arabian food industries company (domty) - s.a.e...

ARABIAN FOOD INDUSTRIES COMPANY

(DOMTY) - S.A.E

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2016

TOGETHER WITH AUDITORS’ REPORT

Translation of Auditors’ report

Originally issued in Arabic

INDEPENDENT AUDITORS’ REPORT

TO THE BOARD OF DIRECTORS OF ARABIAN FOOD INDUSTRIES COMPANY (DOMTY) S.A.E

Report on the Consolidated Financial Statements

We have reviewed the accompanying consolidated interim balance sheet of Arabian Food Industries Company

(DOMTY) – S.A.E (the “Company”), as of 30 June 2016 and the related interim statements of income, interim

changes in equity and interim cash flows for the three months then ended, and a summary of significant

accounting policies and other explanatory notes. Management is responsible for the preparation and fair

presentation of these interim financial statements in accordance with Egyptian Accounting Standards. Our

responsibility is to express a conclusion on these interim financial statements based on our review.

Scope of Review

We conducted our review in accordance with the Egyptian Standard on Review Engagements No. 2410, “Review

of Interim Financial Statements Performed by the Independent Auditors of the Entity.” A review of interim

financial statements consists of making inquiries, primarily of persons responsible for financial and accounting

matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit

conducted in accordance with Egyptian Standards on Auditing and consequently does not enable us to obtain

assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly,

we do not express an audit opinion on these interim financial statements.

Conclusion

Based on our review nothing has come to our attention that causes us to believe that the accompanying

consolidated interim financial statements does not give a true and fair view, in all material respects, of the interim

financial position of Arabian Food Industries Company (DOMTY) – S.A.E as of 30 June 2016, and of its

interim financial performance and its interim cash flows for the three months then ended in accordance with

Egyptian Accounting Standards.

Cairo: 11 August 2016

Auditors

Dr Khaled Samahai

FESAA – FEST- CPA

(RAA. 24973)

Nabil & Samaha & Partners Allied for Accounting & Auditing - EY

Public Accountants & Consultants Public Accountants & Consultants

Amr El Shaabini

FESAA – FEST

(RAA. 9365)

Translation of consolidated

financial statements originally issued

in Arabic

ARABIAN FOOD INDUSTRIES COMPANY (DOMTY) – S.A.E

2

CONSOLIDATED BALANCE SHEET

As of 30 June

Note 30 June 2016 31 December 2015

LE LE

Non-current assets

Property, plant and equipment (5) 222,572,690 188,537,569

Projects under construction (6) 97,185,625 20,175,099

Total non-current assets 319,758,315 208,712,668

Current assets

Inventories (7) 159,959,083 164,879,475

Accounts and notes receivable (8) 303,442,995 243,348,832

Prepayments and other receivables (9) 132,401,460 89,994,714

Cash on hand and at banks (10) 318,988,069 28,069,474

Total current assets 914,791,607 526,292,495

Current liabilities

Short term credit facilities (12) 429,784,433 316,137,812

Term loans - current portion (15) 11,533,126 11,525,000

Trade and notes payable (13) 101,862,499 78,828,392

Machines installments – current portion (18) 33,491,004 22,607,687

Provisions (11) 12,590,164 12,028,104

Accrued expenses and other payables (14) 37,312,544 29,261,457

Dividends payable 4,241,479 -

Income tax payable 14,301,105 37,971,903

Total current liabilities 645,116,354 508,360,355

Working capital 269,675,253 17,932,140

Total investment 589,433,568 226,644,808

Financed as follows

Equity

Issued and paid up capital (16) 56,521,739 50,000,000

Share premium 292,815,806 -

Legal reserve 18,859,359 14,445,807

Other reserve 170,196 170,196

Retained earnings (17) 85,377,050 6,681,462

Profit for the period/year 44,868,899 91,594,898

Merger reserve (26) (4,503,358) (4,503,358)

Equity attributable to equity holders of the parent 494,109,691 158,389,005

Minority interest 1,708 1,527

Total equity 494,111,399 158,390,532

Non-current liabilities

Term loans (15) 21,066,250 26,828,800

Machines installments – non current portion (18) 50,532,413 17,604,205

Sales tax payable on plant and equipment (19) 4,779,974 5,459,432

Long term notes payable 253,900 380,850

Deferred tax liabilities (20) 18,689,632 17,980,989

Total non-current liabilities 95,322,169 68,254,276

Total finance of working capital and non-current assets 589,433,568 226,644,808

Finance Managing Director

Chairman

Mohamed Abdelbaky Eng. Omar Mohamed El Damaty

- The accompanying notes from (1) to (32) are an integral part of these consolidated financial statements.

- Auditors’ report attached.


financial statements originally issued in Arabic


CONSOLIDATED STATEMENT OF INCOME For the period ended 30 June 2016

3

Note

From 1/1/2016

Till 30/6/2016

From 1/1/2015

Till 30/6/2015 From 1/4/2016

Till 30/6/2016

From 1/4/2015

Till 30/6/2015

LE LE LE LE

Sales 786,564,297 713,348,885 415,990,348 403,813,945

Cost of sales (600,537,589) (534,759,174) (327,007,883) (301,222,192)

GROSS PROFIT 186,026,708 178,589,711 88,982,465 102,591,753

Selling and marketing expenses (21) (100,628,124) (68,159,187) (52,279,155) (37,358,877)

General and administrative expenses (22) (15,100,379) (9,425,851) (7,886,712) (5,136,666)

Net other operating income/expenses (23) 9,015,295 6,486,924 5,041,133 3,902,758

Provisions (11) (156,750) (200,376) (4,050) (99,771)

OPERATING PROFIT 79,156,750 107,291,221 33,853,681 63,899,197

Finance income 5,825,000 159,211 5,825,000 88,939

Finance expenses (24) (25,102,922) (20,050,580) (12,083,373) (7,860,056)

PROFIT BEFORE INCOME

TAXES

59,878,828 87,399,852 27,595,308 56,128,080

Income tax expenses (20) (15,009,748) (25,326,019) (6,875,897) (16,600,759)

PROFIT FOR THE PERIOD 44,869,080 62,073,833 20,719,411 39,527,321

Attributable to :

Equity holders of the Parent 44,868,899 62,073,672 20,719,317 39,527,240

Minority interest 181 161 94 81

44,869,080 62,073,833 20,719,411 39,527,321

Basic and diluted earnings per share

attributable to equity holders of the

Parent

(27) 0,144 25,56 0,067 16,32

-The accompanying notes from (1) to (32) are an integral part of these consolidated financial statements.


financial statements originally issued

in Arabic


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the period ended 30 June 2016

4

-The accompanying notes from (1) to (32) are an integral part of these consolidated financial statements.

