Dangote flour mill annual report 2013

DANGOTE FLOUR MILLS PLC

AUDITED CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR NINE MONTHS ENDED 30 SEPTEMBER 2013 AND THE YEAR ENDED 31 DECEMBER 2012

DANGOTE FLOUR MILLS PLC For the nine months ended 30 September 2013

Content

Page

Corporate information i Report of the Directors ii Corporate Governance report vii Statement of management's responsibilities xi Report of the independent auditors 1 Consolidated and separate statements of profit or loss

2

Consolidated and separate statement of comprehensive income 3 Consolidated and separate statements of financial position

4

Consolidated and separate statements of changes in equity 5 Consolidated and separate statements of cash flows

6

Notes to the consolidated and separate statements of cash flows 7

Notes to the consolidated and separate financial statements

8

Segment report 48 Statement of value added 52 Financial summary 53


i

CORPORATE INFORMATION LEGAL FORM Dangote Flour Mills Plc was incorporated in Nigeria on 1 January, 2006. The company is listed on the Lagos Floor of the Nigerian Stock Exchange (NSE) with the symbol "DANGFLOUR". The Group's ultimate parent company is Tiger Brands Limited, listed on the Johannesburg Stock Exchange. REGISTERED OFFICES Terminal ‘E’ Greenview Development Building Apapa Wharf Lagos. Nigeria. TRANSFER OFFICE Oceanic Registrars 154, Ikorodu Road, Onipanu, Shomolu, Lagos. COMPANY SECRETARY AISHA LADI ISA (Mrs) AUDITORS Akintola Williams Deloitte (Chartered Accountants) 235, Ikorodu Road, Illupeju, Lagos BANKERS Zenith Bank Plc Diamond Bank Plc Mainstreet Bank Ltd Access Bank Plc Sterling Bank Plc First City Monument Bank Plc First Bank of Nigeria Plc United Bank for Africa Plc. GTBank Plc Ecobank Nigeria Plc BOARD OF DIRECTORS The names of Directors who are currently in office are as follows: Executive directors: Non-executive directors: Mr. Nthabiseng Segoale (Appointed 4th October, 2012) Alh. Aliko Dangote (GCON) Mr. Suleiman Olarinde (Appointed 20th February, Mr. Olakunle Alake 2013 and resigned 1st August, 2013) Mr. Asue Ighodalo

Mr Peter Matlare ( Appointed 4th October, 2012) Ms. Olufunke Ighodaro (Appointed 4th October, 2012) Mr Thushen Govender (Appointed 4th October, 2012 and resigned 30th June, 2013) Mr Patrick Sithole (Appointed 4th October, 2012 and resigned 30th June, 2013) Mr Ian Isdale (Appointed 20th February, 2013)


xi

STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2013 The Directors of Dangote Flour Mills Plc are responsible for the preparation of the consolidated financial statements that present fairly the financial position of the Group as at 30 September 2013, and the results of its operations, cash flows and changes in equity for the period then ended, in compliance with International Financial Reporting Standards ("IFRS"). In preparing the financial statements, the Directors are responsible for: - Properly selecting and applying accounting policies;

- Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the company's financial position and financial performance;

- Making an assessment of the group's ability to continue as a going concern;

- Maintaining adequate accounting records that are sufficient to disclose and explain the financial position of the group and its transactions and results accurately in accordance with IFRS;

- Designing, implementing and maintaining an effective and sound system of internal controls throughout the group;

- Maintaining statutory accounting records in compliance with legislation in force in Nigeria and in accordance with IFRS;

- Taking such steps as are reasonably available to them to safeguard the assets of the Group; and

- Preventing and detecting fraud and other irregularities by implementing a sound system of internal controls. The financial statements of the Group for the nine-month period ended 30 September 2013, were approved by management on 16 November, 2013 Signed on behalf of management of the Group Mr Nthabisheng Segoale Mr Moruf Adealu Group Chief Executive Officer Chief Finance Officer Date: 16 November, 2013 Date 16 November, 2013

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF

DANGOTE FLOUR MILLS PLC

Report on the Financial Statements We have audited the accompanying consolidated and separate financial statements of Dangote Flour Mills Plc and its subsidiaries which comprise the consolidated and separate statements of financial position as at 30 September 2013, the consolidated income statement, statement of changes in equity and cash flow statement for the nine month period ended 30 September 2013 and a summary of significant accounting policies and other explanatory information set out on pages 2 to 54. Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011, International Financial Reporting Standards and for such internal controls as the Directors determine necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the financial position of Dangote Flour Mills Plc. and its subsidiaries as at 30 September 2013 and the financial performance and cash flows for the nine month period ended 30 September 2013 in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011 and International Financial Reporting Standards. Emphasis of Matters We draw attention to Note 1.3 which describes that in 2013, the Company changed its reporting period end from December 31 to September 30 to align its reporting period with that of its majority shareholder. Accordingly, in 2013, the Company has reported its performance for the 9 months period ended September 30, 2013 whereas prior year comparatives are based on 12 months reported figures to December 31, 2012. The balance sheet and related notes were reported as at September 30, 2013, whereas prior year comparatives were reported as at December 31, 2012 We also draw attention to note 1.4 which describes the effects of the decision of the shareholders to sell the company’s holding in Agrosacks Limited, and the classification of the company’s assets and liabilities as held for sale, and the effect of the re-classification of the profit and loss account of Agrosacks to a single line as discontinued activities, with the corresponding re-classifications in the prior year. Chartered Accountants Lagos, Nigeria 19 November 2013 FRC/2013/ICAN/00000001364


2

STATEMENT OF PROFIT OR LOSS for nine months ended 30 September 2013

COMPANY GROUP

9 months 12 months

9 months Restated

12 months ended ended

ended ended

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012

(N '000) Notes 2013 2012

23,079,590 29,859,976

Revenue 4 29,960,419 41,472,599 (22,728,987) (28,740,533)

Cost of sales

(29,317,791) (39,310,274)

350,603 1,119,443

Gross profit

642,628 2,162,325 (3,642,573) (2,360,838)

Distribution and administrative expenses

(6,541,606) (4,810,501)

42,708 253,848

Other income 5 233,975 325,490 - (1,409,450)

Impairment of trade receivables

(201,584) (1,409,450)

(64,618) 161,083 (Loss)/profit on significant disposal of fixed assets 6 (130,678) 161,083

(3,313,880) (2,235,914)

Operating (loss) / profit (5,997,265) (3,571,053) (2,346,275) (2,059,643)

Finance costs 7 (2,364,956) (2,085,169)

12,665 30,974

Interest received 7 19,927 53,250

(5,647,490) (4,264,583)

Loss before taxation from continuing operations (8,342,294) (5,602,972) 1,166,842 1,126,464

Taxation 8 1,577,990 1,258,659

.

(4,480,648) (3,138,119)

Loss for the year from continuing operations (6,764,304) (4,344,313)

Discontinued operations 25

Profit after tax for the period from discontinued operations (452,697) 2,080,976

.

- -

Loss for the period

(7,217,001) (2,263,337)

(4,480,648) (3,138,119)

Owners of the parent

(7,932,996) (2,840,714)

(4,480,648) (3,138,119)

Continuing operations

(6,698,446) (4,261,802) - -

Discontinued operations

(1,234,550) 1,421,088

- -

Non-controlling interests

715,995 577,377

- -


(65,858) (82,511) - -


781,853 659,888

(4,480,648) (3,138,119)

(7,217,001) (2,263,337)


3

STATEMENT OF OTHER COMPREHENSIVE INCOME for nine months ended 30 September 2013

COMPANY GROUP

9 months 12 months

9 months Restated

12 months

ended ended

ended ended

30-Sep 31-Dec

30-Sep 31-Dec

2013 2012

(N '000) Notes 2013 2012

(4,480,648) (3,138,119)

Loss for the year from continuing operations

(7,217,001) (2,263,337)

Other comprehensive income:

- -

Actuarial Gains - Assumption

- 2,382

- -

Actuarial Gains - Experience - 68,608

(4,480,648) (3,138,119) Total comprehensive loss for the year (7,217,001) (2,192,347)

Attributable to:

(4,480,648) (3,138,119)


(7,932,996) (2,769,724)

- -


715,995 577,377

(4,480,648) (3,138,119) (7,217,001) (2,192,347)

Basic and diluted loss per share (kobo per share) 9 (158.66) (55.39)


4

STATEMENT OF FINANCIAL POSITION As at 30 September 2013

COMPANY GROUP

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012 (N '000) Notes 2013 2012

Assets 21,777,704 27,302,587

Non-current assets

32,898,984 45,673,663

17,351,051 18,747,467 Property, plant and equipment 10 30,002,456 44,048,647 2,597,637 7,553,637

Interest in subsidiary companies 11 - -

- -

Long-term receivables 14 - 3,894 1,829,016 1,001,483

Deferred taxation asset 12 2,896,528 1,621,122

33,066,395 31,889,256

Current assets

24,768,875 31,775,355

7,686,391 7,317,448 Inventories 13 9,372,457 12,946,862 3,961,715 3,732,124

Trade and other receivables 14 7,789,466 11,927,694

17,219,636 16,953,231

Amounts owed by subsidiaries 11 - - 3,288,629 3,025,036

Short-term loans receivable 15 6,183,288 5,083,533

910,024 861,417

Cash and bank balances 16 1,423,664 1,817,266

4,956,000 -

Assets classified as held for sale 25 17,813,681 -

59,800,099 59,191,843

Total assets

75,481,540 77,449,018

Equity and liabilities

18,233,825 22,714,473

Issued capital and reserves

16,311,182 24,244,178

2,500,000 2,500,000

Ordinary share capital 17 2,500,000 2,500,000 18,116,249 18,116,249

Share premium 17 18,116,249 18,116,249

(2,382,424) 2,098,224

Retained earnings

(4,305,067) 3,627,929


1,795,343 1,079,348

18,233,825 22,714,473

Total equity

18,106,525 25,323,526

12,039,546 14,201,759

Non-current liabilities

12,099,553 14,801,783

2,393,244 2,825,800

Deferred taxation liability 12 2,453,251 2,855,079 - 851,584

Retirement benefit obligation 18 - 1,254,329

9,646,302 10,524,375

Long-term borrowings 19 9,646,302 10,692,375

29,526,728 22,275,611

Current liabilities

35,671,584 37,323,709

7,677,861 5,173,729

Trade and other payables 20 11,992,772 10,433,756 149,204 212,284

Taxation

238,448 401,155

17,757,915 15,178,614

Short-term borrowings 21 21,040,451 24,346,967 - 216,669

Shareholders for dividend

- 216,669

1,547,289 1,331,717

Amounts owed to subsidiaries 11 - - 2,394,459 162,598

Bank overdrafts 16 2,399,913 1,925,162

- -

Liabilities classified as held for sale 25 9,603,878 -

59,800,099 59,191,843

Total equity and liabilities

75,481,540 77,449,018

The consolidated and separate financial statements on pages 2 to 54 were approved by the Board of Directors on 16 November, 2013 and signed on its behalf by:

_________________________ ____________________________ ____________________________

Alhaji Aliko Dangote Mr Nthabisheng Segoale Mr Moruf Adealu Chairman Group Chief Executive Officer Chief Finance Officer FRC/2013/IODN/00000001766 FRC/2013/IODN/00000002455 FRC/2013/ICAN/


5

STATEMENT OF CHANGES IN EQUITY for nine months ended 30 September 2013

Total

Share

attributable

capital to owners Non- Total

(N '000) Notes and

premium Accumulated

profit of the

parent Controlling

interests equity

Group

Balance at 1 January 2012 20,616,249 6,897,652 27,513,901 501,971 28,015,872 Loss for the period

- (2,840,713) (2,840,713) 577,377 (2,263,336)

Other comprehensive loss for the period - 70,990 70,990 - 70,990

20,616,249 4,127,929 24,744,178 1,079,348 25,823,526 Dividends on ordinary shares 9 - (500,000) (500,000) - (500,000)

Balance at 31 December 2012 20,616,249 3,627,929 24,244,178 1,079,348 25,323,526 Loss for the period

- (7,932,996) (7,932,996) 715,995 (7,217,001)

Balance at 30 September 2013 20,616,249 (4,305,067) 16,311,182 1,795,343 18,106,525

