dangote flour mills annual report 2009
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Dangote flour mills annual report 2009TRANSCRIPT
RC 501757
1D A N G OT E F L O U R M I L LS P L C
Notice of 4th Annual General Meeting 2
Directors, Advisers and Other Corporate Information 3
Financial Highlights 4
Chairman’s Statement 5
Board of Directors 7
Report of the Directors 8
Corporate Governance Report 12
Report of the Audit Committee 14
Report of the Independent Auditors 15
Statement of Significant Accounting Policies 16
Consolidated Profit and Loss Account 18
Consolidated Balance Sheet 19
Consolidated Statement of Cash Flows 20
Notes to the Consolidated Financial Statements 21
Consolidated Value Added Statement 32
Consolidated Four-Year Financial Summary 33
Share Capital History 34
Proxy Form
Contents
2 D A N G OT E F L O U R M I L LS P L C
NOTICE IS HEREBY GIVEN that the 4th ANNUAL GENERAL MEETING OF DANGOTE FLOUR MILLS PLC will hold at TahirHotel, Kano on Wednesday, 6th October, 2010 at 12.00 noon prompt to transact the following business:
ORDINARY BUSINESS
1. To receive the Audited Financial Statements for the year ended 31st December 2009 along with the reports of theDirectors and Audit Committee thereon for the year 2009.
2. To declare a Dividend.
3. To re-elect Directors.
4. To re-appoint the Auditors.
5. To authorize the Directors to fix the remuneration of the Auditors.
6. To appoint members of the Audit Committee.
SPECIAL BUSINESS
To fix the remuneration of the Directors.
PROXY
A member of the Company entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend andvote instead of him. A proxy need not be a member of the Company. A proxy for an organization may vote on a show ofhands and on a poll. For the appointment to be valid, a completed proxy form must be deposited at the registered officeof the Company or with the Registrar not later than 48 hours before the time fixed for the meeting.
DIVIDEND
The Board recommends for the approval of shareholders a payment of final dividend of 50 kobo per ordinary share of 50kobo each, out of the profits declared in the financial year ended 31st December, 2009 and which will be subject towithholding tax at the appropriate rate having paid an interim dividend of 30 kobo per share for the period ended 30thSeptember, 2009 the total dividend payable for the year ended 31st December, 2009 will be 80 kobo per share.
DIVIDEND WARRANTS
If approved, the dividend warrants will be posted on Monday, 25th October, 2010 to shareholders, whose names appearin the Company Register of Members at the close of business on Friday, 17th September, 2010.
NOTES
1. CLOSURE OF REGISTER AND TRANSFER BOOKS
NOTICE IS HEREBY GIVEN that the Register of Members and Transfer Books of the Company will be closed fromMonday, 20th September, 2010 to Monday, 27th September, 2010 both days inclusive.
2. AUDIT COMMITTEE
In accordance with Section 359(5) of the Companies and Allied Matters Act 1990, a nomination (in writing) by anymember or shareholder for appointment to the Audit Committee should reach the Company Secretary at least 21days before the Annual General Meeting. The Audit Committee comprises three shareholders and three Directors.
BY ORDER OF THE BOARD
A. L. ISA (MRS)Company Secretary
Dated this 6th day of September, 2010
DANGOTE FLOUR MILLS PLC8, Rycroft Street,Off Liverpool Road,Apapa, Lagos,Nigeria.
Notice of 4th Annual General Meeting
A. L. ISA (MRS)Company Secretary
3D A N G OT E F L O U R M I L LS P L C
DIRECTORS
Alhaji Aliko Dangote — Chairman
Alhaji Sani Dangote — Director
Mr. Olakunle Alake — Director
Mr. Uzoma Nwankwo — Director
Alhaji Abdu Dantata — Director
Alhaji Abdullahi Mahmoud — Director
Mr. Asue Ighodalo — Director
Brigadier-General S. L. Teidi (Rtd) — Director
Mr. Rohit Chaudhry — Managing Director
Alhaji Shuaibu Idris — Deputy Managing Director
COMPANY SECRETARY/LEGAL ADVISER
A. L. Isa (Mrs)
REGISTERED OFFICE
1, Alfred Rewane Road,Falomo,Ikoyi, Lagos.
REGISTRAR AND TRANSFER OFFICE
Oceanic Registrars Ltd.154, Ikorodu Road, Onipanu,Shomolu, Lagos.
AUDITORS
Akintola Williams Deloitte (Chartered Accountants)235, Ikorodu Road, Ilupeju, Lagos.
BANKERS
Zenith Bank PlcAfribank PlcEquitorial Trust Bank PlcFirst Bank of Nigeria PlcGuaranty Trust Bank PlcOceanic Bank PlcDiamond Bank PlcAccess Bank PlcIntercontinental Bank PlcFirst City Monument Bank PlcUnited Bank for Africa Plc
Directors, Advisers and Other Corporate Information
4 D A N G OT E F L O U R M I L LS P L C
Financial Highlights
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
PROFIT AND LOSS
Turnover 61,388,064 47,927,300 41,839,919 30,109,610
Profit before taxation 5,374,056 3,167,625 5,156,801 1,758,137
Taxation 187,024 (178,066) 203,060 (54,045)
Profit after taxation 5,561,080 2,989,559 5,359,861 1,704,092
BALANCE SHEET
Share capital 2,500,000 2,500,000 2,500,000 2,500,000
Shareholders’ funds 28,469,073 24,707,190 26,749,581 23,157,859
Per 50 kobo share data (kobo)
Earnings per share (kobo) 111 60 107 34
5D A N G OT E F L O U R M I L LS P L C
Distinguished shareholders,
Members of the Board of Directors,
Gentlemen of the Press,
Ladies and Gentlemen,
It is my pleasure to welcome you on behalf of the Boardof Directors to the 4th Annual General Meeting of ourgreat Company, Dangote Flour Mills Plc. This meetinggives me the opportunity to present our Companyfinancial statements and scorecard to shareholders andvarious stakeholders for the year ended 31st December2009, the challenges we faced, how these challengeswere managed to make the Company stay afloat.
Before I go into the details of the accounts, permit meto briefly state major economic events which impactedour operations during the year under review.
PREVAILING ECONOMY
The year 2009 was a challenging one for business bothlocally and globally. The global financial crisis, whichstarted in 2007, reached its climax in 2009 with thecrash of the global stock markets and failure of several
Chairman’s Statement
banks, which led to government interventions torecapitalise the financial system. The Nigerian StockExchange also experienced huge stock price fall in 2009with the All Share Index dropping drastically. Thistriggered loss of investors’ confidence and subsequentliquidity crisis in the Nigerian economy; therebyaffecting our customer’s ability to fund their businessesappropriately.
There was no significant improvement in the poor stateof infrastructure including power and road networkduring the year. Despite government’s efforts, only anaverage of 3,500 megawatts was reportedly achievedas opposed to the target of 6,000 megawatts. The crisisin the Nigerian energy sector has constituted ahindrance to socio-economic transformation and,consequently, capacity utilization in the industry wherewe operate. The state of our road network also was a
major challenge in 2009 financial year. Thesedevelopments impacted adversely on our business
and has not helped the operating environment.
Inspite of this tough period however, yourCompany was able to significantly increase itsmarket share, revenue and profit.
COMPANY PERFORMANCE
With a relative stability in price for all our products forthe year under review, I am delighted to report thatour Company has delivered record revenue and profitfor the financial year ended 31 December 2009.Dangote Flour Mills Plc achieved a profit before tax ofN=5.374 billion in 2009, representing a growth rate of69.7% from N=3.167 billion reported in the previousyear. The turnover also increased from N=47.927 billionin 2008 to N=61.388 billion in 2009 with profit after taxmoving from N=2.989 billion in 2008 to N=5.561 billionin 2009. This represents 28.1% and 86% increase inturnover and profit after tax respectively. Thesubsidiaries have contributed an impressive N=19.5billion to the Group turnover which is highlycommendable despite all the challenges of survivingin a highly competitive industry. Continuous effort ingrowing economies of scales, and cost reductionthrough operational efficiency as well as the effect offocusing on human capital development hadcontributed to the Group’s better performance
The flour milling business remains strong andconstitutes a key component of the Group’s profitability.
6 D A N G OT E F L O U R M I L LS P L C
Although overall average selling price had remainedstable compared to the prior year, flour sales were morefavourable. This increase resulted in a profit before taxrecorded of N=5.37 billion for the year.