From 1/1/2016

Till 30/6/2016

From 1/1/2015

Till 30/6/2015 From 1/4/2016

Till 30/6/2016

From 1/4/2015

Till 30/6/2015

LE LE LE LE

Profit for the period 44,869,080 62,073,833 20,719,411 39,527,321

Other comprehensive income - - - -

Total comprehensive income 44,869,080 62,073,833 20,719,411 39,527,321

Translation of consolidated financial

statements originally issued in Arabic


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY For the period ended 30 June 2016

5


Attributable to the equity holders of the Parent

Issued and paid up

capital

Legal

reserve

Other

reserves

Share

premium

Retained

earnings

Profit for the

period

Merger

reserve

Total Minority

interest Total equity

LE LE LE LE LE LE LE LE LE LE

Balance as of 1 January 2015 50,000,000 11,001,561 170,196 - 83,894,541 28,266,359 (4,503,358) 168,829,299 1,194 168,830,493

Transferred to legal reserve - 1,587,613 - - - (1,587,613) - - - -

Transferred to retained earnings - - - - 26,678,746 (26,678,746) - - - -

Profit for the period - - - - - 62,073,672 - 62,073,672 161 62,073,833

Balance as of 30 June 2015 50,000,000 12,589,174 170,196 - 110,573,287 62,073,672 (4,503,358) 230,902,971 1,355 230,904,326

Balance as of 1 January 2016 50,000,000 14,445,807 170,196 - 6,681,462 91,594,898 (4,503,358) 158,389,005 1,527 158,390,532

Transferred to legal reserve - 4,413,552 - - - (4,413,552) - - - -

Transferred to retained earnings - - - - 87,181,346 (87,181,346) - - - -

Capital increase 6,521,739 - - - - - - 6,521,739 - 6,521,739

Share premium - - - 292,815,806 - - - 292,815,806 - 292,815,806

Dividends - - - - (8,485,758) - - (8,485,758) - (8,485,758)

Profit for the period - - - - - 44,868,899 - 44,868,899 181 44,869,080

Balance as of 30 June 2016 56,521,739 18,859,359 170,196 292,815,806 85,377,050 44,868,899 (4,503,358) 494,109,691 1,708 494,111,399




CONSOLIDATED STATEMENT OF CASH FLOWS For the period from 1 January to 30 June 2016

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Non-cash transactions:

- Purchase of new packing machines during the period amounting to LE 56,534,145 by incurring machines

instalments liability.


Note

30 June 2016

30 June 2015

LE LE

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before income taxes 59,878,828 87,399,852

Depreciation of property, plant and equipment (5) 12,717,025 11,202,241

Amortization of deferred capital gain and loss 69,543 10,396

Provisions (11) 562,060 200,376

Reversal of Provision for impairment of accounts receivable - (4,758,985) Provision for impairment of accounts receivables 279,503 -

(Gain) on sale of property, plant and equipment (5) (205,695) (60,190)

73,301,264 93,993,690

Change in working capital:

Change in inventories 4,920,392 (44,108,800)

Change in accounts and notes receivable (60,373,666) (92,321,965)

Change in due from related parties - (1,426,186)

Change in prepayments and other receivables (59,354,556) (12,822,705)

Change in trade and notes payable 22,907,157 30,666,543

Change in accrued expenses and other payables 7,371,629 7,231,037

CASH FLOWS (USED IN) OPERATING ACTIVITIES (11,227,780) (18,788,386)

Income tax paid (33,816,256) (11,422,216)

NET CASH FLOWS (USED IN) OPERATING ACTIVITIES (45,044,036) (30,210,602)

CASH FLOWS FROM INVESTING ACTIVITIES

Payment to acquire property, plant and equipment (5) (46,681,128) (5,510,755)

Proceeds from sale of property, plant and equipment (5) 244,197 2,328,508

Payment to acquire projects under construction (20,585,901) (8,566,744)

NET CASH FLOWS (USED IN) INVESTING ACTIVITIES (67,022,832) (11,748,991)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short term credit facilities 875,812,384 680,181,407

Payment of short term credit facilities (762,165,763) (591,496,495)

Proceeds from term loans 8,126 -

Repayment of term loans (5,762,550) (8,882,928)

Proceeds to increase capital 6,521,739 -

Proceeds from share premium 292,815,806 -

Dividends paid (4,244,279) (15,201,879)

NET CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES 402,985,463 64,600,105

Net increase in cash and cash equivalent during the period 290,918,595 22,640,512

Cash and cash equivalent - beginning of the period 28,069,474 24,333,213

CASH AND CASH EQUIVALENT – END OF THE PERIOD (10) 318,988,069 46,973,725




NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 June 2016

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1 REPORTING ENTITY

Arabian Food Industries Company (DOMTY) – S.A.E (the “Company”) or (the “Parent”) was originally

established under the name of Damati Company for Food Industries as a limited liability company under contract

No. 18/84 dated 14 March 1984. The contract was amended on 18 July 1988 when the Company's

headquarters changed, and on 14 August 1988 an Extraordinary General Assembly meeting was held and resolved

to change the company's legal form from limited liability company to joint stock company subject to the

Companies Law No. 159 of 1981 and its executive regulations.

Based on the shareholders resolution made in the Extraordinary General Assembly meeting held on 16 August

2005 the Company's name was changed to Domty Company for Food Industries "S.A.E"

Based on the shareholders resolution made in the Extraordinary General Assembly meeting held on 6 August

2006 the company name changed to Arabian Food Industries Company (Domty) S.A.E instead of Domty

Company for Food Industries and the commercial register was amended.

The Company has been registered under the commercial register number 80124 on 7 September 1988.

The Company's headquarter is located at 32 c Taha Hussein Street, previously Murad Street - Giza

The main activities undertaken by the Company is to manufacture all types of dairy and food products.

The consolidated financial statements comprise the financial statements of the Company and its subsidiary, El

Tatweer Food Industries Company (S.A.E) (collectively, the “Group”). On 30 April 2014 the Company acquired

99.99% of the shares of El Tatweer Food Industries Company (S.A.E) (note 2).

EL Tatweer Food Industries Company was established as a joint stock company subject to the Companies Law

No. 8 of 1997 and its regulations and for the purpose of establishing and operating a factory for the manufacture

of different kinds of cheese, canning juice and the establishing of stores and a refrigerator for dairy products by

cooling and freezing for the Company and for others, subject to the laws and its regulations.

The Company is registered under the commercial register number 37566 in the 11 March 2009.

2 BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared under the going concern assumption on a historical cost

basis.

On 30 April 2014, the Company acquired 99.99% El Tatweer for Food Industries Company (S.A.E) that was

previously under the control of the shareholders of the Parent (the “Common Control Transaction”) for LE

10,752,733 in cash. As this transaction involved the combination of businesses under common control, the

pooling of interests method of accounting was applied in the presentation of the consolidated financial statements

which present the results of the Group as if El Tatweer for Food Industries Company (S.A.E) had always been

part of the Group. Accordingly the assets and liabilities transferred to the Company were recognized at historical

amounts. The consolidated financial statements present the results and changes in equity of the Company and its

subsidiary as if the Group had been in existence throughout the years presented.