Company

Balance at 1 January 2012 20,616,249 5,736,343 26,352,592 - 26,352,592 Loss for the period

- (3,138,119) (3,138,119) - (3,138,119)

Dividends on ordinary shares - (500,000) (500,000) - (500,000)

Balance at 31 December 2012 20,616,249 2,098,224 22,714,473 - 22,714,473 Loss for the period

- (4,480,648) (4,480,648) - (4,480,648)

-

20,616,249 (2,382,424) 18,233,825 - 18,233,825

Balance at 30 September 2013 20,616,249 (2,382,424) 18,233,825 - 18,233,825


6

STATEMENT OF CASH FLOWS for nine months ended 30 September 2013

COMPANY

GROUP 9 months 12 months

9 months

12 months

ended ended

ended

ended 30-Sep 31-Dec

30-Sep

31-Dec

2013 2012 (N '000) Notes 2013

2012

(1,865,103) 796,745

Cash operating profit A 6,547

4,471,455 761,804 (2,075,911) Working capital changes B 4,167,690

(4,270,941)

(1,103,299) (1,279,166)

Cash generated from operations

4,174,237

200,514 12,665 30,974

Interest received

19,927

53,251

(2,346,275) (2,059,643)

Finance costs

(2,871,893)

(3,146,412) (156,328) (1,064,539)

Taxation paid C (161,232)

(1,136,772)

(3,593,237) (4,372,374)

Net cash inflow/ (outflow) from operating activities 1,161,039

(4,029,419)

(332,096) (313,116)

Purchase of property, plant and equipment E (851,023)

(1,998,897)

60,812 161,083

Proceeds on disposal of property, plant and equipment

305,366

168,153

(271,284) (152,033)

Net cash outflow from investing activities (545,657)

(1,830,744)

6,003,525 14,725,606

Long-term borrowings raised

6,003,525

14,725,606 1,844,845 -

Long-term borrowings (repaid)/raised

(8,351,103)

(2,016,000)

(6,167,103) (2,103,869)

Short term borrowings (repaid)/raised

(1,333,012)

1,196,689 - (500,000)

Dividends paid D -

(500,000)

. .

1,681,267 12,121,737 Net cash (outflow) / inflow from financing activities (3,680,590)

13,406,295

(2,183,254) 7,597,332

Net (decrease)/ increase in cash and cash equivalents (3,065,208)

7,546,132

Transferred to assets held for sale

25 2,196,855

-

Cash and cash equivalents (329,089)

-

Bank overdrafts 2,525,943

-

698,819 (6,898,513)

Cash and cash equivalents at beginning of the year

(107,896)

(7,654,028)

(1,484,435) 698,819

Cash and cash equivalents at end of the year F (976,249)

(107,896)


7

NOTES TO THE STATEMENT OF CASH FLOWS for nine months ended 30 September 2013

COMPANY

GROUP

9 months 12 months

9 months


ended

ended 30-Sep 31-Dec

30-Sep

31-Dec

2013 2012 (N '000) Notes 2013

2012

A Cash operating profit

(3,313,880) (2,235,914) Operating loss after impairment allowance - continuing operations (5,997,264)

(3,571,053)

Operating loss after impairment allowance - discontinued operations (343,860)

2,734,853

Add back:

- 1,490,453

Non-cash flow impairment allowance -

1,316,968

- (281,287)

Gratuity: Provision for the year

-

(307,879)

(206,887) (144,365)

Gratuity: Payments during the year

(444,596)

(168,239)

Fair value re-measurement on assets held for sale - DAS 2,627,873

(64,618) (161,083)

(Profit) / Loss on disposal of fixed assets 378,241

(161,083)

117,200 18,939

Loss on obsolete assets written off to profit and loss 237,703

28,757

1,603,082 2,180,284

Depreciation (Note 10)

3,548,450

4,669,413

- (70,282)

Exchange gain

-

(70,282)

(1,865,103) 796,745 Cash operating profit / (loss) 6,547

4,471,455

B Working capital changes

(416,217) (2,418,315)

Increase in inventories

(577,858)

(1,036,492)

(805,229) 469,705

Increase in trade and other receivables (1,900,640)

(2,032,017)

1,983,250 (127,301)

Increase / (decrease) in trade and other payables 6,646,188

(1,202,432)

761,804 (2,075,911) Working capital changes 4,167,690

(4,270,941)

C Taxation paid

(212,284) (1,114,176)

Amounts payable at beginning of year

(401,155)

(1,333,931)

(93,248) (162,647)

Income statement charge - continuing operations (134,034)

(203,996)

Income statement charge - discontinued operations (23,786)

-

Classified as held for sale

159,296

-

149,204 212,284

Amounts payable at the end of year

238,447

401,155

(156,328) (1,064,539) Total taxation paid (161,232)

(1,136,772)

D Dividends paid

(216,669) (216,669)

Amounts accrued and payable at beginning of year (216,669)

(216,669)

- (500,000)

Declared per statement of changes in equity -

(500,000)

216,669 -

Reclassified to other payables

216,669

-

- 216,669

Amounts accrued and payable at end of year -

216,669

- (500,000) Total dividends paid -

(500,000)

E Purchase of property, plant and equipment

(332,096) (3,830,276)

Expansion

(601,774)

(1,998,897)

- -

Replacement

(249,249)

-

(332,096) (3,830,276) (851,023)

(1,998,897)

F Cash and cash equivalents at end of the year


910,024 861,417

Cash and cash equivalents

1,423,664

1,817,266

(2,394,459) (162,598)

Bank overdrafts

(2,399,913)

(1,925,162)

- -

-

(1,484,435) 698,819 (976,249)

(107,896)


NOTES TO THE FINANCIAL STATEMENTS

8

1. General Information

1.1 Company Information

Dangote Flour Mills Plc (the Company) is a public limited company incorporated in Nigeria. Its parent and ultimate holding company is Tiger Brands Limited, a company listed on the Johannesburg Stock Exchange. The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report.

1.2 Nature of operations

The principal activities of Dangote Flour Mills PLC and subsidiaries (“the Group”) are the milling of wheat and production of wheat products. Dangote Pasta Limited, Dangote Noodles Limited and Dangote Agro Sacks Limited are fully owned subsidiaries of the Dangote Flour Group. Dangote Flour produces bread flour, confectionary flour, bread flour, pasta semolina and alkama.

1.3 Accounting period

In 2013, the Company changed its reporting period end from 31 December to 30 September, so as to align its reporting period with that of its owner. Accordingly, in 2013, the Company has reported its performance for the 9 months period ended 30 September, 2013, whereas the prior year comparatives are based on the 12 months reported figures to 31 December, 2012. The balance sheet and related notes were reported as at 30 September, 2013 whereas the prior year comparatives were reported as at 31 December, 2012. Accordingly, the amounts presented in the financial statements are not entirely comparable with those reported as prior year comparatives

1.4 Assets held for sale

At the Annual general meeting held on 19 August, 2013 the shareholders approved the resolution to dispose of the shares in Dangote Agrosacks Limited and as a result Agrosacks assets and liabilities have been classified as “Held for sale” to give visibility of the impact of the disposal. As a result, the amount relating to Agrosacks Limited have been re-classified and included as a separate line item relating to discontinued operations and the comparative amounts in the profit and loss account have been re-stated for comparability.

1.5 Performance The group’s performance for the nine months ended September 2013 continues to reflect the effects of significant challenges faced during the latter half of 2012 financial year. The group continues to pursue recoveries in supply chain efficiencies as well as market share across its core categories. Management changes, process improvement, customer engagements, enhancement of the internal control environment as well as a review of the products positioning were amongst the key focus areas of management’s attention. Satisfactory progress has been achieved in implementing these interventions which have been designed to turn the group’s performance around.

1.6 Going Concern

The group has experienced a loss for the period of N7,932,996,000 (year ended 31 December 2012: N2,840,713,000) which has resulted in accumulated losses of N4,305,067,000 at 30 September, 2013 (31 December 2012: retained earnings of N3,627,929,000). Group current liabilities exceeded current assets at 30 September 2013 by N10,902,709,000 (31 December 2012: N5,548,354,000). However there was a net cash inflow from operations for the period ended 30 September 2013 of N1,161,039,000 (year ended 31 December 2012 net cash outflow – N4,029,419,000).



9

1.6.1 Going Concern

Management considers that, in light of the changes implemented as noted in Note 1.4, and considering the improved performance indicated in the group’s budgets for the coming year, and expected cash flows in the next twelve months, that the company will be able to continue to meet its obligations as they fall due, and hence the preparation of the group financial statements on a going concern basis, is appropriate.

2. General information and statement of compliance with IFRS

2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements

In the current year, the Group has applied a number of new and revised IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2013. Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities The Group has applied the amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments have been applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the amendments has had no material impact on the disclosures or on the amounts recognised in the consolidated financial statements. New and revised Standards on consolidation, joint arrangements, associates and disclosures In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011) Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the first-time application of the standards. In the current year, the Group has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) together with the amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance. IAS 27 (as revised in 2011) is not applicable to the Group as it deals only with separate financial statements. The impact of the application of these standards is set out below. Impact of the application of IFRS 10 IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee. Some guidance included in IFRS 10 that deals with whether or not an investor that owns less than 50% of the voting rights in an investee has control over the investee is relevant to the Group.

The application of IFRS 10 has had no material impact on the disclosure or the amounts recognized in the consolidated financial statement.



10

2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements

(continued) Impact of the application of IFRS 11 IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (as revised in 2011). IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under IFRS 11, there are only two types of joint arrangements - joint operations and joint ventures. The classification of joint arrangements under IFRS 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, IAS 31 contemplated three types of joint arrangements - jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under IAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).

As the group does not have any interests in JVs, the application of IFRS 11 has had no material impact on the disclosure or the amount recognised in the consolidated financial statement.

Impact of the application of IFRS 12 IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of IFRS 12 has resulted in more extensive disclosures in the consolidated financial statements (please see note 3).

Amendments to IAS 1 Presentation of Financial Statements (as part of the Annual Improvements to IFRSs 2009 - 2011 Cycle issued in May 2012)

The Annual Improvements to IFRSs 2009 - 2011 have made a number of amendments to IFRSs. The amendments that are relevant to the Group are the amendments to IAS 1 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financialstatements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position.

In the current year, the application of the new accounting standards have not resulted in material effects on the information in the consolidated statement of financial position as at 1 January 2012. No third statement of financial position as at 01 January, 2012 has therefore been presented.

Changes in Accounting Estimates and Errors as detailed below.

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 Financial Instruments2

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures2

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities1

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities1

1 Effective for annual periods beginning on or after 1 January 2014, with earlier application permitted.

2 Effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.



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2.1 New and revised IFRSs affecting amounts reported and/or disclosures in the financial

statements(continued)

IFRS 9 Financial Instruments IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Key requirements of IFRS 9: • All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and

Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured attheir fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.

The directors of the Company anticipate that the application of IFRS 9 in the future may have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been completed.

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities

The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. To qualify as an investment entity, a reporting entity is required to: • Obtain funds from one or more investors for the purpose of providing them with professional investment

management services. • Commit to its investor(s) that its business purpose is to invest funds solely for returns from capital

appreciation, investment income, or both. • Measure and evaluate performance of substantially all of its investments on a fair value basis.

Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities.

The directors of the Company do not anticipate that the investment entities amendments will have any effect on the Group’s consolidated financial statements as the Company is not an investment entity. Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’. The directors of the Company do not anticipate that the application of these amendments to IAS 32 will have a significant impact on the Group’s consolidated financial statements as the Group does not have any financial assets and financial liabilities that qualify for offset.



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3. Summary of accounting policies

3.1 Statement of Compliance with IFRS

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards.

3.2 Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis, as

explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price is directly

observable or estimated using another valuation technique. In estimating the fair value of an asset or a

liability, the Group takes into account the characteristics of the asset or liability if market participants would

take those characteristics into account when pricing the asset or liability at the measurement date. Fair value

for measurement and/or disclosure purposes in these consolidated financial statements is determined on

such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing

transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value

but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3

based on the degree to which the inputs to the fair value measurements are observable and the significance

of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the

entity can access at the measurement date; • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset

or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability.

3.3. Presentation of financial statements in accordance with IAS 1 (revised 2007)

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial

Statements (revised 2007). The Group has elected to present the 'Statement of comprehensive income' in a

separate statement from the Income statement.