OUR PEOPLE
Our achievements this year would not have beenpossible without the dedication and commitment ofour most important asset — our people. I would like toseize this opportunity to acknowledge the goodcontributions of our management and staff for theirrelentless and painstaking efforts towards theachievement of the Dangote Flour Mills Plc dream. Onour part, we would remain committed to providingadequate and necessary development programmes andenabling environment in order to maximise theireffectiveness and efficiency on the job at all times.
FUTURE PROSPECT
With an improved economic environment and barringany unforeseen circumstances, Dangote Flour Mills Plcis expected to perform favourably in 2010. The Grouphas embarked on an expansion project to enlarge ourmanufacturing and packaging facilities within thecountry. The current ongoing projects in our variousmills are aimed at achieving 7,300 metric tons per day.These projects are scheduled to be completed in thelast quarter of 2010. With the planned introduction ofour wheat meal brand, Alkama and retail packs for flourand Danvita, the future looks bright and our Companyis positioned to take over the market lead. The plan tocommence direct and indirect export into Chad,Cameroon, Niger and Sudan is at final stage. Yourfuturist management is also exploring the need to sitea mill in Senegal. There is also a plan to increase thecapacity of our subsidiary (Agrosacks Limited) by 5million bags per day. It is expected that this expansionwill contribute positively to the Group and assist inachieving greater economies of scale.
DIVIDENDS
With the favourable profit for the year ended 31December 2009, the Board of Directors is pleased torecommend a final dividend of 50 kobo per 50 koboshare for your approval at this Annual General Meeting.
This is in addition to the interim dividend of 30 koboper ordinary share earlier paid; thus bringing totaldividend payout to 80 kobo per 50 kobo share.
GLOBAL ENVIRONMENT
Recent global events and their impact on our businessis another important factor which must be mentionedhere. The international price of our major raw material,wheat is already soaring due to bad harvest and fireincidence in Russia, one of the major producers ofwheat. This is in addition to the current global financialcrisis whose negative effects on sourcing offshore fundsto finance imports of raw materials and spares haveremained unabated.
Despite the above, I wish to re-assure shareholders thatour Company in its proactive manner has put strategiesin place to cope with any challenges arising from thiscrisis.
CORPORATE SOCIAL RESPONSIBILITY
We would also continue to play our part in the societyas a responsible corporate body by not only complyingwith required standards in products quality but also byengaging with the larger society to continue tocontribute positively to the improved social welfare ofour operating environment.
CUSTOMERS
Our customers are considered indispensable partnersin our business. Within the year under review, we hadseries of interactive sessions with them which enabledthem air their views and make significant contributionson how to grow our partnership together. We shallcontinue to hold this wonderful group of people inhigh esteem. On behalf of the Board, Management andStaff of the Company, I hereby wish to say a big thankyou to all our numerous customers.
APPRECIATION
On behalf of the Board of Directors, I would like toexpress our heartfelt appreciation to the managementand employees of the Group for their continueddedication, support and commitment during the year.
I would also like to thank you, my fellow shareholders,as well as our customers, suppliers, bankers,government agencies and regulatory authorities, for theunrelenting support and confidence in Dangote FlourMills Plc.
Thank you and God bless.
Alhaji (Dr.) Aliko Dangote, CONChairman
Chairman’s Statement cont’d
(rtd.)
8 D A N G OT E F L O U R M I L LS P L C
1. ACCOUNTS
The Directors are pleased to submit their report together with the audited accounts of the Company for the yearended 31st December 2009.
2. RESULTThe Group The Company
N=’000 N=’000
Turnover 61,388,064 41,839,919Profit after taxation and minority interest 5,530,732 5,359,861
3. PRINCIPAL ACTIVITIES
The principal activities of the Company during the year are as follows:
(a) Manufacturing and selling of bread and biscuit flour
(b) Manufacturing and selling of Wheat Offal (Bran)
(c) Manufacturing of Semolina.
The principal activities of its subsidiaries are:
Pasta
Manufacture of Spaghetti, Macaroni etc.
Agrosacks
Manufacture of packaging materials.
4. LEGAL FORM
The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated as publiclimited liability company on 1 January 2006 and commenced operations on the same date. It however becamequoted on the Nigerian Stock Exchange on 4 February 2008. Its principal activity is the milling, processing andmarketing of branded flour.
5. DIRECTORS AND DIRECTORS’ INTEREST
The names of Directors who are currently in office are as follows:
(a) Alhaji Aliko Dangote(b) Alhaji Sani Dangote(c) Mr. Olakunle Alake(d) Mr. Uzoma Nwankwo(e) Alhaji Abdu Dantata(f) Alhaji Abdullahi Mahmoud(g) Mr. Asue Ighodalo(h) Brigadier-Gen. S. L. Teidi (rtd)(i) Mr. Rohit Chaudhry(j) Alhaji Shuaibu Idris
(i) In accordance with the provisions of Section 259 of the Companies and Allied Matters Act 1990, one-third ofthe Directors of the Company shall retire from office. The Directors to retire every year shall be those who havebeen longest in office since their last election. In accordance with the provisions of this section, Mr. OlakunleAlake, Mr. Uzoma Nwankwo and Alhaji Abdullahi S. Mahmoud retire by rotation and being eligible, offerthemselves for re-election.
(ii) No Director has a service contract not determinable within five years.
Report of the Directorsfor the Year Ended 31 December, 2009
9D A N G OT E F L O U R M I L LS P L C
(iii) The Directors’ interest in the issued share capital of the Company as recorded in the register of membersand/or as notified by them for the purpose of Section 275 of the Companies and Allied Matters Act, C20 Lawsof the Federation of Nigeria 2004 are as follows:
Number of 50k Shares heldas at 31 December 2009
(a) Alhaji Aliko Dangote 38,148,029(b) Alhaji Sani Dangote 2,200,000(c) Mr. Olakunle Alake 2,377,500(d) Mr. Uzoma Nwankwo 271,500(e) Alhaji Abdu Dantata —(f) Alhaji Abdullahi Mahmoud 43,750(g) Mr. Asue Ighodalo —(h) Brigadier-Gen. S. L. Teidi (rtd) —(i) Mr. Rohit Chaudhry —(j) Alhaji Shuaibu Idris 118,680
6. DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for the preparation of financial statements which give true and fair view of the state ofaffairs of the Company at the end of each financial year and of the profit or loss for that period and comply with theCompanies and Allied Matters Act, C20 Laws of the Federation of Nigeria 2004. In doing so they ensure that:
(a) Proper accounting records are maintained which disclose with reasonable accuracy the financial position ofthe Company and which ensure that the financial statements comply with the requirements of the Companiesand Allied Matters Act of Nigeria;
(b) Applicable accounting standards are followed;
(c) Suitable accounting policies are adopted and consistently applied;
(d) Judgments and estimates made are reasonable and prudent;
(e) It is appropriate for the financial statements to be prepared on a going concern basis;
(f) Internal control procedures are instituted which as far as is reasonably possible, safeguard the assets andprevent and detect fraud and other irregularities.
7. CORPORATE GOVERNANCE
Dangote Flour Mills Plc is committed to manage the Company with best practice and policies which align managementof the Company with the interests of all stakeholders. This, in the long run results in beneficial relationship andlong-term growth.
Dangote Flour Mills imbibes good Corporate Governance as a key factor in achieving its business success whileremaining within the ambit of the law as a good corporate entity.
The Board in line with its responsibilities to Shareholder works to achieve the best practice of good CorporateGovernance. The business of the Company is conducted in a fair, honest and transparent manner which conformsto high ethical standards.
8. SUBSTANTIAL INTEREST IN SHARES
The Registrar has advised that according to the register of members on 31st December 2009, only Dangote IndustriesLimited with 3,667,716,667 ordinary shares of 50k each held more than 5% of the issued share capital of theCompany.
9. FIXED ASSETS
Movements in fixed assets during the year are shown in Note 6 to the Accounts. In the opinion of the Directors, themarket value of the Company’s properties is not less than the value shown in the accounts.
Report of the Directors cont’dfor the Year Ended 31 December, 2009
10 D A N G OT E F L O U R M I L LS P L C
10. DONATIONS AND CHARITABLE GIFTS
The holding Company Dangote Industries Limited currently makes donation on behalf of the Group Companies.
11. POST BALANCE SHEET EVENTS
There were no significant developments since the balance sheet date which could have had a material effect on thestate of affairs of the Company as 31st December, 2009 and the profit for the year ended on that date which havebeen adequately recognized.
12. COMPANY DISTRIBUTORS
The Company’s products are distributed through many distributors spread across the whole country.
