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Transcript of Oman Cables Industry (SAOG) Annual Report · PDF fileOman Cables Industry (SAOG) Annual Report...
Truly Omani.... Trusted Globally...
Oman Cables Industry (SAOG)
Annual Report 2010
OCI ANNUAL REPORT 2010
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His Majesty Sultan Qaboos bin Said
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Our VisionTo ensure that through our product offering, we remain a leader in our
industry in quality and performance, exceeding the expectations of our
customers and stakeholders
Our MissionTo continuously strive for excellence in all aspects of our business through
the integration of sustainable business development and innovation,
enhancing shareholder value and outstanding customer service
Values & PrinciplesBuild Sustainable Growth through Innovation
Transparency in all our actions
Promoting an environment of open Communication for all
Integrity driven by Accountability
Continued integration of World Class Quality Management
Safety is not compromised
Responsible corporate citizenship in compliance to Environmental norms
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Contents
Board of Directors 7
Report of the Board of Directors 9 - 13
Management Discussion & Analysis 14 – 16
Auditors report to the Shareholder on Corporate Governance 17
Corporate Governance Report 18 – 23
Report of the Auditors 26 - 27
Statement of Financial Position 28
Income Statement 29 - 30
Statement of Changes in Equity 31 - 32
Cash Flow Statement 33
Notes 34 - 70
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Mustafa Bin Mukhtar Bin Ali Al LawatiChairman
Hussain Salman Al LawatiVice Chairman & Managing Director
Maqbool Ali SalmanDirector
Christian RaskinDirector
Dr. Mohammed ShihabDirector
Salim RabbaniDirector
Hilal Al AhsaniDirector
Board of Directors
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OCI’s management cautiously applies all its
business strategies with a primary objective to
ensure sustainability and to retain the inherent
strength of the Company that has been built with
hard toil over two decades
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To our esteemed shareholders
With the grace and mercy of God, Allah (Subhanahu
Wattalla), on behalf of the Board of Directors of Oman Cables
Industry (SAOG), we are pleased to welcome you all to the
22nd Annual General Meeting (AGM) of Oman Cables Industry
(SAOG) and we wish you all a Blessed and Prosperous New
Year.
It is a great privilege to mention that Oman Cables has won
two prestigious awards i.e. Corporate Governance Excellence
Award in the Industrial category and Overall Excellence
Award in the entire listed companies on the Muscat Securities
Market. This highly regarded recognition was awarded to
our company by the Capital Market Authority of Oman on 2nd
January 2011. It is a reflection of OCI’s consistent adherence
to Corporate Governance over the years, with constant
enhancement. We congratulate each and every shareholder
as well as all stakeholders of the company. We extend our
sincere gratitude to the authorities of CMA for this unique
recognition which will enable OCI’s Management to strive
further to enhance the Corporate Governance at OCI.
We are pleased to report to you on the improved performance
of our company for the year 2010. Following the Global
financial crises and the consequent changes in the economies,
have proved once again that successful enterprises needs
to have resilience to withstand the dramatic volatilities
witnessed in the recent past. OCI remains undeterred and
demonstrated resilience against the economic fluctuations
by taking proactive and constructive measures to protect
shareholder’s value.
BASEC (British Approvals Service for Cables) accreditation
provides product certification and services for electrical
cables that is synonymous with quality and safety of the
products. OCI obtained BASEC certification for complete range
of products and has successfully supplied BASEC certified
products. BASEC certification will further strengthen OCI’s
Quality Management System and is expected to enhance
OCI’s position in the countries where BASEC certified products
are valued with a premium against non-BASEC products.
The year 2010 witnessed a recovery in demand for OCI’s
products especially in our home market, however, there are
continued pressure on the sales and profitability due to the
increased competition from International competitors.
The demand in the regional market has witnessed moderate
growth and the emphasis remains focused on megatrends
with the development of Power, Telecom, Water and
Transportation sectors.
Sales in the international markets are slowly returning to
previous levels and it is anticipated that increased growth
will be seen as the economies return to normality. The
company has added further dimensions to its international
markets by successfully entering new markets. These
initiatives will broader the customer base and targeted to
achieve significant progress.
The fluctuations in commodity prices has also put pressure on
the Gross Profit, however, OCI has tackled this by countering
with its low cost base and effectively strengthening its
markets; which stood OCI in good stead to compete in the
changing market scenario. Despite these challenges, the
company achieved a sales of RO 191.8 million, a growth
Report of the Board of Directors
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of 23% and achieved a profitability of RO 8.3 million, an
increase of 23%.
The management is continually focusing on key drivers of
growth with emphasis on enhancing the product offering as
well as new international accreditations in selected market
sectors. The company remains committed to a consistent
Capital Investment Programme to ensure that the company’s
strategic objectives are achieved.
During the year, our company has further enhanced its
operations and its internal efficiencies and has become an
Efficient Manufacturing Industry to service its customers
across the Globe.
Aluminum Rod Plant at Sohar – (OAPIL)
Oman Aluminium Processing Industries LLC (OAPIL) is a joint
venture between Oman Cables and Takamul Investment Co
(Oman Oil). In continuation of the regular quarterly updates
we are pleased to inform that the project has been finally
completed after overcoming the initial teething difficulties
within the budgetary cost. OAPIL was capable to obtain
in a short span of time its product approval locally and
internationally.
The company successfully exported aluminum rods to various
countries during the year under review and the total Sales for
the part of the year since commissioning arrived to RO 11.8
million with the Net Loss of RO 185,000/- which is lower
than what was budgeted.
It is further to mention that the Omanization has been given
top priority since inception and the current work force consists
about 100 employees and more than 70% are Omanis.
Omani engineers had extensive training at the operations
of Southwire, which is OAPIL’s equipment supplier and also
operates the largest Aluminium Rod and Overhead Line
Conductor Plant in United States. This will greatly contribute
to the smooth operations of the plant in the future.
The designed capacity of the plant is around 48,000 tonnes
and it is expected that the plant will operate at full capacity
in 2011 of Aluminium to Rod and Overhead line conductors.
OAPIL is equipped with the latest technology and
manufacturing plant in the region is well positioned to
ensure a sustainable market position in the future. The aim
of the shareholders is to make OAPIL, a truly Global player in
the Aluminium industry.
OAPIL is a subsidiary of Oman Cables and hence OAPIL
accounts are consolidated with that of Oman Cables Industry
and reported as “Group”.
Human Resources
OCI believes that its people are the biggest strength to
realize its vision to create a world-class organization. OCI
is a young, energetic and vibrant company that attracts
global professionals and the company has sourced some
outstanding local and global talent to emerge far stronger
and to drive its growth strategy going forward.
It is further to mention that the Omanization
has been given top priority since inception
and the current work force consists about 100
employees and more than 70% are Omanis.
Omani engineers had extensive training at
the operations of Southwire, which is OAPIL’s
equipment supplier and also operates the
largest Aluminium Rod and Overhead Line
Conductor Plant in United States. This will
greatly contribute to the smooth operations of
the plant in the future.
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We have today over 630 employees with 55% Omanization.
Omanization is constantly increasing noticeably in the
technical functions of the company. The company focused
to the development of Omani engineers by exposing them
with sound business knowledge, leadership and technical
skills on a continuous basis. Omani engineers and graduates
have been deputed to the developed countries on a regular
basis to hone their skills to operate advanced technological
processes. Further our company is collaborating with local
institutions with the aim to build local talent to meet OCI’s
requirements. These initiatives added immense value to
the organization’s objective to build sustainability into the
operations and embedded a culture of belongingness to the
company.
Corporate Governance
The Company has internal systems and manuals to assist the
management in day-to-day operations. These systems and
manuals are regularly reviewed and updated in-line with
statutory requirements while meeting the organizations
goals that gives transparency to all transactions and in-line
with Capital Market Authority regulations as a public listed
company on the Muscat Securities Market and International
Financial Reporting Standards (IFRS).
We have in place a well qualified Internal Audit team
reporting directly to the Audit Committee of the Board to
audit and advise on financial and operating systems, to
ensure that all financial and other operational reporting is a
true reflection of the business of the company.
OCI shares the information with all stakeholders and public
in general through regular publication of its quarterly and
annual results in print media, on MSM and OCI’s website.
The Board will continue to monitor the operations with
the input from the Audit Committee and the Strategic Risk
Committee.
Community Support
OCI believes in giving back to the society through its Corporate
Social Responsibility (CSR) programme. Oman Cables CSR has
a strong base, that provides assistance to the organizations
that are dedicated to improve the quality of life for the less
privileged people in the society.
Future Outlook
The recovery in demand indicates that the medium and long-
term outlook for the cable industry remains promising as the
demand for energy generation, transmission and distribution
is rising Globally. OCI is well placed to benefit from a upward
recovery given its strong customer base, low cost structure,
continued organic growth programme, and sound financial
position. Our priorities are focused on further strengthening
our position in the markets we serve and we are cautiously
optimistic of the future growth.
Omani engineers and graduates have been
deputed to the developed countries on a
regular basis to hone their skills to operate
advanced technological processes. Further our
company is collaborating with local institutions
with the aim to build local talent to meet
OCI’s requirements. These initiatives added
immense value to the organization’s objective
to build sustainability into the operations and
embedded a culture of belongingness to the
company.
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The global financial and economic crisis of 2008/2009 was a
major test for all the Gulf countries, but Oman’s steady and
well planned Government development policy and its long-
term vision kept Oman relatively immune from the worst
implications of the crisis. As the World economy is on the path
of recovery and oil prices are on the rise again, the Sultanate
is geared for further economic growth and development
through enhancing and modernizing its infrastructure. OCI
through its management will strive and put all efforts to
benefit from these major projects in Oman and the Region.
OCI has invested in broadening its product range for the oil
and gas sector and is expected that it will further enhance
OCI’s market share through a broader customer base.
Operational Review
Sales:
Despite the challenging market conditions, our sales
performance is better than the previous year and the
Company’s market share in key customer segments has
shown significant improvement due to the strategic intent
to broaden the company’s product offering as well as
developing new market sectors, Globally.
We have witnessed constant growth and are pleased to
report sales revenues of RO 191.8 million for the company
for the year 2010, an increase of 23% compared to 2009 and
the sales of RO 200.9 million for the Group, an increase of
29% compared to 2009.
The increased sales is attributable to further penetration
of selected Global markets, recovery in the copper prices
and the increased demand for OCI’s products in the local
market due to the Government’s continued expenditure on
infrastructure development.
The Net Profit of the company for the year 2010 has increased
to RO 8.3 million compared to RO 6.7 million achieved in
2009, an increase of 23%. The Net Profit for the Group for
the year 2010 has increased to RO 8.1 million compared to
RO 6.6 million achieved in 2009, an increase of 22%.
The improved profitability is due to management’s continued
initiatives towards cost optimization, managing overheads in
spite of increased volumes, alternate raw material sourcing
and tight working capital management. The company has
achieved excellent progress on international accreditations
which has also contributed positively to the operating
results. The continuous focusing on improving operational
efficiencies and processes to maintain and enhance our cost
base is reflected in the operating margins.
Dividend
The Board of Directors, during the board meeting No
01/2011 held on 22 January 2011 reviewed the company’s
annual accounts. Considering the guidelines issued by
the Capital Market Authority, the liquidity requirements
for OCI’s operational needs and OCI’s uninterrupted record
of declaration of dividend, the Board members propose
distributing a cash dividend to OCI’s shareholders.
Taking into account the financial performance for 2010, the
Board recommends to distribute 40% dividend on paid-up
capital, ie RO 0.040 baiza for each share value of RO 100
baiza, to the shareholders registered as on the date of
Annual General Meeting.
The improved profitability is due to
management’s continued initiatives towards
cost optimization, managing overheads in spite
of increased volumes, alternate raw material
sourcing and tight working capital management.
The company has achieved excellent progress
on international accreditations which has
also contributed positively to the operating
results. The continuous focusing on improving
operational efficiencies and processes to
maintain and enhance our cost base is reflected
in the operating margins.
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The Board of Directors also recommends to the shareholders
at the AGM to approve the total Director’s remuneration of RO
200,000 (including meeting attendance fees) to be paid to
the Board of Directors, in recognition and appreciation of their
efforts towards their responsibilities and for their continuous
inputs, guidance and support to the management.