3.4. Basis of consolidation The Group financial statements consolidate those of the parent company and all of its subsidiary undertaking(s) drawn up to 30 September 2013. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The company obtains and exercises control through more than half of the voting rights for all its subsidiaries. All subsidiaries have a reporting date of 30 September except Dangote Agrosacks Nigeria Limited which was classified as discontinued operation. . The results of subsidiaries acquired are included in the consolidated financial statements from the date of acquisition, being the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. Subsidiaries acquired with the intention of disposal within 12 months are consolidated in line with the principles of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and disclosed as held for sale. All intragroup transactions, balances, income and expenses are eliminated on consolidation.



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3.4 Basis of consolidation (continued)

Non-controlling interests represent the portion of profit or loss, or net assets not held by the group. It is presented separately in the consolidated income statement, and in the consolidated statement of financial position, separately from own shareholder’s equity. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non-controlling interest even if that results in a deficit balance. If the group loses control over a subsidiary, it:

Derecognises the assets (including goodwill) and liabilities of the subsidiary;

Derecognises the carrying amount of any non-controlling interest;

Derecognises the cumulative translation differences, recorded in equity;

Recognises the fair value of the consideration received;

Recognises the fair value of any investment retained;

Recognises any surplus or deficit in profit or loss; and

Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.

3.5. Foreign currencies Foreign currency transactions The consolidated financial statements are presented in Nigerian Naira, which is the company’s functional and presentation currency. Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange ruling at the date of the transaction. Translation of foreign currency transactions Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Exchange differences are taken to profit or loss, except for differences arising on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to other comprehensive income, in the consolidated annual financial statements, until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to such exchange differences are also accounted for in other comprehensive income. If non-monetary items measured in a foreign currency are carried at historical cost, the exchange rate used is the rate applicable at the initial transaction date. If they are carried at fair value, the rate used is the rate at the date when the fair value was determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).



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3.6. Interest in group companies

Business combinations are accounted for using the acquisition method. The value of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed. When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit and loss. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, is recognised in accordance with IAS 39 either in profit or loss or as charge to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. The company carries its investments in subsidiaries and associate companies at cost less accumulated impairment losses.

3.7. Segment reporting

Reporting segments The group has reportable segments that comprise the structure used by the chief operating decision-maker (“CODM”) to make key operating decisions and assess performance. The group’s reportable segments are operating segments that are differentiated by the activities that each undertakes and the products they manufacture and market (referred to as business segments). The group evaluates the performance of its reportable segments based on operating profit. The group accounts for intersegment sales and transfers as if the sales and transfers were entered into under the same terms and conditions as would have been entered into in a market related transaction. The financial information of the group’s reportable segments is reported to the CODM for purposes of making decisions about allocating resources to the segment and assessing its performance.

3.8. Property, plant and equipment Property, plant and equipment are stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment losses. Assets subject to finance lease agreements are capitalised at the lower of the fair value of the asset and the present value of the minimum lease payments. Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate assets. Expenditure incurred on major inspection and overhaul, or to replace an item, is also accounted for separately if the recognition criteria are met. Depreciation is calculated on a straight-line basis, on the difference between the cost and residual value of an asset, over its useful life. Depreciation starts when the asset is available for use. An asset’s residual value, useful life and depreciation method is reviewed at least at each financial year-end. Any adjustments are accounted for prospectively. Depreciation is not calculated in respect of freehold land and assets under construction.



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3.8 Property, plant and equipment (continued)

The following useful lives have been estimated: Freehold land - Not depreciated Leasehold land and buildings - 50 years Plant and machinery - 15 years Motor vehicles - 4 years Tools and equipment - 5 years Furniture and fittings - 5 years Computer equipment - 3 years An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

3.9. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Unless internally generated costs meet the criteria for development costs eligible for capitalisation in terms of IAS 38 (refer to research and development costs accounting policy below), all internally generated intangible assets are expensed as incurred. Research and development costs Research costs, being the investigation undertaken with the prospect of gaining new knowledge and understanding, are recognised in profit or loss as they are incurred. Development costs arise on the application of research findings to plan or design for the production of new or substantially improved materials, products or services, before the start of commercial production. Development costs are only capitalised when the group can demonstrate the technical feasibility of completing the project, its intention and ability to complete the project and use or sell the materials, products or services flowing from the project, how the project will generate future economic benefits, the availability of sufficient resources and the ability to measure reliably the expenditure during development. Otherwise development costs are recognised in profit or loss. During the period of development, the asset is tested annually for impairment. Following the initial recognition of the development costs, the asset is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when development is complete. The development costs are amortised over the period of expected future sales. Impairment The group assesses tangible and intangible assets, excluding goodwill, development assets not yet available for use and indefinite life intangible assets, at each reporting date for an indication that an asset may be impaired. If such an indication exists, the recoverable amount is estimated as the higher of the fair value less costs to sell and the value in use. If the carrying value exceeds the recoverable amount, the asset is impaired and is written down to the recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the hierarchy is firstly a binding arm’s length sale, then the market price if the asset is traded in an active market, and lastly recent transactions for similar assets. Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset.



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3.9 Intangible assets (continued)

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there is a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to the revised recoverable amount, but not in excess of what the carrying amount would have been had there been no impairment. A reversal of an impairment loss is recognised directly in profit or loss. Derecognition of intangible assets An intangible asset is derecognised on disposal; or when no future economic benefits are expected from its use. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

3.10. Financial instruments Financial instruments are initially recognised when the group becomes a party to the contract. The group has adopted trade date accounting for “regular way” purchases or sales of financial assets. The trade date is the date that the group commits to purchase or sell an asset. Financial instruments are initially measured at fair value plus transaction costs, except that transaction costs in respect of financial instruments classified at fair value through profit or loss are expensed immediately. Transaction costs are the incremental costs that are directly attributable to the acquisition of a financial instrument, i.e. those costs that would not have been incurred had the instrument not been acquired. A contract is assessed for embedded derivatives when the entity first becomes a party to the contract. When the economic characteristics and risks of the embedded derivative are not closely related to the host contract, the embedded derivative is separated out, unless the host contract is measured at fair value through profit or loss. The group determines the classification of its financial instruments at initial recognition.

Classification The group’s classification of financial assets and financial liabilities are as follows: Description of asset/liability Classification Investments Available-for-sale Derivatives Financial Instruments at Fair value through profit or loss Loans and advances receivable Loans and receivables Loans to subsidiaries Loans and receivables Trade and other receivables Loans and receivables Cash and cash equivalents Loans and receivables Loans payable and borrowings Financial liabilities at amortised cost Trade and other payables Financial liabilities at amortised cost Loans from subsidiaries Financial liabilities at amortised cost Available-for-sale financial assets

These are non-derivative financial assets that are designated as available-for-sale or are not classified as loans and receivables or held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are subsequently measured at fair value with unrealised gains or losses recognised directly in other comprehensive income. When such a financial asset is disposed of, the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss. Interest earned on the financial asset is recognised in profit or loss using the effective interest method. Dividends earned are recognised in profit or loss when the right of receipt has been established.



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3.10 Financial Instruments (continued)

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans and receivables are measured at amortised cost less impairment losses. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Financial liabilities at amortised cost After initial recognition, liabilities that are not carried at fair value through profit or loss are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process. Fair value The fair value of listed investments is the quoted market bid price at the close of business on the reporting date. For unlisted investments, the fair value is determined using appropriate valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of similar instruments, discounted cash flow analysis and option-pricing models. Impairment of financial assets The group assesses at each reporting date whether there is objective evidence a financial asset, or group of assets, is impaired. Available-for-sale financial assets In the case of equity investments classified as available- for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. Factors taken into consideration would include external market and economic outlook reports, observable trends and cyclicality. If an available-for-sale asset is impaired, the amount transferred from other comprehensive income to profit or loss is:

the difference between the asset’s acquisition cost (net of any principal payments and amortisation); and

its current fair value, less any impairment loss previously recognised in profit or loss. Reversals in respect of equity instruments classified as available-for-sale are not recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss. Assets carried at amortised cost If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses) discounted at the asset’s original effective interest rate. The group assesses whether there is objective evidence of impairment individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all of the amounts due under the original terms of the sale. The carrying amount of the asset is reduced through the use of an allowance account, and is recognised in profit or loss. Impaired debts are derecognised when they are assessed as uncollectible. If, in a subsequent period, the amount of the impairment decreases and the decrease relates objectively to an event occurring after the impairment, it is reversed to the extent that the carrying value does not exceed the amortised cost. Any subsequent reversal of an impairment loss is recognised in profit or loss.



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3.10 Financial Instruments (continued)

Derivative instruments Derivatives are financial instruments whose value changes in response to an underlying factor, require little or no net investment and are settled at a future date. Derivatives, other than those arising on designated hedges, are measured at fair value with changes in fair value being recognised in profit or loss. Derecognition of financial assets and financial liabilities Financial assets or parts thereof are derecognised when:

the right to receive the cash flows have expired;

the right to receive the cash flows is retained, but an obligation to pay them to a third party under a ‘pass-through’ arrangement is assumed; or

the group transfers the right to receive the cash flows, and also transfers either all the risks and rewards, or control over the asset.

Financial liabilities are derecognised when the obligation is discharged, cancelled or expired.

3.11. Non-current assets held for sale and discontinued operations

An item is classified as held-for-sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Assets classified as held-for-sale are not subsequently depreciated and are held at the lower of their carrying value and fair value less costs to sell. A discontinued operation is a separate major line of business or geographical area of operation that has been disposed of, or classified as held-for-sale, as part of a single coordinated plan. Alternatively, it could be a subsidiary acquired exclusively with a view to resale. In the consolidated income statement of the reporting period and of the comparable period, income and expenses from discontinued operations are reported separate from income and expenses from continuing activities down to the level of profit after taxes, even when the group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the income statement.

3.12. Inventories

Inventories are stated at the lower of cost or net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: Raw materials: Weighted average cost. Finished goods and work-in-progress: Cost of direct material and labour and a proportion of manufacturing

overheads based on normal operating capacity but excluding borrowing costs.

Consumables are written down with regard to their age, condition and utility. Net realisable value is the estimated selling price in the ordinary course of business, less estimated completion and selling costs.



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3.13. Provisions

Provisions are recognised when the group has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.14. Leases

At inception date an arrangement is assessed to determine whether it is, or contains, a lease. An arrangement is accounted for as a lease where it is dependent on the use of a specific asset and it conveys the right to use that asset. Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the group as lessee. Finance lease assets and liabilities are recognised at the lower of the fair value of the leased property or the present value of the minimum lease payments. Finance lease payments are allocated, using the effective interest method, between the lease finance cost, which is included in financing costs, and the capital repayment, which reduces the liability to the lessor. Capitalised lease assets are depreciated in line with the group’s stated depreciation policy. If there is no reasonable certainty that the group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of its estimated useful life and lease term. Operating leases are those leases which do not fall within the scope of the definition of a finance lease. Operating lease rentals are charged against trading profit on a straight-line basis over the lease term.

3.15. Revenue

Revenue comprises turnover. Turnover from the sale of goods is recognised when the significant risks and rewards of ownership have passed to the buyer, usually on dispatch of the goods, unless the group is responsible for delivery, in which case the sale of goods is recognised on delivery. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received/receivable excluding value-added tax, normal discounts, rebates, settlement discounts, promotional allowances, and internal revenue which is eliminated on consolidation. The group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent.

3.16. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily

takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of

the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs

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

assets generally take two years to get ready for their intended use.



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3.17. Taxation

The income tax expense represents the sum of current tax payable (both current and deferred).

Current tax The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. Current tax may include under- or over provisions relating to prior year taxation. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Current taxation relating to items recognised outside profit or loss is recognised outside profit or loss. Current tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred taxation Deferred tax is calculated on the liability method, using the difference between the carrying amounts of assets and liabilities and their corresponding tax base used in the computation of taxable profit.

