The Arab Potash Company Limited A Public Shareholding Company

Transcription

The Arab Potash Company Limited
A Public Shareholding Company
This report is for the Year Ended December 31, 2002
and is presented to the General Assembly in its annual
meeting held in Amman on Sunday April 27, 2003.
Contents
The Board of Directors
9
Letter from the Chairman
11
Board of Directors report
13
The World Scene
13
1- International Potash Consumption
2- World Production of Potash
3- International Potash Prices
Company Activities
14
1-Production
2-Sales
3-Marketing
Main Financial Indicators
18
The Company's Projects
18
1-Salt Mushroom Removal
2-Industrial Potash
3-Production Expansion (stage ) III
4-Production Expansion (stage ) IV
5-Thermal Power Station
6-Rehabilitation of Dike (18)
7-Privatization
Subsidiaries & Affiliates
1-Jordan Safi Salt Company
2-Numeira Mixed Salts & Mud Company
3-Jordan Magnesia Company
4-Kemira Arab Potash Company
5-Jordan Bromine Company
6-Jordan Dead Sea Industries Company (JODICO)
20
Contents
Administrative Affairs
1-The Board of Directors
21
2-Executive Officers
3-Employees, Training and Housing
4-Administrative Restructuring of the Company
5-The Local Community
Consolidated Financial Statements
27
1-Capital
2-Fixed Assets
3-Inventories
4-Investments
5-Loans
6-Revenues
7-Total Cost
8-Profits
9-Shareholders’ Equity
10-Audit Fees
Financial Indicators
30
Future Plan
30
Declaration of the Board of Directors
30
Recommendations
31
st
The Board of Directors Until January 31 2003
The Jordan Investment Corporation
Mr. Suleiman Hafez
Chairman
Mr. Abdul Rahman Al-Ajlouni
Member
Dr. Nabih Salameh
Member
Dr. Ahmed Mustafa
Member
Eng. Awni Masri
Member
Eng. Mohamad Arafeh
Member
Eng. Moh'd Zafer Al-Alem
Member
Arab Mining Company
nd
Eng. Talal Saadi
Deputy Chairman (until June 22 , 2002)
Mr. Yousef Abed Al-Mula
Deputy Chairman (since June 23 , 2002)
Eng. Farouk Bandar
Member
Eng. Mousa Abu Taleb
Member
nd
Islamic Development Bank/ Jeddah
Member
Mr. Hisham Sha'ar
Government Of Iraq
st
Eng. Munther Al-Nakshabandi
Member (until July 31 , 2002)
Eng. Abed Al-Satar Al-Safi
Member (since August 1 , 2002)
st
Libyan Arab Company For Foreign Investments
nd
Eng. Abd Al-Aleem Shaeri
Member (until January 2 , 2002)
Mr. Taher Al-Qurabi
Member (since January 3 , 2002)
rd
Kuwaiti Investment Authority
Mr. Abdullah Hassan Al-Bader
Member
General Manager
Eng. Issa Ayyoub
Deputies Of The General Manager
Senior Deputy General Manager
Dr. Wanas Hindawi
Eng. Younes Madadha
Marketing Manager
Deputy General Manager for
Technical Affairs
Deputy General Manager
Mr. Anwar Al-Masri
Finance Manager
Auditors
Allied Accountants
Members of Ernst & Young International
st
The Board of Directors Since February 1 , 2003
The Jordan Investment Corporation
th
Eng. Issa Ayyoub
Chairman (since February 6 ,2003)
Mr. Hisham Al-Tall
Member
Dr. Nabih Salameh
Member
Dr. Abed Al-Razaq Bani Hani
Member
Eng. Saeed Al-Bakri
Member
Mr. Mohamad Nour Shrida
Member
Mr. Eyad Qudah
Member
Mr. Muhamed Saeed Shaheen
Member
Arab Mining Company
Mr. Yousef Abed Al-Mula
Deputy Chairman
Eng. Farouk Bandar
Member
Eng. Mousa Abu Taleb
Member
Islamic Development Bank/ Jeddah
Mr. Hisham Sha'ar
Member
Government Of Iraq
Member
Libyan Arab Company For Foreign Investments
Member
Mr. Taher Al-Qurabi
Member
General Manager
th
General Manager (Since February 6 2003)
Dr. Wanas Hindawi
Deputies Of The General Manager
Deputy General Manager for
Eng. Younes Madadha
Technical Affairs
Deputy General Manager
Mr. Anwar Al-Masri
Finance Manager
Auditors
Allied Accountants
Members of Ernst & Young International
Letter from the Chairman
On behalf of myself and the Members of the Board of Directors, I would like
to welcome you to the Annual General Meeting for the year 2002. We are
pleased to present the forty sixth Annual Report which includes The
Consolidated Financial Statements and details of the activities of the
Company.
The International Potash scene witnessed a marked rise in demand during
2002. This was estimated at about (5.3%) due to better commodity and
agricultural products. World Potash production increased by around (4%)
mainly to plug the gap that was created by the rise in demand in Asia and
Brazil. The increase in production came mainly from Canada, Russia,
Belorussia, and Israel. Production costs also increased during the year due
to higher energy costs. This also reflected on internal transport and ocean
freight costs.
Despite these factors prices decreased during the year.
The Arab Potash Company maintained a production level of (1.956) million
tons and sales of (1.960) million tons.
The after tax net profit was (15.4) million JDs after a provision of JD (11.9)
million was made to offset the risks that may be associated with losses
stemming from the acquisition of the assets of Jordan Safi Salt Company
and a valuation of the slow moving spare parts inventories held. The Board
of Directors has decided to recommend to you to distribute dividends
totaling (14.997) million JDs to the shareholders which represent(18%) of
the capital.
The Company is currently studying ways of maximizing production in
cooperation with international consulting groups. The various options of
expanding the Solar Evaporation System and the Production units will be
carefully evaluated.
In addition, we intend to double the compaction capacity for potash through
a tender to build a (150) Thousand Metric Tons per year new plant, and to
increase Industrial Potash Sales to (30) Thousand Metric Tons during 2003 .
As for energy, and to satisfy our future steam requirements, a tender to
qualify contractors for a new power plant has been announced. The new
plant is expected to produce (230) tons of steam per hour and (45)
megawatts of electricity. This project is expected to be completed in 2005.
As for corporate restructuring, a contract to computerize all activities of the
Company is in effect and will be implemented during 2003. Additionally new
guidelines, procedures, and organizational structures will be introduced
during the year. A new Human Resources unit has also been formed to
develop personnel skills and training.
In the field of privatization, The Government selected HSBC as an advisor to
evaluate the Company and to assist in the process of choosing the best
partner. This process is expected to be completed in the second half of
2003. The Government intends to sell half of its (53%) shareholding through
this process which represents (26%) of Companies paid in capital. The
Company also intends to undertake necessary studies to privatize some of
the service activities such as Medical Services, Housing, Employee
transport, and other activities which can be handled more efficiently by the
private sector.
The progress of subsidiaries and allied companies are as planned. Kemira
Arab Potash Company and Jordan Bromine Company both began trial
production in the latter part of 2002, and Jordan Magnesia Company is
expected to begin producing in the second half of 2003 after employing an
international construction management firm.
In consideration with Jordan Safi Salt Company, the Board of Directors is
also discussing with the Government of Jordan and the Liquidation
Committee the best means to guarantee our rights.
I would like to extend my thanks to the Government of Jordan, to the Arab
Governments who are shareholders in the Company, to the Islamic
Development Bank/Jeddah, to all the International and local financing
institutions, and to the Company’s Staff at all locations for their support and
efforts to achieve these results.
A special gratitude must be conveyed to our valued customers and partners
for their trust in our products and services which we pledge to maintain at the
highest levels of quality.
We salute the leadership and guidance of our beloved monarch and pray to
God for his blessings and benevolence.
Board of Directors Report
The Board of Directors is pleased to welcome you in this annual general meeting and to present to you the
forty sixth annual report and the consolidated financial statements for the year ended 31 December ,2002
in accordance with article (169) of the Companies Law and articles (11 and 12 ) of APC by-laws.
The World Scene:
The International Potash Market
The international potash market was more active in 2002 compared to 2001 in terms of production and
consumption. In 2002, APC increased its sales volume by (1%) compared to 2001.
1- Demand
World potash demand was increased by (5.3%) during 2002. This demand totaled (41.8) Million tons compared to
(39.7) million tons in 2001. This significant increase was achieved despite of the difficulties the world economy is
facing. The increase came as a result of the improvement in the demand for raw materials and the agricultural
commodities which was in line with the world's population increase and as a result for the need to avoid any
shortages in the world's grain stocks.
Increase of world demand was registered in the following countries:1- India
Despite the fact that consumption in 2002 increased by (100,000) tons however it didn't reach 1999 and 2000
records. It is also expected that consumption in India will continue to grow during 2003.
2- China
The off-take was significantly increased during 2002. This increase was not attributed to factors related to the
MILLION TONS KCL
internal potash consumption but to the change in the potash procurement pattern.
In 2002, Sinochem Corporation succeeded in signing exclusive contracts with all of the potash suppliers and
accordingly controlled the market. The contracts signed were sizable and resulted in building up stock in China.
The consumption level in 2003 is not expected to increase.
3- Malaysia
The off take in 2002 was back to its normal level and it is speculated that consumption in 2003 would stabilize.
4- Brazil
The increase in world prices of agricultural crops especially soyabeans improved the financial standing of the
POTASH (KCL) WORLD
CONSUMPTION
Brazilian farmers. This attributed positively to the consumption levels of the fertilizers including potash which
increased by (8%). Market studies show that the growth in 2003 would further increase.
World Consumption of Potash (Million tons KCL)
Country
2002
2001
2000
1999
1998
14.0
12.7
12.9
13.0
11.3
North America
9.5
9.5
9.6
9.7
9.7
Europe
8.6
8.7
8.9
9.0
9.1
CIS
2.4
2.3
2.3
2.6
2.7
Latin America
6.1
5.3
5.3
4.9
5.2
Asia
Africa & The Middle East
Total
1.2
1.2
1.1
1.2
1.1
41.8
39.7
40.1
40.4
39.1
MILLION TONS KCL
2)Production
World Potash production registered a record in 2002. It totaled (42.7) million tons compared to (41.0) million tons in
2001 (4% increase). The production increase came from Canada, CIS, Belorussia and Israel as a response to the
increase in demand in Asia and Brazil. Production
POTASH CONSUMPTION
IN BRAZIL
WORLD POTASH
PRODUCTION
MILLION TONS KCL
costs for all suppliers increased due to the increase in world fuel prices, which in return, was
reflected as increases in the cost of inland transportation as well as marine freight.
Jordan represented (4.7%) of the total world potash production. Reports prepared by
consultants showed that APC continues to enjoy a high competitive advantage compared to
other suppliers because of the relatively lower production cost, especially for potash exported to
Asian markets.
World Production of Potash (Million tons KCL)
Country
CIS
Canada
Europe
USA
DSW
Jordan
Other
Total
2002
13.8
14.3
6.0
1.1
3.4
2.0
2.1
42.7
2001
13.2
13.6
6.2
1.1
3.0
2.0
1.9
41.0
2000
11.8
15.3
6.5
1.2
2.9
1.9
1.6
41.2
1999
12.8
13.7
7.0
1.4
2.8
1.8
1.3
40.8
1998
11.6
15.3
7.6
1.5
2.7
1.5
1.1
41.3
3)Prices
WORLD POTASH
PRODUCTION 2002 (Kcl)
Despite the high consumption records registered in 2002, world potash prices were under
pressure until the end of the year. The factors behind this price deterioration was the ability of
suppliers to compensate any increase in demand rapidly from unutilized capacity and also as a
result of the severe competition among suppliers in their endeavor to increase their shares in
areas which witnessed significant increase in consumption .