Conclusion
We have faith in the management of OCI and the two
decades of growth history will enable OCI to create
sustainable stakeholder wealth and enlarge our contribution
to the Omani Society.
We acknowledge the role played by our local and global
customers, business associates, the finance fraternity, and
all other stakeholders for their support during the past year.
OCI acknowledges the great support extended by the
Government of His Majesty Sultan Qaboos Bin Said, the
Authorities in the Ministry of Commerce & Industry as well
as all other Ministries.
We pray to the Almighty to help our beloved Oman to
develop even more under the wise leadership of His Majesty
Sultan Qaboos Bin Said by granting His Majesty with good
health and longevity.
Mustafa Bin Mukhtar Bin Ali Al Lawati
Chairman of the Board of Directors
(Arabic version prevails over the English)
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1. Industry Structure and Development
The Energy sector is an important element of infrastructure
development Globally and is viewed as a strategic sector
in any country. The Electrical industry is one of the major
players within the energy sector and the Cable Industry is a
key component in the chain.
While the Energy sources have evolved and diversified
over the years mainly from Hydrocarbon to Nuclear and
Renewable sources, the method of transmission and
distribution of electric power has essentially remained the
same using different types of conductors and cables.
The development within the cable industry is further refined
to the conducting materials such as copper, aluminium,
aluminium alloys and enhanced insulating materials with
unique properties for specific applications.
Oman Cables is well positioned in having the complete
product spectrum for transmission and distribution of electric
power and is also at the forefront of the latest technology
developments in the application fields.
2. Opportunities and Threats
With the consistent development of the infrastructure in
the Middle East driven primarily by Oil revenues and other
emerging economies, presents OCI the opportunities for
accelerated growth.
OCI’s focused strategies on backward integration and product
diversification is to capitalize on opportunities in Oman,
MENA region and selected World markets. OCI has further
expanded its marketing network beyond GCC in-line with
OCI’s strategic intent and capabilities.
OCI’s Balance Sheet has inherent strength that can be
leveraged quickly to seize the growth opportunities which
are expected to emerge from strong economic indicators in
the markets we operate.
As the Global economy is slowly recovering from the financial
crises, the competitive forces in the Global market has
increased currently, however, the forecasted Global growth
is likely to negate the present imbalance over the long term.
Oman Cables has the resilience in the local and regional
markets to sustain its growth and is well placed to further
enhance its position viewed in-line with the opportunities
identified.
3. Segment Performance
OCI has further diversified its market segments and
successfully achieved growth across all the geographic
markets. The domestic market has shown the better
growth for the year under review in-line with Oman’s robust
infrastructure development programme across a broad
spectrum.
OCI’s export programme remains a key focus of the business
strategy and in this regard OCI has grown and developed new
products for new markets. OCI’s backward integration project
in Aluminium rod and conductor manufacturing has added a
new dimension to OCI’s product offering and is expected to
contribute to growth in the years ahead.
Management Discussion and Analysis Report
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4. Outlook
The outlook for the cable industry remains promising as the
demand for energy generation, transmission and distribution
is rising Regionally and Globally. OCI is poised to benefit from
a upward recovery given its low cost base, market driven
growth programmes, loyal customer relationships coupled
with a sound financial position. Priorities are focused on
further enhancing OCI position in the Global markets it serves
and OCI remains positive to achieve future growth.
Management strategy is to constantly evaluate and enhance
its product range and in this regard the company has an
investment programme in place to enter the oil and gas
sector which is a major growth market in the years to come.
The joint venture project of Aluminium rod and conductor
in Sohar, Oman is now in full commercial production. The
continued growth for power transmission and distribution
leading to increase demand of conductors and cables
especially in the emerging markets will result in achieving
the anticipated growth.
5. Risk and Concerns
With the slow Global recovery in many parts of the World,
the business has shifted to emerging markets. The local
market remains active due to Oman’s Governments robust
infrastructure spend which is positive, however, it has brought
also the fierce competition from Global Cable manufacturers
that has excess capacity in their own territories. This resulted
in strong competition at the cost of the local manufacturers
offering high quality products. Management remains
cautious until the fair rules will be introduced to enhance the
local industries participation on national projects.
The GCC has become a net exporter of cables due to the
excess capacity that was installed on the assumption of
growth period of 2006-2007. This has had a negative
impact on price levels at a time when the demand is on
a downward trend. Oman Cables has been capable to tap
the emerging markets but can only do it successfully with a
strong local base.
The sharp and sudden rise in metal prices has disrupted
the execution of the orders by the customers in time, thus
exerting pressure on the company’s production planning and
imbalance in capacity utilization.
6. Internal Control Systems and Their Adequacy
OCI has sound internal control systems and operating manu-
als in place. Its operations are audited by a professional in-
ternal audit team, external statutory financial auditors and
ISO auditors. This ensures that the systems and procedures
laid down are being adhered to and helps Management in
monitoring the same. Continuous refinements are being
made to operating procedures and policies to ensure that OCI
builds in sustainability on its fast track growth path.
7. Expansion Project
In-line with OCI’s strategy of market demand driven
expansion of its manufacturing capability, management
has undertaken an expansion project within the existing
premises of OCI to expand the current capacity for selective
product and introducing a new product range.
With the slow Global recovery in many parts of
the World, the business has shifted to emerging
markets. The local market remains active due
to Oman’s Governments robust infrastructure
spend which is positive, however, it has brought
also the fierce competition from Global Cable
manufacturers that has excess capacity in their
own territories. This resulted in strong competition
at the cost of the local manufacturers offering
high quality products. Management remains
cautious until the fair rules will be introduced
to enhance the local industries participation on
national projects.
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8. Sales and Profitability
The operational performance of the Company for the last 5
years is as under:
2006 2007 2008 2009** 2010**
Sales (RO’ 000) 125,718 217,445 304,377 155,603 200,885
Profit after Tax (RO’ 000)
9,537 15,134 6,173 6,674 8,165
Equity (RO’ 000) 13,789 27,914 31,537 41,510 46,899
Dividend (%) 210% 40% 20% 30% 40%*
*recommended ** for Group
9. Conclusion
OCI demonstrated resilience in dealing under very
challenging market conditions that was caused by the
Global financial crises and the subsequent slow recovery of
Global markets especially the low level of GDP expenditure
in matured World regions. With the ability to have shown
consistent growth and enhanced year by year performance,
with our excellent relationship with our vast client base
and other stakeholders including our loyal employees, the
Executive Management with the guidance of the Board of
Directors, the Management is confident that the company is
on a sound footing to consistently improve its Global market
position and shareholder value.
(Arabic version prevails over the English)
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Company’s philosophy on Code of Corporate Governance
The Board of Directors of Oman Cables Industry (SAOG) are
firmly committed to the highest standards of Corporate
Governance by committing to adopt the best practices. The
provisions of the Code of Corporate Governance for MSM
listed Companies, issued by Capital Market Authority (CMA)
have been followed by the Company as detailed below. The
Company’s ensures good Corporate Governance through a
combination of factors like:
z Instituting Internal Regulations and Operating
Procedures by constantly updating the Human Resource
and Administration Manual and Operations Manual
for Finance, Marketing and Procurement, with the
objective of ensuring effective Internal Controls
z Monitoring adherence to the Internal Regulations and
Operating procedures through frequent internal checks,
conducting Internal Audit, submission of report to Audit
Committee comprising of Board Member, carrying out
regular ISO Audits on documentation compliance
z Regular management reviews and structured written
reports by Management to the Board
z Periodical communication with shareholders
z Adherence to the process of nomination and election
of Directors laid down by CMA, thus ensuring that the
Board is constituted of skilled Directors to oversee the
company operations
z Ensuring the compliance with relevant laws and
regulations
Corporate governance includes the relationships among
the stakeholders like shareholders, the board of directors,
employees, customers, creditors, suppliers, and the
community at large and the goals for which the corporation
is governed.
Key elements of good corporate governance adopted by OCI
include honesty, trust and integrity, openness, performance
orientation, responsibility and accountability, mutual respect,
and commitment to the organization.
The directors and management of OCI has developed a model
of governance that aligns the values of the Company and
then evaluate this model periodically for its effectiveness.
The senior executives of OCI conduct themselves honestly
and ethically, especially concerning actual or apparent
conflicts of interest, and disclosure in financial reports.
OCI has also set up an Audit Committee Charter, an Internal
Audit Charter, Disclosure and Insider Trading Policy which has
been duly approved by the Board and which are all based on
the regulations of CMA.
Report on Corporate Governance
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Board of Directors
The Board comprises of seven Directors. The Board of Directors were elected on 24 March 2009 at the Annual General Meeting.
Following are the relevant details of the Directors:
Name Designation in OCI Category Other Directorships held
Mustafa Bin Mukhtar Bin Ali Al Lawati
Chairman Non-executive Non-independent
Chairman: Al Saleh Enterprises, Jenfel LLC, Jenfel Heavy EquipmentsMember : Shubaila LLC
Hussain Salman Al Lawati
Vice Chairman & Managing Director
ExecutiveNon-independent
Member : Al-Saleh Enterprises, Jenfel LLC, Jenfel Heavy Equipments and Shubaila LLCChairman: Oman Aluminium Processing Industries LLCDirector: Shumookh Investment and Services (SAOC)
Maqbool Ali Salman Director Non-executive & Independent
Vice Chairman & Managing Director: Al Hassan Engineering Co. SAOGMember: Al Hassan Electrical LLC
Dr. Mohammed Shihab Director Non-executive & Independent
NA
Christian Raskin Director Non-executive & Independent
NA
Salim Rabbani Director Non-executive & Independent
NA
Hilal Al-Ahasani Director Non-executive & Independent
Chairman: Oman & Emirates Investment Holding Co. (SAOG)Vice Chairman: Financial Corporation Co. (SAOG )
Chairman
Mr. Mustafa Bin Mukhtar Bin Ali Al Lawati is Chairman of
Board of Directors and one of the founders of Oman Cables
Industry (SAOG). He has a Masters Degree in International
Relations and has total experience of 45 years including 11
years in Banking Industry. He held his last position as Director
General (Administration & Financial Affairs) in Ministry of
Water & Electricity, and has business experience since 1975
in Al-Saleh Enterprises.
Company Management
The names, designations, description of responsibilities in
OCI and brief profile of the Company Management personnel
is as follows:
z Hussain Salman Al Lawati - Vice Chairman & Managing
Director since last 25 years and one of the founders
of Oman Cables Industry, with 43 years enterprising
experience, of which 36 years in electrical and cable
industry. Responsible for the overall strategic management
of the Company, reporting to the Board of Directors.
z Cornelis Johannes (Hans) Meiring - Chief Executive
Officer
Experience of 37 years in Cable industry, of which 30
years at executive management levels. Responsible
for all the operations of the Company reporting to Vice
Chairman & Managing Director.
z M. M. Vaidya - General Manager – Corporate Finance
Experience of 28 years, of which 23 years at executive
management levels. Responsible for Finance and Risk
Management functions.
z Louis Dupreez - General Manager – Sales and Marketing
Experience of 31 years in industry, of which 21 years
at executive management levels. Responsible for Sales,
Marketing and Customer Service.
z V. Duggal - General Manager – Works
Experience of 38 years in manufacturing in Cable
industry, of which 18 years at executive management
levels. Responsible for Manufacturing and Quality
Assurance.
OCI ANNUAL REPORT 2010
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20 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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z Ahmed Farooqui – General Manager – Procurement and
Supply Chain
Experience of 28 years in industry, of which 16 years at
executive levels
z Mohammed Mustafa Mukhtar Al Lawati – General
Manager – Corporate Projects
Experience of 10 years, of which 3 years in senior levels.
Responsible for Projects in the Company
z Fawzi Mubarak Al Kiyumi – General Manager – Human
Resources and Administration
Experience of 24 years, of which 15 years at executive
levels
z Kuldip Chadha – General Manager – Strategic Business
Development
Experience of 33 years, of which 20 years at executive
levels
Board Meetings held during the year:
During the year 2010 the company held five Board Meetings
on the following dates:
18 January 2010, 17 April 2010, 12 July 2010, 10 October
2010 and 4 November 2010.