Deferred tax liabilities are recognised for taxable temporary differences except:

where the liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, where it is probable that the asset will be utilised in the foreseeable future except:

where the asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, only to the extent that it is probable that the differences will reverse in the foreseeable future, and taxable profit will be available against which these differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent it has become probable that future taxable profit will allow the asset to be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates/laws that have been enacted or substantively enacted by the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Dividends withholding tax A Dividend withholding tax of 10% is withheld on behalf of the taxation authority on dividend distributions. Withholding tax is payable on the earliest of declaration or payment of dividends. Should payment not have been affected when due, the net amount payable to the taxation authority is included as part of trade and other payables at the time a dividend is declared.



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3.17 Taxation (continued)

Value added tax Revenues, expenses and assets are recognised net of the amount of value added tax except:

where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables that are stated with the amount of value added tax included.

The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

3.18. Employee benefits

A liability is recognised when an employee has rendered services for benefits to be paid in the future, and an expense when the entity consumes the economic benefit arising from the service provided by the employee. In respect of defined contribution plans, the contribution paid by the company is recognised as an expense. If the employee has rendered the service, but the contribution has not yet been paid, the amount payable is recognised as a liability. In respect of defined benefit plans, the company’s contributions were based on the recommendations of independent actuaries and the liability measured using the projected unit credit method, up to the date of cessation of the scheme. Actuarial gains and losses were recognised in the income statement when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses were recognised over the expected average remaining working lives of the employees participating in the plans. Past-service costs were recognised as an expense on a straight-line basis over the average period until the benefits became vested. If the benefits vested immediately following the introduction of, or changes to, a defined benefit plan, the past-service cost was recognised immediately.

On cessation of the scheme, it was agreed that the frozen liability at closure would be paid into an independently administered fund, as a contribution to a defined contribution plan.

3.19. Contingent assets and contingent liabilities

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. Contingent assets are not recognised as assets. A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. Alternatively, it may be a present obligation that arises from past events but is not recognised because an outflow of economic benefits to settle the obligation is not probable, or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised as liabilities unless they are acquired as part of a business combination.

3.20. Events after the reporting period Recognised amounts in the financial statements are adjusted to reflect significant events arising after the reporting date, but before the financial statements are authorised for issue, provided there is evidence of conditions that existed at the reporting date. Events after the reporting date that are indicative of conditions that arose after the reporting date are dealt with by way of a note.



22

3.21. Significant accounting judgements and estimates

Judgements In the process of applying the group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Carrying value of intangible assets Intangible assets are tested for impairment annually or more frequently if there is an indicator of impairment. Tangible assets and finite life intangible assets are tested when there is an indicator of impairment. The calculation of the recoverable amount requires the use of estimates and assumptions concerning the future cash flows which are inherently uncertain and could change over time. In addition, changes in economic factors, such as discount rates, could also impact this calculation. Residual values and useful lives of tangible and intangible assets Residual values and useful lives of tangible and intangible assets are assessed on an annual basis. Estimates and judgements in this regard are based on historical experience and expectations of the manner in which assets are to be used, together with expected proceeds likely to be realised when assets are disposed of at the end of their useful lives. Such expectations could change over time and therefore impact both depreciation charges and carrying values of tangible and intangible assets in the future. Deferred tax assets Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are contained in note 12. Pension and other post-employment benefits

The cost of defined benefit pension plans and other post-employment medical benefits is determined by actuarial valuations using the projected unit credit method, to make a reliable estimate of the ultimate cost to the group of the benefit that employees have earned in return for their service in the current and prior periods. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Further details are given in note 18.

Provisions Best estimates, being the amount that the group would rationally pay to settle the obligation, are recognised as provisions at the reporting date. Risks, uncertainties and future events, such as changes in law and technology, are taken into account by management in determining the best estimates. Where the effect of discounting is material, provisions are discounted. The discount rate used is the pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability, all of which requires management estimation. The establishment and review of the provisions requires significant judgement by management as to whether or not a reliable estimate can be made of the amount of the obligation. The group is required to record provisions for legal or constructive contingencies when the contingency is probable of occurring and the amount of the loss can be reasonably estimated. Liabilities provided for legal matters require judgements regarding projected outcomes and ranges of losses based on historical experience and recommendations of legal counsel. Litigation is however unpredictable and actual costs incurred could differ materially from those estimated at the reporting date.



23

3.21 Significant accounting judgements and estimates

Impairment of trade and other receivable The Company makes allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analysed historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgment to evaluate the adequacy of the allowance of doubtful debts of receivables. Where the expectation is different from the original estimate, such difference will impact the carrying value of receivables. Allowance for inventories written down Reviews are made periodically by management on damaged, obsolete and slow moving inventories. These reviews require judgment and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. Impairment of assets Determining whether assets are impaired requires an estimation of the value in use of the cash-generating units to which assets have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The assets were tested for impairment which resulted in no impairment loss being identified. No impairment loss was therefore recognised during 2013.

COMPANY GROUP

9 months 12 months

9 months Restated

12 months

ended ended

ended ended

30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

4 Revenue

23,079,590 29,859,976

Flour products

21,219,884 27,995,744

- -

Spaghetti, macaroni and other pasta products

4,667,669 8,610,388

- -

Noodles products

4,072,866 4,866,467

- -

Agrosacks packaging materials

-

23,079,590 29,859,976 Total revenue 29,960,419 41,472,599

Revenue is net of value-added tax, normal discounts, rebates and promotional allowances. Refer to the segmental analysis for details of the segmental split and inter-company eliminations.



24

COMPANY GROUP

9 months 12 months

9 months Restated


ended ended

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012 (N '000) 2013 2012

5 Operating (loss)/ profit

Operating (loss)/ profit from continuing operations is determined after charging/(crediting) the following:

External auditors' remuneration

44,000 38,750

- Audit fees

67,500 60,250

20,881 25,401

- Other fees and expenses

20,881 25,401

1,603,082 2,180,284

Depreciation

2,844,268 4,350,384

84,877 87,304

Buildings

103,180 108,119

1,493,087 2,051,110

Plant, equipment and vehicles

2,706,593 4,175,939

25,118 41,870

Computer and office equipment

34,495 66,326

115,692 29,328

Professional and consultant fees

160,004 46,154

-

Operating lease charges

- -

- 134,865

Land and buildings

75,000 152,585

- -

Plant, equipment and vehicles

- -

-

Staff costs

-

1,525,676 2,581,971

Salaries, allowances and other benefits

2,301,473 3,422,592

28,643 120,596

Employer's contribution to retirement funding 68,744 165,393

41,807 28,733

Employer's contribution to medical aid

46,441 56,053

- -

Foreign exchange loss

- -

(42,708) (253,848)

Other Income

(233,975) (325,490)

- -

Insurance claims received

- (3,956)

- (70,282)

Foreign exchange profit

- (70,282)

- (127,175)

Provision no longer required

- -

(42,708) (56,391)

Other sundry income

(233,975) (251,252)

904,174 141,792

Non-recurring items

1,839,970 208,459

244,188 -

Redundancy costs

495,881 -

95,000 32,000

Stock write off

116,410 98,667

- -

Provision for bad debts

201,584 -

- -

VAT (prior years)

461,109 -

564,986 109,792

Penalties on late submission of VAT

564,986 109,792



25

COMPANY GROUP

9 months 12 months

9 months Restated


ended ended

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012 (N '000) 2013 2012

5 Operating (loss)/ profit (continued)

Directors' emoluments

Executive directors - -

- salaries and bonuses

33,000 21,780

1,993 14,700

- retirement, medical and other benefits

1,993 27,734

Non-executive directors

35,115 59,267

- fees

22,423 59,267

37,108 73,967

Total directors' emoluments

57,416 108,781 - -

Less: Paid by subsidiaries

- (34,814)

37,108

73,967

Emoluments paid by company

57,416 73,967

The number of Directors excluding the Chairman whoseemoluments were within the following ranges were:

3 8 N5 000 000 – N10 000 000 3 8 - 1

N14 800 001 - N15 000 000

- 1

1 1

N15 000 000 and above 1 1

The number of employees with gross emoluments within the bands stated below are:

193 328

Up to N1 000 000 747 1,065 256 351

N 1 000 001 - N2 000 000 359 467

119 122

Above 2 000 001 159 179

568 801 1,265 1,711

Average number of persons in the Company's employment in the financial period were as follows:

90 99 Managerial 142 153 245 352 Senior staff 440 564

5 3 Expatriates 5 9 228 347 Junior staff 678 985

568 801 1,265 1,711

6 (Loss)/Profit on disposal of Fixed Assets:

(64,618) -

Loss on disposal on PPE (trucks and motor vehicles)

(130,678) -

- 161,083

Profit on disposal on PPE (Production machinery) - 161,083

(64,618) 161,083 (130,678) 161,083

7 Finance costs

(2,346,275) (2,059,643) Finance costs (2,364,956) (2,085,169)

(2,208,403) (1,002,242)

Long-term borrowings

(2,208,403) (383,773) (137,872) (1,057,401)

Bank and other short term borrowings

(156,553) (1,200,126)

- -

Other - financial liabilities

- (501,270)

12,665 30,974 Interest received 19,927 53,250

12,665 30,974

From cash and cash equivalents

19,927 53,250

(2,333,610) (2,028,669) Net finance costs (2,345,029) (2,031,919)



26

COMPANY GROUP

9 months 12 months

9 months Restated

12 months

ended ended

ended ended

30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

8 Income tax relating to continuing operations

8.1 Income tax recognised in profit and loss

Current taxation

(109,526) (154,216)

Nigerian current taxation

(132,918) (177,185)

- -

Education tax

- (18,380)

- (8,431)

Capital gain tax

- (8,431)

In respect of prior years

(127,689) - Nigerian current taxation 6,980 -

3,480 - Education tax 2,027 -

(93,248) (162,647) (123,911) (203,996)

Deferred taxation

1,260,089 1,289,111

In respect of current year

1,701,901 1,462,655

1,260,089 1,289,111 1,701,901 1,462,655

1,166,842 1,126,464 Total income tax relating to continuing operations 1,577,990 1,258,659

Dangote Noodles Ltd, a subsidiary of the company obtained approval from the Nigerian Investment PromotionCommission for a five year pioneer tax status incentive (tax holiday), taking effect from 1 July 2010.

Movement per deferred tax accounts

(827,533) (545,570)

(Increase) / decrease in deferred taxation asset (942,874) (681,591)

(432,556) (743,541)

(Decrease) / increase in deferred taxation liability (759,027) (781,064)

The charges for taxation in these financial statements were based on the provisions of the Companies Income Taxation Act, CAP C21, LFN 2004 as amended and the Education Tax Act, CAP E4, LFN 2004.



27

8.2 The income tax expense for the period can be reconciled to accounting loss as follows:

COMPANY GROUP

9 months 12 months

9 months Restated


ended ended

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012 (N '000) 2013 2012

The income tax expense for the period can be reconciled to accounting loss as follows:

(5,647,490) (4,264,583) Loss before tax from continuing operations (8,342,294) (5,602,972)

(1,694,247) (1,279,375) Income tax expense calculated at 30% (2012: 30%)

(2,502,688) (1,680,891)

- - Effects of income tax that is exempt taxation

- -

326,401 101,562 Effects of expenses that are not deductible in determing taxable profit

464,734 203,768

169,496 - Effects of unused tax losses and tax offsets not recognised as deferred tax assets

222,418 218,464

- - Effects of recognising tax offsets not previously recognised as deferred tax assets

(97,838) -

121,277 150,896 Effect of utilising minimum tax provisions and education tax

128,595 -

79,727 - Others

- - (99,547) Effect of prior year over/(under) provision 206,789 -

1,166,842 1,126,464 Income tax expense recognised in profit or loss (relating to continuing operations) (1,577,990) (1,258,659)

8.3 Unrecognised deductible temporary differences, unused tax losses and unused tax credits

COMPANY GROUP 9 months 12 months

9 months 12 months

ended ended

ended ended 30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

Deductible temporary differences, unused tax losses and unused tax credits for which

no deferred tax assets has been recognised are attributable to the following:

- - Tax losses (revenue in nature)

779,009 656,591

- - Other deductible temporary differences

- 97,838

- - Total 779,009 754,429

8. 4 Current tax liabilities

COMPANY GROUP 9 months 12 months

9 months 12 months

ended ended

ended ended 30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

Current tax liabilities 83,770 146,330 Income tax payable 148,666 322,786 57,003 63,523 Education tax 81,351 69,938

8,431 8,431 Capital gains tax 8,431 8,431

149,204 212,284 238,448 401,155



28

9 Basic and diluted earnings per share and dividends declared

COMPANY

GROUP

9 months 12 months

9 months Restated


ended ended

30-Sep 31-Dec

30-Sep 31-Dec 2013 2012

2013 2012

9 Basic and diluted earnings per share and dividends declared

Basic earnings per share is calculated by dividing the net profit for the year by the weighted average

number of ordinary shares outstanding during the year. Basic and diluted earnings per share is the

same as there are no dilutive effects on earnings.