In general, it is expected that the world potash consumption would continue to grow in 2003, or
at least to be in line with 2002 levels. Also, world potash prices are expected to achieve
significant increase in many of the spot markets starting the second quarter of 2003.
CANADA
The expected price increase will be a translation of the healthy potash consumption which is
expected to prevail in 2003 and as a result of the increase in prices of the energy, marine
transportation and agricultural crops.
EUROPE
USA
ISRAEL
JORDAN
OTHERS
CIS
Company Activities
Production
The company produced four potash grades: Standard, Fine, Granular (Red and White color)
and the Industrial grade. The Standard grade accounts for more than half of the total quantity
produced.
POTASH PRICE
DEVELOPMENT
FROM 1998-2002
The company produced (1.956) million tons during the year compared to (1.964) million tons in
2001. This is only (0.4%) decrease over 2001.In 2002 the Standard grade made up (57.6%) of
the total production compared to (56.4%) in the year 2001. The Fine grade represented
(37.8%) of the total production compared to (38.4%) in 2001
Production by Grade (Tons)
2002
Grade
Standard
Fine
Granular
Industrial
Total
Tonnage
1,126,723
739,635
86,165
3,500
1,956,023
2001
Percent
57.60
37.81
4.41
0.18
100.00
Tonnage
1,106,485
753,180
91,910
10,960
1,962,535
Percent
56.38
38.38
4.68
0.56
100.00
while the produced carnallite (the raw material for Potassium Chloride) reached (9.5) million
metric tons exceeding the targeted quantity by (4%) and a drop of (13.6%) from the year 2001,
which was (11) million metric tons.
JAN
FEB
MAR
APR.
MAY
JUN
JULY
AUG.
TONS (KCL 2002) PRODUCTIONTHREE GRADES
APR.
MAY
JUN
JULY
SEP.
GRAN.
AUG.
SEP.
OCT.
OCT.
FINE
NOV.
DEC.
STD.
TOTAL
NOV.
CARNALLITE PRODUCTION BY MONTH IN 2002
ACTUAL AND PLANNED
APC POTASH PRODUCTION
MILLION TONS KCL
DEC.
ACTUAL
PLANNED
The Produced Potash is transported from the plant's site at Safi to the Company's warehouses
at Aqaba. This year (1.961) Million metric tons were transported to Aqaba, (93%) of which were
transported by the Company's fleet, while a local contractor handled the remaining quantities.
The Nippon Jordan Fertilizer Company received (30)Thousand metric tons of Potash.
Potash Sales
Potash sales increased by an average of (1%) to reach (1.960) Million tons in the year 2002. The
sales distributed according to the grades as follows:
Standard (53.59%), Fine ( 41.5%), Granular (4.51%), Industrial (0.16%) and Grade B (0.24%).
SALES BY GRADE (TONS)
2002
Grade
Standard
Fine
Granular
Industrial
Potash Grade-B
Total
Tonnage
1,050,308
813,402
88,380
3,047
4,750
1,959,887
2001
Percent
53.59
41.50
4.51
0.16
0.24
100.00
Tonnage
1,189,181
639,632
99,020
7,151
0,00
1,934,984
Percent
61.46
33.05
5.12
0.37
0.00
100.00
APC POTASH (KCL)
SALES BY GRADE IN TONS 2002
STANDNRD
It is noted that the percentage of Fine Potash sold has increased in comparison with Standard
Potash up to (41.5%) in 2002, where in 2001 the share of Fine grade sales reached (33.1%).
This can be explained through the increase of demand on Fine grade as it is used as raw
material in producing NPK fertilizers especially in China. As for Granular Potash sales, it has
decreased from (5.1%) in 2001 to (4.5%) in 2002.
The Asian market held the biggest share of sales, with an average of (78.5%) of the total sales,
while the European market got (14.7%). The Arab and regional countries' share witnessed a
minor increase from (4%) in 2001 to (4.1%) in 2002. It is worth mentioning that most of sold
Potash is used in producing NPK fertilizers and in oil well drilling. It is expected that local sales
will augment in the coming years especially after the beginning of production in the Chlorine
plant in 2005 and Potassium Nitrate at Aqaba which has already began production.
FINE
GRADE B
GRANULAR
APC SALES DISTRIBUTION (PERCENT)
INDUSTIAL
Market
2002
Asia
78.51
Oceania
0.10
Arab Region
4.10
Europe
14.72
Africa
0.63
America
0.00
Other
1.94
Total (Percent)
100.00
Total Sales (Thousand Tons) 1.960
2001
84.70
0.10
4.00
8.20
1.40
1.60
0.00
100.00
1.935
2000
82.90
0.48
0.86
10.90
1.20
1.90
1.76
100.00
1.919
1999
79.10
0.96
0.46
14.20
2.87
0.21
2.20
100.00
1.706
1998
73.60
4.00
1.50
14.90
3.00
0.95
2.05
100.00
1.517
India comes first on the list of Jordanian Potash consumers although its share decreased from
(30.2%) in 2001 to (26.6%) in 2002. China increased its imports to reach (22.6%) in 2002
instead of (20.9%) in 2001 despite strong Russian competition and advantageous shipping
terms.
It is clear that (80.9%) of the total exports of Jordanian Potash concentrated in ten major
markets in 2002 against (86.5%) in 2001. This trend is expected to continue in the few coming
years.
TOP TEN IMPORTERS OF APC POTASH (PERCENT)
Country
India
China
Malaysia & Singapore
Indonesia
Philippines
South Korea
Spain
Taiwan
Thailand
Japan
Total (percent)
Total Sales (Thousand Tons)
2002
26.6
22.6
8.5
7.7
3.6
3.2
3.3
2.2
1.6
1.6
80.9
1.960
2001
30.2
20.9
10.6
6.1
5.5
2.8
4.3
3.0
1.4
1.7
86.5
1.935
2000
28.3
23.7
8.3
5.3
4.4
3.6
3.3
2.9
2.0
1.6
83.4
1.919
1999
26.1
20.6
12.0
0.8
4.3
4.7
3.7
3.5
0.6
2.3
78.6
1.706
The consolidated sales (Potassium Chloride through APC and Carnallite through Numeira)
have reached (142) million JD in 2002,compared to (144) million JD in 2001 with a slight drop of
(1.4%). Numeira's sales from mud and Carnallite totaled (395) Thousand JD.
1998
32.4
10.9
11.1
0.9
4.3
3.7
5.0
4.3
0.0
2.6
75.2
1.517
000 MT (Kcl)
Sales Development In The Major Markets
INDIA
CHINA
MALAYSIA
INDONESIA
EUROPE
Marketing
In general, the structure of the international Potash markets did not change. However, Potash
prices continued to drop in the European markets. Due to the fluctuation in Euro prices against
the Dollar, APC increased its share thus allowing it to export to certain European countries
such as the Netherlands, Belgium, Finland and France in addition to Croatia, which made up
(1.7%) of these exports. While the Chinese market witnessed a stable consumption trend due
to organizing the market by Sinochem (APC's sole importer in China). As for the Indian market
it suffered from many complexities due to severe price competition.
APC sold (3,047) tons of Industrial Potash in 2002 against (7,151) in 2001. The Company will
continue its strategy to produce Red Granular Potash according to the market demand and the
development of Industrial Potash marketing. The Company retained its share in the Indonesian market reaching an average of (20%) of the total Indonesian market.
APC has restructured its marketing strategy for the next years as follows:* Maintaining the relationship with Sinochem in China.
* Focusing on the Indian market by depending on three major consumers: IPL, Zuari, and
Coromandel.
* Reorganizing APC 's position in the Indonesian market.
* Seizing the available opportunities in Thailand and Vietnam.
* Sustaining APC 's position in Malaysia, Taiwan, Japan, and Korea. In the Philippines the
Company became the biggest provider through its alliance with the Philphos group.
* Reorganizing APC 's sales to Europe and providing Kemira group with part of its demand in
Finland.
* Executing experimental selling of Red Standard and Bulk Industrial Potash.
* Constructing the Industrial Potash warehouses in Aqaba.
* Computerizing the local sales system totally.
APC is looking forward to achieving the following during this year:
* Achieving a comprehensive plan for warehouses and handling systems.
* Concluding the computerized sales system.
* Developing means of transporting Industrial Potash in bulk from Aqaba.
* Stud ying the possibilities of storing and managing activities through distribution centers in
Egypt, the Gulf and the Mediterranean countries.
* Developing the packaging operations.
Main Financial Indicators
The Company's total consolidated revenue decreased from JD (147.9) Million in the year 2001
to JD (144.7) Million in the year 2002 meaning by (2.2%). The decrease of income generated
from bank interest by around JD (1.1) Million, as a result of decline of the rate of interest on
deposits, participated in the occurrence of such decrease. However, the total consolidated costs
witnessed an increase, as they increased by (11.3%) to reach JD (127) Million. When compared to
JD (114.1) Million in the year 2001. The Company business in the year 2002 resulted in a net
profit after tax and provisions, amounted to JD (15.4) Million against JD (28.2) Million in the year
2001, although provisions for an amount of JD (11.9) Million were set aside to face potential
losses at Jordan Safi Salt Company liquidation and the provision for slow moving spare parts
inventories. In view of this the shareholders' equity decreased by around (1%) to reach JD
(285.4) Million.
The Company's consolidated fixed assets increased from JD (437.2) Million at the end of the
year 2001 to JD (456) Million at the end of the year 2002. However, these assets are evaluated,
as it is known, at cost, which is much less than their market value. Accordingly, the large
difference represents invisible reserves for the Potash Company, and consolidates its capital
base. The balance of long term loans at the end of the year 2002 increased to JD (82.9) Million,
compared to JD (76.1) Million at the end of the year 2001, due to the drawing of the granted loans
to Jordan Magnesia Company, although the Company was able to repay JD (5.7) Million during
the year 2002, and is expected to repay JD (8) Million during the year 2003.
The Company's Projects
Presently, there are six projects occupying the Company’s interest which reached various
stages of execution. These projects are as follow:
1- Salt Mushroom Removal
The work in this project has started in the year 1997, and the completion is expected to be in the
2
year 2003. in this project, (45)Km of the salt mushroom were removed at a cost of around
JD (60) Million.
Salt mushroom are hard deposits of salt accumulated at the ponds ground, which weaken the
productivity of the brine, as they decrease the area of the surface exposed to evaporation, and
also impeded the flow of brine. It is, however, estimated that their elimination will result in
increasing the production by around (54) thousand tons annually, which will rise up to (125)
Thousand tons per year after executing the fourth expansion project.
2- Industrial Potash
The production of the Industrial potash plant reached (3.500) Metric tons in the year 2002, due to
the market needs and unavailability of special store to keep its purity. The store was ready in
October 2002. The production was low and for short period of time. A marketing plan for this
production is under preparation in order to run the plan at its full production capacity of
(100) Thousand metric tons annually. However, (3.047) Metric tons had been marketed during
the year 2002, and it is expected to market (33) Thousand metric tons during the year 2003.
3- Production Expansion (Stage III)
This project aimed at increasing the potash production capacity by around (100) Thousand
2
metric tons annually by adding a new pond with an area of (11) Km . The work on the project has
started in the year 1998, but its execution was impeded due to the collapse of parts of the dike
surrounding the salt pond with a length of (2.3)km in March of the year 2000. The Company took
all the necessary actions of follow up with the contractor, designer and insurance companies in
order to recover the Company rights. However, it is expected to issue the arbitration panel's
award in respect of the arbitration case filed against the contractor during first half of the year
2003. and the Company is still pursuing the lawsuit filed against the designer and the insurance
companies before Jordanian Courts. The Company is currently studying the various means for
repairing the said dike.
4- Production Expansion (Stage IV)
The expansion of production project included in its fourth stage the increase of potash
production capacity to around (2.4) Million metric tons by adding Two new carnalite ponds. The
initial studies on this project were started by the company staff in the year 1999 and continued
through the year 2000. To make an integrated feasibility study for this project, with respect to
the areas of the salt ponds and carnalite ponds, the expansions required for the refineries and
increasing the production by making certain modifications which might be necessary to the
refineries equipment before starting the expansion stage.