13. SUPPLIERS
The Company procures its materials at arm’s length basis from overseas and local suppliers. Amongst its mainoverseas and local suppliers are Cargill International SA, Ameropa SA, Vitachem Nigeria Limited and BiochemicalNigeria Limited.
14. ANALYSIS OF SHAREHOLDINGS
Analysis of shareholdings as at 31st December, 2009
Range No. of Holders Per cent Units Per cent
1 — 50,000 381,999 99.58 782,865,597 15.6650,001 — 100,000 817 0.21 63,053,575 1.26
100,001 — 1,000,000,000 809 0.20 486,364,869 9.731,000,000,001 and above 1 0.01 3,667,715,959 73.35
383,626 100.00 5,000,000,000 100.00
15. HUMAN RESOURCES
1. Employment, Training and Employees
The Company recruits without discrimination in considering application for employment through selectionprocess to get the best and most suitable for various positions after interview. The Company employsmanagement professional and technical expertise and continues to invest in developing such skills and maintainto set standards. The Company also has in-house training facilities in additional to external training for employees.This gives every employee equal opportunity for career development.
2. Employees Welfare and Safety at Work
The Company continuously strives to improve its operations to ensure a safe working environment. TheCompany maintains a high standard of hygiene in all its premises through sanitation practices and the regularfumigation exercises have been further strengthened by the installation of pest and rodent control gadgets.Safety and environment workshops have been organized for all senior employees with a broad focus on goodhouse-keeping to ensure good and safe working environment. Nutritionally balanced meals are provided instaff canteens at fully subsidized prices. The use of safety shoes, goggles, apron e.t.c. is enforced. The Companycarries out safety and fire awareness drills for all staff on regular basis. As a guide in the performance of allfunctions, a written Safety Policy for ensuring safe working practices is in place. Safety Officers and SecuritySupervisors are on hand to ensure the use of the systems and implementation of procedures for safety by allstaff. Also, there is a clinic within each factory to provide adequate medical care in the event of accidents orany emergency in the work place.
3. Employee Development
Local and overseas training and development programmes have been organized to meet the need of theCompany’s modernization, automation strategy implementation. The Company continues to place premiumon its human capital development arising from the fact that this would ensure improved efficiency of thebusiness while maintaining strategic advantage over competition. On the other hand, the employee is fullyequipped to provide quality service which at the end will be beneficial to the organization and thus contributeto its growth.
Report of the Directors cont’dfor the Year Ended 31 December, 2009
11D A N G OT E F L O U R M I L LS P L C
16 AUDIT COMMITTEE
In compliance with the provisions of Section 359(3) of the Companies and Allied Matters Act, Cap C20 Laws of theFederation of Nigeria 2004, the Company has an Audit Committee comprising 3 Shareholders and 3 Directors asfollows:
1. Mr. Alex Adio2. Alhaji Kasumu Ibrahim3. Chief M. O. Mbonu4. Alhaji Abdullahi Mahmoud5. Mr. Asue Ighodalo6. Mr. Olakunle Alake
The functions of the Audit Committee are as laid down in Section 357(2) of the Companies and Allied Matters Act,Cap C20 Laws of the Federation of Nigeria 2004.
17. AUDITORS
Messrs Akintola Williams Deloitte (Chartered Accountants) have indicated their willingness to continue in office asthe Company’s Auditors in accordance with Section 357(2) of the Companies and Allied Matters Act, Cap C20 Lawsof the Federation of Nigeria, 2004. A resolution will be proposed authorizing the Directors to fix their remuneration.
BY ORDER OF THE BOARD
A. L. ISA (MRS)Company Secretary
Dated this 6th day of September, 2010
Report of the Directors cont’dfor the Year Ended 31 December, 2009
12 D A N G OT E F L O U R M I L LS P L C
DANGOTE FLOUR MILLS PLC is committed to the best practice and procedures in corporate governance. Overseen bythe Board of Directors, corporate governance practice are constantly under review, in line with the dynamics of thebusiness environment.
The Corporate Governance policies adopted by the Board of Directors are designed to ensure that the Company’s businessis conducted in a fair, honest and transparent manner which conforms to high ethical standards.
THE BOARD
Appointment to the Board is made by Shareholders at the Annual General Meeting, upon the recommendation of theBoard of Directors.
The Board consists of ten (10) members comprising the Chairman, Managing Director, assisted by one (1) DeputyManaging Director and seven (7) non-Executive Directors.
The Board governs and supervises the overall activities of the Company through the Managing Director.
Members of the Board of Directors hold quarterly meetings to decide on policy matters and direct the affairs of theCompany, review its performance, its operations, finances and formulate growth strategy. Attendance at Directors’ meetingswas impressive. In line with provisions of Section 258(2) of the Companies and Allied Matters Act, C20 Laws of theFederation of Nigeria 2004, the records of Directors’ attendance at Board meetings is available for inspection at theAnnual General Meeting.
The remuneration of Executive Directors is fixed and reviewed by a Committee of non-Executive Directors.
Composition of Committees within the Board of Directors
Members of Nomination and Remuneration Committee
Mr. Asue IghodaloAlhaji Abdu DantataMr. Uzoma Nwankwo
Members of Finance and Investment Committee
Alhaji Abdullahi S. MahmoudBrigadier-Gen. S. L. Teidi (rtd)Mr. Olakunle Alake
The Board delegates the day-to-day running of the Company’s affairs to the Managing Director/Chief Executive. TheManaging Director/Chief Executive is supported in this task by an Executive Management Committee. The Board consistsof 10 members, made up of the Chairman, Managing Director, 1 Deputy Managing Director and 7 non-Executive Directors.
FREQUENCY OF MEETINGS
The Board of Directors holds at least four (4) meetings a year, to consider important corporate events and actions such asapproval of Corporate Strategy, Annual Corporate Plan, review of internal risk management and control systems, reviewperformance and direct the affairs of the Company, its operations, finances and formulate growth strategies. It mayhowever, convene a meeting if the need arises. During the year under review, the Board had a total of four (4) meetings.
Attendance at Directors’ meetings is impressive. In line with provisions of Section 258(2) of the Companies and AlliedMatters Act, Cap C20 Laws of the Federation of Nigeria 2004, the record of Directors’ attendance at Board meetings isavailable for inspection at the Annual General Meeting.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS
It is the responsibility of the Board of Dangote Flour Mills Plc to:
• Ensure that the Company’s operations are conducted in a fair and transparent manner that conforms to high ethicalstandards;
• Ensure integrity of the Company’s financial and internal control policies;
• Ensure the accuracy, adequacy and timely rendition of the statutory returns and financial reporting to the regulatoryauthorities (NSE, CAC, SEC) and Shareholders;
Corporate Governance Report
13D A N G OT E F L O U R M I L LS P L C
• Ensure value creation for the Shareholders, employees and other stakeholders;
• Review and approve corporate policies, strategy, annual budget and business plan;
• Monitor implementation of policies and the strategic direction of the Company;
• Set performance objectives, monitor implementation and corporate performance;
• Review and approve all major and capital expenditure of the Company;
• Ensure that the statutory rights of all Shareholders are protected at all times;
• Provide the Company with entrepreneurial leadership within a framework of prudent and effective controls whichenables risk to be assessed and managed;
• Deploy the Company’s resources to profitable use;
• Outline the Company’s strategic and corporate aims;
• Ensure that the necessary financial and human resources are in place for the Company to meet its objectives;
• Review management performance on a continuous basis;
• Set the Company’s values and standards;
• Take decisions objectively in the interests of the Company;
• Ensure that its obligations to its Shareholders and other stakeholders are understood and met;
• Constructively challenge and help develop proposals on strategy developed by Management.
The Board carries out some of the above responsibilities through the Board Committees whose terms of reference set outclearly their roles, responsibilities, scope of authority and procedure for reporting to the Board.
Each Committee is presided over by a non-Executive Director to ensure strict compliance with the principles of goodCorporate Governance practice; while the Audit Committee has a representative of the Shareholders as its Chairman.