Total comprehensive loss attributable to ordinary shareholders:

(4,480,648) (3,138,119)

Total comprehensive loss for the period (N '000)

(7,933,883) (2,769,724)

(4,480,648) (3,138,119)


(6,698,841) (4,261,802) - -


(1,235,042) 1,421,088

5,000 5,000

Weighted average number of ordinary shares (million)

5,000 5,000

(89.61) (62.76)

Basic and diluted loss per share (kobo per share) (158.68) (55.39)

(89.61) (62.76)


(133.98) (85.24)

- -

Discontinued operation

(24.70) 28.42

No ordinary share transactions or potential transactions occurred after the reporting date that would have changed the number of ordinary shares or potential ordinary shares outstanding at the end of the period if those transactions had occurred before the reporting date.

Dividends declared

The company declared a dividend of 10 kobo per ordinary share out of the profits for the year ended 31 December 2012 and no dividend has been declared for the period ending 30 September 2013.

- 500,000

Dividend declared (N '000)

- 500,000

5,000 5,000

Weighted average number of ordinary shares (Million) 5,000 5,000

- 10.00

Dividend per share (kobo per share)

- 10.00



29

Plant,

Leasehold vehicles Computer Assets

GROUP

land and and and office under

con- (N '000) buildings equipment equipment struction Total

10 Property, plant and equipment

Cost

Balance at 1 January 2012

4,549,937 44,619,132 467,603 10,351,806 59,988,478

Additions

78,236 1,280,057 6,635 633,969 1,998,897

Disposals

- (20,044) (173) - (20,217)

Transfers between classes of assets 2,918,272 6,153,963 19,510 (9,094,258) (2,513)

Adjustment - allocation correction from accumulated depreciation

118,499 3,439,579 87,888 - 3,645,966

Written off

- (80,005) - - (80,005)

Balance at 31 December 2012

7,664,944 55,392,683 581,463 1,891,517 65,530,607

Additions

73,178 680,402 21,354 76,089 851,023

Disposals

- (1,417,690) - - (1,417,690)

Transfer from discontinued operation (1,103,050) (14,299,517) - (278,262) (15,680,829)

Balance at 30 September 2013 6,635,072 40,355,878 602,817 1,689,344 49,283,111

Accumulated depreciation


357,755 12,603,584 272,149 - 13,233,488

Depreciation

130,475 4,452,573 86,365 - 4,669,413

Continued operations

108,119 4,175,939 66,326 - 4,350,384


22,356 276,634 20,039 - 319,029

Disposals

- (15,660) - - (15,660)


118,499 3,439,579 87,888 - 3,645,966

Impairment

- 25,520 - - 25,520

Written off - (76,768) - - (76,768)

Balance at 31 December 2012 606,729 20,428,829 446,402

21,481,960

Depreciation

120,976 3,396,294 31,180 - 3,548,450

Continued operations

103,180 2,706,593 34,495 - 2,844,268


17,797 689,701 (3,315) - 704,183

Disposals

- (734,083) - - (734,083)

Fair value loss on remeasurement of DAS (57,105) (2,570,769) - - (2,627,873)

Transfer from discontinued operation (51,888) (2,335,912) - - (2,387,799)

Balance at 30 September 2013 618,713 18,184,360 477,582 - 19,280,655

Net book value


4,192,182 32,015,548 195,454 10,351,806 46,754,990


7,058,215 34,963,854 135,061 1,891,517 44,048,647

Balance at 30 September 2013

6,016,359 22,171,518 125,235 1,689,344 30,002,456



30

10 Property, plant and equipment (continued)

The adjustment of N3.6 billion in cost and accumulated depreciation in the prior year relates to correction of book

value of assets shown net in the cost of assets in prior years. The net transfer of assets of N2.513 million relates to

an item of work-in-progress expensed during the year. Impairment represents damaged vehicles which have been

recognised in profit or loss.

Assets under construction represent mainly expenditure incurred on the Danvita Flour Mills at Apapa. Assets

amounting to N14.2 billion are encumbered by debenture in favour of Zenith Bank Plc, Eco Bank Plc, Diamond

Bank Plc and FCMB Plc.

The following useful lives are used in the calulation of depreciation:

Plant, vehicles and equipment

4 - 15 years

Computer and office equipment 3 - 5 years

Plant,

Leasehold vehicles Computer Assets

Company

land and and and office

under con-

(N '000) buildings equipment equipment struction Total

10 Property, plant and equipment

Cost


2,430,043 16,865,086 227,208 6,960,952 26,483,289

Additions

29,941 110,704 6,248 166,222 313,115

Transfers between classes of assets

2,914,572 2,767,454 10,665 (5,695,204) (2,513)


118,499 3,439,579 87,888 - 3,645,966

Written off

- (80,005) - - (80,005)

Balance at 31 December 2012 5,493,055 23,102,819 332,009 1,431,970 30,359,853

Additions

50,917 183,736 21,354 76,089 332,096

Disposals

- (395,715) - - (395,715)

Balance at 30 September 2013 5,543,972 22,890,840 353,363 1,508,059 30,296,234

Accumulated depreciation

Additions

216,669 5,510,174 122,872 - 5,849,715

Depreciation

87,304 2,051,110 41,870 - 2,180,284


118,499 3,439,579 87,888 - 3,645,966

Impairment

- 13,189 - - 13,189

Written off

- (76,768) - - (76,768)

Balance at 31 December 2012 422,472 10,937,285 252,630

11,612,387

Depreciation

84,877 1,493,087 25,118 - 1,603,082

Disposals

- (270,285) - - (270,285)

Balance at 30 September 2013 507,349 12,160,087 277,748 - 12,945,184

Net book value


2,213,374 11,354,912 104,336 6,960,952 20,633,574


5,070,583 12,165,534 79,379 1,431,970 18,747,467

Balance at 30 September 2013

5,036,623 10,730,753 75,615 1,508,059 17,351,050

The following useful lives are used in the calulation of depreciation:

Leasehold land and buildings

50 years

Plant, vehicles and equipment

4 - 15 years

Computer and office equipment

3 - 5 years



31

10 Property, plant and equipment (continued)

The adjustment of N3.6 billion in cost and accumulated depreciation relates to correction of book value of assets shown net in the cost of assets in prior years. The net transfer of assets of N2.513 million relates to an item of work-in-progress expensed during the year. Impairment represents damaged vehicles which have been recognised in profit or loss. Assets under construction represent expenditure incurred on the Danvita Flour mills at Apapa. Assets amounting to N14.2 billion are encumbered by debentures in favour of Zenith Bank Plc, Eco Bank Plc, Diamond Bank Plc and FCMB Plc.

COMPANY

30 September 2013 31 December 2012

Percentage

Percentage

(N '000) holding (%) (N '000) holding (%) 11 Interest in subsidiary companies

Unlisted - shares at cost: Dangote Pasta Limited

2,507,637 99% 2,507,637 99% Dangote Agrosacks Limited

- - 4,956,000 99%

Dangote Noodles Limited

90,000 90% 90,000 90%

2,597,637

7,553,637

Loans receivable from subsidiaries – held directly

Dangote Pasta Limited

14,612,558

14,095,272 Dangote Noodles Limited

2,607,078

2,857,959

17,219,636

16,953,231

Loans payable to subsidiaries – held directly Dangote Agrosacks Limited

1,547,289

1,331,717

1,547,289

1,331,717

In 2007 the company acquired controlling interests in Dangote Pasta Limited and Dangote Agrosacks Limited.

During 2008, the company acquired a controlling interest in Dangote Noodles Limited. The investments and loans were evaluated for impairment by evaluating net asset values of the subsidiary companies using the cost and income valuation techniques. The fair value measurement took into account the ability of the group to generate economic benefits from the entities by using their plants and assets in their highest and best use. The investment in Dangote Agrosacks Limited has been re-classified as assets held for sale. Details of the transaction are contained in Note 25.

11.1 Subsidiaries Details of Group's material subsidiaries as at the end of reporting period are as follows:

Portion of ownership,

interest and voting power held by the

Group

Place of

incorporation 30-Sep 31-Dec

Name of subsidiary

Principal activity

and operation 2013 2012

Dangote Pasta Limited

Manufacturing and sale of pasta products Nigeria 99% 99%

Dangote Noodles Limited

Manufacturing and sale of noodles products Nigeria 90% 90%

Dangote Agrosacks Limited

Manufacture and sale of sacks Nigeria 99% 99%



32

11.2 Composition of Group

Number of non-wholly-

owned subsidiaries

Place of

incorporation 30-Sep 31-Dec Name of subsidiary

Principal activity and operation 2013 2012

Dangote Pasta Limited Manufacturing and sale of pasta products Nigeria

1

1 Dangote Noodles Limited Manufacturing and sale of noodles products Nigeria

1

1


Manufacture and sale of sacks Nigeria

1

1

11.3 Details of non-wholly owned subsidiaries that have material non-controlling interests

Portion of ownership,

interest and voting power held by non-controlling interests

(Loss)/ profit allocated to non-controlling

interests Accumulated non-controlling interests

(9 months) (12 months) ended ended

30-Sep 31-Dec 30-Sep 31-Dec 30-Sep 31-Dec

Name of subsidiary

2013 2012 2013 2012 2013 2012

Dangote Pasta Limited 1% 1% (18,112) (4,109) (5,315) 12,797

Dangote Noodles Limited 10% 10% (47,253) (73,666) (412,388) (365,135)

Dangote Agrosacks Limited 1% 1% 22,977 16,074 123,955 105,266 Agrosacks Obajana Limited 25% 25% 758,383 639,078 2,089,071 1,326,420

Total

(715,995) (577,377) (1,795,323) (1,079,348)



33

11.3 Details of non-wholly owned subsidiaries that have material non-controlling interests (continued)

Summarised information in respect of each of the Group's subsidiaries that has material non-controlling interest is set below.

The summarised amounts below represent amounts before intragroup eliminations.

9 months

ended 12 months

ended

30-Sep 31-Dec

Dangote Pasta Limited 2013 2012

Current assets 5,157,077 6,733,100

Non-current assets 13,107,745 12,890,545

Current liabilities (1,884,443) (1,330,538)

Non-current liabilities (14,685,847) (14,787,341)

Equity attributable to the owners of the company (1,699,847) (3,492,969)

Revenue 4,674,880 8,610,388

Expenses 6,486,153 9,021,268

(Loss) / profit for the period (1,811,273) (410,880)

Attributable to:

Owners of the parent (1,793,161) (406,771)

Non-controlling interests 18,112 4,109


Owners of the parent - 70,280

Non-controlling interests - 710

Total comprehensive (loss)/income for the year

Owners of the parent (1,793,161) (339,890)


Net cash inflow/ (outflow) from operating activities (16,146) 723,813

Net cash outflow from investing activities (279,339) (322,616)

Net cash (outflow) / inflow from financing activities 352,945 (367,167)

Net cash inflow/ (outflow) 57,460 34,030



34

11.3 Details of non-wholly owned subsidiaries that have material non-controlling interests (continued)

30-Sep 31-Dec Dangote Noodles Limited 2013 2012

Current assets 751,244 888,809

Non-current assets 1,352,918 1,301,497

Current liabilities (2,775,166) (1,080,110)

Non-current liabilities (3,352,894) (4,661,541)

Equity attributable to the owners of the company 4,023,899 3,551,348

Revenue 4,073,866 4,866,467

Expenses 4,545,419 5,603,123

(Loss) / profit for the period (472,553) (736,656)

Attributable to:

Owners of the parent (425,298) (662,990)



Owners of the parent - -

Non-controlling interests - -

Total comprehensive (loss)/income for the year

Owners of the parent (425,298) (662,990)

Non-controlling interests 47,253 73,666 7,367

Net cash inflow/ (outflow) from operating activities (1,870,539) 437,821

Net cash outflow from investing activities 2,378 (128,506)

Net cash (outflow) / inflow from financing activities (59,721) (127,057)

Net cash inflow/ (outflow) (1,927,882) 182,258

COMPANY GROUP 30-Sep

31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

12 Deferred taxation

Balance at beginning of year: 1,001,483

455,913

- Deferred tax asset

1,621,122 939,531

(2,825,800)

(3,569,341) - Deferred tax liability (2,855,079) (4,114,138)

(1,824,317)

(3,113,428)

(1,233,957) (3,174,607)

Income statement movement

827,533

545,570 - Temporary differences : deferred tax asset 1,408,471 681,591 432,556

743,541 - Temporary differences : deferred tax liability 268,763 780,703

- Temporary differences : deferred tax asset (discontinued operations) 589,721 -

- Temporary differences : deferred tax liability (discontinued operations) 133,065 478,356

Transfer from discontinued operations 25


(589,721) -

- Deferred tax liability

133,065 -

(564,228)

(1,824,317) Balance at end of year 443,277 (1,233,957)

1,829,016

1,001,483


2,896,528 1,621,122 (2,393,244)

(2,825,800)

- Deferred tax liability

(2,453,251) (2,855,079)



35

12 Deferred taxation (continued)

Assessed losses available for offset against future taxable income have been recognised when it is probable that there will be future taxable income against which the assessed loss may be utilised.