5- Thermal Power Station
Specifications and tender documents for the construction of a new thermal power station with a
capacity of (230) ton steam/hour, together with an electricity generation unit with a capacity of
(45) megawatt, as well as the necessary auxiliary equipment, were set by an international
consultant, aim at responding to the increasing demand for steam in the coming year, it is
expe cted to award this tender during the first half of the year 2003.
6- Rehabilitation of Dike (18)
It was obvious that there were subversive holes in the dike floor, since it has been filled with
seawater in the year 1997. The company took measures in due time and treated this situation.
In May 2001, the increase of the artesian pressure at the bottom of the dike was noted, a fact
which was considered as an indicator of the decline of the safety factor. This necessitated the
lowering of the water level in the pond by around two meters, to raise the safety co-efficiency
and put the pond temporarily out of operation. In preparation to conduct the necessary studies
and tests for the dike foundations in order to handle the matters.
However, the studies were completed at the beginning of the year 2002, with recommendations
for remedial actions which are necessary to restore the dike to its proper condition, and which
requires about (18) months of work for its execution. It is also worth to mention that the
cessation of work at the dike's pond during the said period will not have any negative
impact on production, for the year 2003 due to the existence of good inventories of carnalite.
In addition, the company will claim from any party concerned with the design and construction of
the dike for the damages incurred by it as result. Based on the policy of prudence, the Board of
Directors took a resolution to allocate an amount of JD (4) Million in the year 2001 from profits as
a provision for dike (18) rehabilitation.
7- Privatization
The Hashemite Kingdom of Jordan has decided to privatize the Company by selling half of its
shares in the capital which is around(44.1) Million shares. Some parties working in the fertilizers production showed their interest.
The Government appointed (HSBC) bank as a financial advisor to valuate the company's fair
value in order to facilitate the selection of one of the strategic investors, by the second half of the
year 2003. In the other hand the company is preparing studies to privatize the none core services such as Medical Insurance, Employee Transportation and Housing, and other services which can be handled more efficiently by the private sector.
Subsidiaries & Affiliates
There are six companies which their activities are related to the potash industry and its mining.
The Arab Potash Company owns various shares therein ranging from (20%-55%). Following is
a briefing of the said companies:
1- Jordan Safi Salt Company (under liquidation)
Due to restrucuting of the Jordan Dead Sea Industrial Company (JODICO), Arab Potash
Company owns (24.2%) of the share capital of JOSSCO. This company has incurred losses
despite the assistance provided indirect lending by Arab Potash or by guarantees against
facilities granted thereto a voluntary liquidator resolution had been taken by the extra ordinary
th
general assembly of the company at April 28 2002.
The dues for Arab Potash Company from this company amounted to around JD (15) Million at
the end of the year 2002. The liquidation committee awarded the bid to acquire its assets for JD
rd
(8) Million to Arab Potash Company at December 3 2002, and after the transfer of the assets to
APC, it will be operated and managed by Jordan Industrial Co. (JODICO) on behalf of APC by a
management contract.
2- Numeira Mixed Salts & Mud Company
This company was established in the year 1997 aiming at packaging and distributing mixed
salts and mud for cosmetic industries purposes. The Arab Potash Company owns (52.7%) of
the company's share capital of JD (1.5) Million. Also, Arab Potash Company's employees
saving fund owns (32.7%) of its shares.
3- Jordan Magnesia Company
This company was established in the year 1997 with a share capital of JD (30) milion, the
construction of its plants at Ghor Al-Safi was started in the year 1999 and is expected to be
completed in the second half of the year 2003, for the purpose of producing (50) Thousand tons
annually of magnesium oxide used in the fire bricks industry, and around (10) thousand tons of
magnesium derivatives and magnesium hydroxide. The Arab Potash Company owns (55.3%)
of the shares of this company. The capital investment in this project expected to reach about
(77) Million.
4- Kemira Arab Potash Company
This joint venture was established with Kemira Company / Denmark in the year 1999 with a
share capital of JD (29) milion. The Plant at Aqaba will produce (150) Thousand metric tons
annually of potassium nitrate ( fertilizer) and (75) Thousand metric tons of di-calcium phosphate
(animal feed). The company commenced production in the last quarter of the year 2002. The
capital investment is expect to reach JD (80) Million. The Arab Potash Company owns this
company equaly with Kemira Copany/Denemark (50% each).
5- Jordan Bromine Company
Jordan Bromine Company was established in the year 1999 with a share capital of JD (30)
milion following the signing of the joint venture agreement with Albemarle Corporation/USA,
which owns the technical and the marketing know-how. The Jordan Bromine Company will
construct a plant in Ghor Al-Safi for the production of bromine, calcium bromide, sodium
bromide and hydrogen bromide., as well as to produce chlorine, hydrochloric acid, potassium
hydroxide and tetrabromo besphenol. After the amendment of the joint venture agreement to
construct a chlorine plant as well to purchase other assets, a resolution by the general assembly
of the company had taken a decision at October 2002, to increases the share capital by JD
(19.4) Million as additional paid in capital.
The company commenced production at the last quarter of the year 2002. The capital
investment is expected to reach JD (89) Million. The Arab Potash Company owns this company
equaly with Kemira Copany/Denemark (50% each).
6- Jordan Dead Sea Industries Company (JODICO)
This company was established in the year 1994 as a holding company with a share capital of JD
(60) Million at the initiative of the Arab Potash company, to oversee the activities of investments
and setting up downstream industries from Dead Sea minerals, with the exception of potash
industries. The Arab Potash Company, participated with (51%) of the company's share capital.
(JODICO) established both the Jordan Magnesia Company in the year 1997 and the Jordan
Safi Salt Company in the year 1996. The holding status of the company was repealed in the year
1998, enabling (JODICO) to participate in the share capital of the Jordan Bromine Company.
By establishing these three companies, (JODICO) would have fulfilled its mission, and to avoid
duplication of authority and administrative costs, a decision was made to acquire the minority
shareholdings in (JODICO). It was converted to a limited liability company with a nominal capital
of JD (100) Thousand following the purchase by the Arab Potash Company of its fixed assets,
and all of its investments in Jordan Bromine Company, Jordan Magnesia Company and Jordan
Safi Salt Company. It is expected that this company will manage the industrial salt plant and
table salt by a management contract after the completion of the transfer of all assets of Safi Salt
Company to Arab Potash Company.
Administrative Affairs
The Board of Directors
The current Board of Directors of the company consists of:
st
Representatives of Jordan Investment Corporation until January 31
2003.
Mr. Suleiman Hafez:
Chairman since August 2000. He has B.A. in commerce in the year 1968 he held several
positions, including : Minister of Finance, Minister of Post and Communications, Secretary
General of the Ministry of Finance, Director ( Member of the Board of Directors) at each of Royal
Jordanian Airlines, Jordan Electricity Authority, Social Security Corporation, Agricultural
Credit Corp., Arab Engineering Industries, Civil Aviation Authority, Jordan Cement Factories
Co., Deputy Governor of Islamic Development Bank/Jeddah for Jordan, Deputy Governor of
Arab Monetary Fund for Jordan, and Governor at the International Monetary Fund for Jordan.
Also he held the position as a Chairman in Jordan Telecommunications Corporation, Free
Zones Corporation and Jordan Investments Corporation. In addition to financial administrative
and manag erial experience at several companies.
Mr. Abdul Rahman Al-Ajlouni
Board member since November 1995. He has M.Sc. in Public Administration from Missouri
University/USA in 1978. He held the post as the Director General of the Audit and Inspection
Bureau.
Eng. Mohammad Sa'eed Arafah
Board member since August 2000. He has diploma in Electrical Engineering from the University
of Engineering and Technology Vienna/ Austria in the year 1966. He held the post of Director
General of Irbid Governorate Electricity Company, and the Jordan Electricity Authority.
Eng.Awni Al-Masri
Board member since August 2000, he has M.Sc. in Civil Engineering from Perdue University,
Indiana/USA, in the year 1961. He worked at several Jordanian companies, and held the post of
Minister of Public Works and Minister of Planning.
Eng. Mohammad Zafer Al-Alem
Board member since March 2001. He has M.Sc. in Water Resources Mining Engineering from
the University of London/England, in the year 1969, M.Sc. in Civil Engineering of HydroConstruction from UTAH University / USA, in the year 1974, Diploma in Irrigation Systems from
the University of Colorado/USA, and Diploma in Hydrology from the University of London/UK.
He is currently the Secretary General of Jordan Valley Authority.
Dr. Ahmed Mustafa
Board member since October 1997, he has PH.D. in Economics from Texas University 1983.
He held the post of Deputy Governor of the Central Bank of Jordan.
Dr. Nabeeh Salameh
Board member since March 2001, he has a B.Sc. in Economics from the University of Jordan in the
year 1969, and M.Sc. in Economics from the University of Jordan in the year 1981, higher studies in
Economics from Harvard University/USA in the year 1988, and Ph.D in Economics from Cairo. He is
currently the General Manager of Jordan Investment Corporation.
st
Representatives of Jordan Investment Corporation from February 1
2003.
Eng. Issa Ayyoub
th
General Manager from August 2000 until February 6 2003, when he was appointed as a
Chairman of the Board. He has a B.Sc. in Civil Engineering from Warwick University /England in
the year 1978. He is a member of the National Industrial Committee. He held several positions
including: Ministry of Transportation, Secretary General of the Ministry of Transportation,
Chairman of Arab Bridge Co., Jordan Iraqi Co., for Land Transportation, Aqaba Railway Corporation, Hijaz Railway Corporation , Civil Aviation Authority, Public Transportation Corporation,
and Aqaba port Authority. Also, as a board member at Royal Jordanian Airlines, Free Zone
Corporation, Jordan Telecommunications Authority and the Privatization Committee.
Mr. Hisham Al-Tal
Board member. He held several positions as Minister of Justice,Minister of Cabinet Affairs and
a member of the Supreme Court and a Deputy Chairman to the Amman Stock Exchange. He is
currently practicing law.
Dr. Nabeeh Salameh
Board member since March 2001. he has a B.Sc. in Economics from the University of Jordan in
the year 1969, and M.Sc. in Economics from the University of Jordan in the year 1981, higher
studies in Economics from Harvard University/USA in the year 1988,Ph.D. in Economics from
Cairo. He is currently the General Manager of Jordan Investment Corporation.
Dr. Abed Al-Razaq Bani Hani
Board member. He has a PH.D. in Economics from California University/ USA in the year 1985.
He is a Professor of Economics at Yarmouk University/Jordan since the year 1986. He held the
positions of Secretary General at the Ministry of Planning. He is currently the Prime Minister’s
Counselor.
Eng. Sa'eed Al-Bakri
Board member. He has a B.Sc. in Civil Engineering from Miami University/USA in the year 1982.
He is currently the Secretary General of Ministry of Water and Irrigation.
Mr. Mouhamed Nour Shrida
Board member. He has M.Sc. in Business Administration from the University of Jordan in the
year 1990. He is currently the Secretary General of the Jordanian Cabinet.
Mr. Iyad Al-Quda
Board member. He has M.Sc. in Business Administration from Sul Ross State University/USA.
He is currently theGeneral Manager of the Sales Tax Department.
Eng. Mouhamed Saeed Shaheen
Board member. He has M.Sc. In Public Administration from Harvard University/USA in the year
1978. He is currently The Deputy Governor of The Central Bank of Jordan.
Arab Mining Company Representatives
Eng. Talal Al-Sadi
Vice Chairman of the Company since December 1993, until June 2002. He has a M.Sc. in
Industrial Metals from Daram University/England in 1969 and M.Sc. in Mineral Process Design
Engineering from London University/England in 1970. He is currently the General Manager of
the Arab Mining Company.