In compliance with the practices of good Corporate Governance, the Chairman of the Board is not a member of any of theCommittees, namely:
THE FINANCE AND INVESTMENT COMMITTEE1. Alhaji Mahmoud S. Abdullahi — Chairman2. Brigadier-Gen. S. L. Teidi (rtd) — Member3. Mr. Olakunle Alake — Member
THE NOMINATION AND REMUNERATION COMMITTEE1. Mr. Asue Ighodalo — Chairman2. Mr. Uzoma Nwankwo — Member3. Alhaji Abdu Dantata — Member
THE AUDIT COMMITTEE
The Audit Committee is made up of six (6) members, consisting of three representatives of the Shareholders and threemembers of the Board of Directors. Members of the Audit Committee are elected at the General Meetings. The Committee,in compliance with the requirements of Corporate Governance practice is chaired by a Shareholder. The Committee mettwo (2) times during the year under review. Members of the Committee are:
1. Mr. Alex Adio — Shareholder/Chairman2. Chief M. O. Mbonu — Shareholder3. Alhaji Kasumu Ibrahim — Shareholder4. Mr. Asue Ighodalo — Director5. Mr. Olakunle Alake — Director6. Alhaji Mahmoud Abdullahi — Director
In addition to its responsibility to review the scope, independence and objectivity of the audit, the Audit Committeecarries out all such matters as are reserved to the Audit Committee by the Companies and Allied Matters Act, Cap C20Laws of the Federation of Nigeria, 2004.
• Review adequacy and effectiveness of Dangote Flour Mills Plc internal control policies prior to endorsement by theBoard.
• Direct and supervise investigations on matters within the scope, such as evaluations of the effectiveness of DangoteFlour Mills Plc internal controls, cases of employee, business partner and client misconduct or conflict of interest.
Corporate Governance Report cont’d
14 D A N G OT E F L O U R M I L LS P L C
TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC
In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, 1990, we have examinedthe Auditors’ report for the year ended 31st December, 2009. We have obtained all the information and explanation werequired.
In our opinion, the Auditors’ report is consistent with our review of the scope and planning of the audit. We are alsosatisfied that the accounting policies of the Company are in accordance with the legal requirements and agreed ethicalpractice. Having reviewed the Auditors’ findings and recommendations on Management matters, we are satisfied withManagement’s response therein.
Mr. Alex AdioChairman, Audit Committee
Dated this 6th day of September, 2010
Members of the Committee
Alhaji Kasumu IbrahimChief M. O. MbonuMr. Asue IghodaloAlhaji Abdullahi S. MahmoudMr. Olakunle Alake
Report of the Audit Committee
15D A N G OT E F L O U R M I L LS P L C
TO THE MEMBERS OF DANGOTE FLOUR MILLS PLC
We have audited the accompanying consolidated financial statements of Dangote Flour Mills Plc and its subsidiaries,set out on pages 16 to 33 which comprise the balance sheet as at 31 December 2009, the income statement, statementof cash flows and statement of value added for the year then ended, and a summary of the significant accounting policiesand other explanatory information.
Directors’ Responsibility for the Financial Statements
The Directors are responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with the Companies and Allied Matters Act, CAP C20, LFN 2004 and for such internal control as the Directorsdetermine are necessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financialstatements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of materialmisstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financialstatements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, aswell as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofDangote Flour Mills Plc and its subsidiaries as at 31 December 2009, and of its financial performance and its cash flowsfor the year then ended; the Company and its subsidiaries have kept proper books of account, which are in agreementwith the balance sheet and income statements in the manner required by the Companies and Allied Matters Act, CAPC20, LFN 2004 and in accordance with the Statements of Accounting Standards issued by the Nigerian AccountingStandards Board.
Chartered AccountantsLagos, Nigeria
19 August, 2010
Akintola Williams Deloitte235 Ikorodu Road, IlupejuP.O. Box 965, MarinaLagos,Nigeria
Tel: +234 1 2717800Fax: +234 1 2717801www.deloitte.com/ng
Report of the Independent Auditors
16 D A N G OT E F L O U R M I L LS P L C
The following are the significant accounting policies which have been adopted.
1. Basis of accounting
The consolidated financial statements are prepared on the historical cost basis. Adjustment has not been made toreflect the impact of specific price changes or changes in the general level of prices on the financial statements.
2. Consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries whichare Dangote Pasta Limited and Dangote Agrosacks Limited whose financial statements are equally made up to31 December. All inter-company transactions and balances are eliminated.
3. Turnover
Turnover represents the net value of goods and services sold to third parties during the year less discounts.
4. Fixed assets
Fixed assets are stated at cost less accumulated depreciation.
5. Depreciation
Depreciation is calculated to write off the cost of fixed assets on a straight line basis over their expected useful lives.The principal annual rates used for this purpose are:
%Leasehold land and buildings — 2
Plant and machinery — 6
Motor vehicles — 25
Tools and equipment — 20
Furniture and fittings — 20
Computer equipment and softwares — 33
6. Stocks and work-in-progress
Stocks and work-in-progress are stated at the lower of cost based on FIFO and net realisable value while goods intransit are stated at the invoice price. Cost of stocks includes purchase cost, conversion cost (materials, labour andoverhead) and other costs incurred to bring inventory to its present location and condition.
7. Foreign currencies
Transactions in foreign currencies are recorded in Naira at the rates of exchange ruling at the time they arise. Assetsand liabilities existing in foreign currencies are converted to Naira at the rates of exchange ruling at the balancesheet date. Gains or losses arising therefrom are included in the profit and loss account.
8. Debtors
Debtors are stated after deduction of specific provisions for debts considered doubtful of recovery.
9. Taxation
(i) Companies income tax
Income tax and education tax are provided by applying the current statutory rate on the taxable profit andadjusted profit respectively.
(ii) Deferred taxation
Deferred taxation is provided using the liability method at the current rate of income tax on all timing differencesbetween the treatment of certain items for accounting purposes and their treatment for taxation in accordancewith SAS 19.
Statement of Significant Accounting Policiesfor the Year Ended 31 December, 2009
2–3
1–3
17D A N G OT E F L O U R M I L LS P L C
10. Employees retirement benefit scheme
The Company and its subsidiaries make provision for retirement benefits in accordance with the Pension Reform Actof 2004. The contribution of the employer is 7.5% while that of the employee is 7.5% of relevant emoluments.
The Company and its subsidiaries also operate a gratuity scheme for its permanent Nigerian staff, the benefits underwhich are related to employees’ length of service and remuneration. The provision for liability in respect thereofbased on actuarial valuation is provided in full in the financial statements.
11. Investments
Investments are stated at cost after specific provision for diminution in value.
12. Provisions
Provisions are recognized when the Company and its subsidiaries have present obligation whether legal or constructive,as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation in accordancewith the Statement of Accounting Standards (SAS) 23.
13. Segment reporting
The Company’s business segments are presented by products that are subject to similar risks and returns.
Statement of Significant Accounting Policies cont’dfor the Year Ended 31 December, 2008
18 D A N G OT E F L O U R M I L LS P L C
The Group The Company
2009 2008 2009 2008Note N=’000 N=’000 N=’000 N=’000
Turnover 3 61,388,064 47,927,300 41,839,919 30,109,610
Cost of sales (48,560,958) (38,288,106) (31,842,774) (24,078,077)
Gross profit 12,827,106 9,639,194 9,997,145 6,031,533
Distribution and administrative expenses (4,944,119) (5,182,564) (2,787,500) (3,271,788)
Operating profit 7,882,987 4,456,630 7,209,645 2,759,745
Other income 4 411,530 1,012,493 185,877 940,375
Profit before interest payable 8,294,517 5,469,123 7,395,522 3,700,120
Interest income 95,821 97,121 65,385 15,370
Interest payable and similar charges (3,016,282) (2,398,619) (2,304,106) (1,957,353)
Profit before taxation 5 5,374,056 3,167,625 5,156,801 1,758,137
Taxation 6 187,024 (178,066) 203,060 (54,045)
Profit after taxation 5,561,080 2,989,559 5,359,861 1,704,092
Attributable to:
Equity holders — parent 20 5,530,732 2,947,448 5,359,861 1,704,092
Non-controlling interest 21 30,348 42,111 — —
5,561,080 2,989,559 5,359,861 1,704,092
Earnings per share — Basic (kobo) 111 60 107 34
The accounting policies on pages 16 and 17 and other explanatory notes on pages 21 to 31 form part of these consolidatedfinancial statements.