12.1

Analysis of deferred tax asset balances:


31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

-

-

Property, plant and equipment

595,541 397,045

193,409

255,475

Gratuity

337,215 329,110 606,712

422,835

Allowance for bad debt

823,225 571,794

1,028,895

323,173

Others

1,140,548 323,173

1,829,016

1,001,483

Balance at end of year

2,896,528 1,621,122

Analysis of deferred tax liability balances:

(2,393,244)

(2,825,800)


(2,453,251) (2,855,079)

(2,393,244)

(2,825,800)

Balance at end of year

(2,453,251) (2,855,079)

12.2

Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognised are attributable to the following:

- tax losses (revenue in nature) 779,009 656,591 - deductible temporary differences - 97,838

779,009 754,429

12.3 Analysis of movement in deferred tax balances COMPANY

Opening Balance

Profit and Loss

Closing Balance

Property, plant and equipment (2,825,800) 432,556 (2,393,244) Gratuity 255,475 (62,066) 193,409 Allowance for bad debt 422,835 183,877 606,712 Tax losses available for carry forward 323,173 705,722 1,028,895

(1,824,317)

1,260,089

(564,228)

GROUP

Opening Balance

Profit and Loss

Held for sale

Closing Balance

Property, plant and equipment (2,458,034) 759,027 (158,703) (1,857,710) Gratuity 329,110 (62,066) 70,171 337,215 Allowance for bad debt 571,794 259,522 (8,091) 823,225 Tax losses available for carry forward 323,173 789,922 - 1,113,095 Others - (44,504) 71,956 27,452

(1,233,957) 1,701,901

(24,667)

443,277



36


31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

13 Inventories

7,030,498

6,591,961

Raw material and work-in-progress

7,882,459 9,861,296 207,909

107,410

Finished goods

765,089 1,110,440

565,184

618,077

Engineering spares and other stock

962,612 2,105,109 (117,200)

-

Amounts written down as slow moving (237,703) (129,983)

7,686,391

7,317,448 9,372,457 12,946,862

The cost of inventories recognised as an expense in cost of sales during the period in respect of continuing operations

20,959,691

27,117,287

26,609,286 37,090,273

14 Trade and other receivables

8,677,964

9,007,011

Trade receivables

9,940,320 16,758,381 520,271

46,332

Prepayments

602,431 202,983

799,887

715,188

Sundry receivables

4,000,808 1,619,970

9,998,122

9,768,531

Total

14,543,559 18,581,334 (5,436,248)

(5,436,248)

Impairment provision: Trade receivables (6,126,190) (6,021,843)

(600,159)

(600,159)

Impairment provision: Other receivables (627,903) (627,903)

3,961,715

3,732,124 Net trade and other receivables 7,789,466 11,931,588

-

- Long-term portion - 3,894 3,961,715

3,732,124 Short-term portion 7,789,466 11,927,694

The average credit period granted to customers is 30 days. Trade receivables, which generally have 30-60 day terms, are non interest-bearing and are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Included in the provision is N2.4 billion of the Dangote Flour Mills Plc’s trade debtors which is backed by an insurance bond, overdue by more than one year. The carrying amount approximates fair value. Before accepting a new customer the Group initially trades with the customer on a cash basis to assess the customer’s ability and also determine the customer’s transaction volumes. This enables a reasonable credit limit to be set. Once these are determined the customer is then allowed to apply for a credit facility from the company through a rigorous process with several levels of approval. Trade receivables disclosed above include amounts that are past due at the end of the reporting period for which the Group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. Of the trade receivables balance at the end of the year, the following Companies made up the largest customers in the Group and Company:

COMPANY GROUP 30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

160,950 184,849

Company A

294,224 2,187,544 95,098

176,472

Company B

188,402 757,400

90,242

144,442

Company C

165,617 163,104

346,290

505,763 648,243 3,108,048

The reduced concentration arises due to the reclassification of receivables to Dangote Agrosacks Limited, which are now included in assets held for re-sale.



37

14 Trade and other receivables (continued)

Impairment Provisions

Provision is made when there is objective evidence that the company will not be able to collect the debts. The allowance raised is the amount needed to reduce the carrying value to the present value of expected future cash receipts. Bad debts are written off when identified. Movements in the provision were:

COMPANY GROUP 30-Sep 31-Dec

30-Sep 31-Dec

2013 2012 (N '000) 2013 2012

6,036,407

4,545,957

Balance at the beginning of the year 6,649,746 5,094,586 -

-

Utilised during the year

- -

-

1,490,450

Raised during the year

104,347 1,555,160

6,036,407

6,036,407 Balance at the end of the year 6,754,093 6,649,746

Past due but not impaired analysis: Trade receivables ageing:

1,784,291

828,858

Current to 60 days

2,085,770 4,170,229 38,129

152,011

61 to 90 days

46,733 1,580,646

7,237

240,235

91 - 180 days

105,803 930,955 1,412,060

2,349,659

180 - 365 days

1,575,824 4,054,709

3,241,717

3,570,763 Total 3,814,130 10,736,539

Impaired analysis: Trade receivables ageing:

-

-

Current to 60 days

- - -

-

61 to 90 days

- -

-

-

91 - 180 days

- - 5,436,248

5,436,248

> 365 days

6,126,190 6,021,843

5,436,248

5,436,248 Net outstanding 6,126,190 6,021,843

In determining the recoverability of the trade receivable, the Group and Company consider any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited because of the customer base being large and unrelated and large credit risks are insured against irrecoverability. Accordingly, the directors believe that there is no further impairment allowance required in excess of the allowance for doubtful debts. Amounts past due but not impaired 180 – 365 days are covered by an indemnity of N1.7 billion provided by Dangote Industries Limited and hence have not been provided for.


31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

15 Short-term loans receivable

Unsecured, interest free loans repayable on request:

3,288,629

3,025,036

Due from related parties (refer to note 22) 6,122,476 5,083,533 -

-

Other short-term loans

60,812 -

3,288,629

3,025,036 Total

6,183,288 5,083,533

The carrying amount of short-term loans approximates their fair value.



38

COMPANY GROUP

30-Sep

31-Dec

30-Sep 31-Dec 2013 2012 (N '000)

2013 2012

16 Cash and bank balances

910,024

861,417

Bank balances and short-term deposits

1,423,664 1,817,266 (2,394,459)

(162,598)

Bank overdrafts

(2,399,913) (1,925,162)

(1,484,435)

698,819

(976,249)

(107,896)

17 Share capital and premium

Authorised share capital 3,000,000

3,000,000

6 000 000 000 ordinary shares of 50k each 3,000,000 3,000,000

Issued ordinary share capital

2,500,000

2,500,000 5 000 000 000 ordinary shares of 50k each 2,500,000 2,500,000

18,116,249

18,116,249

Share premium

18,116,249 18,116,249

18 Retirement benefit obligation

The company and its subsidiaries were operating a defined benefit gratuity scheme which entitled employees to certain benefits after 5 years of service with the group.

The defined benefit gratuity scheme was un-funded.

For the purpose of these disclosures and in order to comply with the requirements of IAS 19, valuations have been performed by independent actuaries using the projected unit credit method. The scheme terminated on 30th September 2012 and in view of this, the actuarial valuation was prepared on a discontinuance basis. The scheme's liability at termination date was without any projection.

The amounts included in the statement of financial position arising from the Group and Company’s obligations in respect of its defined benefit retirement benefit scheme are as follows:


31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

851,584

1,277,236

Balance at beginning of the year

1,254,329 1,730,447 -

(443,828)

Current Service Cost

- (451,711)

-

162,541

Interest Cost

- 214,822 -

-

Actuarial Gains / (losses) - Assumption

- (2,382)

-

-

Actuarial Gains / (losses) - Experience

- (68,608) (206,887)

(144,365)

Benefits paid by from company

(444,596) (168,239)

(644,697)

-

Transferred to other payables

(809,733) -

-

851,584 Balance at the end of the year - 1,254,329

The outstanding balance of N810m as at September 2013 has been transferred to accounts payable as a result of management intention to fund this scheme and pay the balance to a fund manager within the next year.



39


31-Dec

30-Sep 31-Dec

2013 2012 (N '000)

2013 2012

19 Long-term borrowings

14,725,606

-

Balance at beginning of the year 16,909,606 4,200,000 6,003,525

14,725,606

Loan advanced

6,003,525 14,725,606

(6,167,103)

-

Repayment

(8,351,103) (2,016,000)

14,562,028

14,725,606 Balance at the end of the period 14,562,028 16,909,606

9,646,302

10,524,375 Long-term portion 9,646,302 10,692,375

4,915,726

4,201,231 Short-term portion included in short-term borrowings (note 21) 4,915,726 6,217,231

The loans were obtained in January 2012 and January 2013 and are repayable over periods of 36 to 48 months at fixed interest rates of 15% and 16% per annum. The loans are secured by a debenture over the assets of Dangote Agrosacks Limited (DAS), Obajana Agrosacks Limited and Dangote Flour Mills Plc. Short term portion of the long-term borrowing for Dangote Agrosacks Limited of N672m has been transferred liabilities held to sale.


31-Dec

30-Sep 31-Dec

2013

2012

(N '000)

2013 2012

20 Trade and other payables

5,493,944

3,758,150

Trade payables and accruals

9,425,128 8,521,991 1,163,076

1,074,782

Customers' deposits

1,163,076 1,473,427

644,697

-

Retirement benefit obligation (due to pension fund administrator) 809,733 -

-

196,048

Deferred income (wheat rebate)

- 196,048 376,144

144,749

Withholding tax

594,835 242,290

7,677,861

5,173,729 Net trade and other payables 11,992,772 10,433,756

The average credit period on purchases is 30 days. No interest is charged on the trade payables from the date of the invoice. The Group has financial risk management policies in place to ensure that all payables are paid within pre-agreed credit terms. The carrying amount approximates fair value.


31-Dec

30-Sep 31-Dec

2013

2012

(N '000)

2013 2012

21 Short-term borrowings

-

-

Unsecured loans (a)

250,000 315,867

3,377,132

2,734,773

Amounts due to related parties (refer to note 22) 6,409,667 8,071,259

-

-

Short-term bank loans

- 1,500,000 9,465,058

8,242,610

Letters of credit for wheat purchases 9,465,058 8,242,610

4,915,726

4,201,231

Short-term portion of long-term borrowings (note 19) 4,915,726 6,217,231

17,757,915

15,178,614 Total 21,040,451 24,346,967

(a) A subsidiary of the company, Dangote Noodles Limited secured a loan of N310 million from Dangote

Industries Limited at a fixed interest rate of 8% per annum.

The carrying amount of short-term borrowings approximates their fair value.



40

22 Related party disclosures

Unless stated otherwise, all related party transactions are concluded at arm’s length in the normal course of business. All material intergroup transactions are eliminated on consolidation. The following related party balances existed:


31-Dec

30-Sep 31-Dec

2013

2012

(N '000)

2013 2012

Amounts due from related parties (refer to note 15)

-

2,516

a Dangote Cement Plc.