Mr. Yousef Abed Al-Moula
Board member since June 2002, He has M.Sc in Business Administration. He is currently the
General Manager of the Lybian Arab Company for Foreign Investment.
Eng. Musa Abu-Taleb
Board member since December 2001. he has a M.Sc. in Engineering. He is currently the
Director of the Investment Department at the Kuwaiti Real Estate Investment Group.
Eng. Farouk Al-Bandar
Board member since March 1997. He has a B.Sc. in Engineering. He is currently General
Secretary at the Ministry of Industry and Minerals in Iraq.
Islamic Development Bank/ Jeddah Representative
Mr. Hisham Al-Sha'ar
Board member since November 1997. He has a B.Sc. in Law and Economics from St. Joseph
University/Lebanon in 1958. He is currently the General Secretary of the Council of Ministers in
Lebanon and the Lebanon Representative to the Scientific National Research Council and
Alternate Governor to the Islamic Development Bank/Jeddah.
Iraqi Government Representative
Eng. Munther Nakshabandi
Board member since March 1997 until July 2002. He has a B.Sc. in Mechanical Engineering.
He held the post of General Manager at the Ministry of Industry and Minerals in Iraq. He is
currently the Minister of Labour and Social Affairs.
Board member since August 2002. He has B.Sc. in Mechanical Engineering. He is currently the
General Manager of Economics Department in the Ministry of Industry and Metal in Iraq.
Libyan Arab Company for Foreign Investment Representative
Eng. Abdel Alim Al-Shaeri
Board member since April 1993 until January 2002. He has a M.Sc. in Food Engineering from
Reading University/England. And B.Sc. in Chemistry in 1961. He is currently an Industrial
Consultant at the Industrial Executive Projects Council to the Ministry of Industries in Libya.
Mr. Taher Al-Qurabi
Board member since January 2002, He has a B.Sc. in Accounting. He is currently the Deputy of the
General Manager at the Finance Department at the Lybian Company for Foreign Investment in
Lybia.
Kuwaiti Investment Authority Representative
Board member since May 1998. He has a B.Sc. in Trade, and a member in several professional
societies. He is currently the Chief Internal Auditor for the Kuwaiti Investment Authority.
Executive Officers
Eng. Issa Ayyoub
th
General Manager from August 2000 until February 6 2003, when he was appointed as a
the Chairman of the Board. He has a B.Sc. in Civil Engineering from Warwick University /England in
year 1978. He is a member of the National Industrial Committee. He held several positions
including: Ministry of Transportation, Secretary General of the Ministry of Transportation, Chairman
of Arab Bridge Co., Jordan Iraqi Co., for Land Transportation, Aqaba Railway Corporation, Hijaz
Railway Corporation, Civil Aviation Authority, Public Transportation Corporation, and Aqaba port
Authority. Also, as a board member at Royal Jordanian Airlines, Free Zone Corporation, Jordan
Telecommunications Authority and the Privatization Committee.
Dr. wanas Hindawi
th
General Manager since February 6 2003. He has Ph.D in Economics. He has been appointed
as Deputy General Manager since June 1997, and Marketing Manager since 1985.
Eng. Younis Madadha
Deputy Manager for Technical Affairs. He has B.Sc. in Civil Engineering. He has been in this
position since June 1997. He was the Manager of Civil Works Department in the company for 20
years.
Mr. Anwar Al-Masri
Deputy General Manager and Finance Manager. He has M.Sc. in Business Administration and
Accounting. He has worked for the Company since 1981.
The Board of Directors Remuneration for 2002 in JD
Details
Jordan Investment Corporation
Mr. Suleiman Hafez
Dr. A. Al-Ajloni
Dr. A. Mustafa
Eng. A. Masri
Eng. M. Arafeh
Eng. M. Al-Alem
Dr. N. Salameh
Arab Mining Company
Eng. T. Al-Saadi
Mr. Y. A. Al-moula
Eng. F. Al-Bander
Eng. Musa Abu-Taleb
Islamic Development Bank/Jeddah
Mr. H. Al-Sha'ar
Iraqi Government
Eng. M. Al-Nakshabandi
Eng. A. Al-Safi
Libyan Arab company for
Foreign Investments
Mr. T. Al-Qurabi
Mr. A. Al-Bader
Total
Per Diem
Travel Expenses
Remuneration
Transportation
Allowance
Membership in
Other
Companies
Committees
40,000
3,600
3,600
3,600
3,600
3,600
3,600
3,600
7,200
7,200
18,000
7,200
3,600
1,200
6,350
5,150
1,400
3,550
5,200
2,700
4,500
3,600
1,600
15,000
1,800
1,800
3,600
3,600
450
5,000
3,600
550
5,000
2,100
5,000
1,500
3,600
5,000
75,000
3,600
50,400
48,000
31,450
57,851
23,204
Amounts Paid to Executive Officers During 2002 in JD
Name
Salaries
Position
Mr. Sulieman Hafez
Eng. Issa Ayyoub
Dr. Wanas Hindawi
Eng. Yunes Madadha
Mr. Anwar Al-Masri
Committees
28,000
46,910
3,600
4,450
30,110
3,600
700
31,720
3,600
27,380
3,600
164,120
14,400
Chairman
General Manager
Senior Dep. Gen.Mgr.
Marketing Mgr.
Dep. General. Mgr.
Tech. Affairs
Dep. Gener al. Mgr.
Financial Manager
Total
Travel Expenses
Membership in
Other Companies
Employees, Training and Housing
The total number of employees is (2,195) at the end of the year 2002, including the employees,
workers and trainees, and around (200-230) daily workers. The company provides its staff
members with advanced medical services and is keen to train them and enhance their efficiency
according to regular annual programs consisting of local and sometimes overseas training
courses. The total participants in such courses were (1,695) employee during the year 2002.
Percentage
Number of Employees
Location
Plants/Safi
Housing/Safi
Medical Services/Safi
Aqaba Terminal
Head Office/Amman
Total
1,717
78.22
175
7.97
48
2.19
91
4.15
164
7.47
2,195
100.00
* Daily Workers (200-230)
Labor Force Distribution by Discipline & Education
Qualification
Doctors
Medical assistants
Engineers
Chemists
Administrative
Accountants
Technical
Semi Skilled
Technicians
Unskilled
Technicians
Drivers
Firemen
Guards 5,150
Daily Labor
70,756
Total
Total Percent
University
Community
College
Tawjihi
High
School
Junior
High
School
Total
Percentage
6
3
212
19
104
46
24
0
7
0
13
53
7
342
0
7
0
0
59
1
121
0
5
0
0
46
0
141
0
2
0
0
35
0
175
6
24
212
32
297
54
803
0.27
1.09
9.66
1.46
13.53
2.46
36.58
1
4
14
91
134
244
11.12
0
3
4
26
54
87
3.96
1
0
1
0
417
19.00
3
0
1
0
433
19.73
14
4
4
0
228
10.39
50
7
7
2
375
17.08
250
17
44
31
742
33.80
318
28
57
33
2,195
* Daily Workers (200-230)
The Company continues to grant housing loans to its employees. The total granted increased by
around JD (1.3) Million to reach JD (16.9) Million at the year end. At the same time, it provides
accommodation to its employees directly. About (2.193) of the Company staff members and
their families reside in the Company’s township and other housing facilities.
14.49
1.28
2.60
1.5
100.00
100.00
The year witnessed noticeable improvement in the safety, security and environment levels
inside the company projects, where work injuries declined by (56%), and the vehicle accidents
declined by (31%).
ANNUAL ACCIDENT
FREQUENCY &SEVERITY
INDICATOR (FSI) VARIATION
Training Courses and Programs During the year 2002
No. of Training Activities
Number of Participants
Details
Internal Training Center
Courses
21
195
Lectures
78
324
3
65
External Courses
Vocational Training
Universities & Colleges Students
-
Technical Trainees
61
143
-
Scientific Visits
590
102
1,378
Courses
51
171
Seminars
33
71
Total
Local Training In Jordan
Conferences
PARTICIPATION AT
DIFFERENT TRAINING
ACTIVITIES DURING- 2002
Total
Abroad Training
33
92
275
Courses
8
9
Conferences
7
20
5
13
Seminars
Total
42
20
1,695
214
Grand Total
INTERNAL ACTIVITIES
8
Administrative Restructuring
VOCATIONAL TRAINING
SEMINARS & SUMMITS
SEMINARS & SUMMITS
SUMMER TRAINEES
The Company continued during the year 2002 the implementation of the restructuring of
program to improve both structural and operational efficiencies and in this respect the following
has been done during the year 2002:
1-Prepare the functional procedural manual.
2-Permanently award of the enterprise resource planning (ERP).
3-Employees teams to study some of the administrative policies such as (employees
indemnities, postretirement medical insurances, salaries, advancements and bounces), it is
exp ected to finish all these studies by the first half of the year 2003.
NUMBER OF PARTICIPANTS
FOR THE TRAINING ACTIVITIES
IN THE TRAINING CENTER
THE ARAB POTASH COMPANY
1800
Internal Control Department
Legal Advisor
Chairman &
1600
Board Members
Investments Department
1400
General Manager
Advisors
1200
1000
Technical Deputy
General Manager/
Plants Manager
800
Financial Deputy
General Manager/
Financial Manager
600
Plants Manager
400
Finance & Computer Department.
Quality Department
Marketing Department
Housing & Utilities Dept.
Administration Department
Medical Services
Procurement Department
Aqaba Site
Technical Department
Maintenance Department
Production Department
Training Center
Civil Works Department
0
Projects Department
200
Safety & Environment Department
Operations Departments
The Local Community
As the company believes in the necessity to sustain the local communities surrounding its
location, it continued with the implementation of its policy to provide material support by
allocating cash amounts to local organizations to spend on various projects, as well as to
provide other sums to support scientific researches and studies by providing donations to the
universities and various scientific institutions. In addition to this, the company sustained the
youth movement by providing donations to sport clubs and various youth centers, and by
participating in sport (athletic) activities at the level of the Kingdom. In addition, it supported the
charitable, social and women activity organizations in the provinces by contributing cash
amounts and offering donations. The company, however, provides health services through the
hospital and clinics available at the company for all the emergency cases referred to it. The
Company has also participated in activating the commercial and economic sector in the region
through the purchase of foodstuffs and provisions from these markets according to its needs.
Donations During The Year 2002
Amount in JD
55,000
10,000
45,000
15,000
40,750
10,200
22,975
87,880
87,980
125,000
73,774
17,800
3,120
61,881
656,360
Name of Donee
Karak Municipality
Aqaba Municipality
Southern Municipality
Other Municipality
Charitable Association
Mosques and Churches
Unions & Sport Clubs
Palestinian Ministry of Health
Karak Governorate Sports Clubs
Jordan Hashemite Fund
Government Institutions/Amman & Ghor
Combating Poverty Pockets Program
Writers & Scientists
Scholarships
Total
Consolidated Financial Statement
Capital
Arab potash Company paid-up capital is (83,317,500) Dinar/Shares distributed as follows:
Shareholders
Jordan Government (Jordan Investment Corporation)
Arab Mining Company
Islamic Development Bank/Jeddah
Iraqi Government
Libyan Arab Company for Foreign Investment
Other Arab Governments
Private Sector
Total
Number of Shares
44,060,532
17,251,993
4,300,000
3,920,707
3,386,250
3,286,095
575,754
6,536,169
83,317,500
Percentage
52.883
20.706
5.161
4.706
4.064
3.944
0.691
7.845
100.000
Fixed Assets
The cost of fixed assets, before depreciation amounted to JD (456) Million compared with JD
(437.2) Million at the end of 2001, an increase of (4.3%). Fixed assets after depreciation
amounted to JD (129.6) Million compared with JD (134.3) Million at the end of 2001, a decrease
of (3.6%), due to the fact that the new additions to fixed assets during the year were less than the
depreciation provisions.