Consolidated Profit and Loss Accountfor the Year Ended 31 December, 2009
19D A N G OT E F L O U R M I L LS P L C
Consolidated Balance Sheetas at 31 December, 2009
The Group The Company
2009 2008 2009 2008Note N=’000 N=’000 N=’000 N=’000
FIXED ASSETS 7 35,238,199 32,449,283 18,961,804 15,732,634
INVESTMENTS 8 — — 7,463,637 7,463,637
GOODWILL 278,925 278,925 — —
DEFERRED TAXATION 16 328,067 — 328,067 —
CURRENT ASSETSStocks 9 8,246,918 9,910,531 3,248,788 5,397,449Trade debtors 10 9,402,933 7,410,110 7,838,096 6,118,790Other debtors and prepayments 11 1,681,842 1,333,748 952,239 626,649Due from subsidiaries 27.1 — — 9,218,193 12,806,780Due from related companies 27.2 6,997,161 8,865,888 5,716,330 2,972,121Bank and cash balances 1,929,598 1,648,773 1,226,829 371,632
28,258,452 29,169,050 28,200,476 28,293,421CREDITORS: Amounts falling duewithin one yearBank loans and overdrafts 12 13,868,256 20,595,334 10,652,531 15,214,170Trade creditors 6,408,279 4,387,431 5,214,589 3,173,700Other creditors and accruals 13 8,375,659 7,039,548 5,237,955 4,849,947Due to subsidiaries 27.1 — — 974,969 690,711Dividend payable 14 822,460 — 822,460 —Taxation 6 351,068 423,248 212,389 139,361Due to related companies 27.3 5,016,326 3,960,932 4,624,887 3,887,582
34,842,048 36,406,493 27,739,780 27,955,471
NET CURRENT LIABILITIES (6,583,596) (7,237,443) 460,696 337,950
TOTAL ASSETS LESS CURRENT LIABILITIES 29,261,595 25,490,765 27,214,204 23,534,221
PROVISION FOR LIABILITIES ANDCHARGESGratuity 17 (559,926) (582,037) (464,623) (376,362)
NET ASSETS 28,701,669 24,908,728 26,749,581 23,157,859
CAPITAL AND RESERVES
Share capital 18 2,500,000 2,500,000 2,500,000 2,500,000Share premium 19 11,806,537 11,806,537 11,806,537 11,806,537Revenue reserve 20 14,162,536 10,400,653 12,443,044 8,851,322
Shareholders’ fund 28,469,073 24,707,190 26,749,581 23,157,859Non-controlling interest 21 232,596 201,538 — —
28,701,669 24,908,728 26,749,581 23,157,859
The consolidated financial statements on pages 16 to 33 were approved by the Board of Directors on 19 August, 2010and signed on its behalf by:
Alhaji Aliko Dangote
Rohit Chaudhry
The accounting policies on pages 16 and 17 and other explanatory notes on pages 21 to 31 form part of these consolidatedfinancial statements.
} Directors
20 D A N G OT E F L O U R M I L LS P L C
Consolidated Statement of Cash Flowsfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008Note N=’000 N=’000 N=’000 N=’000
Cash flows from operating activities
Cash receipts from customers 60,197,219 45,993,302 40,220,976 28,917,530
Cash payments to suppliers and employees (42,978,388) (36,719,304) (26,513,175) (21,300,004)
Value added tax paid — — — —
Income tax paid (213,223) — (51,979) —
Net cash provided by operating activities 22 17,005,608 9,273,998 13,655,822 7,617,526
Cash flows from investing activities
Proceeds from disposal of fixed assets — 138 — 138
Purchase of fixed assets 7 (5,399,703) (7,181,130) (4,322,725) (3,289,943)
Net cash provided by investing activities (5,399,703) (7,180,992) (4,322,725) (3,289,805)
Cash flows from financing activities
Dividend paid (1,677,540) — (1,677,540) —
Interest income 95,821 97,121 65,385 15,370
Term loan:
— Obtained — 244,000 — —
— Repaid (483,863) (1,094,490) — —
Interest paid (3,016,283) (2,398,619) (2,304,106) (1,957,353)
Net cash provided by financing activities (5,081,865) (3,151,988) (3,916,261) (1,941,983)
Net increase/(decrease) in cash andcash equivalents 6,524,040 (1,058,982) 5,416,835 2,385,738
Cash and cash equivalents at 1 January (18,462,698) (17,403,716) (14,842,538) (17,228,276)
Cash and cash equivalents at 31 December 23 (11,938,658) (18,462,698) (9,425,702) (14,842,538)
D A N G OT E F L O U R M I L LS P L C 21
Notes to the Consolidated Financial Statementsfor the Year Ended 31 December, 2009
1. THE COMPANY
1.1 Legal form
The Company started operating as a division of Dangote Industries Limited in 1999. It was incorporated aspublic limited liability company on 1 January 2006, commenced operations on the same date and was quotedon the Nigerian Stock Exchange on 4 February 2008.
In 2007, the Company acquired controlling interests in Dangote Pasta Limited and Dangote Agrosacks Limited.Particulars of these subsidiaries are:
Subsidiaries Percentage held Principal Activities
Dangote Pasta Limited 99 Manufacture of Spaghetti, Macaroni and other Pastaproducts.
Dangote Agrosacks Limited 99 Manufacture of packaging materials. It holds 75%equity in Obajana Agrosacks Limited.
1.2 Principal activities
The principal activities of the Company are the milling, processing and marketing of branded flour.
2. STRATEGIC CONSIDERATIONS
Dangote Industries Limited has confirmed its capacity and commitment to continue to support Dangote Flour MillsGroup and has committed to takeover all external borrowings and provide medium-term loan facilities.
3. ANALYSIS OF TURNOVER AND COST OF SALES
The Group 2009 2008
Analysis by: Turnover Cost of sales Gross profit Turnover Cost of sales Gross profitActivity N=’000 N=’000 N=’000 N=’000 N=’000 N=’000
Flour 38,808,447 30,330,161 8,478,286 26,269,299 21,746,622 4,522,677
Bran 2,399,162 723,589 1,675,573 1,996,365 419,821 1,576,544
Danvita and Semolina 632,310 378,455 253,855 2,401,532 1,911,634 489,898
Sacks 10,007,648 8,923,678 1,083,970 8,442,720 6,774,998 1,667,722
Spaghetti 8,401,722 7,216,594 1,185,128 8,456,424 7,435,031 1,021,393
Macaroni 1,138,775 988,481 150,294 360,960 — 360,960
61,388,064 48,560,958 12,827,106 47,927,300 38,288,106 9,639,194
The Company
Flour 38,808,447 30,740,730 8,067,717 26,269,299 21,746,622 4,522,677
Bran 2,399,162 723,589 1,675,573 1,438,779 419,821 1,018,958
Danvita and Semolina 632,310 378,455 253,855 2,401,532 1,911,634 489,898
41,839,919 31,842,774 9,997,145 30,109,610 24,078,077 6,031,533
22 D A N G OT E F L O U R M I L LS P L C
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
4. OTHER INCOME
Sale of scraps — 100,689 — 100,689Provision no longer required 316,844 839,686 156,689 839,686Sundry income 94,686 72,118 29,188 —
411,530 1,012,493 185,877 940,375
5. PROFIT BEFORE TAXATION
This is arrived at after charging/(crediting):
Directors’ emoluments:— Fees 2,550 2,100 2,550 2,100— Salaries and allowances 66,020 58,756 51,820 20,450Audit fee 50,190 45,500 28,800 27,500Depreciation 2,603,849 1,801,832 1,093,555 932,014Management fee (Note 28) 431,224 176,348 — —
6. TAXATION
Profit and loss account
Tax based on the profit for the yearIncome tax — 67,407 — —Education tax 141,043 110,659 125,007 54,045
141,043 178,066 125,007 54,045Deferred taxation (Note 16) (328,067) — (328,067) —
(187,024) 178,066 (203,060) 54,045
Balance sheet
As per profit and loss account 141,043 178,066 125,007 54,045At 1 January 423,248 245,182 139,361 85,316Payments during the year (213,223) — (51,979) —
At 31 December 351,068 423,248 212,389 139,361
The charges for taxation in these financial statements were based on the provisions of the Companies IncomeTaxation Act, CAP C21, LFN 2004 as amended and the Education Tax Act, CAP E4, LFN 2004.