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Statement of compliance

The financial statements of the company have been prepared in accordance with the Egyptian Accounting

Standards and the applicable laws and regulations.

Basis of consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies

generally a shareholding of more than one half of the voting rights. The existence and effect of potential voting

rights that are currently exercisable or convertible are considered when assessing whether the Group controls

another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They

are de-consolidated from the date that control ceases.

Accounting for business combination under EAS 29 only applies if it is considered that a business has been

acquired. For acquisitions meeting the definition of a business, the purchase method of accounting is used to

account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of

the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs

directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities

assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of

the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of

the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of

the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.

Inter-company transactions, balances and unrealized gains on transactions between Group companies are

eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where

necessary to ensure consistency with the policies adopted by the Group.

(b) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with equity owners of

the Group.

For purchases from minority interests, the difference between any consideration paid and the relevant share

acquired of the carrying value of the net assets of the subsidiary is recorded in equity. Gains or losses on

disposals to minority interests are also recorded in equity.

Changes in accounting policies

The accounting policies adopted this period are consistent with those of the previous year.

3 SIGNIFICANT ACCOUNTING POLICIES

3-1 Foreign currency translation

The financial statements are prepared and presented in Egyptian pounds, which is the functional currency of the

Company and its subsidiary.

Transactions in foreign currencies are initially recorded using the exchange rate prevailing on the date of the

transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated using the exchange rate

prevailing at the reporting date. All differences are recognized in the statement of income.





9

Nonmonetary items that are measured at historical cost in foreign currency are translated using the exchange rates

prevailing at the dates of the initial recognition.

Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates prevailing

at the date when the fair value is determined.

3-2 Property, plant and equipment

Property, plant and equipment are stated at historical cost net of accumulated depreciation and accumulated

impairment losses. Such cost includes the cost of replacing part of the plant and equipment when that cost is

incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognized

in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are

satisfied. All other repair and maintenance costs are recognized in the statement of income as incurred.

Depreciation of an asset starts when it is in the location and condition necessary for it to be capable of operating in

the manner intended by management, and is computed using the straight-line method according to the estimated

useful life of the asset as follows:

Depreciation %

Buildings 2.5%

Machinery and equipment 10%

Motor vehicles 20%

Tools 15%

Computers and software 20-25 %

Furniture and fixtures 10-20%

Property, plant and equipment are derecognized upon disposal or when no future economic benefits are expected

from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the statement of

income when the asset is derecognized.

The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end.

The Company assesses at each reporting date whether there is an indication that property, plant and equipment

may be impaired. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered

impaired and is written down to its recoverable amount. Impairment losses are recognized in the statement of

income

A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to

determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so

that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that

would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior

years. Such reversal is recognized in the statement of income.

3-3 Projects under construction

Projects under construction represent the amounts that are incurred for the purpose of constructing or purchasing

property, plant and equipment until it is ready to be used in the operation, upon which it is transferred to property,

plant and equipment. Projects under construction are valued at cost less impairment if any.





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3-4 Inventories

Inventories are stated at the lower of cost and net realizable value. Costs are those expenses incurred in bringing

each product to its present location and condition as follows:

a) Raw materials and Spare parts: at purchase cost on a weighted average basis.

b) Work in process and finished goods: cost of direct materials and labour plus attributable overheads based on a

normal level of activity.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of

completion and the estimated costs necessary to make the sale.

The amount of any write down of inventories to net realizable value and all losses of inventories shall be

recognized in cost of sales in the statement of income in the period the write down or loss occurs. The amount of

any reversal of any write down of inventories, arising from an increase in net realizable value, shall be recognized

as reduction of cost of sales in the statement of income in the period in which the reversal occurs.

3-5 Accounts receivable and other receivables

Accounts receivable and other receivables are stated at original invoice amount net of any impairment losses.

Impairment losses are measured as the difference between the receivables carrying amount and the present value

of estimated future cash flows. The impairment loss is recognized in the statement of income. Reversal of

impairment is recognized in the statement of income in the period in which it occurs .

3-6 Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past

event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at the

financial position date and adjusted to reflect the current best estimate.

Where the effect of the time value of money is material, the amount of a provision should be the present value of

the expected expenditures required to settle the obligation. Where discounting is used, the increase in the

provision due to the passage of time is recognized as a finance cost.

3-7 Legal reserve

According to the Company’s articles of association, 5% of the net profits of the year is transferred to the legal

reserve until this reserve reaches 50% of the issued capital. The reserve is used upon a decision from the general

assembly meeting based on the proposal of the board of directors.

3-8 Borrowings

Borrowings are initially recognized at the value of the consideration received. Amounts maturing within one year

are classified as current liabilities, unless the Company has the right to postpone the settlement for a period

exceeding one year after the reporting date, then the loan balance should be classified as long term liabilities.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using

the effective interest rate method. Gains and losses are recognized in the income statement when the liabilities are

derecognized as well as through the effective interest rate method amortization process.





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Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that

are an integral part of the effective interest rate. The effective interest rate amortization is included in finance cost

in the statement of income.

3-9 Income taxes

Income tax is calculated in accordance with the Egyptian tax law.

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the

taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the

reporting date in Egypt.

The current income tax charge is calculated on the basis of the tax laws enacted at the reporting date in Egypt.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax

regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected

to be paid to the tax authorities.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss

In respect of taxable temporary differences associated with investments in subsidiaries, associates and

interests in joint arrangements, when the timing of the reversal of the temporary differences can be

controlled and it is probable that the temporary differences will not reverse in the foreseeable future

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits

and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit

will be available against which the deductible temporary differences, and the carry forward of unused tax credits

and unused tax losses can be utilised, except:

When the deferred tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time of

the transaction, affects neither the accounting profit nor taxable profit or loss

In respect of deductible temporary differences associated with investments in subsidiaries, associates and

interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that

the temporary differences will reverse in the foreseeable future and taxable profit will be available

against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no

longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be

utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent

that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the

asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively

enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax

items are recognised in correlation to the underlying transaction directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax

assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation

authority.





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3-10 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the

revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding

discounts, rebates to customers and sales taxes or duty. The following specific recognition criteria must also be

met before revenue is recognized:

* Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods

have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair

value of the consideration received or receivable, net of returns and allowances, trade discounts and volume

rebates, if any.

* Interest income

Interest income is recognized as interest accrues using the effective interest method. Interest income is included in

finance income in the statement of income.

* Government grants

Government grants that are received as compensation for expenses or losses already incurred for the purpose of

giving immediate financial support to the company with no further related costs are recognized in the income

statement in the period in which they become virtually certain and all attached conditions are complied with.

3-11 Expenses

All expenses including operating expenses, general and administrative expenses and other expenses are

recognized and charged to the statement of income in the financial year in which these expenses were incurred.

3-12 Borrowing costs

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

All borrowing costs are expensed in the year incurred.