Inventories
The Potash and Carnalite inventories amounted to JD (6.6) Million, compared to JD (7) Million
at the end of the year 2001 it is the company's policy not to maintain a large stock. This figure,
however, constitutes the production of part of the last month of the year.
The spare parts and supplies inventories amounted to JD (33.7) Million at the year end. The
said inventories were subjected to close control and follow up, for the purpose of decreasing
some of their items aims at arriving to the optimum stock level. The provision for slow moving
spare parts was increased by JD (4.2) Million to amount JD (6.1) Million at the year end.
Investments
The company's investments in affiliated companies and other companies, decreased from JD
(31.3) Million in the year 2001 to JD (29.6) Million, a decrease of (5.6%) due to the selling of part
of the shares in the Jordan Shipping Lines Company and to the losses of the affiliate companies
as per International Financial Reporting Standards.
Loans
The balance of long term loans rose to JD (82.9) Million compared to JD (76.1) Million at the end
of year 2001. The withdrawals during the year totaled to JD (9.1) Million, and the principal
repayment amounted to JD (5.7) Million. The increase was due to the withdrawal of the loan
granted by the Islamic Development Bank/Jeddah and the syndicated bank loans, to finance
the magnesium oxide project.
At the year end, an amount of JD (8) Million of the long term loans was classified as short term
loa ns. Debt Equity Ratio reached (25.1%) which is less far than the acceptable international
ratio of (60%-70%).
Revenue
The total consolidated revenues for the year 2002 reached to JD (144.7) Million, compared to
JD (147.9) Million in the year 2001, a decrease of (2.2%), of which JD (142) Million from potash
and mixed salt and carnalite sales, meaning (98.1%). The remaining balance of JD (2.7) Million
was derived from the following sources:
Details
Interest
Others
Net (Loss) from Investments in Affiliates
Total
Amount in Million JD
3,2
2,2
(2,7)
2,7
Total Cost
Total consolidated cost amounted to JD (127) Million in the year 2002, compared to JD (114.1)
Million in the year 2001, an increase of (11.3%), which represents (89.4%) of the net consolidated sales, versus (79.3%) in the year 2001.
Consolidated cost of goods sold amounted to JD (85.6) Million, representing (60.3%) of the net
consolidated sales, compared to JD (78.9) Million, and (54.8%) in the year 2001.
Selling and distribution expenses amounted to JD (9.138) Million, compared to JD (9.494)
Million in the year 2001, a decrees (6.4%) representing of (3.8%) of the net consolidated sales,
versus (6.6%) in the year 2001.
Royalty amounted to JD (4.8) Million compared to JD (7.1) Million a decrease of (32.4%) in the
year 2001, representing (3.4%) of the net consolidated sales , versus (5%) in the year 2001.
Consolidated general and administration expenses amounted to JD (6) Million in the year 2002
compared to JD (5.5) Million in the year 2001, an increase of (9%) due to the increase in salaries
and expenses for rehabilitation of dike (18), representing (4.3%) of the net consolidated sales
versus (3.9%) in the year 2001.
Profits
The Company realized consolidated net profit before income tax and other provisions of JD
(20.405) Million, after the deduction of income tax amount JD ( 5.934) Million, thus the net profit
amounted to JD (15.392) Million compared to JD ( 28.242) Million in the year 2001, which is due
to the JD (11.940) Million provisions as mentioned earlier.
Profits available for appropriation, after the addition of retained earnings of JD (5.064) Million,
totaled to JD (27.038) Million and appropriated as follows:
Details
Statutory reserve (10%)
Voluntary Reserve (10%)
Jordanian Universities' Fees (1%)
Provision for Vocational Training and Scientific Research (1%)
Training and Scientific Fund
Directors Remuneration
Dividends (18%) of Share Capital
Provision for Income Tax
Retained Earnings
Total
Amount in Million JD
2,197
2,197
0,220
0,220
0,133
0,075
14,997
5,934
1,065
27,038
Shareholders' Equity
The shareholders equity at the end of the year 2002 amounted to JD (285.4) Million a decrease
of (1%) over the year 2001, after the appropriation of (10%) of net income for both statutory and
voluntary reserves. The book value of the company's share amounted to JD (3.425) at the end
of the year 2002.
Audit Fees
The audit fees for the company and its subsidiaries amounted to JD (25.820) Thousand.
Financial Indicators
The following table summarizes the major indicators for the past five years noting that all figures
(except for the financial ratios and per share data) are in Million JD.
Details
Potash production (Tons)
Potash Sales (Tons)
Potash Sales Revenue
Consolidated Sales Revenue
Other Revenue
Financing Charges
Net Profit After Taxes
Net Fixed Assets
Long Terms Loans &
Other Long Term Obligations
Minority Interest
Shareholders' Equity
Debt /Equity Ratio
Return on Investments
Return on Shareholders Equity
Debt Service Ratio
Current Ratio
Closing Share Price/JD
Earning Per Share/JD
Market Price/Earning Ratio
2002
1,956
1,960
141.6
142.0
2.7
4.1
15.4
129.6
2001
1,962
1,935
143.6
144.0
3.9
3.1
28.2
134.3
2000
1,935
1,919
142.1
144.3
9.2
4.4
29.5
146.0
1999
1,800
1,706
130.8
136.5
9.0
6.4
31.4
156.9
1998
1,526
1,516
116.0
119.4
7.4
5.1
24.1
159.4
87.8
82.3
68.0
65.8
67.1
13.5
285.4
25.1%
4%
5.4%
6.5
3.6
3.760
0.185
20.2
14.4
288.3
23.3%
7.0%
10.0%
8.6
4.0
3.680
0.339
11.0
14.9
275.1
23.2%
7.3%
11.0%
2.7
4.0
3.050
0.354
9.0
32.9
264.0
25.0%
7.9%
12.0%
2.7
3.3
4.300
0.377
11.0
23.0
232.6
26.7%
6.7%
10.0%
1.2
2.7
2.800
0.288
9.7
Future Plans
The Company is looking forward to:1- Maintain the production level at not less than (1.9) Million metric tons for the period 20032005.
2- Complete the feasibility studies and prepare the infrastructure to increase production
capacity to around (2.4) Million Metric tons.
3- Improve the marketing strategies by entering new markets and strengthening APC's position
In the existing one's by improving its production in accordance with the market needs.
4- Control production costs.
5- Proceed in the restructuring of the Company and to implement the ERP project.
6- Increase the revenues of its investment in other companies.
7- Employ all necessary means to secure the company's rights from all parties involved in the
collapse of part of dike (19) and rehabilitation of dike (18).
Declaration of the Board of Directors
The Board of Directors of the Arab Potash Company hereby declares that according to the best
of their information and knowledge there are no substantial matters which may affect the
Company as a going concern during 2003.
The Company Board of Directors hereby declares its responsibility for the preparation of the
financial statements and an effective control system in the Company.
Recommendations
Your endorsement to the following will be appreciated:
1- The minutes of the previous General Assembly meeting.
2- The Board of Directors report regarding the company's business for the year 2002 and its
plan.
3- The independent auditor's report vis-à-vis its Consolidated Balance Sheet, the Consolidated
Income Statement and Other Consolidated Financial Statements.
4- The Distribution Statement and the recommendation for distributing (18%) of the Share
Capital as dividends according to the Board of Directors' resolution.
5- Electing the independent auditor for the fiscal year ending December 31, 2003.
6-Any other matters.
To conclude, the Board of Directors extends thanks to the Government of the Hashemite
Kingdom of Jordan for its support and help provided to the Company. The Board also extends
thanks to all the Arab and International Organizations who contributed to the financing of the
Company projects, and hails the efforts exerted by the Company’s employees at all levels.
Forty-Sixth Annual Report And Financial Statements
ARAB POTASH COMPANY LIMITED
A Public Shareholding Company
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 and 2001
Together With
Auditors’ Report
33
To The Shareholders of Arab Potash Company
Amman – Jordan
We have audited the accompanying consolidated balance sheet of ARAB POTASH
COMPANY AND SUBSIDIARIES as of December 31, 2002 and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with International Auditing Standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatements.
An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ARAB POTASH
COMPANY AND SUBSIDIARIES as of December 31, 2002 and the consolidated
results of the operations and the consolidated cash flows for the year then ended in
accordance with International Financial Reporting Standards.
Amman – Jordan
March 1, 2003
34
Arab Potash Company
Consolidated Balance Sheet as of December 31, 2002
(In Thousands of Jordanian Dinars)
Notes
ASSETS
Current Assets
Cash on Hand and at Banks
Accounts Receivable, Net
Inventory
Spare Parts
Other Current Assets
Total Current Assets
2002
2001
90,632
31,425
6,630
12,346
4,039
145,072
66,414
26,776
7,015
11,214
5,119
116,538
7
21,345
25,237
25
8
9
3,211
86,335
28,730
875
11,429
129,600
426,597
10,715
85,360
29,688
1,565
11,184
134,260
414,547
7,991
7,066
8,350
16,489
39,896
5,614
7,243
16,627
29,484
74,939
12,855
13,508
70,483
11,822
14,421
83,318
54,854
14,997
46,894
84,271
1,065
285,399
426,597
83,318
54,854
18,330
44,697
82,074
5,064
288,337
414,547
3
4
5
6
Strategic Spare Parts, Net
Due Form Jordan Safi Salt Company
(under liquidation), Net
Projects in Progress
Investment in Associates
Available for Sale Investments
Other Assets
Property, Plant and Equipment
Total Assets
10
Liabilities and Shareholders’ Equity
Current Liabilities
Current Portion of Long Term Loans
Accounts Payable
Cash Received under Letters of Guarantee
Other Current Liabilities
Total Current Liabilities
11
12
13
Long Term Loans
Other Reserves
Minority Interests
11
14
15
Shareholders’ Equity
Paid in Capital
Additional Paid in Capital
Dividends
Statutory Reserve
Voluntary Reserve
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
16
The accompanying notes from 1 to 30 are an integral part of these consolidated
financial statements
35
Arab Potash Company
Consolidated Statement of Income
for the Year Ended December 31, 2002
(In Thousands of Jordanian Dinars Except for Per Share Data)
Notes
Sales, Net
Cost of Sales
Gross Profit
18
Less: Selling and Distribution Expenses
General and Administrative Expenses
Royalty to the Government of Jordan
Provision for Slow Moving Spare Parts
Provision for Doubtful Debts
23
20
17
Income from Operations
Interest and Commission Income
Other Income, Net
Other Expenses
Interest Expense and Bank Charges
Net Loss from Investments in Associates
21
22
24
Income Before Income Tax, Provision for Jordan Safi
Salt Company Losses and Provision for Exceptional
Losses
2002
2001
141,960
85,623
56,337
143,967
78,940
65,027
9,138
6,041
4,800
4,227
1,384
9,494
5,540
7,146
171
1,451
30,747
41,225
3,195
2,222
( 1,229)
( 4,135)
( 2,682)
4,245
518
( 1,367)
( 3,146)
( 872)
28,118
40,603
Provision for Jordan Safi Salt Company
(under liquidation) Losses
Provision for Exceptional Losses
25
26
( 7,713)
-
( 2,000)
( 4,000)
Income Before Income Tax
19
20,405
( 5,934)
34,603
( 6,731)
Income After Income Tax
Minority Interests
14,471
921
27,872
370
Net Income
15,392
28,242
0,185
0,339
83,318
83,318
Earnings Per Share
Weighted Average Number of Shares
(In Thousands of Shares)
36
Arab Potash Company
Consolidated Statement of Changes in
Shareholders’ Equity
Balance at January 1, 2001
Dividends Paid
Net Income
Appropriations to
Statutory Reserve (10%)
Appropriations to
Dividends Proposed
Balance at January 1, 2002
Dividends Paid
Net Income
Appropriations to
Statutory Reserve (10%)
Appropriations to
Dividends Proposed
Balance at December 31, 2002
Paid in
Capital
83,318
-
Additional
Paid in Dividends Statutory Voluntary Retained
Total
Capital
Reserve Reserve Earnings
54,854
14,997
41,121 74,921
5,881 275,092
(14,997)
(14,997)
28,242
28,242
-
-
-
3,576
-
( 3,576)
-
83,318
-
54,854
-
18,330
18,330
(18,330)
-
44,697
-
7,153
82,074
-
( 7,153)
(18,330)
5,064
15,392
288,337
(18,330)
15,392
-
-
-
2,197
-
( 2,197)
-
83,318
54,854
14,997
14,997
46,894
2,197
84,271
( 2,197)
(14,997)
1,065
285,399
37
Arab Potash Company
Consolidated Statement of Cash Flows
2002
2001
20,405
24,032
( 3,195)
4,135
2,682
7,713
1,384
4,227
1,182
34,603
24,642
( 4,245)
3,146
872
2,000
1,451
171
4,000
557
( 6,242)
385
( 1,467)
1,080
16,862
(
640)
( 2,205)
599
(
Income Tax Paid
Net Cash Flows from Operating Activities
(
177)
( 1,049)
8,350
63,445
( 5,151)
58,294
Cash Flows from Investing Activities
Purchase of Property, Plant and Equipment, Net
Amounts Paid for Projects in Progress
Purchase of Investments
Proceeds from Sale of Investments
Interest and Commission Received
Other Assets
Net Cash Flows Used in Investing Activities
( 1,763)
(16,071)
( 1,729)
695
3,195
( 245)
(15,918)
( 7,476)
( 39,662)
( 14,285)
480
4,245
(
491)
( 57,189)
Cash Flows from Financing Activities
Proceeds from Loans
Repayment of Loans
Interest and Bank Charges Paid
Dividends
Minority Interests
Net Cash Flows Used in Financing Activities
Net Increase in Cash
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
9,112
( 5,678)
( 3,270)
(18,330)
8
(18,158)
24,218
66,414
90,632
Cash Flows from Operating Activities
Income before Income Tax
Depreciation
Interest and Commission Income
Interest and Bank Charges Expense
Losses from Investments in Affiliates
Provision for Jordan Safi Salt Company (under liquidation) Losses
Provision for Doubtful Debts
Provision for Slow Moving Spare Parts
Provision for Exceptional Losses
Others
Decrease (Increase) in Current Assets
Accounts Receivable
Inventory
Spare Parts
Other Current Assets
(Decrease) Increase in Current Liabilities
Accounts Payable
Other Current Liabilities
Cash Received under Letters of Guarantee
716)
1,465
82,562
( 11,139)
71,423
(
(
(
(
(
17,900
4,883)
3,466)
14,997)
130)
5,576)
8,658
57,756
66,414
38
Arab Potash Company
Notes to the Consolidated Financial Statements
December 31, 2002
(In Thousands of Jordanian Dinars, Except for Share and Per Share Data)
(1) GENERAL
The Arab Potash Company a public shareholding company was founded and registered
on July 7, 1956. During 1958, the Company was granted a concession from the
Government of Jordan, to exploit the minerals and salts of the Dead Sea brine. The concession expires after 100 years from the grant date, after which, the Company’s factories
and installations become the property of the Government of Jordan. Under the terms of
the concession, the Government of Jordan is entitled to a royalty of JD 0.008 for each
ton of potassium chloride, (“Potash”), exported by the Company. The maximum royalty payable is limited to 25% of the Company’s net income.