24,014 115,813 3,058,121

3,021,642

b Dangote Industries Limited

5,786,636 4,662,355

-

-

c National Salt Company of Nigeria Plc

- -

1,500

1,500

Dangote Fisheries Nigeria Limited

1,500 1,500 51,000

51,000

d Dangote Textiles Nigeria Limited

51,000 55,593

-

-

e Dangote Foundation

65,937 115,213 -

-

j Dangote Freight Limited

15,381 15,381

230,647

-

k UAC Foods

230,647 72

3,606

Others

72 350,950

(52,711)

(55,228)

Impairment allowance

(52,711) (233,272)

3,288,629

3,025,036 Total 6,122,476 5,083,533

Amounts due to related parties (refer to note 21)

174,339

68,061

g Dangote Nigeria Limited

174,446 76,817

-

b Dangote Industries Limited

2,661,108 3,953,741

1,779,602

1,779,631

h Dangote Transport Nigeria Limited

1,873,960 1,871,065 184,777

148,694

f Dangote Sugar Refinery Plc

255,353 323,092

42,931

42,931

Bluestar Shipping Company

42,931 42,931 557,221

474,771

i Greenview Development Nigeria limited 557,221 474,771

-

c National Salt Company of Nigeria Plc 12,640 17,033

17,645

17,645

Dangote Port Operations

17,645 18,168 202,985

-

Tiger Brands Limited

202,985 -

403,725

203,040

a Dangote Cement Plc

501,920 1,116,877 -

-

m Dancom Technologies Limited

93,679 111,698

13,907

l Deli Foods Limited

13,907

-

Bulk Pack Nigeria Limited

802 13,857

-

Other

1,070 51,209

3,377,132

2,734,773 Total 6,409,667 8,071,259

a Dangote Cement Plc is a related company through common shareholdings. Dangote Cement Plc buys

consumables from Dangote Agrosacks Ltd, a subsidiary of the company and provides haulage trucks from time to time to the company.

b Dangote Industries Limited is a related company through shareholding in Dangote Flour Mills Plc. It provides

strategic management services. c National Salt Company of Nigeria Plc is a related company through common shareholding and procures consumables from Dangote Agrosacks Ltd, a subsidiary of the company. d Dangote Textiles Nigeria Limited is a related company through common shareholding. No transactions were concluded during the period under review.



41

22 Related party disclosures (continued) e Dangote Foundation is a related company through common shareholding and buys pasta and noodles products from the company's subsidiaries. f Dangote Sugar Refinery Plc is a related company by means of common shareholding and provides power and LPFO (Low Pour Fuel Oil) to some of the company's mills. g Dangote Nigeria Ltd is a related party by means of common shareholding. h,j Dangote Transport Nigeria Limited and Dangote Freight Limited are a related party by means of common

shareholding and provides haulage services to the company and the group.

i Greenview Development Nigeria Limited is a related party by means of common shareholding and provides leased property during the period under review. k UAC Foods is a related party by means of common shareholding and buys flour (raw material) from DFM l Deli Foods Limited is a related party by means of common shareholding and buys flour (ram material) from

DFM m Dancom Technologies Limited is a related party by means of common shareholding and information

technology services 23 Financial instruments

The main risks arising from the group's financial instruments are, in order of priority: credit risk, procurement

risk, liquidity risk, interest rate risk and foreign currency risk, as detailed below.

The group's objective in using financial instruments is to reduce the uncertainty over future cash flows arising principally as a result of commodity price, currency and interest rate fluctuations. The use of derivatives for the hedging of firm commitments against commodity price, foreign currency and interest rate exposures must be approved by the board of directors. Significant finance obtained is approved by the board of directors. The group finances its operations through a combination of retained surpluses, bank borrowings and long-term loans.

Credit risk Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations and arises principally from the group’s trade receivables (customers) and investment securities.

The potential concentration of credit risk consists mainly of other receivables and cash and cash equivalents. The group limits its counterparty exposures from its cash and cash equivalents by dealing only with well established financial institutions of a high quality credit standing. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

Credit risk in respect of the group's customer base is controlled by the application of credit limits and credit monitoring procedures.

Certain significant receivables are monitored on a daily basis. Where appropriate, credit guarantee insurance is obtained. The group's credit exposure in respect of its customer base is represented by the net aggregate balance of amounts receivable.



42

23 Financial instruments (continued)

Procurement risk (commodity price risk)

Commodity price risk arises from the group being subject to raw material price fluctuations caused by supply

conditions, weather, economic conditions and other factors. The strategic raw materials acquired by the group include wheat, and polypropylene.

The group will implement the use of commodity futures and option contracts or other derivative instruments to reduce the volatility of commodity input prices of strategic raw materials. Derivative contracts will be taken out in order only to match an underlying physical requirement for the raw material. The group will not enter into 'naked' derivative contracts.

Liquidity risk Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The

group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient cash on demand to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The group manages its liquidity risk by monitoring weekly cash flows and ensuring that adequate cash is available or borrowing facilities with shareholders and holding company structures are accessible and maintained.

The following tables detail the group’s and company’s remaining contractual maturity for non-derivative

financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group and company will be required to pay. The table includes both interest and principal cash flows.

0 – 6 months

7 – 12 months 1 – 5 years > 5 years

Group

At 30 September 2013:

Trade and other payables

11,992,772 - - -

Borrowings (long and short term)

11,689,139 9,351,311 9,646,302 -

At 31 December 2012:


10,433,756 - - -

Borrowings (long and short term) 3,629,499 3,111,000 28,298,843 -

Company



7,677,861 - - -


9,865,509 7,892,407 9,646,302 -



5,173,729 - - -


2,334,017 1,909,650 21,459,321 -



43

23 Financial instruments (continued)

Interest rate risk management Interest rate risk results from the cash flow and financial performance uncertainty arising from interest rate fluctuations. Financial assets and liabilities affected by interest rate fluctuations include bank and cash deposits as well as bank borrowings. The group manages interest rate risk by ensuring that loans and overdrafts are on fixed rates and balances from subsidiary and other related companies are interest free. Foreign currency risk The group has currency exposure arising from purchases of raw materials (wheat) and goods and services in currencies other than the reporting currency. The Group is exposed to the extent of exchange rate fluctuation on it’s outstanding liabilities under letters of credit. As at 30 September, 2013 the Company had short – term financial liabilities in US Dollar of N9,924,592,000 (2012: N8,180,036,000). The effect of a 5% fluctuation in the exchange rate would result in a corresponding movement in the Naira value of financial liabilities held in US Dollars N500,000,000 (2012: 410,000,000). The level of foreign currency risk is monitored regularly by the Company’s management. Capital management The group’s policy is to maintain a strong capital base and healthy capital ratios so as to maintain investor, creditor and market confidence and to sustain future development of the business. The company and group manages its capital structure, calculated as equity plus net debt and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the company and group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or increase or decrease levels of debt. The Group and Company are not subject to any externally imposed capital requirements. The Group’s risk management committee reviews the capital structure of the Group on a frequent basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group has put in place measures to improve on current gearing ratios. Fair value of financial instruments Financial instruments are normally held by the group until they close out in the normal course of business. There are no significant differences between carrying values and fair values of financial assets and liabilities. Trade and other receivables, investments and loans and trade and other payables carried on the statement of financial position approximate the fair values thereof. Long-term and short-term borrowings are measured at amortised cost using the effective interest method and the carrying amounts approximate their fair value. The group used techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data for determining and disclosing the fair value of financial instruments.



44

24 Contingent liabilities and commitments

Contingent liability As at 30 September 2013, the contingent liabilities in respect of legal litigation against the Group were N 209 million (2012:N209 million). According to the directors and solicitors acting on behalf of the Group, the expected final liabilities, if any, are not likely to be significant and no provision has been made in these financial statements. The contingent liability relates to claims made for demurrage costs, loss of income and damages from alleged negligence. There is an outstanding tax enquiry into the affairs of Dangote Pasta Limited for the years 2006 to 2008. A provision of N461m has been included in the statement of profit and loss.

Commitments Lease commitments under operating leases for periods of no more than 12 months:

COMPANY GROUP 30-Sep 30-Sep 31-Dec

30-Sep 30-Sep 31-Dec

2013 2012 2012 (N '000)

2013 2012 2012

Lease as lessee

Non-cancellable operating lease rentals are payable as follows:

189,934 189,934 189,334

- Less than one year 189,934 228,091 207,492

212,674 268,605 221,484

- One to five years 212,674 317,729 270,607

Capital commitments

15,100

Authorised and committed

15,100

402,608 473,639 410,818 Total commitments 402,608 560,920 478,099

Some leases require restoration of the facilities at the group's expense upon termination of the agreements. Management is confident all lease agreements will be renewed under largely the same terms and has not provided for demolition costs.



45

25 Discontinued operations

On 19 August 2013, the Group at the annual general meeting announced the decision of its board to dispose of Dangote Agrosacks Limited. Management is committed to a plan to sell the company to Dangote Industries Limited. The results of Dangote Agrosacks Limited are therefore classified as held-for-sale in the balance sheet and income statement of the group. The results for the period are presented below:

9 months 12 months

30-Sep 31-Dec

(N '000)

2013 2012

Revenue

13,621,327 17,202,738

Cost of sales (10,351,855) (14,089,427)

Gross profit

3,269,472 3,113,311


(984,646) (628,002) Other income - 178,554

Operating profit 2,284,826 2,663,863 Net finance costs (506,937) (1,061,243)

(Loss)/ profit before taxation

1,777,083 1,602,620

Taxation

398,093 478,356

(Loss)/ profit for the period 2,175,176 2,080,976

Attributable to:


1,416,793 1,441,898


758,382 639,078

(Loss)/ profit for the period 2,175,176 2,080,976

Fair value re-measurement on Assets held for sale (2,627,873) -

(Loss)/Profit after tax on discontinued activities (452,697) 2,080,976



46

25 Discontinued operations (continued)

The major classes of assets and liabilities of Dangote Agrosaacks Limited classified as held for sale as at 30 September 2013 are, as follows:

N’000

Assets

Dangote Agrosacks Group Assets &

Liabilities held for Sale Property, plant and equipment

10,665,157

Deferred taxation asset

589,721 Amounts due from related parties

1,557,881

Inventories

3,914,560 Trade and other receivables

4,943,007

Cash and bank balances

329,089

Assets classified as held for sale

21,999,415

Fair value re-measurement on Assets held for Sale (2,627,873) Elimination of intercompany balances

(1,557,881)

Net Assets Classified as held for Sale 17,813,661

Liabilities

Deferred taxation liability

(133,065) Taxation

(159,296)


(6,113,574) Short-term borrowings

(3,197,943)

Liabilities classified as held for sale

(9,603,878)

Net Assets

12,395,537 Minority Interest

Obajana Agrosacks Limited

(2,089,958)


(123,955)

Net assets attributable to the company

10,181,623

Sales Proceeds

7,553,750

Fair value re-measurement on assets held for sale

(2,627,873)

The net cash flows incurred by Dangote Agrosacks Limited are, as follows:

Operating

4,288,291

Investing

(390,562)

Financing

(3,624,337)

Net cash inflow

273,392



47

26 Remuneration of directors

Remuneration of directors and key management personnel for the 9 months ended 30 September 2013 was N192 million (2012: 136 million)

For nine months ended 30 September 2013 For the 12 months ended 31 December 2012

Board meetings

Other fees Total Board meetings Other fees Total

Non-executive Directors: (N '000)

Alh. Aliko Dangote

1,250 6,274 7,524 1,250 6,274 7,524

Alh. Sani Dangote (Resigned)

- - - 600 5,650 6,250

Mr. Olakunle Alake

2,000 5,649 7,649 2,000 5,649 7,649

Mr. Uzoma Nwankwo (Resigned) - - - 1,000 5,650 6,650

Alh. Abdu Dantata (Resigned)

- - - 800 5,649 6,449

Mr. Asue Ighodalo

1,600 5,650 7,250 1,600 5,650 7,250

Brig. Gen. S.L.Teidi (Resigned) - - - 1,200 7,642 8,842

Alh. Abdullahi S. Mahmoud (Resigned) - - - 1,700 6,953 8,653

4,850 17,573 22,423 10,150 49,117 59,267



48

26 Remuneration of directors (continued)

Nature of interest

Number of ordinary shares

('000)

Percentage of issued share

capital

Directors’ interest in share capital


Alhaji Aliko Dangote

shareholding 38,729 0.77%

Olakunle Alake


Nature of interest

Number of ordinary shares

('000)

Percentage of issued share

capital

Directors’ interest in share capital


Alhaji Aliko Dangote


Olakunle Alake


Alhaji Abdullahi S. Mahmoud shareholding 44 0.00%

27 Events after the reporting period There are no significant events after the reporting period. 28 Segment information Products from which reportable segments derive their revenue

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided.