D A N G OT E F L O U R M I L LS P L C 23
7. FIXED ASSETS
(a) The Group
Freehold/ Computer AssetsLeasehold equipment Furniture under
land and Plant and Tools and and and Motor construc-buildings machinery equipment softwares fittings vehicles Trucks tion Total
N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000Cost
At 1 January 2,730,581 26,934,690 619,777 71,841 148,626 323,472 — 7,690,387 38,519,374Additions 26,153 422,079 99,203 19,640 22,938 650,957 1,740,587 2,418,146 5,399,703Disposals — — — (452) — — — — (452)Transfers 317,000 3,516,947 (8,854) — 127 — — (3,825,220) —Amortised to direct cost — — — — — — — (6,939) (6,939)
At 31 December 3,073,734 30,873,716 710,126 91,029 171,691 974,429 1,740,587 6,276,374 43,911,686
Depreciation
At 1 January 178,302 5,262,432 344,365 46,786 75,674 162,531 — — 6,070,090Charge for the year 56,092 1,988,876 142,758 25,865 30,062 184,697 175,499 — 2,603,849Disposals — — — (452) — — — — (452)
At 31 December 234,394 7,251,308 487,123 72,199 105,736 347,228 175,499 — 8,673,487
Net book value
At 31 December 2009 2,839,340 23,622,408 223,003 18,830 65,955 627,201 1,565,088 6,276,374 35,238,199
At 31 December 2008 2,552,279 21,672,258 275,412 25,055 72,952 160,940 — 7,690,387 32,449,283
(b) The Company
Computer AssetsLeasehold equipment Furniture under
land and Plant and Tools and and and Motor construc-buildings machinery equipment softwares fittings vehicles Trucks tion Total
N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000Cost
At 1 January 1,844,899 10,541,472 415,525 47,266 77,983 113,383 — 5,433,864 18,474,392Additions 2,164 20,260 33,695 13,746 16,274 95,476 1,740,587 2,400,524 4,322,725Disposals — — — (452) — — — — (452)Transfers 317,001 1,267,363 (8,854) — 127 — — (1,575,637) —
At 31 December 2,164,064 11,829,095 440,366 60,560 94,384 208,859 1,740,587 6,258,751 22,796,665
Depreciation
At 1 January 109,323 2,284,816 209,207 29,363 39,084 69,965 — — 2,741,758Charge for the year 38,149 718,235 89,044 16,648 17,040 38,940 175,499 — 1,093,555Disposals — — — (452) — — — — (452)
At 31 December 147,472 3,003,051 298,251 45,559 56,124 108,905 175,499 — 3,834,861
Net book value
At 31 December 2009 2,016,592 8,826,044 142,115 15,001 38,260 99,954 1,565,088 6,258,751 18,961,804
At 31 December 2008 1,735,576 8,256,656 206,318 17,903 38,899 43,418 — 5,433,864 15,732,634
Assets under construction comprise of capacity expansion projects in flour production mills Apapa, Ilorin and Calabar.
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
24 D A N G OT E F L O U R M I L LS P L C
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
8. INVESTMENTS (UNQUOTED)
Dangote Pasta Limited49,500,000 ordinary shares of N=1 each inDangote Pasta Limited — — 2,507,637 2,507,637Dangote Agrosacks Limited84,150,000 ordinary shares of N=1 each inDangote Agrosacks Limited — — 4,956,000 4,956,000
— — 7,463,637 7,463,637
9. STOCKS
Raw materials and work-in-progress 4,806,929 5,747,680 2,871,634 3,766,420Finished goods 2,315,765 2,321,381 138,431 501,985Engineering spares and other stocks 1,061,387 821,709 159,359 109,283Goods-in-transit 79,364 1,019,761 79,364 1,019,761
8,263,445 9,910,531 3,248,788 5,397,449Provision for slow moving items (16,527) — — —
8,246,918 9,910,531 3,248,788 5,397,449
10. TRADE DEBTORS
Trade debtors 12,214,178 9,616,719 10,343,829 8,223,263Provision for bad and doubtful debts (2,811,245) (2,206,609) (2,505,733) (2,104,473)
9,402,933 7,410,110 7,838,096 6,118,790
11. OTHER DEBTORS AND PREPAYMENTS
Other debtors 1,130,483 349,908 442,633 424,147Advances to suppliers 954,956 244,106 954,956 244,106Deposit for stocks — 600,334 — —Staff debtors 67,367 — 67,367 —VAT receivable — 73,711 — 73,711Prepayments 168,977 65,689 108,677 53,968
2,321,783 1,333,748 1,573,633 795,932Provision for other debtors (639,941) — (621,394) (169,283)
1,681,842 1,333,748 952,239 626,649
12. BANK LOANS AND OVERDRAFTS
Bank overdrafts 5,482,578 9,536,663 4,478,622 7,801,362Short-term loans 8,385,678 10,574,808 6,173,909 7,412,808Term loan (Note 15) — 483,863 — —
13,868,256 20,595,334 10,652,531 15,214,170
The loans and overdraft are secured by Corporate Guarantee of a related party, Dangote Industries Limited.
D A N G OT E F L O U R M I L LS P L C 25
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
13. OTHER CREDITORS AND ACCRUALS
Customers’ deposits 1,459,624 1,069,176 595,198 680,712Accruals 3,034,335 1,552,827 2,064,324 1,119,969Pension contribution 66,702 — — —VAT payable 651,012 101,943 651,012 —Other creditors 3,163,986 4,315,602 1,927,421 3,049,266
8,375,659 7,039,548 5,237,955 4,849,947
14. DIVIDEND PAYABLE
At 1 January — — — —Dividend declared (Note 20) 2,500,000 — 2,500,000 —Payment during the year (1,677,540) — (1,677,540) —
At 31 December 822,460 — 822,460 —
15. TERM LOAN
At 1 January 483,863 1,334,353 — —Repayment during the year (483,863) (1,094,490) — —Loan obtained during the year — 244,000 — —
At 31 December — 483,863 — —Due within one year (Note 12) — (483,863) — —
Due after more than one year — — — —
16. DEFERRED TAXATION
At 1 January — — — —Provision for the year (Note 6) (328,067) — (328,067) —
At 31 December (328,067) — (328,067) —
The deferred tax asset of N=328 million arises from an excess of depreciation charged in the financial statements overcapital allowances claimed on the related assets.
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
17. GRATUITY
At 1 January 582,037 389,402 376,362 312,829Provision for the year 183,792 267,415 143,158 114,419Adjustments (129,470) — — —
636,359 656,817 519,520 427,248Payments during the year (76,433) (74,780) (54,897) (50,886)
At 31 December 559,926 582,037 464,623 376,362
26 D A N G OT E F L O U R M I L LS P L C
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
18. SHARE CAPITAL
Authorised
6,000,000,000 ordinary shares of 50k each 3,000,000 3,000,000 3,000,000 3,000,000
Issued and fully paid
5,000,000,000 ordinary shares of 50k each 2,500,000 2,500,000 2,500,000 2,500,000
19. SHARE PREMIUM
At 31 December 11,806,537 11,806,537 11,806,537 11,806,537
Exchangeequali- 2009 2008
Revenue sation Capital Total TotalN=’000 N=’000 N=’000 N=’000 N=’000
20. RESERVES
The Group
At 1 January 3,689,251 122,765 6,588,637 10,400,653 7,958,095Transfer from non-controlling interest (710) — — (710) —Prior year adjustment 731,861 — — 731,861 (504,890)Dividend declared — Final 2008 (1,000,000) — — (1,000,000) —Dividend declared — Interim 2009 (1,500,000) — — (1,500,000) —Transferred from profit and loss account 5,530,732 — — 5,530,732 2,947,448
At 31 December 7,451,134 122,765 6,588,637 14,162,536 10,400,653
The Company
At 1 January 8,851,322 7,600,955Prior year adjustment 731,861 (453,725)Dividend declared — Final 2008 (1,000,000) —Dividend declared — Interim 2009 (1,500,000) —Transferred from profit and loss account 5,359,861 1,704,092
12,443,044 8,851,322
Prior year adjustment relates adjustment for prior year reconciling items in intercompany balance with DangoteIndustries Limited cleared during the year.
On 9 December 2009, a dividend of 20 kobo per ordinary share of 50 kobo totalling N=1 billion in respect of 2008was approved by shareholders and subsequently paid.
On 29 October 2009, the Board of Directors approved interim dividend of 30 kobo per ordinary share of 50 koboeach amounting to N=1.5 billion and subsequently paid.
At the Board of Directors meeting held on 19 August 2010, the Directors proposed final dividend of 50 kobo perordinary share of 50 kobo each amounting to N=2.5 billion. The dividend is subject to approval by shareholders at theAnnual General Meeting net of withholding tax at the appropriate rate. Consequently, it has not been included as aliability in these financial statements as they do not constitute present obligation to the Company in accordancewith (SAS) 23 on Provisions, Contingent Liabilities and Contingent Assets.