The Company has increased its paid in capital during December 1997 from JD 79,695
to JD 83,318. The increase was effected through the issue of Global Depository Receipts
(GDRs) on the London Stock Exchange at a price of US$ 9.03 for each GDR. Each GDR
represents one ordinary share with a nominal value of JD 1 per share. Currently, the
Company produces and markets Potash only and trades it in the international market.
The number of employees in the Company was 2,379 and 2,364 as of December 31,
2002 and 2001, respectively.
The financial statements were authorised for issue by the Board of Directors subsequent
to their meeting held on March 1, 2003. These financial statements require the approval
of the shareholders.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards, as published by the International
Accounting Standards Board. They are prepared under the historical cost convention,
except for available for sale investments which are stated at their fair value.
2.1
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all of
the companies that it controls. This control is normally evidenced when the Company
owns, either directly or indirectly, more than 50% of the voting rights of a company's
share capital and is able to govern the financial and operating policies of an enterprise
39
so as to benefit from its activities. The equity and net income attributable to minority
shareholders' interests are shown separately in the balance sheets and income statements, respectively.
The following subsidiaries have been consolidated:
Paid in capital
Thousands of Shares
Jordan Dead Sea Industries ✽
Jordan Magnesia Company
Numeira Mixed Salts and Mud Company
100
30.000
1.500
Percentage of
Ownership
99.7
55.3
52.7
✽ During 2001, Jordan Dead Sea Industries reduced its share capital from JD 30,000
to JD 100 and changed its status from a public shareholding company to a limited
liability company.
The purchase method of accounting is used for acquired businesses. Companies
acquired or disposed of during the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal.
2.2
Cash and Cash Equivalents
Cash includes cash on hand and cash with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less and that are subject to an insignificant risk of
change in value.
2.3
Receivables
Receivables are stated at the fair value of the consideration given at the date of sale and
are carried later at amortized cost, after provision for impairment.
2.4
Inventory and Spare Parts
Finished goods are valued at the lower of average cost or net realizable value. Cost
includes all direct production costs plus a share of the indirect overheads. Work in
progress for Potash is not recognized, since the production cycle spanning the pumping
of carnallite, the essential raw material, to the refineries is less than one day.
Spare parts and materials are valued at the lower of the moving average cost or market
after provision for slow moving items. Strategic spare parts are expected to be used after
more than one year. The Company’s policy is to maintain sufficient spare parts to maintain its plants, since the technology used in producing Potash is unique to the Dead Sea
location and is not commonly used by other producers in other locations.
40
2.5
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment loss. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from
their disposal is included in the income statement.
The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs
of bringing the asset to its working condition and location for its intended use.
Expenditures incurred after the fixed assets have been put into operation, such as repairs
and maintenance and overhaul costs, are normally charged to income in the period in
the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be
obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalised as an additional
cost of property, plant and equipment.
Depreciation is computed on a straight-line basis at annual rates between 2% to 20%.
The useful life and depreciation method are reviewed periodically to ensure that the
method and period of depreciation are consistent with the expected pattern of economic
benefits from items of property, plant and equipment.
Projects in progress represents plant and properties under construction and is stated at
cost. This includes cost of construction, plant and equipment and other direct costs.
Construction in progress is not depreciated until such time as the relevant assets are
completed and put into operational use.
2.6
Investments in Associated Companies
Investments in associated companies (investments between 20% to 50% in a company’s
equity) where significant influence is exercised by the Company are accounted for using
the equity method. An assessment of investments in associates is performed when there
is an indication that the asset has been impaired or the impairment losses recognised in
prior years no longer exist.
When the Company’s share of losses exceeds the carrying amount of the investment, the
investment is reported at nil value and recognition of losses is discontinued except to
the extent of the Company’s commitment.
2.7
Available for Sale Investments
The company adopted IAS 39, Financial Instruments: Recognition and Measurement on
1 January 2001. Accordingly, investments are classified as available for sale.
All purchases and sales of investments are recognised on the trade date.
Investments are initially measured at cost, which is the fair value of the consideration
given for them, including transaction costs.
41
Available for sale are subsequently carried at fair value without any deduction for transaction costs by reference to their quoted market price at the balance sheet date.
Investments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured by alternative valuation methods are measured at cost.
Gains or losses on measurement to fair value of available-for-sale investments are recognised directly in the fair value reserve in shareholders equity, until the investment is sold
or otherwise disposed of, or until it is determined to be impaired, at which time the
cumulative gain or loss previously recognised in equity is included in net profit or loss
for the period.
2.8
Revenue Recognition
Revenue is recognised when it is probable that the economic benefits associated with
the transaction will flow to the enterprise and the amount of the revenue can be measured reliably.
Revenue from sales of goods are recognised when delivery has taken place and transfer
of risks and rewards has been completed.
2.9
Foreign Currency
Assets and liabilities denominated in foreign currencies are translated to Jordanian
Dinars using the prevailing exchange rates at year end. Foreign currency transactions
during the year are recorded using exchange rates that were in effect at the dates of the
transactions. Foreign exchange gains or losses are reflected in the statement of income.
2.10 Employee Termination Indemnities
The Company operates an employee termination indemnity scheme, where the benefit
accrues to employees on pro-rata basis during their employment period and is based on
each employee’s current salary. Other liabilities in the accompanying consolidated
financial statements reflect the maximum amounts of the indemnities as of the balance
sheets dates of JD 12,792 and JD 11,731 respectively, at December 31, 2002 and 2001.
2.11 Borrowings
Borrowing costs generally are expensed as incurred. Borrowing costs are capitalised if they
are directly attributable to the acquisition, construction or production of a qualifying asset.
Capitalization of borrowing costs commences when the activities to prepare the asset are
in progress and expenditures and borrowing costs are being incurred.
Borrowing costs are capitalised until the assets are substantially ready for their intended
use. If the resulting carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded.
Interest capitalized on Magnesium Oxide project during the years 2002 and 2001
amounted to JD 2,513 and JD 1,544 respectively. The company stopped to capitalize
interest on Magnesium Oxide project on June 30, 2002.
42
2.12 Income Taxes
The Company provides for income taxes in accordance with the Income Tax Law number (57) of 1985 and its subsequent amendments, the latest of which being Law No. 25
of 2001 which came into effect on January 1, 2001, and in accordance with IAS 12.
Deferred taxation is brought to account under the liability method in accordance with
IAS 12, for the difference between the book and the tax bases for assets and liabilities.
Under IAS 12, timing differences on end of service indemnity and depreciation, may
give rise to a deferred tax asset, which due to its uncertainty has not been recognized in
the financial statements.
(3) CASH AT BANKS
This item consists of the following:
-Deposits in Jordanian Dinars at local banks that mature within one and 3 months bearing interest that ranges between 3.25% to 5.76%.
-Deposits in US Dollars at local banks that mature within one month bearing interest
that ranges between 0.7% to 1.89%.
-Deposits in Euro at local banks that mature within one month bearing interest that
ranges between 2.30% to 2.61%.
-Deposits at banks with total amount of JD 4,233 represent the net balance of confiscated guarantee from the contractor of Jordan Magnesia Company after deducting
amounts spent on the project (note 12).
(4) ACCOUNTS RECEIVABLE
Trade Receivables
Due from Associates
Advances to Magnesia Project Contractors
Others
Less: Allowance for Doubtful Debts
2002
2001
36,108
365
557
133
37,163
5,738
31,425
29,082
487
1,402
159
31,130
4,354
26,776
(5) INVENTORY
Finished Potash
Others
43
2002
2001
6,466
164
6,630
6,801
214
7,015
(6) OTHER CURRENT ASSETS
Prepayments
Payments on Letters of Credit
Other
2002
2001
397
3,244
398
4,039
93
4,759
267
5,119
2002
2001
27,452
6,107
21,345
27,341
2,104
25,237
(7) STRATEGIC SPARE PARTS
Strategic Spare Parts
Less: Allowance for Slow Moving Spare Parts
(8) PROJECTS IN PROGRESS
Beginning of 2002 Additions
59,827
7,790
17,223
520
85,360
Magnesium Oxide Project
Salt Mushrooms Dredging ❈
Construction of Dikes 19 and 20 (note 26)
Other Projects
Total
8,204
8,032
2,348
18,584
Transfers
15,822
1,787
17,609
End of 2002
68,031
17,223
1,081
86,335
The dredging of the salt mushrooms will increase the production capacity of the company’s solar evaporation system. Salt dikes will be constructed using the dredged salt.