3-13 Related party transactions

Related parties represent associated companies, major shareholders, directors and key management personnel of

the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing

policies and terms of these transactions are approved by the boards of directors.





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3-14 Impairment

Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a

group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if,

and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the

initial recognition of the asset and has an impact on the estimated future cash flows of the financial asset or the

group of financial assets that can be reliably estimated.

Impairment of non financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any

indication exists, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the

higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is

determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of

those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable

amount, the asset is considered impaired and is written down to its recoverable amount.

A previously recognized impairment loss is only reversed if there has been a change in the assumptions used to

determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so

that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that

would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior

years. Such reversal is recognized in the statement of income.

3-15 Leases

Under Egyptian Laws and regulations all lease contracts including finance leases are accounted for as operating

lease, where the lease payments are recognized as an expense on a straight line basis over the lease term.

3-16 Sales lease back

Gain or loss resulting from the difference between the sale price and the net book value of disposal asset which is

sold under a sale lease-back contract is recorded as deferred capital gain or loss and is amortized over the lease

contract term.

3-17 Statement of cash flows

The statement of cash flows is prepared using the indirect method.

3-18 Cash and cash equivalent

For the purpose of preparing the cash flow statement, the cash and cash equivalent comprise cash on hand, current

accounts with banks and time deposits maturing within three months less bank overdrafts.





14

4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of these financial statements requires management to make judgments and estimates that affect

the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures and the

disclosure of contingent liabilities at the reporting date. Uncertainty about these assumptions and estimates could

result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities affected in

future periods.

Estimates and their underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimates are revised.

The key judgements and estimates that have a significant impact on the financial statement of the Company are

discussed below:

Judgements

There were no matters involving significant management judgment for the presented periods herein.

Estimates

Impairment of trade and other receivables

An estimate of the collectible amount of trade and other receivables is made when collection of the full amount is

no longer probable. For individually significant amounts, this estimation is performed on an individual basis.

Amounts which are not individually significant, but which are past due, are assessed collectively and a provision

applied according to the length of time past due, based on historical recovery rates.

Useful lives of property, plant and equipment

The Company’s management determines the estimated useful lives of its property, plant and equipment for

calculating depreciation. This estimate is determined after considering the expected usage of the asset or physical

wear and tear. The management periodically reviews estimated useful lives and the depreciation method to ensure

that the method and period of depreciation are consistent with the expected pattern of economic benefits from

these assets.

Taxes

The Company is subject to income taxes in Egypt. Significant judgment is required to determine the total

provision for current and deferred taxes. The Company established provisions, based on reasonable estimates, for

possible consequences of audits by the tax authorities in Egypt. The amount of such provision is based on various

factors, such as experience of previous tax audits and differing interpretations of tax regulations by the Company

and the responsible tax authority. Such differences of interpretations may arise on a wide variety of issues

depending on the conditions prevailing in Egypt.

Impairment of non-financial assets

The Company assesses whether there are any indicators of impairment for all non-financial assets at each

reporting date. The non-financial assets are tested for impairment when there are indicators that the carrying

amounts may not be recoverable. When value in use calculations are undertaken, management estimates the

expected future cash flows from the asset or cash-generating unit and chooses a suitable discount rate in order to

calculate the present value of those cash flows.

Translation of consolidated financial statements

originally issued in Arabic



15

5 PROPERTY, PLANT AND EQUIPMENT

- Audi Bank – Egypt has the right to a first degree commercial mortgage on the Parent company’s Property, Plant and Equipment and intangible assets covering not less than 110% of the loan balance in case of breaching any

financial covenants within the contract. (note 15)

- Depreciation expense is allocated as follows : Disposals of property, plant and equipment represent the sale of some assets as follows:

Sale of assets

The Group entered in a sale and lease back contract with Incolease company , whereby the Group sold assets amounting to LE 7,745,217 with net book value amounting to LE 8,440,641 , as a

results of this sale the Group incurred capital losses amounting to LE 695,424 to be amortized over 60 months (lease term ) starting from march 2015, the amortization for the period amounted to

L.E 69,543.

Land Buildings Machinery and

equipment Vehicles Tools

Computers and

software

Furniture and

fixtures Total

LE LE LE LE LE LE LE LE

Cost

As of 1 January 2016 8,221,307 42,405,008 187,630,792 30,344,855 10,126,567 7,465,333 5,849,137 292,042,999

Additions - 51,563 2,055,193 43,696,686 104,942 344,082 428,662 46,681,128

Transferred from projects under construction (note 6) - 109,520 - - - - - 109,520

Disposals - - - (77,002) - - - (77,002)

As of 30 June 2016 8,221,307 42,566,091 189,685,985 73,964,539 10,231,509 7,809,415 6,277,799 338,756,645

Accumulated depreciation

As of 1 January 2016 - (5,971,280) (67,296,304) (18,417,326) (4,326,850) (4,601,743) (2,891,927) (103,505,430)

Depreciation for the period - (531,205) (8,483,079) (2,289,018) (617,329) (541,790) (254,604) (12,717,025)

Disposals - - - 38,500 - - - 38,500

As of 30 June 2016 - (6,502,485) (75,779,383) (20,667,844) (4,944,179) (5,143,533) (3,146,531) (116,183,955)

Net book value as of 30 June 2016 8,221,307 36,063,606 113,906,602 53,296,695 5,287,330 2,665,882 3,131,268 222,572,690

30 June 2016

LE

Cost of sales 9,381,333

Selling and marketing expenses (note 21) 3,137,617

General and administrative expenses (note 22) 198,075

12,717,025

LE LE

Proceeds from sales of property, plant and equipment 244,197

Cost of disposed property, plant and equipment 77,002

Accumulated depreciation relating to disposals (38,500)

Net book value of disposed property, plant and equipment 38,502

Gain from sale of property, plant and equipment (note 23) 205,695

Translation of consolidated financial statements

originally issued in Arabic



16

- Audi Bank – Egypt has the right to a first degree commercial mortgage on the Parent company’s Property, Plant and Equipment and intangible assets covering not less than 110% of the loan balance in case of breaching any

financial covenants within the contract. (note 15)

- Depreciation expense is allocated as follows : Disposals of property, plant and equipment represent the sale of some assets as follows:

Sale of assets

The Group entered in a sale and lease back contract with Incolease company, whereby the Group sold assets amounting to LE 2,135,523 with net book value amounting to LE 2,291,463, as a

results of this sale the Group incurred capital losses amounting to LE 155,940 to be amortized over 60 months (lease term) starting from march 2015, the amortization for the period amounted to

L.E 10,396.

