of the subsidiary company, in accordance with the provisions of Qatar Commercial Companies Law No 5 of
2002, a sum not exceeding 10% of the net profit of the Company available for distribution in each year is required to be
appropriated to the legal reserve until the balance in this reserve account becomes equal to 50% of the paid up capital.
Balance in the reserve account is not distributable except in the circumstances specified in the above-mentioned law.
12. SYNDICATED LOAN
On 2 July 2001, the Company obtained a syndicated loan facility amounting to QR 1,456 million (US$ 400 million) to assist
in financing the design, construction and commissioning of QAFCO IV Project. The outstanding balances are as follows:
2005
2004
Syndicated loan
579,983,040 1,164,800,000
Classified as:
Current liability
Non-current liability
579,983,040
125,361,600
- 1,039,438,400
579,983,040 1,164,800,000
Repayment commenced 48 months after the execution date of the loan agreement (2 July 2001) and the loan is repayable
over 10 semi annual instalments. During the year, the loan has been rescheduled and is repayable over 3 semi annual
instalments. The repayment schedule of the loan outstanding is as follows:
2005
Payable within 1 year
Payable in 2 to 5 years
2004
579,983,040
125,361,600
- 1,039,438,400
579,983,040 1,164,800,000
The loan carries interest at LlBOR plus 0.75%.
Distributions to the shareholders, as defined under the terms of agreement of the loan facility obtained to finance
QAFCO IV Project, are restricted to meeting conditions defined in the agreement. As per the terms of the loan agreement,
certain cash balances need to be maintained as set out in note 9 of the consolidated financial statements.
31
in Qatari Riyals
13. EMPLOYEEES’ END OF SERVICE BENEFITS
2005
2004
Balance at the beginning of the year
Provision for the year
Less: Payments made during the year
Transferred to pension account
114,602,143
8,868,509
(8,101,757)
(44,752,640)
110,623,059
11,127,287
(7,148,203)
-
Balance at the end of the year
Less: Advance against end of service benefits
70,616,255
(21,696,428)
114,602,143
(65,243,661)
48,919,827
49,358,482
2005
2004
38,897,088
33,727,605
112,275,083
138,465,595
33,905,182
105,458,545
184,899,776
277,829,322
Balance at the end of the year
14. ACCOUNTS PAYABLE AND ACCRUALS
Trade accounts payable
Pension liability for Qatari employees (including employee’s contribution)
Other payables and accruals
The amount recognized for 2005 as an expense for the pension liability for Qatari employees is QR 2,529,988 (31 December
2004: 2,442,683).
15. COST OF SALES
Raw materials
Salaries, wages and related expenses
Depreciation
Amortization of catalysts
External services
Materials and equipment
Bagging
Insurance, rents and fees
Maintenance allocated to general and administrative expenses
Increase in finished goods inventory
2005
2004
446,659,614
122,738,687
331,858,237
7,493,359
37,280,633
58,153,117
1,722,340
12,037,732
(15,331,728)
(7,858,885)
284,278,348
117,523,284
254,559,863
3,023,213
44,526,202
52,173,921
471,637
10,285,536
(11,971,425)
(31,154,883)
994,753,106
723,715,696
2005
2004
46,570,008
4,117,331
478,299
3,000
693,151
880,668
5,197,174
5,496,771
13,399,219
4,670,224
23,109,877
134,463
597,210
842,998
557,695
1,278,067
2,904,898
3,780,934
5,607,354
1,428,236
81,505,845
40,241,732
16. OTHER INCOME
Interest income
Foreign currency exchange gain
Sale of gas
Rent income
Club contribution
Contribution from Norwegian Government for QAFCO Norwegian school
Demurrages and dispatch
Net income from hiring of vessel
Reversal of excess provisions made during previous year
Miscellaneous income
32
in Qatari Riyals
17. SELLING EXPENSES
Freight, insurance and handling
Sales commission
Other sales expenses, net
2005
2004
12,922,333
49,032,200
1,247,153
27,536,425
34,714,370
1,182,510
63,201,686
63,433,305
2005
2004
57,909,102
41,350,180
17,213,083
11,486,575
8,982,666
9,547,679
4,280,253
3,261,029
5,210,113
9,546,884
57,659,645
32,446,120
23,971,425
10,484,301
9,478,110
7,744,091
4,785,086
2,215,381
3,891,277
8,499,020
168,787,564
161,174,456
18. GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and related expenses
Depreciation
Maintenance
Materials and equipment
External services
Insurance, rents and fees
Travel expenses
Communication expenses
Advertising, public relations and donations
Others
Included in others is in the nature of sitting fees paid to the directors for the year amounting to QR 1,180,000
(2004: QR 1,180,000).
19. FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or
equity instrument of another enterprise. Accounting policies for financial assets and liabilities are set out in note 2.
Financial instruments comprise of cash and bank balances, accounts receivables, other receivables, due from/to related
parties, loans, accounts payable and accruals.
(a) Interest rate risk exposure
The Group’s interest sensitive cash and cash equivalents of QR 1,880,834,371(2004: QR 1,213,353,437) have an
effective interest rate of 4.3% (2004 : 2.7%).
The interest rates and maturities of syndicated loan are detailed in note 12 to these financial statements.
The Group’s remaining financial assets and liabilities are non-interest sensitive.
(b) Credit risk exposure
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party
to incur a financial loss. The Group’s exposure to credit risk is as indicated by the carrying amount of its financial assets
which consist principally of accounts receivable, due from related parties and bank balances. Accounts receivable and
due from related parties are shown net of provision for doubtful receivables and bank balances are with reputed banks.
As at balance sheet date, there were no significant concentrations of credit risk. The Group has a credit policy in place
and the exposure to credit risk is monitored on an ongoing basis. Further, significant receivables of the Group are covered
by the letters of credit.
33
in Qatari Riyals
19. FINANCIAL INSTRUMENTS (Continued)
(c) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes on foreign exchange rates.
All time deposits are designated in Qatar Riyals and United States Dollar (US$) which is pegged against the Qatar Riyal
and most of the payments due to suppliers are in US$ and hence, the management is of the opinion that the Group’s
exposure to currency risk is minimal.
(d) Fair values of financial assets and liabilities
Fair value is the amount for which an asset can be exchanged or a liability settled, between knowledgeable and willing
parties transacting at “arms length”. The accounting convention under which the financial statements have been prepared
is disclosed in Note 2(a) i.e. historical cost convention. The carrying value of the Group’s financial instruments as recorded
could therefore be different from the fair value. However, in management’s opinion the fair values of the Group’s financial
assets and liabilities approximate to their carrying amounts.
20. CAPITAL COMMITMENTS
The Board of Directors have authorized capital commitments of QR 39,223,000 as at 31 December 2005 (31 December
2004: QR 20,026,406)
21. CONTINGENT LIABILITIES
Letters of credit
Letters of guarantee
2005
2004
146,042,034
1,105,204
23,451,773
100,000
147,147,238
23,551,773
2005
2004
731,533
2,926,132
13,533,360
555,948
2,223,792
10,840,986
17,191,025
13,620,726
22. OPERATING LEASES
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
The Company has entered in a non-cancellable operating lease agreement with Qatar Petroleum for the land on which the
Company has constructed its plant. The lease is for an initial period of forty years effective 29 June 1969, with an option
to renew the lease after that date. Lease payments are increased annually to reflect market prices.
During the year ended 31 December 2005, QR 731,533 was recognized as an expense in the income statement in respect
of operating leases (2004: QR 555,948).
23. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the presentation in the current year’s financial statements.
Such reclassification did not have any effect on the net profit and net assets of the previous year.
34