In addition, the salt dikes will be constructed to such levels that will increase the useful
life of the solar evaporation system. The increase in production capacity as a result of
this project is estimated to be 54,000 tons of potash per annum initially, and it will rise
to 125,000 tones per annum following the completion of the solar system conversion
project.
❈
Based on the above, since the project will increase the production capacity and the useful life of the solar system and since the original cost of the solar system has been fully
depreciated, the company’s management decided to capitalize the project’s cost and
depreciate it over the estimated useful life in accordance with International Financial
Reporting Standards. The project is expected to be completed during 2003 at total estimated cost of JD 61,700. Up to December 31, 2002 the Company paid JD 56,200 on
this project which has been transferred to property, plant and equipment.
44
(9) INVESTMENT IN ASSOCIATES
This item represents the Company’s investment in the share capital of the following
companies:
Number Percentage
of shares of ownership
14,500,000
Kemira Arab Potash Company
15,000,000
Jordan Bromine Company (paid 93.7%)
3,345,600
Nippon Jordan Fertilizer Company
Jordan Investment and South
833,000
Development Company ❈
12,000
Jordan International Chartering Company
1,452,308
Jordan Safi Salt Company ❈❈
200,000
Consulting Company for Construction and Maintenance ❈❈❈
South Development Company for Industrial
100,000
Equipment and Workshops
2002
2001
50
50
20
12,100
11,776
4,368
14,224
11,183
3,771
45.45
20
24.21
38
383
103
-
402
108
-
22
28,730
29,688
Jordan Investment and South Development owns 77.6% of South Development
Company for Industrial Equipment and Workshops.
❈
The General Assembly of Jordan Safi Salt Company decided in its extraordinary meeting held on April 28, 2002 to liquidate the company.
❈❈
The General Assembly of Consulting Company for Construction and Maintenance
decided in its extraordinary meeting held on June 19, 1999 to liquidate the company.
❈❈❈
(10) PROPERTY, PLANT AND EQUIPMENT
Land
Cost Balance at
January 1, 2002
Additions
Disposals ❈
Balance at
December 31, 2002
Accumulated Depreciation
Balance at
January 1, 2002
Additions
Disposals *
Balance at
December 31, 2002
Net Book Value as of –
December 31, 2002
December 31, 2001
❈
Buildings
Dikes
Machinery
Furniture
and
and
Hospital
Equipment Vehicles Fixture Equipment
2,937 41,080 106,461 256,064 22,909
539
3,035
167 15,301
374
42
28
-
Tools
Total
5,774
321
136
453
-
1,501 437,179
47 19,410
580
2,937 41,219 121,762 259,057 23,074 5,959
and Impairment Losses -
453
1,548 456,009
-
30,130 48,220 198,320 20,310
2,042 7,594 12,805 1,108
374
19
28
4,296
373
121
429
4
-
1,214 302,919
106 24,032
542
-
32,144 55,814 211,106 21,044 4,548
433
1,320 326,409
20
24
228 129,600
287 134,260
2,937 9,075 65,948
2,937 10,950 58,241
47,951
57,744
2,030
2,599
1,411
1,478
This item represents fixed assets disposals at their net book value.
45
(11) LONG TERM LOANS
This item represents loans granted by the following:
Installments
Shor Term Long Term
2002
2002
International Bank for Reconstruction & Development
Islamic Development Bank - Jeddah
Syndicated loan
European Investment Bank
1,538
1,328
2,840
2,285
7,991
4,786
22,112
17,750
30,291
74,939
Total
2002
2001
6,324
23,440
20,590
32,576
82,930
7,868
23,912
10,650
33,667
76,097
International Bank for Reconstruction & Development
Loan (B) for an amount of US $ 12,000,000 to finance plant modification. The loan is
repayable over 26 semi annual installments, the first of which was due on September 1,
1991 and the last installment will be due on March 1, 2004. The loan is guaranteed by
the Government of Jordan. The loan agreement stipulates that “ the borrower shall pay
interest on the principal amount of the loan withdrawn and outstanding from time to
time at a rate per annum for each interest period equal to one half per cent per annum
above the cost of the bank’s qualified borrowings for the last semester ending prior to
the commencement of such interest period”. The average interest incurred by the
Company was approximately 7.1% per annum. The company pays a guarantee fee at
0.8% per annum.
Loan (C) for an amount of US $ 15,000,000 to finance potash expansion project. The
loan is repayable over 24 semi annual installments, the first of which was due on
January 15, 1997 and the last installment will be due on July 15, 2008. The loan is guaranteed by the Government of Jordan. The loan agreement stipulates that “ the borrower shall pay interest on the principal amount of the loan withdrawn and outstanding
from time to time at a rate per annum for each interest period equal to one half per cent
per annum above the cost of the bank’s qualified borrowings for the last semester ending prior to the commencement of such interest period”. The average interest incurred
by the Company was approximately 4.1% per annum. The Company pays a guarantee
fee at 0.8% per annum.
Islamic Development Bank – Jeddah
Loan (B) for an amount of SDR 780,000 (JD 794) to finance the Dead Sea Complex studies. The loan is repayable over 24 semi annual installments, the first of which was due
on June 30, 1993 and the last installment will be due on December 30, 2004. The loan
is guaranteed by the Government of Jordan. The loan carries no interest but a service
fee is charged at 1.5% per annum.
Loan (C) for an amount of SDR 14,152,292 (JD 14,412) to finance the construction of
the cold crystallization plant. The loan is repayable over 14 semi annual installments,
the first of which was due on July 17, 1996 and the last installment will be due on
46
January 17, 2003. The loan is guaranteed by the Government of Jordan. The cost of
borrowing is approximately 9% per annum less 15% discount subject to repayments
being made on the due dates.
Jordan Dead Sea Industries Company signed an agreement with Islamic Bank for
Development / Jeddah, in which the bank assigned the Company to buy machinery and
equipment on behalf of Jordan Magnesia Company for an amount not exceeding
US$ 28,035,000 and to lease it to the company for 9 years after a preparation period of
3 years for an annual fee of 7.5%. The ownership of the machinery will be transferred
to the company as a donation at the end of the agreement period. This agreement is
guaranteed by Arab Potash Company. The loan agreement was modified at August 29,
2002 for Jordan Magnesia Company to become the borrower instead of Jordan Dead
Sea Industries Company. Only US$ 26,550,465 (JD 18,824) has been utilized from this
loan up to December 31, 2002 which represents 95% of total loan amount.
West Merchant Bank
The Company was granted a loan amounting to US $ 10,000,000 to finance the construction of the industrial salt plant. The loan is repayable in ten semi annual installments, the first installment was due on April 21, 1997 and the last installment was due
on October 21, 2001. The loan is guaranteed by the Arab Bank – London and bears
interest at 7.48% per annum.
European Investment Bank
The Company was granted a loan amounting to US $ 47,485,760 to finance operations.
The loan is repayable over 22 semi annual installments, the first of which will be due
on October 10, 2002 and the last installment on April 10, 2013. The loan is guaranteed by the Government of Jordan and bears interest at 6.18% per annum.
Syndicated loan
Jordan Magnesia Company was granted a Syndicated loan amounting to US$
30,000,000 managed by Arab Bank and Citi Bank to finance part of its project. This
loan bears interest at six months LIBOR plus 1.75% and is repayable over ten unequal
semi annual installments, the first of US$ 1,000,000 was due on July 12, 2002 and the
last of US$ 5,000,000 will be due on January 12, 2007. Only US$ 29,000,000
(JD 20,590) has been utilized from this loan which represents 96.6% of total loan
amount. This loan is guaranteed by Arab Potash Company.
47
The aggregate amounts of annual principal maturities of long term obligations are as
follows:
December 31
2004
2005
2006
2007
2008
Thereafter
13,091
11,259
11,249
8,563
7,901
22,876
74,939
(12) CASH RECEIVED UNDER LETTERS OF
GUARANTEE
These letters of guarantee were withdrawn during June 2002 due to the Magnesium
Oxide project contractor (Atilla Dogan and Agra Monenco Companies Joint Venture) non
compliance with the terms and conditions of the contract agreement. Moreover, the
company terminated the contract on July 22, 2002 in accordance with the terms of the
contract which indicates that the Company shall complete the project and charge the
contractor.
(13) OTHER CURRENT LIABILITIES
This item consists of the following
Royalty to The Government of Jordan
Contractors Retentions
Accrued Interest and Expenses
Jordanian Universities’ Fees
Scientific Research and Vocational Training
Education, Vocational and Technical Training Support Fund
Other
2002
2001
4,800
2,817
1,471
5,034
220
652
133
1,362
16,489
7,146
2,034
1,308
3,978
358
617
1,186
16,627
2002
2001
12,792
63
12,855
11,731
91
11,822
(14) OTHER RESERVES
Employees’ end of Service Indemnity Provision
Employees’ Vacation Provision
48
(15) MINORITY INTERESTS
This item represents net shareholders’ partners’ equity in subsidiary companies after
deducting Arab Potash Company’s share in these companies.
The details of minority interests in subsidiary companies are as follows:
Jordan Magnesia Company
Numeira Mixed Salts and Mud Company
Jordan Dead Sea Industries Company
2002
2001
12,883
624
1
13,508
13,773
647
1
14,421
(16) SHAREHOLDERS’ EQUITY
Statutory Reserve
The accumulated amounts in this account of total JD 46,894 represent 10% of the
Company’s net income before income tax according to the Companies Law. The
Company has the option to cease such appropriations when the balance of this reserve
reaches 25 % of the Company’s authorized capital. The statutory reserve is not available
for distribution to shareholders.
Voluntary Reserve
The accumulated amounts in this account of total JD 84,271 represent cumulative appropriations not exceeding 20% of net income before income tax. This reserve is available
for distribution to shareholders.
DIVIDENDS
The Company’s general assembly approved at April 21, 2002, the proposal made by the
Board of Directors to distribute JD 18,330 as dividends, representing 22% of the
Company’s paid in capital.
The Board of Directors will recommend to the Company’s general assembly during 2003
to distribute JD 14,997 as dividends, representing 18% of the Company’s paid in capital.
49
(17) GROSS PROFIT
Following is a breakdown of gross profit (loss) by company:
Sales
Cost of Sales
Potash Co.
2002
2001
141,565 143,625
85,311
78,575
56,254
65,050
Numeira Co.
2002
2001
395
342
312
365
83
( 23)
Total
2002
2001
141,960 143,967
85,623
78,940
56,337
65,027
(18) SALES ANALYSIS
Following is a summary of sales by product and customers’ geographical location
Far East
India & China
Europe
South America
Middle East
Africa
Potash Co.
2002
2001
41,019
48,782
71,864
74,310
17,420
10,389
1,956
6,013
4,671
5,249
3,517
141,565 143,625
Numeira Co.
2002
2001
18
6
36
5
330
342
395
342
Total
2002
2001
41,037
48,782
71,870
74,310
17,456
10,389
5
1,956
6,343
5,013
5,249
3,517
141,960 143,967
(19) INCOME TAX
The provision for income tax was calculated in accordance with the Jordanian Income
Tax Law No. 57 of 1985 and its subsequent amendments, the latest of which being Law
No. 25 of 2001, which came into effect on January 1, 2001.