June 2015 Land Buildings Machinery and

equipment Vehicles Tools

Computers and

software

Furniture and

fixtures Total

LE LE LE LE LE LE LE LE

Cost

As of 1 January 2015 4,665,181 40,299,659 169,359,021 26,317,643 7,291,394 5,646,352 5,158,461 258,737,711

Additions - 1,698,076 906,479 855,141 191,702 1,635,469 223,888 5,510,755

Transferred from projects under construction (note 6) - 225,719 14,044,866 - - - - 14,270,585

Disposals - - (2,766,165) (188,000) - - - (2,954,165)

As of 30 June 2015 4,665,181 42,223,454 181,544,201 26,984,784 7,483,096 7,281,821 5,382,349 275,564,886

Accumulated depreciation As of 1 January 2015 - (4,930,504) (51,652,065) (15,494,078) (3,356,106) (3,611,052) (2,476,057) (81,519,862)

Depreciation for the period - (512,092) (7,968,391) (1,570,135) (494,407) (438,752) (218,464) (11,202,241)

Disposals - - 474,702 188,000 - - - 662,702

As of 30 June 2015 - (5,442,596) (59,145,754) (16,876,213) (3,850,513) (4,049,804) (2,694,521) (92,059,401)

Net book value as of 30 June 2015 4,665,181 36,780,858 122,398,447 10,108,571 3,632,583 3,232,017 2,687,828 183,505,485

30 June 2015

LE

Cost of sales 8,862,545

Selling and marketing expenses (note 21) 2,170,832

General and administrative expenses (note 22) 168,864

11,202,241

LE LE

Proceeds from sales of property, plant and equipment 129,953

Cost of disposed property, plant and equipment 662,702

Accumulated depreciation relating to disposals (662,702)

Net book value of disposed property, plant and equipment -

Gain from sale of property, plant and equipment (note 23) 129,953





17

6 PROJECTS UNDER CONSTRUCTION

30 June 2016 31 December 2015

LE LE

1 January 20,175,099 23,122,956

Additions 77,120,046 21,822,378

Disposals - (132,795)

Transferred to property, plant and equipment (note 5) (109,520) (24,637,440)

97,185,625 20,175,099

Projects under construction are analysed as follows :


LE LE

Buildings 18,008,491 4,431,188

Machinery and equipment 79,177,134 15,743,911

97,185,625 20,175,099

7 INVENTORIES


LE LE

Raw materials 128,072,686 131,909,218

Spare parts 10,050,333 9,923,457

Work in process 453,923 36,721

Finished goods 23,323,341 24,951,279

161,900,283 166,820,675

Write down of inventory* (1,941,200) (1,941,200)

159,959,083 164,879,475

8 ACCOUNTS AND NOTES RECEIVABLE


LE LE

Accounts receivable – Local market 257,085,014 169,296,825

Accounts receivable – Export 33,269,699 28,874,574

Notes receivable 21,694,037 53,503,685

312,048,750 251,675,084

Provision for impairment of accounts receivable* (8,605,755) (8,326,252)

303,442,995 243,348,832

* The provision for impairment of accounts receivable and its reversal are included in the selling and

marketing expenses

The movement of provision for impairment of accounts receivable is represented as follows:


LE LE

Balance at 1 January 8,326,252 12,807,466

Charged during the period (note 21) 279,503 277,771

Reversal (note 21) - (4,758,985)

Balance 8,605,755 8,326,252





18

9 PREPAYMENTS AND OTHER RECEIVABLES


LE LE

Prepaid expenses 15,316,645 7,642,473

Deposits with others 2,104,466 1,767,416

Employees’ advances 631,654 579,895

Advances to suppliers to purchase property, plant and

equipment 25,640,325 4,380,974

Amount due from tax authority 3,168,938 4,155,647

Deferred capital losses (note 5) 559,376 628,919

Advances to suppliers 27,720,460 22,638,065

Other receivables 47,592,674 48,806,697

Letters of credit 10,272,294 -

133,006,832 90,600,086

Provision for impairment of prepayments and other

receivables* (605,372) (605,372)

132,401,460 89,994,714

10 CASH ON HAND AND AT BANKS


LE LE

a) Local Currency

Cash on hand 5,340,345 1,269,607

Current accounts 35,870,625 19,233,926

Deposits 250,000,000 -

291,210,970 20,503,533

b) Foreign currency

Cash on hand 2,813,127 1,227,380

Current accounts 24,963,972 6,338,561

27,777,099 7,565,941

318,988,069 28,069,474

For purposes of statement of cash flows:

The cash and cash equivalent is equal to cash on hand and at banks as there are no bank overdrafts as of 30

June 2016 and 2015.

11 PROVISIONS


LE LE

Balance as of 1 January 12,028,104 10,289,966

Charge for the period 156,750 1,861,513

Transferred from other credit balances during the period 405,310 -

Used during the period - (123,375)

Balance 12,590,164 12,028,104

*The reversal of provision related to settlement of certain disputes .

The balance at 30 June 2016 is expected to be utilized in upcoming years. In the opinion of the Company’s

management after taking appropriate technical advice, the outcome of these claims will not give rise to any

significant loss beyond the amounts provided at 30 June 2016.





19

The information usually required by accounting standards is not disclosed because the management

believes that to do so would seriously prejudice the outcome of the negotiation with those parties. These

provisions are reviewed by management on an annual basis and they are adjusted based on latest

developments, discussions and agreements with those parties.

12 SHORT TERM CREDIT FACILITIES


LE LE

a) Egyptian pounds 334,379,640 277,508,945

b) Foreign currencies 95,404,793 38,628,867

429,784,433 316,137,812

- Credit facilities represent short term facilities from banks to finance the parent’s working capital. The

credit facilities carry on average interest rate of 13,9% for facilities denominated in Egyptian pound and

average interest rate of 2.7% for facilities denominated in foreign currencies .

- Credit facilities denominated in Euros amounted to LE 1,618,371. (31 December 2015: LE 2,117,674)

- Credit facilities denominated in other currencies amounted to LE 673. (31 December 2015: LE 80)

- Credit facilities denominated in USD amounted to LE 93,785,749. (31 December 2015:LE 36,511,113)

13 TRADE AND NOTES PAYABLES


LE LE

Trade payables 91,949,925 62,584,946

Notes payable 9,912,574 16,243,446

101,862,499 78,828,392

14 ACCRUED EXPENSES AND OTHER PAYABLES


LE LE

Accrued expenses 19,127,722 12,857,356

Advances from customers 8,920,734 8,092,792

Deposits from others 927,804 321,962

Due to Social Insurance Authority 927,761 728,981

Tax authorities 5,528,873 6,411,025

Other payables 1,879,650 849,341

37,312,544 29,261,457

15 TERM LOANS


LE LE

Non-current 21,066,250 26,828,800

Current 11,533,126 11,525,000

32,599,376 38,353,800





20

Loan from Audi Bank – Egypt

Represents a term loan granted to the Company during 2014, amounting to LE 46.6 million from Audi

Bank - Egypt in two tranches as follow :

- First tranche amounted to LE 36.4 million used to settle certain banks’ credit facilities and to be paid

in twenty quarterly installments starting from September 2014,

- Second tranche amounted to LE 10.2 million and was used to pay term loan granted to the company by

Ahli United Bank - Egypt and be paid in three semi-annual installments starting from December 2014,

- Interest is calculated on the basis of the corridor overnight deposit rate published by the Central Bank of

Egypt plus 2.25%.