Number of Board meetings attended by Directors are:
Name of DirectorNumber of Board
meetings attended
Mustafa Bin Mukhtar Bin Ali Al Lawati 4
Hussain Salman Al Lawati 5
Maqbool Ali Salman 4
Dr. Mohammed Shihab 5
Christian Raskin 5
Salim Rabbani 4
Hilal Al-Ahasani 3
The meetings were coordinated by the Board secretary,
under the guidance of Vice Chairman and Managing Director.
The meetings were conducted with exhaustive agenda and
proceedings were minuted. The Chief Executive Officer’s
reports were reviewed during the meeting. All related issues
were also discussed regarding the growth and progress of
the company.
All the Directors attended the Annual General Meeting of
the company held on 23 March 2010 except Mr. Mustafa Bin
Mukhtar Bin Ali Al Lawati (due to sickness).
Committees of the Board of Directors:
Audit Committee
In line with the regulations issued by the Capital Market
Authorities, the company has formed an Audit Committee.
The Audit Committee approves the audit plan for the year,
reviews the report of the Auditors, issues guidance to
management and oversees that operating management is
adhering to company policies.
The Audit Committee comprised of the following three Non–
executive Independent Directors as members:
Name Designation
No. of
meetings
attended
Maqbool Ali Salman Chairman 4
Christian Raskin Dy. Chairman 4
Dr. Mohammed Shihab Member 4
During the year 2010, Audit Committee met and conducted
four meetings on the following dates, 17 January 2010, 15
April 2010, 10 July 2010 and 9 October 2010.
The committee has reviewed the Audit Reports issued
during the period. Such reports have also been reviewed
by the executive management and necessary guidance was
issued by the Audit Committee. The quarterly accounts were
reviewed by the audit committee before the same were put
up to the Board of Directors for approval.
OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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21
Strategic Risk Management Committee
The following are the members of the Risk Committee:
Name Designation
No. of
meetings
attended
Christian Raskin Chairman 2
Hussain Salman Al Lawati Member 2
During the year 2010, Committee met and conducted two
meetings on the following dates, 10 October 2010 and 3
November 2010.
The committee has reviewed and discussed the Risk
Assessment Report submitted by the Company. The
committee also reviewed and discussed the top 10 key risks
of the company and the IT risk profile.
Process of nomination of the Directors
The Company follows the guidelines issued by the Commercial
Law and CMA in this regard. The Company has made efforts
to have a Board with appropriate skills, experience and
vision.
Remuneration matters
Directors remuneration: Apart from remuneration derived
as “Sitting Fees” of RO 9,700 for (arrived at, in line with
the Articles of Association of the company and as approved
in the previous Annual General Meeting) Board Meetings
and Audit Committee Meetings attended and the proposed
Director’s remuneration of RO 190,300, the Directors have no
other pecuniary relationship or transaction with the company
– except for the Chairman and Vice Chairman & Managing
Director.
Operating Management Remuneration
Salary and perquisites of the five top senior officers (including
Vice Chairman and Managing Director) paid during the year
2010 is RO 675,323 (2009: RO 672,091), which includes RO
549,956 (2009: RO 575,156) as fixed component and RO
125,367 (2009: RO 96,935) linked to performance of 2009.
The severance notice period of these executives is one
month except Vice Chairman and Managing Director whose
notice period is three months, with end of service benefits
payable as per Omani Labour Law. Over and above periodic
salary reviews; OCI also operates an incentive scheme for its
employees. The scheme is based on group productivity.
Employment Contract
OCI enters into a formal Contract of Employment with each
employee and such contracts are in line with the regulation
of Ministry of Manpower and Omani Labour Law.
Details of non-compliance by the Company
There are no instances of non-compliance by the company
which is evident from the fact that there are no penalties
or strictures imposed by Muscat Securities Market / Capital
Market Authority or any other statutory authority; on the
company regarding any matter related to capital market
during last three years.
Means of Communication with Share Holders and Investors
As required by Capital Market Authority, OCI publishes its
quarterly, half yearly, three quarterly and yearly financial
results in two local newspapers. The financial results are
also posted on the website of Muscat Securities Market
and company’s website www.omancables.com. Further
OCI also includes a statement in each of these reports that
shareholders can obtain further details, if required, from
the company registered office and such details are made
available to any shareholder who requests for it. Besides
this the company, at the end of each year, sends to all the
shareholders, financiers and others who are associated with
OCI, the Annual Financial Statements by post.
OCI ANNUAL REPORT 2010
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22 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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The company has an appropriate disclosure policy and
adequate procedures are in place to ensure implementation
and monitoring of compliance of the policy with laws and
regulations in place.
In regard to the Annual audited accounts, after the Annual
General Meeting’s approval, such financial statements are
published in two local newspapers and submitted to Capital
Market Authorities. This information is also posted on the
Company’s website.
All relevant major events impacting the company are
conveyed to the Capital Market Authority.
The Annual Report contains a separate Management
Discussion and Analysis report.
Market price data
During the period 2010 the share price of RO 0.100 face value
moved in the range of high of RO 1.730 to a low of RO. 1.000.
The share price as on 31 December 2010 was RO 1.175.
0.000
0.500
1.000
1.500
2.000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
Low 1.451 1.435 1.400 1.317 1.050 1.000 1.050 1.220 1.215 1.255 1.195 1.147
High 1.730 1.540 1.510 1.510 1.335 1.119 1.285 1.290 1.340 1.379 1.265 1.240
Index 6,532 6,689 6,698 6,830 6,294 6,058 6,295 6,257 6,473 6,553 6,592 6,755
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
The distribution of Major Shareholding is as follows:
Shareholder % of Shares Held of total
Draka Holding (NV) 34.78%
Mustafa Bin Mukhtar Bin Ali Al Lawati
12.54%
Hussain Salman Al Lawati 12.24%
Company does not have any ADR/GDR/Warrants or any
other Convertible Instruments as on 31 December 2010 and
hence likely impact on equity is Nil.
Areas of non-compliance of the provisions of Corporate Governance
There are no areas in which OCI is non-compliant with the
provisions of Code of Corporate Governance.
Profile of Statutory Auditors
Ernst & Young are the statutory auditors of the Company. Ernst
& Young is one of Oman’s oldest established accounting firms,
having had a permanent office in the country since 1974. The
practice comprises one hundred and eighty professionals, and
is working under the direction of four partners. The Oman
office forms part of Ernst & Young’s MENA practice, with over
120 partners and over 4,100 other professionals in 20 offices
in 15 countries throughout the region. The MENA practice is
member firm of Ernst & Young Global, operating in more than
140 countries with approximately 141,000 personnel world-
wide. The Audit fee for the year 2010 is RO 10,500.
OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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23
Any other Aspects
Internal Auditor
In order to ensure the compliance with statutory regulations
and internal controls, the company has a full time internal
audit unit, to carry on an independent assessment and
reports to the Audit Committee.
Board of Directors Acknowledge that
The company has all its systems and procedures formally
documented and in place. The company has “Internal
Regulations” separately compiled as per regulatory
requirements. The Board of Directors have reviewed this
manual and approved it. The “Internal Regulations” has all
the necessary and prescribed procedures. The Board has
reviewed these regulations.
The Board of Directors are responsible to ensure that the
financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB),
interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) and the requirements of
the Commercial Companies Law of the Sultanate of Oman
1974 (as amended) and the rules for disclosure requirements
prescribed by the Capital Market Authority.
There are no material events affecting the continuation of
OCI and its ability to continue its operations during the next
financial year.
(Arabic version prevails over the English)
OCI ANNUAL REPORT 2010
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24 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Om
an C
able
s In
dust
ry O
pera
tion
al P
rese
nce
& E
xpor
t D
esti
nat
ion
s
Expo
rt D
estin
atio
n
Ope
ratio
nal P
rese
nce
Mus
cat
Soha
r
OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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25
OCI ANNUAL REPORT 2010
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28 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of fInanCIal POsItIOn at 31 deCember 2010
Notes Group Parent Company Group Parent Company
2010 2010 2009 2009
ASSETS RO RO RO RO
Non-current assetsProperty, plant and equipment 10 33,078,889 20,218,134 27,992,703 20,832,963
Investment in a subsidiary 11 -- 2,226,660 -- 1,275,000
Investment in an associate 12 712,513 712,513 729,533 729,533
Available for sale investments 13 523,043 523,043 9,005 9,005
Held to maturity investments 14 1,251,204 1,251,204 1,251,204 1,251,204
Total non-current assets 35,565,649 24,931,554 29,982,445 24,097,705
Current assetsInventories 15 42,407,893 40,256,772 25,035,599 25,035,599
Trade and other receivables 16 49,945,723 46,456,035 40,952,326 40,836,465
Due from related parties 26 1,664,286 1,365,802 990,683 990,683
Cash and bank balances 17 2,462,617 1,969,164 3,107,428 2,368,696
Total current assets 96,480,519 90,047,773 70,086,036 69,231,443
Total assets 132,046,168 114,979,327 100,068,481 93,329,148
EQUITY AND LIABILITIESEquityShare capital 18 a 8,970,000 8,970,000 8,970,000 8,970,000
Share premium 18 b 977,500 977,500 977,500 977,500
Legal reserve 18 c 2,990,000 2,990,000 2,990,000 2,990,000
General reserve 18 d 2,620,231 2,620,231 1,794,222 1,794,222
Retained earnings 30,376,205 30,542,090 25,727,773 25,799,008
Cumulative changes in fair values 28 (890,539) (761,321) (105,859) (105,859)
Equity attributable to equity holders of the parent 45,043,397 45,338,500 40,353,636 40,424,871
Non-controlling interests 1,855,809 -- 1,156,558 --
Total equity 46,899,206 45,338,500 41,510,194 40,424,871
LiabilitiesNon-current liabilitiesTerm loans 19 10,246,218 495,500 6,779,805 1,724,867
Deferred government grant 19 7,282 7,282 21,633 21,633
Deferred tax liability 8 812,475 812,475 826,278 826,278
Total non-current liabilities 11,065,975 1,315,257 7,627,716 2,572,778
Current liabilitiesTrade and other payables 21 31,404,577 24,316,032 14,300,662 13,701,590
Due to related parties 26 75,199 1,408,327 104,650 104,650
Bank borrowings 20 40,200,244 40,200,244 34,475,490 34,475,490
Current maturities of term loans 19 1,243,718 1,243,718 1,251,000 1,251,000
Taxation 8 1,157,249 1,157,249 798,769 798,769
Total current liabilities 74,080,987 68,325,570 50,930,571 50,331,499
Total liabilities 85,146,962 69,640,827 58,558,287 52,904,277
Total equity and liabilities 132,046,168 114,979,327 100,068,481 93,329,148
Net assets per share 23 0.502 0.505 0.450 0.451
The financial statements were authorised for issue in accordance with a resolution of the directors on 22nd January 2011.
……………………………. …………………………. Chairman Chief Executive Officer
The attached notes 1 to 32 form part of these consolidated financial statements.
OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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29
Oman Cables Industry saOg and Its subsIdIary COnsOlIdated InCOme statement fOr tHe year ended 31 deCember 2010
Notes Group Parent Company Group Parent Company
2010 2010 2009 2009
RO RO RO RO
Sales 200,884,822 191,750,779 155,603,066 155,603,066
Cost of sales 3 (183,769,636) (175,074,138) (140,748,788) (140,748,788)
Gross profit 17,115,186 16,676,641 14,854,278 14,854,278
Other income 4 123,337 87,674 369,882 366,384
Administrative expenses 5 (3,509,554) (3,235,130) (3,210,440) (3,105,130)
Selling and distribution expenses 6 (3,155,549) (2,953,793) (2,271,453) (2,271,453)
Depreciation (140,499) (123,735) (169,484) (164,286)
Operating profit 10,432,921 10,451,657 9,572,783 9,679,793
Finance costs 7 (1,171,200) (1,003,644) (2,209,814) (2,209,814)
Finance income 119,980 119,277 117,265 109,404
Share of results of an associate 12 iii (35,965) (35,965) 52,646 52,646
Profit before income tax 9,345,736 9,531,325 7,532,880 7,632,029
Income tax expense 8 (1,271,234) (1,271,234) (907,414) (907,414)
Profit for the year 8,074,502 8,260,091 6,625,466 6,724,615
Loss for the year attributable to Non-controlling interests
90,939 -- 48,583 --
Profit for the year Attributable to Shareholders of the parent company
8,165,441 8,260,091 6,674,049 6,724,615
Basic and diluted earnings per share attributable to ordinary equity holders of the parent company
22 0.091 0.092 0.074 0.075
Gross profit margin 8.52% 8.70% 9.55% 9.55%
Net profit margin 4.02% 4.31% 4.26% 4.32%
The attached notes 1 to 32 form part of these consolidated financial statements.