The Company’s effective tax rate was 29.1% and 19.5% for 2002 and 2001 respectively. The principal differences between these effective rates and the statutory tax rates of
15% are as follows:
2002
Computed tax at statutory tax rates
Prior years’ income tax
Tax effect of expenses that are not allowable for tax purposes
Subsidiaries and affiliates losses not available for tax relief
50
3,061
109
2,362
402
5,934
2001
5,190
135
1,275
131
6,731
(20) GENERAL AND ADMINISTRATIVE EXPENSES
2002
1,994
161
307
75
124
45
34
81
41
555
52
107
1,116
783
9
557
6,041
Salaries, Wages and Other Benefits
Travel Expenses
Depreciation
Board of Directors’ Remuneration
Maintenance and Repairs
Electricity Expenses
Fuel
Post, Telephone and Telex
Stationery and Printing
Professional and Consulting Fees
Hospitality
Advertizing
Dike 18 Expenses
Dike 19 Expenses
License and Other Fees
Other
2001
1,605
333
327
75
122
38
46
66
46
370
43
95
750
1,225
16
383
5,540
(21) OTHER INCOME, NET
This item consists of the following
Currency Difference of Exchange Gain (Loss)
Dividends Income
Gain on Sale of Investments
Services Income
Unutilized Provisions
Others, Net
2002
2001
574
323
167
630
477
51
2,222
(199)
54
328
523
(188)
518
2002
2001
656
220
220
133
1,229
651
358
358
1,367
(22) OTHER EXPENSES
Donations and Educational Grants
Jordanian Universities Fees
Scientific Research and Vocational Training Fees
Education, Vocational and Technical Training Fund
51
(23) SELLING AND DISTRIBUTION EXPENSES
Marketing Salaries, Wages and Other Benefits
Sales Commission
Depreciation
Travel Expenses
Advertizing Expenses
Sample Testing
Periodicals
Post, Telephone and Telex
Others
Shipping Terminal (Aqaba) Handling Expenses
Salaries, Wages and Other Benefits
Depreciation
Electricity
Repair and Maintenance
Fuel
Insurance
Rent
Others
2002
2001
265
2,185
14
238
43
232
141
22
23
3,163
238
2,347
15
275
59
384
136
22
10
3,486
3,296
847
1,167
258
231
19
38
23
96
5,975
9,138
3,250
776
1,431
256
128
30
36
24
77
6,008
9,494
(24) NET LOSS FROM INVESTMENTS IN
ASSOCIATES
This item represents (loss) income from investments in associates as follows:
Kemira Arab Potash Company
Jordan Bromine Company
Nippon Jordan Fertilizer Company
Jordan Investment and South Development Company
Jordan Safi Salt Company (under liquidation)
Other
52
2002
2001
(2,124)
(1,157)
597
(
19)
21
(2,682)
(351)
(532)
544
(353)
(151)
( 29)
(872)
(25) JORDAN SAFI SALT COMPANY (UNDER
LIQUIDATION) LOSSES
Due to the substantial losses incurred by Jordan Safi Salt Company which affected its
ability to settle its liabilities towards the Arab Potash Company and other creditors, the
company has been put under liquidation. The total possible losses that might incur to
the company has been estimated to be JD 9,713. Accordingly, the Arab Potash
Company provided for possible losses by JD 2,000 in 2001 and increased the provision
in 2002 by JD 7,713 to become JD 9,713. This provision would be modified according
to the actual losses that follow the liquidation process.
Due from Jordan Safi Salt Company (under liquidation) represents the following:
Due from Jordan Safi Salt Company (under liquidation)
Less: Allowance for Jordan Safi Salt Company (under liquidation) losses
2002
2001
12,924
9,713
3,211
12,715
2,000
10,715
(26) PROVISION FOR EXCEPTIONAL LOSSES
2001
During 2001, several sinkholes have appeared in Dike (18). As a result, the Company
stopped pumping water into the pan and reduced the water level to prevent the dike
from collapsing.
Currently, the Company is conducting technical studies to rehabilitate the dike and to
increase its safety factor in order to put the dike back in operations. An impairment loss
of JD 4,000 has been recognized in the 2001 income statement.
2000
During March 2000, Dike (19) – classified under projects in progress – suffered from
partial failure. A definitive quantification of the damages sustained has not been completed as of the date of these financial statements. The Company’s management is currently involved in the preparation for the initiation of legal proceeding the subject matter of which is to claim for proper compensation. Management is also involved in taking the steps necessary to have Dike (19) re-designed and re-built in order to put it into
operation and have it utilized for the purpose it was originally built. Management
believes that the Company’s financial position and its results of operations will not be
materially affected as a result of the said failure of the Dike and the related litigation.
53
Since the procedures needed for the re-design and the reconstruction of the dike will
take a considerable period of time, the Company has provided the amount of JD 10,000
from the 2000 income statement.
(27) RELATED PARTY TRANSACTIONS
The Company is involved in a number of transactions with the Government of Jordan,
a majority shareholder. The principal transactions are as follows:
• The concession to exploit the Dead Sea brine was granted by the Government of
Jordan. In return, the Company pays to the Government an annual royalty, which is
computed as explained in Note 1.
• As outlined in Note 11, the Government has guaranteed certain loans granted to the
Company.
The Company has obtained a number of loans from the Islamic Development Bank –
Jeddah, which owns 5.2 % of the Company’s share capital and is represented on its
board of directors.
The Company guaranteed Jordan Dead Sea Industries Company obligations to Islamic
Development Bank - Jeddah which resulted from the agreement to purchase and lease
Jordan Magnesia Company machinery and equipment for an amount of
US$ 28,035,000. The loan agreement was modified at August 29, 2002 for Jordan
Magnesia Company to become the borrower instead of Jordan Dead Sea Industries
Company. Also, the company guaranteed the syndicated loan obtained by Jordan
Magnesia Company from local banks for US$ 30,000,000.
Jordan Dead Sea Industries guaranteed overdraft facilities granted by local banks to
Jordan Safi Salt Company with a ceiling of JD 2,200. This guarantee was transferred to
Arab Potash Company instead of Jordan Dead Sea Industries Company during 2002.
On July 7, 1992, the Company and Jordan Phosphate Mines Company signed a supply
agreement with Nippon Jordan Fertilizer Company (“NJFC”). Under this agreement the
Company undertook to supply NJFC with all of its Potash requirements, and NJFC, undertook to purchase all of its Potash requirements from the Company. The price of Potash
will be based on pricing formulas contained in the agreement, whereby the resulting
price will be substantially similar to the international market price of Potash. The
Company owns 20% of NJFC which commenced production during 1997. Total
Company’s sales to NJFC during 2002 and 2001 were JD 2,154 and 2,422 respectively.
On October 10, 1996, the Company signed a cooperation and supply agreement with
Jordan Safi Salt Company (“JOSSC”). Under this agreement, the Company agreed to
grant JOSSC exclusive rights to produce industrial and table salt from within the
Company’s concession area. The agreement has been modified during 2000 to reduce
the cost of raw salt to 3% of JOSSC’s net income with a grace period of 3 years up to
December 31, 2003. The agreement runs for a period of 20 years.
54
On June 2, 1997, the Company signed a cooperation and supply agreement with
Numeira Mixed Salts and Mud Company (Numeira). Under this agreement, the
Company agreed to grant Numeira exclusive rights to produce, dry and sell Carnalite
salts and Dead Sea mud within the Company’s concession area. In addition, The
Company undertook to provide Numeira with salts and mud at JD 0.05 and JD 0.01 per
ton respectively. In addition, Numeira pays an amount of JD 4 in return of land annual rent. The agreement runs for a period of 15 years.
During 1998, the Company signed an agreement with Albamarle Holding Company
(AH) and Jordan Dead Sea Industries Company (Jodico) to establish a company, Jordan
Bromine Company (JBC). Under this agreement, the Company granted JBC the right to
construct and operate an integrated manufacturing facility to produce, sell and market
bromine and bromine derivatives within the Company concession area for at least 7
years, after which JBC has the right of first refusal on any new projects for production of
bromine in Jordan. The Company undertook to provide JBC with potassium chloride.
During 2000, the Company acquired Jodico’s share in JBC.
On June 22,1999, the Company signed an agreement with Kemira Agro to establish a
company, Kemira Arab Potash Company (KEMAPCO), to design, construct and operate
a Potassium Nitrate, Decalcium Phosphate and Nitric Acid plant using the technology
provided by Kemira Agro and the potash provided by the Company. The Company
agreed to sublease KEMAPCO two plots of land in Aqaba and to supply the new project with muriate of potash.
The company guaranteed 50% of the syndicated loan obtained by Nippon Jordan
Fertilizer Company from local banks for US$ 12,200,000 and JD 8,120.
The Company guaranteed 50% of the loans obtained by Jordan Bromine Company from
the European Investment Bank and the Islamic Development Bank – Jeddah for Euro
50,000,000 and US $ 29,000,000 respectively.
The Company guaranteed 50% of the loan obtained by Kemira Arab Potash Company
from the European Investment Bank for Euro 30,000,000.
The Company guaranteed Kemira Arab Potash Company’s obligation to the Islamic
Development Bank – Jeddah which resulted from the agreement to purchase and Lease
the equipment of the project for an amount of US $ 27,000,000.
The Company guaranteed 50% of the loans obtained by Kemira Arab Potash Company
from Jordan Kuwaiti Bank for US$ 5,000,000 and JD 3,550.
The company guaranteed 50% of the loan and facilities obtained by Kemira Arab Potash
Company from Arab Banking Corporation Bank for US$ 4,000,000 and US$ 1,000,000
respectively.
55
(28) CONTINGENT LIABILITIES AND
COMMITMENTS
As of December 31, 2002, the Company had the following additional contingent liabilities and commitments:
• Letters of credit and collection bills amounting to JD 3,107.
• Guarantees for an amount of JD 520.
• The Company’s committed and contracted for capital expenditure amounted to
JD 39,521.
• The Company’s committed but not contracted for capital expenditure amounted to
JD 16,749.
• There are counter claims with the contractor of Jordan Magnesia Company project
due to delay in project completion with no additional obligations on Jordan Magnesia
towards the contractor in the opinion of the Company’s management.
(29) FINANCIAL INSTRUMENTS
Financial risk management
The Company operates internationally, giving rise to exposure to market risks from
changes in interest and foreign exchange rates.
(i) Credit risk
The Company has no significant concentration of credit risk with any single counterparty or group of counterparties having similar characteristics.
Company procedures are in force to ensure on a permanent basis that sales are made to
customers with an appropriate credit history and do not exceed an acceptable credit
exposure limit.
The Company does not guarantee obligations of other parties except where the group
has entered into joint venture agreements or for associates (Note 27).
The maximum exposure to credit risk is represented by the carrying amount of each
financial asset, in the balance sheet.
(ii) Interest rate risk
Most of the financial instruments on the balance sheet are not subject to interest rate risk
except for deposits and loans. Interest on deposits in Jordanian Dinars ranges between
3.25% - 5.76% and on deposits in US Dollars are between 0.7% - 1.89%.
56
(iii) Liquidity risk
The Company policy is to maintain sufficient cash and cash equivalents or have
available funding through an adequate amount of committed credit facilities to meet its
commitments.
(iv) Foreign exchange risk
Most of the Company’s revenues are in US Dollars and most of its operating expenses are
in Jordanian Dinars. Deposits at banks and loans according to currency are as follows:
Deposits
48,400
39,519
2,713
Jordanian Dinars
US Dollars
Special Drawing Right (SDR)
Euro
Loans
81,540
1,390
-
The Jordanian Dinar exchange rate of the Jordanian Dinars is fixed against the US Dollar
(US$ 1.41 for 1 JD).
Fair values
The fair value of securities included in available for sale investments is estimated by reference to their quoted market price at the balance sheet date.
The Company’s principal financial instruments not carried at fair value are cash and
cash equivalents, trade receivables, other current assets, other non current assets, trade
and other payables, bank overdrafts and long term borrowings.
The carrying amount of cash and cash equivalents approximates their fair value due to
the short term maturity of these financial instruments.
Similarly, the historical cost carrying amounts of receivables and payables which are all
subject to normal trade credit terms approximate their fair values.
The fair value of long-term borrowings is based on the quoted market price for the same
or similar issues, or on the current rates available for debt with the same maturity and
credit-rating risk profile and amounts to JD 74,687 as of December 31, 2002.
(30) CLASSIFICATION
Some of 2001 financial statements balances were reclassified to correspond to 2002
presentation. This reclassification has not affected the results of the company or
shareholders’ equity.
57

The Arab Potash Company Limited A Public Shareholding Company

Transcription

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