- The bank has the right to a first degree of commercial mortgage on the Company’s property, plant and

equipment and intangible assets covering not less than 110% of the loan balance in case of breach of the

loan covenants. The loan is also guaranteed by the Company shareholders .

Loan from National Bank of Egypt

Represents a term loan granted to the Company during 2014 amounting to LE 2.1 million from National

Bank of Egypt in order to finance 70% of the cost related to development of hygienic production structure

of Company, in accordance with "environmental compliance" agreement with Egyptian Environmental

Affairs Agency. The loan is due in 16 equal quarterly installments.

- The interest rate is 2.5% per year.

- The equipment financed by this loan is pledged to the National Bank of Egypt until the loan is totally

paid. No equipment was purchased up to 30 June 2016.

Loan from HSBC Bank

The company obtained a term loan during 2013 amounting to LE 18.6 M from HSBC Bank – Egypt. The

loan is repayable over 60 monthly installments starting from August 2013. The loan carries an interest rate

of corridor plus 3.25%.

AUDI

BANK

NATIONAL

BANK OF

EGYPT

HSBC Total

LE LE LE LE Balance as of 1 January 2016 27,300,000 1,443,800 9,610,000 38,353,800

Proceeds during the period - 8,126 - 8,126

Payments during the period (3,640,000) (262,550) (1,860,000) (5,762,550)

Balance as of 30 June 2016 23,660,000 1,189,376 7,750,000 32,599,376

AUDI

BANK

AHLI

UNITED

BANK

HSBC Total

LE LE LE LE Balance as of 1 January 2015 41,380,000 1,650,182 13,330,000 56,360,182

Payments during the period (14,080,000) (206,382) (3,720,000) (18,006,382)

Balance as of 31 December 2015 27,300,000 1,443,800 9,610,000 38,353,800





21

16 ISSUED AND PAID UP CAPITAL

At each of 30 June 2016, 31 December 2015, the Company’s authorized capital amounts to LE

500,000,000.

As of 31 December 2012 , the issued and paid up capital was L.E 30,000,000 divided over 1200000 shares

of par value LE 25 each.

On 30 June 2013 the Extraordinary General Assembly approved the raise of the issued and paid up capital

by L.E 20,000,000 divided over 800000 shares at the par value of L.E 25 to reach L.E 50,000,000 through

share dividends of 2 shares for every 3 outstanding shares,

on 21 October 2015 the Extraordinary General Assembly decided the fragmentation of the nominal value

of each share from LE 25 to LE 0,2 and was approved in the commercial register on 15 December 2015.

On 7 April 2016 the Board of Directors decided (authorized by the extraordinary General Assembly in the

15 January 2016) to increase the paid-up capital by LE 6.521.739 distributed over 32608695 shares with a

nominal value of 20 piaster per share then the initial public offering held on the final fair value for the

share amounted to LE 9,20 per share were the difference of LE 9 were share premium. and the capital

increase was approved in the commercial register on 17 May 2016

accordingly the issued and paid up capital as of 30 June 2016 amounted to L.E 56,521,739 divided over

282608695 shares at the par value of LE 0,2. (2015:LE 50,000,000).

17 RETAINED EARNINGS

The retained earnings of the Group includes an amount of LE 453,913 in 30 June 2016 (31December

2015:LE 287,703) not available for distribution being the legal reserve of the subsidiary.

18 MACHINES INSTALMENTS

The machine installments represent outstanding installments for the purchased packing machines from the

supplier and do not bear interest. The balance is represented as follow :


LE LE

Not later than one year – current 33,491,004 22,607,687

Later than one year and not later than five years – non current 50,532,413 17,604,205

84,023,417 40,211,892

19 SALES TAX PAYABLE ON PLANT AND EQUIPMENT

Sales tax payable on plant and equipment represents the deferred installments of sales tax on the imported

machines and equipment which is deferred for 10 years with 3 years grace period in accordance with

applicable laws.

20 INCOME TAXES

From 1/1/2016

Till 30 /6/2016

From 1/1/2015

Till 30 /6/2015 From 1/4/2016

Till 30 /6/2016

From 1/4/2015

Till 30 /6/2015

LE LE LE LE

Current income taxes 14,301,105 26,314,293 5,920,501 18,405,098

Deferred income taxes 708,643 (988,274) 955,396 (1,804,339)

Income Taxes 15,009,748 25,326,019 6,875,897 16,600,759





22

RECONCILIATION OF THE EFFECTIVE INCOME TAX RATE

30 June 2016 30 June 2015

Rate LE Rate LE

Profit before income taxes 59,878,828 87,399,852

Income taxes at the applicable tax rate 22,5% 13,472,736 5%-25% 26,169,956

Non-deductible expenses 828,369 144,337

Income taxes at the effective tax rate 23,9% 14,301,105 30,1% 26,314,293

Components of deferred tax liability are as follows:


LE LE

Depreciation of Property, plant and equipment 18,689,632 17,980,989

Net deferred tax (liability) 18,689,632 17,980,989

21 SELLING AND MARKETING EXPENSES

From 1/1/2016

Till 30 /6/2016

From 1/1/2015

Till 30 /6/2015 From 1/4/2016

Till 30 /6/2016

From 1/4/2015

Till 30 /6/2015

LE LE LE LE

Advertising and marketing activities 23,054,540 14,320,676 10,267,061 6,392,940

Salaries and wages 42,095,895 30,911,745 23,238,683 16,121,975

Warehousing 4,713,950 3,092,521 2,410,204 1,672,125

Vehicles and transportation rent expenses 8,317,611 6,202,606 4,278,738 3,316,340

Lease (Note 28) 2,425,910 2,184,631 1,163,711 1,110,414

Spare parts and maintenance 4,246,983 4,046,006 2,335,256 2,055,429

Depreciation (note 5) 3,137,617 2,170,832 1,745,881 1,106,458

Insurance 1,311,500 1,214,891 790,831 669,657

Provision for impairment of accounts receivable (note 8) 279,503 - - -

Reversal of impairment of accounts receivable (note 8) - (4,758,985) (9,593) -

Fright expenses 5,148,403 4,572,487 2,941,803 2,588,630

Employees benefits 518,134 315,147 265,566 167,117

Other 5,378,078 3,886,630 2,851,014 2,157,792

100,628,124 68,159,187 52,279,155 37,358,877

22 GENERAL AND ADMINISTRATIVE EXPENSES

From 1/1/2016

Till 30 /6/2016

From 1/1/2015

Till 30 /6/2015 From 1/4/2016

Till 30 /6/2016

From 1/4/2015

Till 30 /6/2015

LE LE LE LE

Salaries and wages 11,515,677 6,255,446 5,923,284 3,222,272

Board allowance 125,000 - 125,000 -

Depreciation (note 5) 198,075 168,864 99,325 93,560

Lease (note 28) 204,598 7,081 102,392 612

Rent 122,173 116,879 61,213 57,705

Employees benefits 257,282 190,843 128,547 99,540

Vehicles and transportation rent expenses 140,928 121,883 74,922 49,807

Amortization of deferred capital gain and loss (note 5) 69,543 10,396 34,772 7,797