OCI ANNUAL REPORT 2010
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30 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Notes Group Parent Company Group Parent Company
2010 2010 2009 2009
RO RO RO RO
Profit for the year 8,074,502 8,260,091 6,625,466 6,724,615
Other comprehensive (loss) income
Net movement in hedging commodity and currency future contracts
(931,813) (678,445 ) 3,931,435 3,931,435
Net movement in available for sale investments
13 4,038 4,038 (831) (831)
Exchange difference on foreign currency translation of associate
18,945 18,945 26,551 26,551
Other comprehensive (loss) income for the year (908,830) (655,462 ) 3,957,155 3,957,155
Total comprehensive income for the year 7,165,672 7,604,629 10,582,621 10,681,770
Attributable to:
Equity holders of the parent 7,380,761 7,604,629 10,631,204 10,681,770
Non-controlling interests (215,089) -- (48,583) --
7,165,672 7,604,629 10,582,621 10,681,770
The attached notes 1 to 32 form part of these consolidated financial statements.
Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of COmPreHensIVe InCOme fOr tHe year ended 31 deCember 2010
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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31
Om
an
Ca
bles
Ind
ustr
y sa
Og
an
d It
s su
bsId
Iary
CO
nsO
lIda
ted
sta
tem
ent
Of
CHa
ng
es In
eQ
uIty
fOr
tHe
yea
r en
ded
31
deC
embe
r 20
10
Att
ribu
tabl
e to
the
equ
ity h
olde
rs o
f th
e pa
rent
Gro
up
Shar
e ca
pita
lSh
are
prem
ium
Lega
l re
serv
eG
ener
al
rese
rve
Reta
ined
Cu
mul
ativ
e ch
ange
s in
N
on-
cont
rolli
ng
Tota
l
(not
e 18
a)(n
ote
18b)
(not
e 18
c)(n
ote
18d)
earn
ings
fair
val
ues
Tota
lin
tere
sts
equi
ty
(not
e 28
)
RORO
RORO
RORO
RORO
RO
As
at 1
Janu
ary
2009
8,97
0,00
097
7,50
02,
990,
000
1,12
1,76
021
,520
,186
(4,0
63,0
14)
31,5
16,4
3271
5,14
132
,231
,573
Profi
t fo
r th
e ye
ar--
----
--6,
674,
049
--6,
674,
049
(48,
583)
6,62
5,46
6
Oth
er c
ompr
ehen
sive
inco
me
----
----
--3,
957,
155
3,95
7,15
5--
3,95
7,15
5
Tota
l com
preh
ensi
ve in
com
e6,
674,
049
3,95
7,15
510
,631
,204
(48,
583)
10,5
82,6
21
Acq
uisi
tion
of a
sub
sidi
ary
(not
e 11
)--
----
----
----
490,
000
490,
000
Div
iden
d fo
r th
e ye
ar 2
008
(not
e 18
e)--
----
--(1
,794
,000
)--
(1,7
94,0
00)
--(1
,794
,000
)
Tran
sfer
to
gene
ral r
eser
ve--
----
672,
462
(672
,462
)--
----
--
At
31 D
ecem
ber
2009
8,97
0,00
097
7,50
02,
990,
000
1,79
4,22
225
,727
,773
(105
,859
)40
,353
,636
1,15
6,55
841
,510
,194
As
at 1
Janu
ary
2010
8,97
0,00
097
7,50
02,
990,
000
1,79
4,22
225
,727
,773
(105
,859
)40
,353
,636
1,15
6,55
841
,510
,194
Profi
t fo
r th
e ye
ar--
----
--8,
165,
441
--8,
165,
441
(90,
939)
8,07
4,50
2
Oth
er c
ompr
ehen
sive
inco
me
----
----
--(7
84,6
80)
(784
,680
)(1
24,1
50)
(908
,830
)
Tota
l com
preh
ensi
ve in
com
e--
----
--8,
165,
441
(784
,680
)7,
380,
761
(215
,089
)7,
165,
672
Incr
ease
in in
vest
men
t in
a s
ubsi
diar
y (n
ote1
1)--
----
--91
4,34
091
4,34
0
Div
iden
d fo
r th
e ye
ar 2
009
(not
e 18
e)--
----
--(2
,691
,000
)--
(2,6
91,0
00)
--(2
,691
,000
)
Tran
sfer
to
gen
eral
res
erve
----
--82
6,00
9(8
26,0
09)
----
----
At
31 D
ecem
ber
2010
8,97
0,00
097
7,50
02,
990,
000
2,62
0,23
130
,376
,205
(890
,539
)45
,043
,397
1,85
5,80
946
,899
,206
The
atta
ched
not
es 1
to
32 f
orm
par
t of
the
se c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
OCI ANNUAL REPORT 2010
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32 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Pare
nt C
ompa
ny
Shar
e ca
pita
lSh
are
prem
ium
Lega
l res
erve
Gen
eral
res
erve
Reta
ined
Cu
mul
ativ
e ch
ange
s in
fai
r va
lues
(not
e 18
a)(n
ote
18b)
(not
e 18
c)(n
ote
18d)
earn
ings
(not
e 28
)To
tal
RORO
RORO
RORO
RO
At
1 Ja
nuar
y 20
098,
970,
000
977,
500
2,99
0,00
01,
121,
760
21,5
40,8
55(4
,063
,014
)31
,537
,101
Profi
t fo
r th
e ye
ar--
----
--6,
724,
615
--6,
724,
615
Oth
er c
ompr
ehen
sive
inco
me
----
----
--3,
957,
155
3,95
7,15
5
Tota
l com
preh
ensi
ve in
com
e--
----
--6,
724,
615
3,95
7,15
510
,681
,770
Div
iden
d fo
r th
e ye
ar 2
008
(not
e 18
e)--
----
--(1
,794
,000
)--
(1,7
94,0
00)
Tran
sfer
to
gene
ral r
eser
ve--
----
672,
462
(672
,462
)--
--
At
31 D
ecem
ber
2009
8,97
0,00
097
7,50
02,
990,
000
1,79
4,22
225
,799
,008
(105
,859
)40
,424
,871
At
1 Ja
nuar
y 20
108,
970,
000
977,
500
2,99
0,00
01,
794,
222
25,7
99,0
08(1
05,8
59)
40,4
24,8
71
Profi
t fo
r th
e ye
ar--
----
--8,
260,
091
--8,
260,
091
Oth
er c
ompr
ehen
sive
inco
me
----
----
--(6
55,4
62)
(655
,462
)
Tota
l com
preh
ensi
ve in
com
e--
----
--8,
260,
091
(655
,462
)7,
604,
629
Div
iden
d fo
r th
e ye
ar 2
009
(not
e 18
e)--
----
--(2
,691
,000
)--
(2,6
91,0
00)
Tran
sfer
to
gene
ral r
eser
ve--
----
826,
009
(826
,009
)--
-
At
31 D
ecem
ber
2010
8,97
0,00
097
7,50
02,
990,
000
2,62
0,23
130
,542
,090
(761
,321
)45
,338
,500
The
atta
ched
not
es 1
to
32 f
orm
par
t of
the
se c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
Om
an
Ca
bles
Ind
ustr
y sa
Og
an
d It
s su
bsId
Iary
CO
nsO
lIda
ted
sta
tem
ent
Of
CHa
ng
es In
eQ
uIty
fOr
tHe
yea
r en
ded
31
deC
embe
r 20
10
OCI ANNUAL REPORT 2010
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33
Group Parent Company Group Parent Company
2010 2010 2009 2009
RO RO RO RO
OPERATING ACTIVITIES
Cash receipt from sales 190,171,076 185,827,468 159,728,257 159,728,257
Cash paid towards cost of sales and expenses (188,256,803) (183,228,119) (110,412,361) (110,355,149)
Cash generated from operations 1,914,273 2,599,349 49,315,896 49,373,108
Interest received 119,980 119,277 123,653 115,792
Income tax paid (926,557) (926,557) (724,482) (724,482)
Directors’ remuneration and meeting attendance fees paid (200,050) (200,050) (200,950) (200,950)
Net cash flows used in operating activities 907,646 1,592,019 48,514,117 48,563,468
INVESTING ACTIVITIES
Investment in a subsidiary -- (951,660) -- (510,000)
Purchase of property, plant and equipment (7,096,681) (1,285,128) (7,104,065) (861,718)
Purchase of held to maturity investment - - (1,251,205) (1,251,205)
Purchase of available for sale investments (510,000) (510,000) - -
Proceeds from available for sale investments - - 123,401 123,401
Proceeds from disposal of property, plant and equipment
4,400 4,400 5,704 5,704
Movement in short term deposits -- -- 2,000,000 2,000,000
Net cash flows used in investing activities (7,602,281) (2,742,388) (6,226,165) (493,818)
FINANCING ACTIVITIES
Repayment of term loans (1,251,000) (1,251,000) (1,551,051) (1,551,051)
Proceeds from term loans 4,695,780 -- 5,054,938 --
Dividends paid to equity holders of the parent (2,691,000) (2,691,000) (1,794,000) (1,794,000)
Net movement in short term loans 2,229,915 2,229,915 (27,918,200) (27,918,200)
Net movement in loans against trust receipts 6,792,191 6,792,191 (18,778,083) (18,778,083)
Interest paid (1,163,710) (1,031,917) (2,550,286) (2,550,286)
Capital contribution in the subsidiary from
non-controlling interest 735,000 -- 490,000 --
Net cash flows from financing activities 9,347,176 4,048,189 (47,046,682) (52,591,620)
Net increase (decrease) in cash and cash equivalents during the year 2,652,541 2,897,820 (4,758,730) (4,521,970)
Cash and cash equivalents at 1 January (392,223) (1,130,955) 4,366,507 3,391,015
Cash and cash equivalents at 31 December 2,260,318 1,766,865 (392,223) (1,130,955)
Cash and cash equivalents at the end of the year comprise:
Current accounts 2,423,362 1,955,070 3,091,677 2,354,529
Cash in hand 39,255 14,094 15,751 14,167
2,462,617 1,969,164 3,107,428 2,368,696
Bank overdraft (202,299) (202,299) (3,499,651) (3,499,651)
2,260,318 1,766,865 (392,223) (1,130,955)
The attached notes 1 to 32 form part of these consolidated financial statements.
Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of CasH flOWs fOr tHe year ended 31 deCember 2010
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34 OCI ANNUAL REPORT 2010
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1. LEGAL STATUS AND PRINCIPAL ACTIVITIES
Oman Cables Industry SAOG (“the company/the parent
company”) is registered in the Sultanate of Oman as
a public joint stock company. The company’s principal
activity is the manufacture and sale of electrical cables
and conductors.
The company holds 51% shareholding in Oman
Aluminium Processing Industries LLC (“the subsidiary”)
which was incorporated in the Sultanate of Oman in
2008 and commenced its operations during the year
[see note11].
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These consolidated and parent company financial
statements have been prepared in accordance with
International Financial Reporting Standards, and
applicable requirements of the Commercial Companies
Law and the Capital Market Authority of the Sultanate of
Oman.
These financial statements have been presented in Rial
Omani which is the functional and reporting currency
for these financial statements.