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
D A N G OT E F L O U R M I L LS P L C 27
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group
2009 2008N=’000 N=’000
21. NON-CONTROLLING INTEREST
At 1 January 201,538 159,427Transfer to revenue reserve 710 —On acquisition of Obajana Agrosacks — 29,552Dangote Agrosacks Limited 29,444 4,759Dangote Pasta Limited 904 7,800
At 31 December 232,596 201,538
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
22. RECONCILIATION OF NET INCOME TO NETCASH PROVIDED BY OPERATING ACTIVITIES
Profit after taxation and exceptional item 5,561,080 2,989,559 5,359,861 1,704,092
Adjustments to reconcile net income tonet cash provided by operating activities
Depreciation 2,603,849 1,801,832 1,093,555 932,014Interest income (95,821) (97,121) (65,385) (15,370)Interest expenses 3,016,282 2,398,619 2,304,106 1,957,353Prior year adjustment 731,861 (504,890) 731,861 —Fixed assets adjustment/transfer 6,939 555 — 555Loss on disposal of fixed assets — 55 — 55
Changes in assets and liabilities
Decrease in stocks 1,663,613 1,516,812 2,148,661 2,988,557Increase in trade debtors (1,992,823) (2,277,300) (1,719,306) (1,989,308)Increase in other debtors and prepayments (348,094) (5,489,632) (325,591) (5,573,120)Decrease/(Increase) in due from subsidiaries — — 3,588,587 (1,148,270)Decrease/(increase) in due from related companies 1,868,728 966,583 (2,744,209) 1,734,176Increase in trade creditors 2,020,848 1,633,160 2,040,889 1,633,904Decrease in other creditors and accruals 1,336,110 6,330,657 388,008 5,714,252Increase/(decrease) in due to related companies 1,055,394 (365,592) 737,305 (438,942)Increase in due to subsidiaries — — 284,258 —(Decrease)/increase in taxation payable (72,180) 178,066 73,028 54,045(Decrease)/increase in gratuity provision (22,111) 192,635 88,261 63,533Increase in deferred taxation (328,067) — (328,067) —
Total adjustments 11,444,528 6,284,439 8,295,961 5,913,434
Net cash provided by operating activities 17,005,608 9,273,998 13,655,822 7,617,526
23. CASH AND CASH EQUIVALENTS
Cash and bank balances 1,929,598 1,648,773 1,226,829 371,632Short-term loans (8,385,678) (10,574,808) (6,173,909) (7,412,808)Bank overdrafts (5,482,578) (9,536,663) (4,478,622) (7,801,362)
(11,938,658) (18,462,698) (9,425,702) (14,842,538)
28 D A N G OT E F L O U R M I L LS P L C
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
24. INFORMATION REGARDING DIRECTORSAND EMPLOYEES
.1 Directors
(i) Directors’ emolument comprises:— Fees 2,550 2,100 2,550 2,100— Salaries and allowances 66,020 58,756 51,820 20,450
68,570 60,856 54,370 22,550
(ii) Highest paid Director 24,270 18,600 24,270 18,600
(iii) The number of Directors excluding theChairman with gross emoluments withinthe bands stated below were:
N=’000 N=’000 Number Number Number Number
Nil — 4,000 — 1 — —10,000 — 15,000 0 1 — —15,000 and above 3 1 2 1
.2 Employees
Average number of persons employedduring the year:Management 170 157 121 106Senior staff 581 500 369 364Junior staff 2,989 2,755 356 375
3,740 3,412 846 845
N=’000 N=’000 N=’000 N=’000Aggregate payroll costs:Wages, salaries, allowances andother benefits 3,889,782 1,565,636 1,242,490 604,458Provision for gratuities 152,054 235,354 111,420 82,358Pension cost 26,847 49,045 26,847 12,438
4,068,683 1,850,035 1,380,757 699,254
The number of employees with grossemoluments within the bands statedbelow are:
N=’000 N=’000 Number Number Number Number
0 — 200 4 — — —200 — 400 2,432 2,444 37 324401 — 600 571 369 309 220601 — 800 199 178 93 50801 — 1,000 162 137 121 100
1,001 — 2,000 257 190 185 1022,001 and above 115 94 101 53
3,740 3,412 846 849
D A N G OT E F L O U R M I L LS P L C 29
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
25. CONTINGENT LIABILITIES
.1 There were no material contingent liabilities in respect of pending litigation against the Company and itssubsidiaries at 31 December 2009 (2008: Nil).
.2 The Directors are of the opinion that all known commitments and liabilities which are relevant in assessing thestate of affairs of the Group have been taken into consideration in the preparation of these financial statements.
26. CAPITAL COMMITMENTSThe Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
Capital commitments 190,000 423,155 190,000 423,155
The capital commitments were made for capacity expansion projects in three of the four production mills (Apapa,Ilorin and Calabar).
27. RELATED PARTY TRANSACTIONS
During the year the Company had dealings with subsidiaries and related companies. The balances emanating fromthe transactions which have been disclosed in the balance sheet as due from subsidiaries and related companies aswell as due to related companies are as analysed below:
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
27.1 Due from/(to) subsidiaries
Dangote Pasta Limited — — 9,218,193 12,806,780Dangote Agrosacks Nigeria Limited — — (974,969) (690,711)
— — 8,243,224 12,116,069
27.2 Due from related companies
Dangote Noodles Limited 1,079,704 601,900 1,050,769 601,900Dangote Industries Limited 4,740,399 8,259,269 4,504,942 2,039,645National Salt Company of Nigeria Plc 51,378 — — 329,076Dangote Fisheries Nigeria Limited 1,500 1,500 1,500 1,500Danote Port operation 200 — 140 —Obajana Cement Plc 1,134,258 — 107,907 —Dangote Pasta Limited — — 72 —Dangote Textile Nigeria Limited 55,593 — 51,000 —Dangote Bail Nigeria Limited 12,263 — — —Benue Cement Company Plc 453 — — —Dangote Foundation 122,562 — — —Savannah Sugar Limited 43 — — —Others 171,508 3,219 — —
7,369,861 8,865,888 5,716,330 2,972,121Less provision (372,700) — — —
6,997,161 8,865,888 5,716,330 2,972,121
30 D A N G OT E F L O U R M I L LS P L C
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
The Group The Company
2009 2008 2009 2008N=’000 N=’000 N=’000 N=’000
27.3 Due to related companies
Dangote Nigeria Limited 61,937 73,350 53,182 —
Dangote Transport Nigeria Limited 2,591,008 2,492,769 2,506,152 2,492,769
Dangote Sugar Refinery Plc 128,601 1,389,885 57,155 1,389,885
Bluestar Shipping Company 3,500 3,500 3,500 3,500
Green View Development Nigeria Limited 10,882 1,428 14,347 1,428
National Salt Company of Nigeria Plc — — 924 —
Dangote Pasta Limited 93,430 — — —
Bulk Pack (Nig) Ltd 27,013 — — —
MRS Plc 107,204 — — —
Dangote Agrosacks Limited 3,124 — — —
Dangote Industries Ltd. — Commercial paper 1,989,627 — 1,989,627 —
5,016,326 3,960,932 4,624,887 3,887,582
27.4 Dangote Pasta Limited
Dangote Pasta is a subsidiary company to Dangote Flour Mills Plc. During the year, the supply of wheat andpasta flour to Dangote Pasta amounted to N=9.2 billion.
27.5 Dangote Agrosacks Nigeria Limited
Dangote Agrosacks Nigeria Limited is a subsidiary of Dangote Flour Mills. During the year, the Company hadsignificant transactions amounting to N=550 million for the supply of bags for packaging of Flour, Bran, Danvita,etc.
27.6 Dangote Industries Limited
Dangote Industries Limited (DIL) is the parent company. DIL undertake payments for expansion projects,recommend external consultants, negotiate bank facilities and purchases of raw materials on behalf of theGroup. The balance at 31 December 2009 amounted to N=4.5 billion (2008: N=2.03 billion).
27.7 Dangote Transport Nigeria Limited
Dangote Transport Nigeria Limited is a related company to Dangote Flour Mills Plc. The Group had had transactionswith respect to haulage of finished products to customers as well as wheat to other plants. The balance at31 December 2009 stood at N=2.51 billion (2008: N=2.49 billion).
27.8 Dangote Sugar Plc
Dangote Sugar Plc is a related company to Dangote Flour Mills Plc. Dangote Sugar supplies power to DangoteFlour Mills Plc. There is no trading relationship between the two companies.
27.9 Dangote Salt Nigeria Limited
Dangote Salt is a related company to Dangote Flour Mills Plc. There were no material transactions between thetwo companies during the year.
27.10 Dangote Noodles Limited
The amount due from Dangote Noodles Limited relates to funds committed to the infrastructural developmentof this entity which is yet to commence operations.