Donation 106,150 824,503 90,500 519,735

Other 2,360,953 1,729,956 1,246,757 1,085,638

15,100,379 9,425,851 7,886,712 5,136,666





23

23 NET OTHER OPERATING INCOME / EXPENSES

From 1/1/2016

Till 30 /6/2016

From 1/1/2015

Till 30 /6/2015 From 1/4/2016

Till 30 /6/2016

From 1/4/2015

Till 30 /6/2015

LE LE LE LE

Export support subsidy 1,958,008 1,861,434 858,793 772,027

Marketing support from Tetra Pak Company 4,792,043 2,685,761 2,951,428 1,991,361

Scrap sales revenue 1,137,907 1,337,507 537,177 812,747

Job orders for others 554,895 542,032 258,418 361,933

Gain from sale of Property, plant and equipment (note 5) 205,695 129,935 180,722 34,435

Loss from sale of project under construction - (69,745) - (69,745)

Other revenues 366,747 - 254,595 -

9,015,295 6,486,924 5,041,133 3,902,758

24 FINANCE EXPENSES

From 1/1/2016

Till 30 /6/2016

From 1/1/2015

Till 30 /6/2015 From 1/4/2016

Till 30 /6/2016

From 1/4/2015

Till 30 /6/2015

LE LE LE LE

Interest on loans and credit facilities 20,411,665 15,260,249 11,022,692 7,684,887

Expenses from foreign exchange differences 4,691,257 4,790,331 1,060,681 175,169

25,102,922 20,050,580 12,083,373 7,860,056

25 CONTINGENT LIABILITIES

At 30 June 2016 the Group had contingent liabilities in respect of banks’ letter of guarantees issued by the

banks on behalf of 3rd parties from which it is not anticipated that material liabilities will arise amounting

to LE 5,483,813 (31 December 2015: LE 3,211,776).

26 MERGER RESERVE

Merger reserve represents the difference between the nominal value of the shares of the subsidiary

acquired in the Common Control Transaction and the cash paid as consideration for such acquisition. Until

the date of the Common Control Transaction, the merger reserve represents the nominal value of the shares

of the subsidiary owned by the controlling shareholders of the Parent. Cash consideration paid by the

Company to the controlling shareholders for the purchase of the subsidiary shares on 30 April 2014 has

been reflected as a distribution.

27 EARNING PER SHARE

Basic and diluted earnings per share are calculated by dividing the profit for the period attributable to the

equity holders of the Parent by the weighted average number of shares outstanding during the year. The

Company has no dilutive securities.

* According to the Egyptian law, employees and Board of Directors members are entitled to a percentage

of the company’s profit as a profit sharing when dividends are declared.

30 June 2016 30 June 2015 LE LE

Net profit for the period 44,868,899 62,073,672

Employees and Board of directors dividends* (7,816,227) (10,954,298)

Net profit available for distribution after employees and board of

directors share of profit 37,052,672 51,119,374

Number of shares outstanding 258152174 2000000

Basic and diluted earnings per share 0,144 25,56





24

28 CAPITAL AND LEASE COMMITMENTS

a. Capital commitments

The balance of the company’s contracted capital commitments as of 30 June 2016 amounted to

LE 4,969,061 (31 December 2015 : LE 15,294,319) as follow:

30 June 2016 Contract

amount Paid amount Un-paid

amount

LE LE LE

-Buildings and construction 21,646,550 (17,396,844) 4,249,706

-Machines 496,000 (204,364) 291,636

-Vehicles 13,593,960 (13,166,241) 427,719

35,736,510 (30,767,449) 4,969,061

31 December 2015 Contract

amount Paid amount Un-paid amount

LE LE LE

-Buildings and construction 21,276,550 (6,255,867) 15,020,683

-Machines 430,000 (156,364) 273,636

21,706,550 (6,412,231) 15,294,319

b. Finance lease commitments

The table below present the details of finance lease commitments including the breakdown by type

of expenses of the period.

30 June 2016 Contract

Amount

Purchasing

Price

Total Lease

Amount

Period lease

payments

LE LE LE LE

Machinery and equipment 28,405,219 (7) 28,405,212 3,294,745

Vehicles 26,092,822 (20) 26,092,802 2,630,508

54,498,041 (27) 54,498,014 5,925,253

31 December 2015 Contract

Amount

Purchasing

Price

Total Lease

Amount

Annual lease

payments

LE LE LE LE

Machinery and equipment 27,723,078 (7) 27,723,071 3,843,180

Vehicles 27,483,237 (24) 27,483,213 5,143,891

55,206,315 (31) 55,206,284 8,987,071

The period lease expenses are charged as follow:

30 June 2016 30 June 2015

LE LE

Cost of sales 3,294,745 1,566,867

Selling and marketing expenses 2,425,910 2,184,631

General and administrative expenses 204,598 7,081

5,925,253 3,758,579





25

The company leases certain of its assets under finance leases. The average lease term is 5 years (31

December 2015: 5 Years). The company has the option to purchase the assets for a nominal amount

at the end of lease terms. The company’s obligation under finance leases are secured by the lessor’s

titles to the leased assets.

Finance lease commitments are as follow:


LE LE

Not later than one year 10,135,471 9,924,686

Later than one year and not later than five years 21,922,840 24,672,075

32,058,311 34,596,761

29 SEGMENT REPORTING

In 2012 the company was operating in one segment. From September 2013, the Company started the

production of juice, therefore the Company started to operate into two segments as follows:

- Dairy products

- Juice Products

The Executive Management Committee monitors the operating results of its business units separately for

the purpose of making decisions about resource allocation and performance assessment. Segment

performance is evaluated based on gross profits and is measured consistently with profit or loss in the

consolidated financial statements. However the Group’s financing (including finance costs and finance

income) and income taxes are managed on a Group basis and are not allocated to operating segments.

The amount of each segment item reported shall be the measure reported to the chief operating decision

maker for the purposes of making decisions about allocating resources to the segment and assessing its

performance.