Changes in accounting policy and disclosures
The accounting policies are consistent with those used
in the previous financial year except as follows:
The group has adopted the following new and amended
IFRS and IFRIC interpretations as of 1 January 2010:
y IFRS 2 Share-based Payment: Group Cash-settled
Share-based Payment Transactions effective 1
January 2010
y IFRS 3 Business Combinations (Revised) and IAS 27
Consolidated and Separate Financial Statements
(Amended) effective 1 July 2009, including
consequential amendments to IFRS 2, IFRS 5 IFRS 7,
IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39
y IAS 39 Financial Instruments: Recognition and
Measurement – Eligible Hedged Items effective 1
July 2009
y IFRIC 17 Distributions of Non-cash Assets to Owners
effective 1 July 2009
y Improvements to IFRSs (May 2008)
y Improvements to IFRSs (April 2009)
These amendments resulting from improvements
to IFRSs did not have any impact on the accounting
policies, financial position or performance of the group.
The following standards, amendments and
interpretations are not yet effective:
Other IASB Standards and Interpretations that have
been issued but are not yet mandatory, and have not
been adopted by the group, are not expected to have a
material impact on the group’s financial statements.
IAS 24 Related Party Disclosures (Amendment)
The amended standard is effective for annual periods
beginning on or after 1 January 2011. It clarified the
definition of a related party to simplify the identification
of such relationships and to eliminate inconsistencies in
its application. The revised standard introduces a partial
exemption of disclosure requirements for government
related entities. The Group does not expect any impact
on its financial position or performance. Early adoption
is permitted for either the partial exemption for
government-related entities or for the entire standard.
IAS 32 Financial Instruments: Presentation –
Classification of Rights Issues (Amendment)
The amendment to IAS 32 is effective for annual periods
beginning on or after 1 February 2010 and amended
the definition of a financial liability in order to classify
rights issues (and certain options or warrants) as equity
instruments in cases where such rights are given pro
rata to all of the existing owners of the same class of an
entity’s non-derivative equity instruments, or to acquire
a fixed number of the entity’s own equity instruments
for a fixed amount in any currency. This amendment will
have no impact on the Group after initial application.
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
IFRS 9 Financial Instruments: Classification and
Measurement
IFRS 9 as issued reflects the first phase of the IASBs work
on the replacement of IAS 39 and applies to classification
and measurement of financial assets as defined in IAS 39.
The standard is effective for annual periods beginning on
or after 1 January 2013. In subsequent phases, the IASB
will address classification and measurement of financial
liabilities, hedge accounting and derecognition. The
completion of this project is expected in early 2011. The
adoption of the first phase of IFRS 9 will have an effect
on the classification and measurement of the Group’s
financial assets. The Group will quantify the effect in
conjunction with the other phases, when issued, to
present a comprehensive picture.
IFRIC 14 Prepayments of a minimum funding
requirement (Amendment)
The amendment to IFRIC 14 is effective for annual periods
beginning on or after 1 January 2011 with retrospective
application. The amendment provides guidance on
assessing the recoverable amount of a net pension
asset. The amendment permits an entity to treat the
prepayment of a minimum funding requirement as an
asset. The amendment is expected to have no impact
on the financial statements of the Group.
IFRIC 19 Extinguishing Financial Liabilities with
Equity Instruments
IFRIC 19 is effective for annual periods beginning on
or after 1 July 2010. The interpretation clarifies that
equity instruments issued to a creditor to extinguish
a financial liability qualify as consideration paid. The
equity instruments issued are measured at their fair
value. In case that this cannot be reliably measured,
the instruments are measured at the fair value of the
liability extinguished. Any gain or loss is recognised
immediately in profit or loss. The adoption of this
interpretation will have no effect on the financial
statements of the Group.
Improvements to IFRSs (issued in May 2010)
The IASB issued Improvements to IFRSs, an omnibus of
amendments to its IFRS standards. The amendments
have not been adopted as they become effective for
annual periods on or after either 1 July 2010 or 1 January
2011. The amendments listed below, are considered to
be relevant for the group:
y IFRS 3 Business Combinations
y IFRS 7 Financial Instruments: Disclosures
y IAS 1 Presentation of Financial Statements
y IAS 27 Consolidated and Separate Financial
Statements
y IFRIC 13 Customer Loyalty Programmes
The Group, however, expects no impact from the
adoption of the amendments on its financial position or
performance.
a) Accounting Convention
These financial statements have been prepared on
the historical cost basis except for derivative financial
instruments, government soft loan, fair value through
profit or loss and available-for-sale financial assets
that have been measured at fair value. The parent
company’s investment in an associate is recorded at fair
value in the parent company financial statements and is
designated as fair value through profit or loss.
b) Basis of consolidation
The consolidated financial statements comprise those of
Oman Cables Industry SAOG and its subsidiaries as at
31 December each year. The financial statements of the
subsidiaries are prepared for the same reporting period
as the parent company using consistent accounting
policies. Adjustments are made to bring into line any
dissimilar accounting policies which may exist.
Subsidiaries are fully consolidated from the date on
which control is transferred to the group and cease
to be consolidated from the date on which control is
transferred out of the group.
All intercompany balances, transactions, income and
expenses and profits and losses resulting from intra-
group transactions are eliminated in full.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
Non-controlling interest represent the portion of profit
or loss and net assets not held by the group and is
presented separately in the income statement and
within equity in the consolidated statement of financial
position, separately from parent shareholders’ equity.
Losses within a subsidiary are attributed to the non-
controlling interest even if that results in a deficit
balance. A change in the ownership interest of a
subsidiary, without a loss of control is accounted for as
an equity transaction.
c) Property, plant and equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and any impairment in value.
Capital work in progress is not depreciated. Depreciation
is calculated on a straight line basis over the estimated
useful lives of the assets as follows:
Years
Buildings 20
Plant and machinery 20
Electrical equipment and installations 10
Motor vehicles 4
Furniture, fixtures and fittings 4
Office equipment 4
Material handling equipment 10
Loose tools 10
Laboratory equipment 10
The carrying values of property, plant and equipment
are reviewed for impairment when events or changes
in circumstances indicate the carrying value may not
be recoverable. If any such indication exists and where
the carrying values exceed the estimated recoverable
amount, the assets are written down to their recoverable
amount, being the higher of their fair value less costs to
sell and their value in use.
Expenditure incurred to replace a component of an item
of property, plant and equipment that is accounted for
separately is capitalised and the carrying amount of
the component that is replaced is written off. Other
subsequent expenditure is capitalised only when it
increases future economic benefits of the related item
of property, plant and equipment. All other expenditure
is recognised in the income statement as the expense
is incurred.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on de-recognition of the asset (calculated as the
difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income
statement in the year the asset is derecognised.
The asset’s residual values, useful lives and methods of
depreciation are reviewed, and adjusted if appropriate,
at each financial year end.
d) Derivative financial instruments
Initial recognition and subsequent measurement
The group uses derivative financial instruments such
as forward currency contracts and forward commodity
contracts to hedge its foreign currency risks and
commodity price risks, respectively.
These derivative financial instruments, which qualify
for hedge accounting and meet the criteria for cash
flow hedge are initially recognized at cost and are
subsequently stated at fair market value. The effective
portion of the gain or loss on the hedging instrument
is recognized directly as other comprehensive income
in the cumulative changes in fair value reserve, while
any ineffective position is recognized immediately
in the income statement. Subsequently the gains or
losses recognized as other comprehensive income are
transferred to the cost of inventories or the income
statement.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
e) Investments
Subsidiary
A subsidiary is a company in which the group owns more
than one half of the voting power or otherwise exercises
control. The financial statement of the subsidiary is
included in the consolidated financial statements. In the
parent company’s separate financial statements, the
investment in the subsidiary is carried at cost.
Investment in an associate
The group’s investment in its associates is accounted for
under the equity method of accounting. An associate is
an entity in which the group has significant influence
and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the
associate is carried in the statement of financial position
at cost plus post- acquisition changes in the group’s
share of net assets of the associate. Goodwill relating
to an associate is included in the carrying amount of the
investment. After application of the equity method, the
group determines whether it is necessary to recognise
any additional impairment loss with respect to the
group’s net investment in the associate. The income
statement reflects the share of the results of operations
of the associate. Where there has been a change
recognised directly in the equity of the associate, the
group recognises its share of any changes and discloses
this, when applicable, in the statement of changes in
equity. Profits and losses resulting from transactions
between the group and the associate are eliminated to
the extent of the interest in the associate.
The associates’ accounting policies conform to those
used by the group for like transactions and events in
similar circumstances.
The consolidated financial statements include the
group’s share of the total recognised gains or losses of
associate on an equity accounted basis.
Financial instruments – initial recognition and
subsequent measurement
Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified
as financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments,
available-for-sale financial assets, or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate. The Group determines the
classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value
plus, in the case of investments not at fair value through
profit or loss, directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial assets
depends on their classification as follows:
Investments carried at fair value through profit or loss
Financial assets at fair value through profit or loss, has two
sub categories namely financial assets held for trading
and those designated at fair value through profit or loss at
inception. Investments typically bought with the intention
to sell in the near future are classified as held for trading.
For investments designated as at fair value through profit
or loss, the following criteria must be met:
y the designation eliminates or significantly reduces
the inconsistent treatment that would otherwise
arise from measuring the assets or liabilities or
recognizing gains or losses on them on a different
basis; or
y the assets and liabilities are part of a group of
financial assets, financial liabilities or both which
are managed and their performance evaluated
on a fair value basis, in accordance with a
documented risk management or investment
strategy; or
y the financial instrument contains an embedded
derivative, unless the embedded derivative does
not significantly modify the cash flows or it is
clear, with little or no analysis, that it would not
be separately recorded.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
These investments are initially recorded at fair value.
Subsequent to initial recognition, these investments
are remeasured at fair value. Fair value adjustments
and realized gain and loss are recognized in the income
statement.
Investments Available for sale
After initial recognition, investments which are
classified “available for sale” are normally re-measured
at fair value, unless fair value cannot be reliably
determined in which case they are measured at cost
less impairment. Fair value changes, are reported as
a separate component of equity until the investment
is derecognised or the investment is determined
to be impaired. On de-recognition or impairment
the cumulative gain or loss previously reported as
“cumulative changes in fair value” within equity, is
included in the income statement for the period.
Investments Held-to-maturity
Non-derivative financial assets with fixed or
determinable payments and fixed maturities are
classified as held-to maturity when the group has the
positive intention and ability to hold it to maturity.
After initial measurement held-to-maturity investments
are measured at amortised cost using the effective
interest rate method (EIR), less impairment. Amortised
cost is calculated by taking into account any discount
or premium on acquisition and fee or costs that are an
integral part of the EIR. The EIR amortisation is included
in finance income in the income statement. The losses
arising from impairment are recognised in the income
statement in finance costs.
De-recognition of financial instruments
Financial assets
A financial asset (or, where applicable a part of a
financial asset or part of a group of similar financial
assets) is de-recognized when:
the rights to receive cash flows from the asset have
expired; or
the group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a
third party under a ‘pass-through’ arrangement; and
either (a) the group has transferred substantially all
the risks and rewards of the asset, or (b) the group
has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset.
When the group has transferred its rights to receive
cash flows from an asset or has entered into a pass
through arrangement, and has neither transferred nor
retained substantially all the risks and rewards of the
asset nor transferred control of the asset, a new asset
is recognized to the extent of the group’s continuing
involvement in the asset.
Continuing involvement that takes the form of a
guarantee over the transferred asset, is measured at
the lower of the original carrying amount of the asset
and the maximum amount of consideration that the
group could be required to repay.
When continuing involvement takes the form of a
written and/or purchased option (including a cash
settled option or similar provision) on the transferred
asset, the extent of the group’s continuing involvement
is the amount of the transferred asset that the group
may repurchase, except that in the case of a written
put option (including a cash settled option or similar
provision) on an asset measured at fair value, the extent
of the group’s continuing involvement is limited to the
lower of the fair value of the transferred asset and the
option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as a de-recognition of the original liability and the
recognition of a new liability, and the difference in the
respective carrying amounts is recognised in the income
statement.
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39
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
f) Inventories
Inventories are stated at the lower of cost and net
realisable value. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses. The
cost of inventories is based on the weighted average
principle and includes expenditure incurred in acquiring
the inventories and bringing them to their existing
location and condition. In the case of finished goods and
work in progress, cost includes an appropriate share of
overheads based on normal operating capacity.