D A N G OT E F L O U R M I L LS P L C 31
Notes to the Consolidated Financial Statements cont’dfor the Year Ended 31 December, 2009
28. MANAGEMENT FEE
Dangote Pasta Limited and Dangote Agrosacks Limited entered into management and technical service agreementdated 2 January 2006 with Dangote Industries Limited (DIL). The agreement is for an initial period of five years withan option to renew for a further period of five years subject to termination by either party in accordance with theterms of the agreement. As consideration for the services provided, a sum equivalent to 2% of the net revenue fromthe Dangote Pasta Limited and Dangote Agrosacks Limited sales for each month is payable to Dangote IndustriesLimited. Management fees for the financial year ended 31 December 2009 amounted to N=431.2 million(2008: N=176.3 million).
29. COMPARATIVE FIGURES
Certain balances in prior year have been reclassified where necessary for more meaningful comparison.
30. POST BALANCE SHEET EVENTS
There were no post balance sheet events that could have had a material effect on the consolidated financial statementsof the Group which had not been adequately provided for or disclosed in these consolidated financial statements.
32 D A N G OT E F L O U R M I L LS P L C
The Group The Company
2009 2008 2009 2008N=’000 % N=’000 % N=’000 % N=’000 %
Turnover 61,388,064 47,927,300 41,839,919 30,109,610Other income 411,530 1,012,493 531,387 955,745
61,799,594 48,939,793 42,371,306 31,065,355Less: Bought-in-materials
and services— Imported (29,332,573) (26,556,495) (26,008,149) (23,623,137)— Local (17,404,151) (13,165,187) (6,427,938) (2,095,460)
Value added 15,062,870 100 9,218,111 100 9,935,219 100 5,346,758 100
Applied as follows:
To pay employees
Salaries, wages andother benefits 4,068,683 27 1,850,035 20 1,380,757 14 699,254 13
To pay providers of capital
Interest on loans and bankoverdrafts 3,016,282 20 2,398,619 26 2,304,106 23 1,957,353 37
To pay government
Taxation (187,024) — 178,066 2 (203,060) 1 54,045 1
To provide for enhancementof assets and growth
Depreciation 2,603,849 17 1,801,832 20 1,093,555 12 932,014 17Profit and loss account 5,561,080 36 2,989,559 32 5,359,861 50 1,704,092 32
15,062,870 100 9,218,111 100 9,935,219 100 5,346,758 100
“Value added” represents the additional wealth the Company has been able to create by its own and employees’ efforts.This statement shows the allocation of that wealth between employees, capital providers, government and that retainedfor future creation of more wealth.
Consolidated Value Added Statementfor the Year Ended 31 December, 2009
D A N G OT E F L O U R M I L LS P L C 33
Consolidated Four-Year Financial Summaryfor the Year Ended 31 December, 2009
The Group The Company
31 DECEMBER 2009 2008 2007 2006 2009 2008 2007 2006N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000 N=’000
BALANCE SHEET
Assets
Fixed assets 35,238,199 32,449,283 27,357,655 — 18,961,804 15,732,634 13,375,453 13,365,235Investments — 601,900 — — 7,463,637 7,463,637 7,750,559 —Goodwill 278,925 278,925 278,925 — — — — —Net current (liabilities)/assets (6,583,596) (7,839,343) (4,636,107) — 460,696 337,950 1,094,309 1,043,095
28,933,528 25,490,765 23,000,473 — 26,886,137 23,534,221 22,220,321 14,408,330Deferred taxation 328,067 — — — 328,067 — — —Long-term liabilities — — (187,012) — — — — —
Provision for liabilitiesand charges (559,926) (582,037) (389,402) — (464,623) (376,362) (312,829) (254,810)
28,701,669 24,908,728 22,424,059 — 26,749,581 23,157,859 21,907,492 14,153,520
CAPITAL AND RESERVES
Share capital 2,500,000 2,500,000 2,500,000 — 2,500,000 2,500,000 2,500,000 1,500,000Share premium 11,806,537 11,806,537 11,806,537 — 11,806,537 11,806,537 11,806,537 11,931,537Revenue reserve 14,162,536 10,400,653 7,958,095 — 12,443,044 8,851,322 7,600,955 721,983Minority interest 232,596 201,538 159,427 — — — — —
28,701,669 24,908,728 22,424,059 — 26,749,581 23,157,859 21,907,492 14,153,520
PROFIT AND LOSS ACCOUNT
Turnover 61,388,064 47,927,300 42,153,272 — 41,839,919 30,109,610 31,303,845 35,672,696
Profit before taxation 5,374,056 3,167,625 675,703 — 5,156,801 1,758,137 375,651 721,983Taxation 187,024 (178,066) (114,144) — 203,060 (54,045) (85,316) —Minority interest (30,348) (42,111) (36,849) — — — — —
Retained profit transferredto general reserve 5,561,080 2,947,448 524,710 — 5,359,861 1,704,092 290,335 721,983
Per share data —50k ordinary share
Earnings:— Basic (kobo) 111 60 11 — 107 34 6 24— Diluted (kobo) 111 60 11 — 107 34 6 14Net assets (Naira) 6 5 4 — 5 5 4 5
Note:
1. Earnings per share are based on profit after taxation and the number of issued and fully paid ordinary shares at theend of each financial year.
2. Net assets per share are based on net assets and the issued and fully paid ordinary shares as at the end of eachfinancial year.
34 D A N G OT E F L O U R M I L LS P L C
Share Capital History
Dangote Flour Mills Plc was quoted on the Nigerian Stock Exchange on 4th February, 2008.
The share capital history of the Company is as indicated below:
Date Authorised Share Capital Issued and Fully Paid Consideration
Value Shares Value Shares
04/02/2008 3,000,000,000 6,000,000,000 2,500,000,000 5,000,000,000 Cash
D A N G OT E F L O U R M I L LS P L C 35
Proxy FormFLOUR
Dangote Flour Mills PlcRC 501757
DANGOTE FLOUR MILLS PLC4TH ANNUAL GENERAL MEETING TO BE HELD AT
12.00 NOON ON WEDNESDAY, 6TH OCTOBER, 2010 ATTAHIR HOTEL, KANO.
I/We* ........................................................................................................
of ...............................................................................................................
hereby appoint ......................................................................................
...................................................................................................................
of ...............................................................................................................or failing him, the Chairman of the meeting, as my/our proxyto act and vote for me/us and on my/our behalf at the FourthAnnual General Meeting of the Company to be held at 12.00noon on Wednesday, 6th October, 2010 and at anyadjournment thereof.
Dated this ................ day of .......................................... 2010.
Signature .................................................................................................
NOTES1. Please sign this proxy card and post it to reach the
registered office of the Company not less than 48 hoursbefore the time for holding the meeting.
2. If executed by a corporation, the proxy card should besealed with the common seal.
3. This proxy card will be used both by show of hands andin the event of a poll being directed or demanded.
4. In the case of joint holders the signature of any one ofthem will suffice, but the names of all joint holders shouldbe shown.
Admission CardDANGOTE FLOUR MILLS PLC
PLEASE ADMIT THE SHAREHOLDER ON THIS FORM OR HIS/HER APPOINTED PROXY TO THE4TH ANNUAL GENERAL MEETING TO BE HELD AT 12.00 NOONON WEDNESDAY, 6TH OCTOBER, 2010 AT TAHIR HOTEL, KANO.
Name of Shareholder* ........................................................................................................................................................................................
IF YOU ARE UNABLE TO ATTEND THE MEETING
A member (shareholder) who is unable to attend Annual General Meeting is allowed by law to vote by proxy. A proxyneed not be a member of the Company. The above proxy card has been prepared to enable you exercise your right tovote if you cannot personally attend.
No. of Shares held Signature of person attending
IMPORTANTPlease insert your name in BLOCK CAPITALS on both proxy and admission card where marked*.
A. L. ISA (MRS)Company Secretary/Legal Adviser
✂
RESOLUTIONS FOR AGAINST
1. To receive the AuditedFinancial Statements for theyear ended 31st December2009 and the Directors’,Auditors’ and Audit Committee’sReports thereon
2. To declare a dividend
3. To re-elect Directors
4. To re-appoint the Auditors
5. To authorise the Directorsto fix the remunerationof the Auditors
6. To appoint members ofthe Audit Committee
SPECIAL BUSINESS
7. To fix the remuneration ofthe Directors
Please indicate with an “X” in the appropriate space howyou wish your votes to be cast on resolutions set outabove. Unless otherwise instructed, the proxy will voteor abstain from voting at his/her own discretion.
Before posting the above form, please sign/tear off this part and retain it for admission to the meeting.
RC 501757RC 501757