Primary segments results – related products for the period ended 30 June 2016 are as follows:

Dairy products Juice products Unallocated Total

LE LE LE LE

Segment Sales 670,964,374 115,599,923 - 786,564,297

Segment cost of sales (499,882,835) (99,319,705) (1,335,049) (600,537,589)

Gross Profit 171,081,539 16,280,218 (1,335,049) 186,026,708

Operating expenses net of other operating

income

(106,869,958)

Finance income 5,825,000

Finance expenses (25,102,922)

Income tax expenses (15,009,748)

Net profit for the period 44,869,080

Depreciation expenses (5,768,747) (2,714,332) (4,233,946) (12,717,025)

Primary segments results – related products for period ended 30 June 2015 are as follows:

Dairy products Juice products Unallocated Total

LE LE LE LE

Segment Sales 598,443,034 114,905,851 - 713,348,885

Segment cost of sales (442,557,551) (90,917,326) (1,284,297) (534,759,174)

Gross Profit 155,885,483 23,988,525 (1,284,297) 178,589,711

Operating expenses net of other operating

income

(71,298,490)

Finance income 159,211

Finance expenses (20,050,580)

Income tax expenses (25,326,019)

Net profit for the period 62,073,833

Depreciation expenses (5,347,381) (2,621,010) (3,233,850) (11,202,241)





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Segments Assets

30 June 2016 Dairy products Juice products Unallocated Total

LE LE LE LE

Total assets 72,490,741 41,415,861 1,120,643,320 1,234,549,922

Segments Assets

31 December 2015 Dairy products Juice products Unallocated Total

LE LE LE LE

Total assets 76,486,190 43,848,297 614,670,676 735,005,163

Secondary Segment results – geographical sales by areas for the periods ended 30 June 2016 are as

follows:

Geographical areas

Local

30 June 2016 30 June 2015

LE LE

Cairo 377,010,688 309,786,083

Alexandria 94,692,847 72,506,147

Delta 149,078,963 122,123,460

Upper Egypt 126,664,848 170,110,528

747,447,346 674,526,218

Export 39,116,951 38,822,667

786,564,297 713,348,885

30 TAX SITUATION

30-1 Arabian food industries company (DOMTY)

a) Corporate taxes

The Company was exempted from corporate taxes for ten years started from the commencement of

operation till 13 December 2000.

All years up to 2010 were inspected by the Tax Authorities and all additional tax liabilities resulted

from the inspection has been agreed and settled by the Company.

The years 2011 and 2014 are currently under inspection

The company submitted the Tax declaration for the year 2015

b) Sales taxes

The Company’s records were inspected and all taxes due were paid for the years from the

commencement of operation till 2014.

From January 2015 till April 2016, the company submitted the sales tax returns on monthly basis

and at the legal dates. No tax inspection took place for that period.

c) Salary taxes

From commencement of operation till 2006, the Company’s records were inspected and all taxes

due were paid.

From 2007 till 2012, the inspection is still in progress.

For the years 2013,2014 and 2015, the company withheld and paid the taxes due on monthly basis

at the legal dates according to relevant tax law till June 2016.





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d) Stamp duty taxes

For all years up to 2010, stamp and duty taxes have been inspected by the Tax Authority and

agreed by the Company.

The years from 2011 to 2014, the company calculate and pay the tax regularly those years are

currently being inspected

The period from 2015 to 30 April 2016, the company calculate and pay the tax regularly.

e) Withholding tax

The Company withholds tax on its transactions in accordance with tax law 91 of 2005 article (59)

and the Ministry resolution no. 310 of 2013.

30-2 El Tatweer for Food Industries Company

a) Corporate taxes

- The Company is subject to tax in accordance with the provisions of Law 91 of 2005. The

company has started its activity in October 2011.

- From commencement of operation till 2015, the Company submitted the tax return on a regular

basis in the legal deadlines in accordance with the provisions of the income tax law.

- No inspection has taken place till 2015.

b) Sales taxes

- From the commencement of operation till 2015, the Company submitted the sales tax returns on

monthly basis and at the legal dates.


c) Salary taxes

- From the commencement of operation till March 2016, the Company withheld and paid the

taxes due on monthly basis at the legal dates according to tax law.


d) Withholding tax

The Company withholds tax on its transactions in accordance with the tax law.

31 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on

its interest bearing liabilities, banks credit facilities and long term loans.

30 June 2016 30 June 2015

Change in

interest rate

Effect on profit

before TAX

Change in

interest rate

Effect on profit

before TAX

LE LE

Liabilities +1% 60,126,295 Liabilities +1% 87,582,364

-1% 59,631,361 -1% 87,217,340





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b) Foreign Currency Risk

The foreign currency risk is the risk that the value of the financial assets and liabilities and the related

cash inflows and outflows in foreign currencies will fluctuate due to changes in foreign currency

exchange rates. The total financial assets denominated in foreign currencies amount to LE

89,142,689 (2015:LE 54,605,085) whereas, the total financial liabilities denominated in foreign

currencies amounts to LE 217,498,508 (2015:LE 93,198,351) .

c) Credit Risk

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 Company seeks to limit its credit risk with respect to banks by applying many control procedures

include credit limits and only dealing with reputable banks.

The Company seeks to limit its credit risk with respect to customers by setting credit limits for all

customers based on internal rating criteria and monitoring outstanding customer receivables balances.

d) Liquidity risk

The Company’s objective is to maintain a balance between continuity of funding and flexibility

through the use of loans and finance lease . The company uses credit limits and watches the loans due

dates.

Financial Liabilities

Less than 3

months

From 3 to 12

months

From 1 to 5

years

More than 5

years Total

30 June 2016

Loans 2,881,250 8,651,876 21,066,250 - 32,599,376

Suppliers, accrued expenses and

other payables 132,586,131 - - - 132,586,131

Sales tax payable on plant and

equipment 199,516 718,301 4,589,054 190,920 5,697,791

Income Tax payable - 14,301,105 - - 14,301,105

Notes Payable 8,367,453 1,545,121 253,900 - 10,166,474

Total financial liabilities 144,034,350 25,216,403 25,909,204 190,920 195,350,877

Less than 3

months

From 3 to 12

months

From 1 to 5

years

More than 5

years Total

31 December 2015

Loans 2,881,250 8,643,750 26,828,800 - 38,353,800

Suppliers, accrued expenses and

other payables 91,257,508 - - - 91,257,508

Sales tax payable on plant and

equipment 60,333 528,562 3,671,264 1,788,168 6,048,327

Income Tax payable 37,971,903 - - - 37,971,903

Notes Payable 15,353,819 889,627 380,850 - 16,624,296

Total financial liabilities 147,524,813 10,061,939 30,880,914 1,788,168 190,255,834





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e) Capital risk management

The company manages its capital to ensure that it will continue in sufficient level while maximising

the return to the shareholders through the optimisation of debt to equity balance. The company’s

overall strategy remains unchanged.

32 FINANCIAL INSTRUMENTS

The Company’s financial instruments are represented in financial assets and financial liabilities.

The financial assets include cash on hands and banks, trade and notes receivables, due from related

parties, and other receivables. The financial liabilities include trade and notes payables, term loans,

short term credit facilities, machinery instalments, long term notes payable and other payables.

The significant accounting policies applied for the recognition and measurement of the above -

mentioned financial assets and liabilities and the related income and expenses are included in note

(3) of the notes to the financial statements.

arabian food industries company (domty) - s.a.e...

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