The liability for goods in transit is recorded when
significant risks and rewards of ownership of the goods
are transferred to the group.
g) Trade and other receivables
Trade and other receivables are stated at original
invoice amount less an allowance for any
uncollectible amounts. An estimate for doubtful
debts is made when collection of the full amount
is no longer probable. Bad debts are written off
as incurred.
h) Cash and cash equivalents
For the purpose of the Cash Flows Statement, cash
and cash equivalents consists of cash and bank
balances, net of outstanding bank overdrafts, and
bank deposits with original maturities of three
months or less.
i) Impairment
Impairment and uncollectibility of financial
assets
An assessment is made at each reporting date to
determine whether there is objective evidence
that a specific financial asset may be impaired.
If such evidence exists, any impairment loss is
recognised in the income statement. Impairment
is determined as follows:
(a) For assets carried at fair value, impairment is the
difference between cost and fair value;
(b) For assets carried at cost, impairment is the
difference between cost and the present value
of future cash flows discounted at the current
market rate of return for a similar financial asset.
(c) For assets carried at amortised cost, impairment
is the difference between carrying amount and
the present value of future cash flows discounted
at the original effective interest rate.
Impairment of non-financial assets
The group assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment
testing for an asset is required, the group makes an
estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash-
generating unit’s fair value less costs to sell and its
value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that
are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using
a pre-tax 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, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples or
other available fair value indicators.
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 makes an estimate of the recoverable amount.
A previously recognised impairment loss is reversed
only if there has been a change in the estimates used
to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the
case the carrying amount of the asset is increased to
its recoverable amount. That increased amount cannot
exceed the carrying amount that would have been
determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such a
reversal is recognised in the income statement.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
The following criteria are also applied in assessing
impairment of specific assets:
Associates
After application of the equity method, the group
determines whether it is necessary to recognise an
additional impairment loss of the group’s investment in
its associates. The group determines at each reporting
date whether there is any objective evidence that the
investment in associate is impaired. If this is the case
the group calculates the amount of impairment as being
the difference between the fair value of the associate
and the acquisition cost and recognises the amount in
the income statement.
j) Dividend on ordinary shares
Dividends on ordinary shares are recognised as a liability
and deducted from equity when they are approved by
the company’s shareholders.
k) Employees’ end of service benefits
Payment is made to the Omani Government Social
Security scheme under Royal Decree 72/91 for Omani
employees.
The group provides end of service benefits to its
expatriate employees. The entitlement to these
benefits is based upon the employees’ final salary
and length of service, subject to the completion of a
minimum service period. The expected costs of these
benefits are accrued over the period of employment.
l) Provisions
Provisions are recognised when the group has an
obligation (legal or constructive) arising from a past
event, and the costs to settle the obligation are both
probable and able to be reliably estimated. If the effect
of the time value of money is material, provisions are
discounted using a current pre tax rate that reflects,
where appropriate, 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.
m) Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the
future for goods or services received, whether billed by
the supplier or not.
n) Deferred Government grant
Interest subsidy is recognised in the statement of
financial position initially as a deferred Government
grant when there is reasonable assurance that it will
be received and that the Group will comply with the
conditions attached to it. This deferred Government
grant is amortised over the life of the loans to which
it relates on a systematic basis in the same periods in
which the interest expense is incurred. Amortisation of
the deferred Government grant is recognised within net
financing costs.
o) Revenue recognition
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,
excluding discounts, rebates, and sales taxes or duty.
The group assesses its revenue arrangements against
specific criteria in order to determine if it is acting as
principal or agent. The group has concluded that it is
acting as a principal in all of its revenue arrangements.
The following specific recognition criteria must also be
met before revenue is recognised:
Sales
Revenue from the sale of goods net of sales commission
and trade discount is recognised in the income
statement when the significant risks and rewards of
ownership have been transferred to the buyer. Revenue
is not recognised if there are significant uncertainties
regarding recovery of the consideration due, associated
costs or the possible return of goods.
Interest
Interest revenue is recognised as the interest accrues
using the effective interest rate method, under which
the rate used exactly discounts, estimated future cash
receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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41
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
Dividend
Dividend revenue is recognised when the right to
receive the dividend is established.
p) Leases
The determination of whether an arrangement is,
or contains a lease is based on the substance of the
arrangement at inception date, whether fulfilment of
the arrangement is dependent on the use of a specific
asset or assets or the arrangement conveys a right to
use the asset.
For arrangements entered into prior to 1 January 2005,
the date of inception is deemed to be 1 January 2005 in
accordance with the transitional requirements of IFRIC 4.
Operating lease payments are recognised as an expense
in the income statement on a straight line basis over
the lease term.
q) 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.
r) Foreign currency translation
The consolidated financial statements are presented
in Rial Omani, which is the parent company’s and the
subsidiary’s functional currency. Each entity in the
group determines its own functional currency and
items included in the financial statements of each
entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded
in the functional currency rate ruling at the date of the
transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the reporting date.
All differences are taken to the income statement. Non-
monetary items that are measured in terms of historical
cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value was determined.
Translation of foreign operations
Exchange differences arising on equity accounting
of foreign associates are taken directly to the foreign
currency translation reserve. Foreign currency translation
reserve is recognized in equity under cumulative
changes in fair value. On disposal of the foreign
associate, such exchange differences are recognised in
the income statement as part of the profit or loss on
sale. A write down of the carrying amount of a foreign
operation does not constitute a disposal.
s) Income tax
Taxation is provided for based on relevant tax laws of
the respective countries in which the group operates.
Deferred income tax is provided, using the liability
method, on all temporary differences at the reporting
date between the tax bases of assets and liabilities and
their carrying amounts.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled,
based on laws that have been enacted at the reporting
date.
Deferred income tax assets are recognised for all
deductible temporary differences and carry-forward of
unused tax assets and unused tax losses to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences and
the carry-forward of unused tax assets and unused tax
losses can be utilised.
OCI ANNUAL REPORT 2010
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42 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
2 SIGNIFICANT ACCOUNTING POLICIES (cont.)
The carrying amount of deferred income tax assets
are reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Income tax relating to items recognised directly in
equity are recognised in equity and not in the income
statement.
t) Directors’ remuneration
The parent company follows the Commercial Companies
Law 1974 (as amended), and other latest relevant
directives issued by CMA, in regard to determination
of the amount to be paid as Directors’ remuneration.
Directors’ remuneration is charged to the income
statement in the year to which they relate.
u) Significant accounting judgments, estimates
and assumptions
The preparation of the group’s financial statements
requires management to make judgments, estimates
and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the
disclosure of contingent liabilities, at the reporting date.
However, uncertainty about these assumptions and
estimates could result in outcomes that could require a
material adjustment to the carrying amount of the asset
or liability affected in the future.
v) Term deposits
Term deposits are carried on the reporting at their
principal amount.
w) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the
fair value of the consideration received less directly
attributable transaction costs.
After initial recognition, interest-bearing loans and
borrowings are subsequently 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.
x) Fair values
For investments traded in organised financial markets,
fair value is determined by reference to quoted market
bid prices.
For unquoted equity investments, fair value is
determined by reference to the market value of a
similar investment or is based on expected discounted
cash flows. Fair value cannot be reliably measured for
certain unquoted foreign investments. Such investments
are measured at cost.
The fair value of interest-bearing items is estimated
based on discounted cash flows using interest rates for
items with similar terms and risk characteristics.
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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43
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
3 COST OF SALES
2010 Group
2010 Parent Company
2009 Group
2009 Parent Company
RO RO RO RO
Cost of materials consumed 176,335,133 168,806,651 134,515,688 134,515,688
Employee costs 2,975,304 2,668,929 2,527,820 2,527,820
Electricity and water 684,656 558,870 566,156 566,156
Stores, consumables, repair and maintenance 1,349,900 980,495 1,470,543 1,470,543
Insurance claim receivable towards damage to stores and consumables -- -- (462,322) (462,322)
Land lease rent 53,509 30,916 30,916 30,916
Depreciation 2,053,066 1,737,936 1,700,702 1,700,702
Provision for slow moving inventories [note 15] -- -- 78,829 78,829
Other direct costs 318,068 290,341 320,456 320,456
183,769,636 175,074,138 140,748,788 140,748,788
4 OTHER INCOME
2010Group
2010 Parent Company
2009Group
2009Parent Company
RO RO RO RO
Insurance claim 66,806 66,806 42,240 42,240
Gain on sale of property, plant and equipment 3,887 3,887 3,591 3,591
Commercial understanding fee (see note below) -- -- 132,900 132,900
Miscellaneous income 52,644 16,981 191,151 187,653
123,337 87,674 369,882 366,384
The parent company had entered into a commercial understanding agreement with Draka Holding NV, relating to future co-
operation, for which an equivalent amount will be received by the parent company from Draka Holding NV annually for 5 years
which commenced in 2005 and was fully paid in 2009.
OCI ANNUAL REPORT 2010
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44 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
5 ADMINISTRATIVE EXPENSES
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Employee costs 2,391,162 2,170,075 2,149,269 2,085,655
Insurance 358,938 358,938 247,721 247,721
Communication 67,762 56,949 51,263 48,537
Travelling 62,541 60,089 58,133 58,133
Repairs and maintenance 18,701 18,701 9,910 9,910
Vehicle running, repairs and maintenance 23,503 15,411 16,829 14,533
Allowance for credit losses (note 16) -- -- 121,889 121,889
Legal and professional charges 81,699 72,418 82,820 70,963
Printing and stationery 31,239 26,452 23,516 22,417
Service charges 19,800 19,800 19,800 19,800
Directors’ remuneration 190,300 190,300 190,350 190,350
Directors’ meeting attendance fees 9,700 9,700 9,650 9,650
Contributions to local organizations 10,375 10,375 18,600 18,600
Other sundry expenses 243,834 225,922 210,690 186,972
3,509,554 3,235,130 3,210,440 3,105,130
6 SELLING AND DISTRIBUTION EXPENSES
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Marketing and freight 2,064,577 1,894,886 1,533,957 1,533,957
Employee costs 595,799 582,624 516,534 516,534
Advertisement and sales promotion 389,668 383,246 168,254 168,254
Travelling 105,505 93,037 52,708 52,708
3,155,549 2,953,793 2,271,453 2,271,453
7 FINANCING COSTS
2010Group
2010Parent company
2009Group
2009Parent company
RO RO RO RO
Financing cost 1,339,217 1,169,424 2,856,908 2,856,908
Less: foreign currency translation (168,017) (165,780) (647,094) (647,094)
1,171,200 1,003,644 2,209,814 2,209,814
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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45
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
8 TAXATION
2010Group and Parent
Company
2009Group and Parent
CompanyRO RO
Statement of comprehensive income
Current year income tax charge 1,157,249 750,495
Prior year income tax charge 127,788 -
Deferred tax:
Relating to origination and reversal of temporary differences (13,803 ) 156,919
Income tax expense reported in the income statement 1,271,234 907,414
Statement of financial position
Current liability
Current year 1,157,249 750,495
Previous year -- 48,274
1,157,249 798,769
Non current liability
Deferred tax liability 812,475 826,278
Deferred tax liability:
At 1 January 826,278 669,359
Movement for the year (13,803) 156,919
At 31 December 812,475 826,278
The deferred liability comprises the following types of temporary differences:2010
Group and Parent Company
2009Group and Parent
CompanyRO RO
Difference between the tax base of property, plant and equipment and its written down value in the books 1,004,475 1,018,278
Provision for doubtful debts (96,000) (96,000)
Provision for inventory (96,000) (96,000)
812,475 826,278Reconciliation of income tax expense
The following is a reconciliation of income taxes calculated on accounting profits at the applicable tax rates with the income
tax expense:
2010 2010 2009 2009
Group Parent Company Group Parent Company
RO RO RO RO
Profit before income tax 9,345,736 9,531,325 7,532,880 7,632,029
Income tax as per rates mentioned above 1,266,918 1,266,918 913,732 913,732
Incomes exempt and tax losses of subsidiaries not allowed as deduction
4,316 4,316 (6,318) (6,318)
Total income tax expense in the income statement
1,271,234 1,271,234 907,414 907,414
OCI ANNUAL REPORT 2010
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46 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
8 TAXATION (continued)
The tax rate applicable to the parent company is 12% (2009 - 12%). For the purpose of determining the tax expense for
the year ended 31 December 2010, the accounting profit has been adjusted for tax purposes. Adjustments for tax purposes
include items relating to both income and expenses.