The Group's reportable segments under IFRS 8, Operating segments are therefore as follows: Flour: milling and sale of bread and confectionery flour Sacks: manufactures and sells spaghetti and macaroni Pasta: manufactures and sells packaging materials Noodles: manufactures and sells noodles

All segments operate in the same geographical area and on an arm's length basis in relation to inter-segment pricing.

The factors used to identify the groups reportable segments include the basis of organisation and the format of regular reporting to management as a basis for decision making. Management has chosen to organise the group around differences in products and separate entities within the group. None of the segments have been aggregated.



49

28 Segment information (continued)

Segment revenue and results The following is the analysis of the Group's revenue and results from continuing operations by reportable segments:

Discontinued

Flour operations Pasta Noodles Inter-group

(N '000) products Sacks products products eliminations Total

For nine months ended 30 September 2013

Revenue

23,079,590

4,667,669 4,072,866 (1,859,707) 29,960,419

Cost of sales (22,728,987)

(5,022,803) (3,871,340) 2,305,339 (29,317,791)

Gross profit

350,603

(355,134) 201,526 445,633 642,628


(2,738,399)

(719,892) (786,336) (438,926) (4,683,553)

Non-recurring items

(904,174)

(1,114,365) (41,098)

(2,059,637)

Other income 42,708

167,757 23,510 - 233,975

Operating (loss) / profit before abnormal items

(3,249,262)

(2,021,633) (602,398) 6,707 (5,866,586)

Abnormal items (64,618)

(46,156) (19,904) - (130,678)

Operating (loss) / profit after abnormal items

(3,313,880)

(2,067,789) (622,302) 6,707 (5,997,264)

Net finance costs (2,333,610)

6,790 (18,210) - (2,345,030)


(5,647,490)

(2,060,999) (640,511) 6,707 (8,342,294)

Taxation

1,166,842

250,971 160,177 - 1,577,990

-

(Loss)/ profit for the period (4,480,648) (452,697) (1,810,028) (480,335) 6,707 (7,217,001)

For the year ended 31 December 2012

Revenue

29,859,976

8,610,388 4,866,467 (1,864,232) 41,472,599

Cost of sales (28,740,533)

(7,642,206) (4,791,767) 1,864,232 (39,310,274)

Gross profit

1,119,443

968,182 74,700 - 2,162,325


(2,360,838)

(1,633,938) (815,725) - (4,810,501)

Other income 253,848

38,007 33,635 - 325,490

Operating (loss) / profit before abnormal items

(987,547)

(627,749) (707,390) - (2,322,686)

Abnormal items (1,248,367)

- - - (1,248,367)

Operating (loss) / profit after abnormal items

(2,235,914)

(627,749) (707,390) - (3,571,053)

Net finance costs (2,028,669)

22,276 (25,526) - (2,031,919)


(4,264,583)

(605,473) (732,916) - (5,602,972)

Taxation

1,126,464

132,195 - - 1,258,659

- (Loss)/ profit for the period (3,138,119) 2,080,976 (473,278) (732,916) - (2,263,337)



50

28 Segment information (continued)

Segment assets and liabilities

As at 30 September 2013

Flour Held for sale Pasta Noodles Inter-group

products Sacks products products eliminations Total

Total assets 59,800,099 17,813,681 18,264,822 2,104,162 (22,501,224) 75,481,540 Total liabilities (41,566,274) (9,603,878) (16,570,290) (6,128,060) 16,493,488 (57,375,015)

As at 31 December 2012

Total assets 59,191,843 22,380,625 19,623,645 2,190,306 (25,937,403) 77,449,016 Total liabilities (36,477,370) (12,165,428) (16,117,879) (5,741,651) 18,376,838 (52,125,490)

Other segment information

For nine months ended 30 September 2013

Depreciation 1,603,082 704,183 1,124,865 116,321 - 3,548,450 Additions to non-current assets 332,096 153,419 299,785 65,723 - 851,023

For the year ended 31 December 2012

Depreciation 2,180,284 1,057,618 1,201,078 230,433 - 4,669,413 Additions to non-current assets 310,602 897,618 657,417 133,260 - 1,998,897



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28 Segment information (continued) Revenue from major products and services The following is the analysis of Group's revenue from continuing operations from its major products and services:

Flour

Pasta Noodles Inter-group

products Sacks products products eliminations Total

For nine months ended 30 September 2013 23,079,590 - 4,667,669 4,072,866 (1,859,707) 29,960,419

For the year ended 31 December 2012 27,995,744 - 8,610,388 4,866,467 - 41,472,599

No segmental report is provided in relation to the company as the company's revenue and losses are all generated from the milling and sale of flour (one segment).


NON IFRS STATEMENT CONSOLIDATED STATEMENT OF VALUE ADDED

52

COMPANY

GROUP

30-Sep

31-Dec

30-Sep

31-Dec

2013

2012

2013

2012

N'000 % N'000 %

N'000 % N'000 % Revenue

23,079,590

29,859,976

29,960,419

41,472,599

Other income

42,708

414,931

233,975

325,490 Interest income

12,665

30,974

19,927

53,250

23,134,963

30,305,881

30,214,321

41,851,339

Less: Bought in materials and services:

- Imported (15,599,144)

(17,278,420)

(18,934,434)

(20,737,509)

- Local (7,637,826)

(11,137,141)

(11,744,814)

(14,237,206)

Value Added

(102,007)

1,890,320 100

(464,927)

6,876,624 100

Applied as follows

To pay employees

Salaries, wages and other benefits

1,596,126 (1,565) 1,914,976 101

2,416,658 (520) 3,644,038 51

To pay providers of capital

Interest payable and similar charges

2,346,275 (2,300) 2,059,643 109

2,364,956 (509) 2,085,169 40

To pay government

Taxation

93,248 (91) 162,647 9

123,911 7 203,996 3

To provide for enhancement of assets and growth Deferred taxation Liability/(asset)

(1,260,089) 1,235 (1,289,111) (68)

(1,701,901) 332 (1,462,655) (25)

Depreciation

1,603,082 (1,572) 2,180,284 115

3,548,450 (763) 4,669,413 59 Non-controlling Interest

- - -

715,995 (154) 577,377 7

(Loss sustained)/profit retained

(4,480,648) 4,392 (3,138,119) (166)

(7,932,996) 1,706 (2,840,714) (35)

(102,007) 100 1,890,320 100

(464,927) 100 6,876,624 100

Value added represents the additional wealth the Group has been able to create by its own and its employees' efforts. This statement shows the allocation of that wealth among employees, capital providers, government and that retained for future creation of more wealth. This report is not prepared under IFRS. Instead, it has been prepared in compliance with the Company and Allied Matters Act (CAMA) requirement


FIVE YEARS FINANCIAL SUMMARY

53

GROUP 30-Sep Restated

31-Dec 31-Dec 31-Dec 31-Dec

IFRS IFRS IFRS NGAAP NGAAP

2013 2012 2011 2010 2009

N'000 N'000 N'000 N'000 N'000

Property, plant and equipment 30,002,456 44,048,647 46,754,990 41,229,708 35,238,199 Investments - - - - - Deferred taxation asset 2,896,528 1,621,122 939,531 - 328,067 Other Long term Assets - 3,894 90,836 - - Assets classified as held for sale 17,813,681 - - - - Net current (liabilities) /assets (10,902,709) (5,548,354) (11,740,900) (9,845,390) (6,583,596)

39,809,956 40,125,309 36,044,457 31,384,318 28,982,670

Deferred taxation liabilities (2,453,251) (2,855,079) (4,114,138) (3,409,430) - Gratuity provision - (1,254,329) (1,730,447) (828,013) (559,926) Liabilities classified as held for sale (9,603,878) - - - - Long term loan (9,646,302) (10,692,375) (2,184,000) - -

18,106,525 25,323,526 28,015,872 27,146,875 28,422,744

CAPITAL AND RESERVES Share capital 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

Share premium 18,116,249 18,116,249 18,116,249 18,116,249 18,116,249 Retained earnings (4,305,067) 3,627,929 6,897,652 6,327,597 7,573,899 Non controlling interest 1,795,343 1,079,348 501,971 203,029 232,596

18,106,525 25,323,526 28,015,872 27,146,875 28,422,744

REVENUE AND PROFIT Revenue 29,960,419 41,472,599 66,281,326 67,600,954 61,388,064

(Loss) /profit before taxation (8,342,294) (5,602,972) 758,742 4,911,885 5,374,056 Other comprehensive income items - 70,990 276,870 - - Taxation 1,577,990 1,258,659 (109,668) (2,189,310) 187,024 Profit after tax for the period from discontinued operations (452,697) 2,080,976 - - - Non controlling interest (715,995) (577,377) (302,322) 39,567 (30,348)

(Loss)/profit transferred to revenue reserve (7,932,996) (2,769,724) 623,622 2,762,142 5,530,732

Per share data- 50k ordinary share (159) (55) 12 55 111

Net assets (Naira) 3 5 6 5 6 Note: 1. Earnings per share are based on profit after taxation and the number of issued and fully paid ordinary shares

at the end of each financial year. 2. Net assets per share are based on net assets and the number of issued and fully paid ordinary shares at the

end of each financial year.

This report is not prepared under IFRS. Instead, it has been prepared in compliance with the Company and Allied Matters Act (CAMA) requirement


FIVE YEARS FINANCIAL SUMMARY

54

COMPANY

30-Sep 31-Dec 31-Dec 31-Dec 31-Dec

IFRS IFRS IFRS NGAAP NGAAP

2013 2012 2011 2010 2009

N'000 N'000 N'000 N'000 N'000


17,351,051 18,747,467 20,633,574 19,880,243 18,961,805

Investments in subsidiary companies 2,597,637 7,553,637 7,553,637 7,553,637 7,463,637 Deferred taxation asset

1,829,016 1,001,483 455,913 - 328,067

Other Long term Assets

- - 83,502 - - Assets classified as held for sale

4,956,000 - - - -

Net current assets

3,539,666 9,613,645 2,472,543 2,829,608 460,695

30,273,370 36,916,232 31,199,169 30,263,488 27,214,204

Deferred taxation liabilities

(2,393,244) (2,825,800) (3,569,341) (3,136,273) -

Gratuity provision

- (851,584) (1,277,236) (638,061) (464,623) Long term loan

(9,646,302) (10,524,375) - - -

18,233,824 22,714,473 26,352,592 26,489,154 26,749,581

CAPITAL AND RESERVES

Share capital

2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Share premium

18,116,249 18,116,249 18,116,249 18,116,249 18,116,249

Retained earnings

(2,382,424) 2,098,224 5,736,343 5,872,905 6,133,332

18,233,825 22,714,473 26,352,592 26,489,154 26,749,581

REVENUE AND PROFIT

Revenue

23,079,590 29,859,976 38,679,844 42,695,383 41,839,919

(Loss)/profit before taxation

(5,647,490) (4,264,583) 1,373,230 5,481,077 5,156,801

Other comprehensive income items - - 130,231 - - Taxation

1,166,842 1,126,464 (583,078) (1,727,829) 203,060

(Loss)/profit transferred to revenue reserve

(4,480,649) (3,138,119) 920,383 3,753,248 5,359,861

Per share data- 50k ordinary share

(Loss)/earnings- Basic (kobo) (90) (63) 18 75 107 Net assets (Naira)

3.65 4.54 5.27 5.30 5.35

Note: 1. Earnings per share are based on profit after taxation and the number of issued and fully paid ordinary shares

at the end of each financial year. 2. Net assets per share are based on net assets and the number of issued and fully paid ordinary shares at the

end of each financial year.

This report is not prepared under IFRS. Instead, it has been prepared in compliance with the Company and Allied Matters Act (CAMA) requirement

Dangote flour mill annual report 2013

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