Assessments of the parent company with the tax department have been completed till year 2009.
Deferred tax asset has been computed at the tax rate of 12% (2009-12%).
The subsidiary company has not made a provision for tax in view of the taxable loss incurred during the year. The subsidiary
expects to receive a exemption from income tax for a period of 5 years from the date of commencement of commercial
production; accordingly no deferred tax asset has been recognized in respect of carry forward losses. None of the subsidiary’s
tax assessments have been finalized till date.
The Board of Directors believe that, any additional tax liability likely to arise on the completion of the assessments of the
above year would not be material to the financial position of the group at the reporting date.
9 EMPLOYEE COSTS
a) Employee costs included under notes 3, 5 and 6 above comprise of:
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Salaries 2,282,697 1,619,265 1,630,855 1,428,936
Other benefits 3,664,893 3,570,777 3,596,348 3,522,221
Contributions to defined retirement plan for Omani employees 110,457 90,424 83,061 79,088
Increase in liability for unfunded defined benefit retirement plan 146,743 141,162 106,846 99,764
Transferred to capital work in progress (242,525) -- (223,487) --
5,962,265 5,421,628 5,193,623 5,130,009
b) Movement in the liability recognised in the statement of financial position is as follows:
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Liability as at 1 January 665,174 658,092 630,812 630,812
Accrued during the year 146,743 141,162 106,846 99,764
Employees’ end of service benefits paid (27,482) (26,709) (72,484) (72,484)
Liability as at 31 December (note 21) 784,435 772,545 665,174 658,092
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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47
Om
an
Ca
ble
s In
du
stry
sa
Og
an
d I
ts s
ub
sId
Iary
nO
tes
tO t
He
COn
sOlI
dat
ed
fIn
an
CIa
l st
atem
ents
at
31 d
eCem
ber
201
0
10
PR
OP
ERTY
, PLA
NT
AN
D E
QU
IPM
ENT
Gro
upYe
ar e
nde
d
31 D
ecem
ber
2010
Build
ings
Pl
ant
and
mac
hine
ry
Elec
tric
al
equi
pmen
t a
nd
inst
alla
tions
M
otor
ve
hicl
es
Furn
iture
, fix
ture
s an
d fit
tings
O
ffice
eq
uipm
ent
Mat
eria
l ha
ndlin
g eq
uipm
ent
Loos
e to
ols
Labo
rato
ry
equi
pmen
t Ca
pita
l wor
k in
pro
gres
s To
tal
RORO
RORO
RORO
RORO
RORO
RO
Cost
At
31
Dec
embe
r 20
096,
338,
973
20,6
82,3
631,
259,
781
184,
575
439,
241
584,
231
2,04
9,34
715
8,23
484
0,71
67,
706,
164
40,2
43,6
25
Add
ition
s du
ring
the
year
77
,439
226,
550
7,03
726
,113
81,3
9881
,565
151,
273
35,0
4511
0,99
66,
520,
621
7,31
8,03
7D
ispo
sals
dur
ing
the
year
(55,
947)
(605
)--
(24,
025)
(3,5
98)
(709
)(1
1,29
0)--
----
(96,
174)
Tran
sfer
s3,
435,
584
7,50
7,38
162
1,60
9--
--37
,600
--6,
948
44,5
85(1
1,65
3,70
7)--
At
31 D
ecem
ber
2010
9,79
6,04
928
,415
,689
1,88
8,42
718
6,66
351
7,04
170
2,68
72,
189,
330
200,
227
996,
297
2,57
3,07
847
,465
,488
Dep
reci
atio
n
At
31 D
ecem
ber
2009
2,11
8,44
26,
609,
416
772,
895
133,
792
386,
489
458,
588
1,19
1,56
113
2,98
344
6,75
6--
12,2
50,9
22
Char
ge f
or t
he y
ear
404,
400
1,17
6,61
213
0,63
431
,662
31,0
1677
,821
262,
629
5,81
372
,978
--2,
193,
565
Rela
ting
to d
ispo
sals
(18,
175)
(603
)--
(24,
022)
(3,1
40)
(659
)(1
1,28
9)--
----
(57,
888)
At
31 D
ecem
ber
2010
2,50
4,66
77,
785,
425
903,
529
141,
432
414,
365
535,
750
1,44
2,90
113
8,79
651
9,73
4--
14,3
86,5
99
Net
boo
k va
lue
At
31 D
ecem
ber
2010
7,29
1,38
220
,630
,264
984,
898
45,2
3110
2,67
616
6,93
774
6,42
961
,431
476,
563
2,57
3,07
833
,078
,889
At
31 D
ecem
ber
2009
4,22
0,53
114
,072
,947
486,
886
50,7
8352
,752
125,
643
857,
786
25,2
5139
3,96
07,
706,
164
27,9
92,7
03
OCI ANNUAL REPORT 2010
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48 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Om
an
Ca
ble
s In
du
stry
sa
Og
an
d I
ts s
ub
sId
Iary
nO
tes
tO t
He
COn
sOlI
dat
ed
fIn
an
CIa
l st
atem
ents
at
31 d
eCem
ber
201
0
10
PR
OP
ERTY
, PLA
NT
AN
D E
QU
IPM
ENT
(con
tin
ued)
Gro
upYe
ar e
nde
d
31 D
ecem
ber
2009
Build
ings
Pl
ant
and
mac
hine
ry
Elec
tric
al
equi
pmen
t a
nd
inst
alla
tions
M
otor
ve
hicl
es
Furn
iture
, fix
ture
s an
d fit
tings
O
ffice
eq
uipm
ent
Mat
eria
l ha
ndlin
g eq
uipm
ent
Loos
e to
ols
Labo
rato
ry
equi
pmen
t Ca
pita
l wor
k in
pro
gres
s To
tal
RORO
RORO
RORO
RORO
RORO
RO
Cost
At
31
Dec
embe
r 20
086,
338,
973
19,0
78,6
981,
245,
906
166,
375
422,
390
565,
096
2,08
1,55
614
9,84
380
6,38
71,
621,
844
32,4
77,0
68
Add
ition
s du
ring
the
year
-
16,6
4313
,875
18,2
0023
,318
19,1
358,
871
8,39
134
,329
7,67
1,34
27,
814,
104
Dis
posa
ls d
urin
g th
e ye
ar-
- -
- (6
,467
)-
(41,
080)
- -
- (4
7,54
7)
Tran
sfer
s-
1,58
7,02
2-
- -
- -
- -
(1,5
87,0
22)
--
At
31 D
ecem
ber
2009
6,33
8,97
320
,682
,363
1,25
9,78
118
4,57
543
9,24
158
4,23
12,
049,
347
158,
234
840,
716
7,70
6,16
440
,243
,625
Dep
reci
atio
n
At
31 D
ecem
ber
2008
1,81
4,88
95,
642,
453
684,
619
104,
481
344,
320
364,
939
961,
052
126,
523
382,
894
--10
,426
,170
Char
ge f
or t
he y
ear
303,
553
966,
963
88,2
7629
,311
46,5
2493
,649
271,
588
6,46
063
,862
--1,
870,
186
Rela
ting
to d
ispo
sals
- -
- -
(4,3
55)
- (4
1,07
9)-
- -
(45,
434)
At
31 D
ecem
ber
2009
2,11
8,44
26,
609,
416
772,
895
133,
792
386,
489
458,
588
1,19
1,56
113
2,98
344
6,75
6--
12,2
50,9
22
Net
boo
k va
lue
At
31 D
ecem
ber
2009
4,22
0,53
114
,072
,947
486,
886
50,7
8352
,752
125,
643
857,
786
25,2
5139
3,96
07,
706,
164
27,9
92,7
03
At
31 D
ecem
ber
2008
4,52
4,08
413
,436
,245
561,
287
61,8
9478
,070
200,
157
1,12
0,50
423
,320
423,
493
1,62
1,84
422
,050
,898
a)
Dep
reci
atio
n of
RO
2,0
53,0
66 (
2009
– R
O 1
,700
,702
) is
incl
uded
und
er c
ost
of s
ales
(no
te 3
).
b)
Capi
tal w
ork
in p
rogr
ess
at t
he r
epor
ting
date
incl
udes
exp
endi
ture
incu
rred
on
plan
t an
d m
achi
nery
and
ele
ctri
cal e
quip
men
t an
d in
stal
latio
ns.
c)
Capi
tal w
ork
in p
rogr
ess
of t
he g
roup
incl
udes
bor
row
ing
cost
s am
ount
ing
to R
O 2
40,7
81 (
2009
– 1
24,2
63)
that
are
dire
ctly
att
ribu
tabl
e to
the
acq
uisi
tion
and
cons
truc
tion
of
mac
hine
ry a
nd b
uild
ing
of t
he s
ubsi
diar
y.
d)
Prop
erty
, pla
nt a
nd e
quip
men
t of t
he s
ubsi
diar
y, w
hich
are
bei
ng c
onst
ruct
ed a
nd in
stal
led
are
mor
tgag
ed a
gain
st te
rm lo
an a
vaile
d fr
om a
loca
l com
mer
cial
ban
k (r
efer
not
e 19
).
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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49
Om
an
Ca
ble
s In
du
stry
sa
Og
an
d I
ts s
ub
sId
Iary
nO
tes
tO t
He
COn
sOlI
dat
ed
fIn
an
CIa
l st
atem
ents
at
31 d
eCem
ber
201
0
10
PR
OP
ERTY
, PLA
NT
AN
D E
QU
IPM
ENT
(con
tin
ued)
Pare
nt C
ompa
nyYe
ar e
nde
d
31 D
ecem
ber
2010
Build
ings
Pl
ant
and
mac
hine
ry
Elec
tric
al
equi
pmen
t a
nd
inst
alla
tions
M
otor
ve
hicl
es
Furn
iture
, fix
ture
s an
d fit
tings
O
ffice
eq
uipm
ent
Mat
eria
l ha
ndlin
g eq
uipm
ent
Loos
e to
ols
Labo
rato
ry
equi
pmen
t Ca
pita
l wor
k in
pro
gres
s To
tal
RORO
RORO
RORO
RORO
RORO
RO
Cost
At
31
Dec
embe
r 20
096,
338,
973
20,6
82,3
631,
259,
781
166,
375
438,
122
573,
474
2,04
9,34
715
8,23
484
0,71
657
0,72
933
,078
,114
Add
ition
s du
ring
the
year
77
,004
44
,652
4,97
522
,363
23,2
8634
,602
23,9
216,
788
90,0
1895
7,51
91,
285,
128
Dis
posa
ls d
urin
g th
e ye
ar(5
5,94
7)
(605
)-
(24,
025)
(3,5
98)
(709
)(1
1,29
0)-
--
(96,
174)
Tran
sfer
s10
6,80
8 -
--
--
--
-(1
06,8
08)
--
At
31 D
ecem
ber
2010
6,46
6,83
820
,726
,410
1,26
4,75
616
4,71
345
7,81
060
7,36
72,
061,
978
165,
022
930,
734
1,42
1,44
034
,267
,068
Dep
reci
atio
n
At
31 D
ecem
ber
2009
2,11
8,44
26,
609,
416
772,
895
130,
378
386,
336
456,
384
1,19
1,56
113
2,98
344
6,75
6-
12,2
45,1
51
Char
ge f
or t
he y
ear
320,
486
996,
589
89,1
6426
,452
25,9
9471
,289
257,
162
4,29
370
,242
-1,
861,
671
Rela
ting
to d
ispo
sals
(18,
175)
(603
)-
(24,
022)
(3,1
40)
(659
)(1
1,28
9)-
--
(57,
888)
At
31 D
ecem
ber
2010
2,42
0,75
37,
605,
402
862,
059
132,
808
409,
190
527,
014
1,43
7,43
413
7,27
651
6,99
8-
14,0
48,9
34
Net
boo
k va
lue
At
31 D
ecem
ber
2010
4,04
6,08
513
,121
,008
402,
697
31,9
0548
,620
80,3
5362
4,54
427
,746
413,
736
1,42
1,44
020
,218
,134
At
31 D
ecem
ber
2009
4,22
0,53
114
,072
,947
486,
886
35,9
9751
,786
117,
090
857,
786
25,2
5139
3,96
057
0,72
920
,832
,963
OCI ANNUAL REPORT 2010
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50 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
oci txt grey fin.indd 2 1/19/11 4:13 PM
10
PR
OP
ERTY
, PLA
NT
AN
D E
QU
IPM
ENT
(Con
tin
ued)
Pare
nt C
ompa
nyYe
ar e
nde
d
31 D
ecem
ber
2009
Build
ings
Pl
ant
and
mac
hine
ry
Elec
tric
al
equi
pmen
t an
d in
stal
latio
ns
Mot
or
vehi
cles
Furn
iture
, fix
ture
s an
d fit
tings
O
ffice
eq
uipm
ent
Mat
eria
l ha
ndlin
g eq
uipm
ent
Loos
e to
ols
Labo
rato
ry
equi
pmen
t Ca
pita
l wor
k in
pro
gres
s To
tal
RORO
RORO
RORO
RORO
RORO
RO
Cost
At
31
Dec
embe
r 20
086,
338,
973
19,0
78,6
981,
245,
906
166,
375
422,
390
560,
520
2,08
1,55
614
9,84
380
6,38
71,
413,
295
32,2
63,9
43
Add
ition
s du
ring
the
year
-
16,6
4313
,875
- 22
,199
12,9
548,
871
8,39
134
,329
744,
456
861,
718
Dis
posa
ls d
urin
g th
e ye
ar-
- -
- (6
,467
)-
(41,
080)
- -
- (4
7,54
7)
Tran
sfer
s-
1,58
7,02
2-
- -
- -
- -
(1,5
87,0
22)
-
At
31 D
ecem
ber
2009
6,33
8,97
320
,682
,363
1,25
9,78
116
6,37
543
8,12
257
3,47
42,
049,
347
158,
234
840,
716
570,
729
33,0
78,1
14
Dep
reci
atio
n
At
31 D
ecem
ber
2008
1,81
4,88
95,
642,
453
684,
619
104,
481
344,
320
364,
367
961,
052
126,
523
382,
894
- 10
,425
,598
Char
ge f
or t
he y
ear
303,
553
966,
963
88,2
7625
,897
46,3
7192
,017
271,
588
6,46
063
,862
1,86
4,98
7
Rela
ting
to d
ispo
sals
- -
- -
(4,3
55)
- (4
1,07
9)-
- -
(45,
434)
At
31 D
ecem
ber
2009
2,11
8,44
26,
609,
416
772,
895
130,
378
386,
336
456,
384
1,19
1,56
113
2,98
344
6,75
6-
12,2
45,1
51
Net
boo
k va
lue
At
31 D
ecem
ber
2009
4,22
0,53
114
,072
,947
486,
886
35,9
9751
,786
117,
090
857,
786
25,2
5139
3,96
057
0,72
920
,832
,963
At
31 D
ecem
ber
2008
4,52
4,08
413
,436
,245
561,
287
61,8
9478
,070
196,
153
1,12
0,50
423
,320
423,
493
1,41
3,29
521
,838
,345
a)
Dep
reci
atio
n of
RO
1,7
37,9
36 (
2009
– R
O 1
,700
,702
) is
incl
uded
und
er c
ost
of s
ales
(no
te 3
).
b)
Capi
tal w
ork
in p
rogr
ess
at t
he r
epor
ting
date
incl
udes
exp
endi
ture
incu
rred
on
plan
t an
d m
achi
nery
and
ele
ctri
cal e
quip
men
t an
d in
stal
latio
ns.
Om
an
Ca
ble
s In
du
stry
sa
Og
an
d I
ts s
ub
sId
Iary
nO
tes
tO t
He
COn
sOlI
dat
ed
fIn
an
CIa
l st
atem
ents
at
31 d
eCem
ber
201
0
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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51
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
11 INVESTMENT IN SUBSIDIARY
%Holding Activity
Year of incorporation
2010Parent Company
2009Parent Company
RO RO
Oman Aluminium Processing Industries LLC (OAPIL) 51%
Manufacture of aluminium rods and overhead conductors 2008 2,226,660 1,275,000
The Parent Company has 51% shareholding in Oman Aluminium Processing Industries LLC (OAPIL). The Subsidiary has
commenced its commercial operations during 2010. During the year the Parent Company contributed RO 951,660 (2009:
RO 510,000) being 51% of the share towards the share capital call made during the year.
The income statement of the group has been made after consolidating the OAPIL accounts and the 49% share of loss of RO
90,939 (2009: RO 48,583) has been shown as non-controlling interest in consolidated income statement.
The Parent Company had a 100% interest in Oman Power Conductors LLC (“subsidiary”), a company registered in the
Sultanate of Oman. The subsidiary was formed during 2001, had not yet commenced commercial operations, and its
shareholders had not contributed towards its capital. In 2006 the subsidiary’s registration had expired and during the year,
the liquidation of this company has been announced in the official gazette. Consequently, there are no assets and liabilities
or results of the subsidiary to be consolidated into the Company’s financial statements.
The following further notes apply:
1. Investment in OAPIL has been set off against the capital and reserves of the subsidiary in the consolidated financial
statements.
2. The Board of Directors of the Parent Company believe that no impairment has arisen in the investment in OAPIL.
12 INVESTMENT IN ASSOCIATE
2010Group and Parent Company
2009Group and Parent Company
i) Name of the associate % HoldingCarrying
value Cost % HoldingCarrying
value Cost
RO RO RO RO
Associated Cables Pvt Ltd, India (ACPL) 40% 712,513 -- 40% 729,533 --
The associate registered in India is engaged in the manufacture and sale of electrical cables.
ii) During the year 2006, the Parent Company had acquired 35% stake and in 2009 an additional 5% stake in the
associate at nil consideration. This acquisition was in accordance with the terms of the commercial understanding
agreement with Draka Holding NV, the Associate Company’s major shareholder.
OCI ANNUAL REPORT 2010
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52 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
12 INVESTMENT IN ASSOCIATE (Continued)
iii) The carrying value of the investment in an associate is as follows:
Group2010
Parent Company Group2009
Parent Company RO RO RO RO
At the beginning of the year 729,533 729,533 650,336 650,336
Share of results / fair value changes of associate (35,965) (35,965) 52,646 52,646
Effect of foreign currency translation 18,945 18,945 26,551 26,551
At the end of the year 712,513 712,513 729,533 729,533
The share of results is based on the unaudited financial statements of the associate as at 31 December 2010; the associate
prepares audited financial statements at 31 March each year.
The summarised financial position of the associate at the statement of financial position date is as follows:
2010 2009
RO RO
Associate’s statement of financial position:
Current assets 1,605,556 1,635,179
Non-current assets 729,402 861,322
Current liabilities (313,761) (276,556)
Non-current liabilities (239,915) (397,341)
Net assets 1,781,282 1,822,604
Associate’s revenue and profit:
Revenue 2,618,034 2,614,787
(Loss)/profit (89,915) 131,614
Carrying amount of investments 712,513 729,533
13 AVAILABLE FOR SALE INVESTMENTS
2010 2009
Group and Parent Group and Parent
Company Company
Market value Cost Market value Cost
RO RO RO RO
Unquoted investments (refer note below) 510,000 510,000 -- --
Marketable securities listed on the Muscat Securities Market
13,043 2,544 9,005 2,544
523,043 512,544 9,005 2,544
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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53
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
13 AVAILABLE FOR SALE INVESTMENTS (Continued)
During the year, the company invested RO 450,000 in 15% shareholding of Shumookh Investment & Services SAOC. The
company is incorporated for the purpose of promoting projects of infrastructure development in the premises of PEIE and
has not yet commenced its operations. These shares are unquoted and carried at cost as its fair value cannot be reliably
determined due to the unpredictable nature of future cash flows.
During the year, the company invested RO 60,000 in units of Oman fixed income fund. The units were not traded during
the period ended 31 December 2010 and are thus carried at cost.
Movements in cumulative changes in fair values arising from available for sale investments are as follows:
2010 2009
Group and Parent company
RO RO
Net unrealised gains 4,038 2,960
Net realised gains reclassified to the income statement on disposal -- (3,791)
4,038 (831)
14 HELD TO MATURITY INVESTMENTS
Held to maturity investments comprise bonds with a commercial bank in Sultanate of Oman. The bonds earn interest at a
rate of 8% per annum.
15 INVENTORIES
2010Group
2010Parent Company
2009Group and Parent
CompanyRO RO RO
Raw materials 8,057,977 6,922,739 9,541,208
Spares, consumables and scrap 1,245,520 1,062,523 860,869
Finished goods 16,428,205 15,637,913 8,372,241
25,731,702 23,623,175 18,774,318
Work in progress 3,619,666 3,577,072 1,721,107
Goods in transit 13,856,525 13,856,525 5,340,174
43,207,893 41,056,772 25,835,599
Less provision for slow moving and obsolete items (800,000) (800,000) (800,000)
42,407,893 40,256,772 25,035,599
The movement in the provision for slow moving inventories is as follows:2010
Group and Parent Company
2009Group and Parent
CompanyRO RO
At the beginning of the year 800,000 721,171
Provision created during the year (note 3) -- 78,829
At the end of the year 800,000 800,000
OCI ANNUAL REPORT 2010
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54 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
16 TRADE AND OTHER RECEIVABLES
Group2010
Parent Company Group2009
Parent Company RO RO RO RO
Trade receivables 48,734,192 45,360,366 39,854,378 39,854,378
Less: allowance for credit losses (800,000) (800,000) (800,000) (800,000)
47,934,192 44,560,366 39,054,378 39,054,378
Advances 1,591,830 1,503,583 1,067,694 979,155
Other receivables and prepayments 419,701 392,086 830,254 802,932
49,945,723 46,456,035 40,952,326 40,836,465
Movements in the allowance for impairment of receivables were as follows:
2010Group and Parent
Company
2009Group and Parent
Company
RO RO
At the beginning of the year 800,000 678,111
Provision created during the year (note 5) -- 121,889
At the end of the year 800,000 800,000
The company offers credit to its customers, after which trade receivables are considered to be past due. At the reporting
date, gross trade receivables amounting to RO 627,763 (2009 – RO 565,619) were assessed as impaired by the management,
for which allowance for credit losses has been established. In addition an amount of RO 172,237 (2009 – RO 234,381) has
also been established as a collective provision for credit losses against unsecured trade receivables.
Past due but not impaired
TotalRO
Neither past due nor impaired
RO
3 -6 monthsRO
6 - 12 monthsRO
>1 yearRO
2010 44,732,603 42,684,097 1,504,431 99,275 444,800
2009 39,288,759 38,917,566 258,214 -- 112,979
At the reporting date 50% of group’s trade receivables are due from 8 customers (2009- 61% from 8 customers). Trade
receivables amounting to RO 42,684,097 (2009 – RO 38,917,566) are neither past due nor impaired and are estimated as
collectible based on historical experience. 72% (2009 – 66%) of the trade receivables are secured against letters of Credit,
bank guarantees or other credit risk cover. The balance amounts are mainly due from Government authorities.
Other receivables include amounts totaling RO 351,535 (2009 – RO 207,585) that relates to derivative financial assets in
relation to raw materials required to meet confirmed sales orders in the year 2010.
OCI ANNUAL REPORT 2010
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OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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55
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
17 CASH AND BANK BALANCES
Group2010
Parent Company Group2009
Parent CompanyRO RO RO RO
Cash in hand 39,255 14,094 15,751 14,167
Cash at bank – current accounts 2,423,362 1,955,070 3,091,677 2,354,529
2,462,617 1,969,164 3,107,428 2,368,696
18 SHARE CAPITAL AND RESERVES
a) Share capital
i) The Parent Company’s authorised share capital comprises 120,000,000 shares of 100 baisas each (2009 – 120,000,000
shares of 100 baisas each).
ii) The Parent Company’s issued and fully paid up share capital comprises 89,700,000 shares of 100 baisas each
(2009 – 89,700,000 shares of 100 baisas each).
iii) Shareholders who own 10% or more of the Parent Company’s share capital at the reporting date and the number of
shares they hold are as follows:
2010 2009
No of shares held % No of shares held %
Draka Holding NV 31,200,000 34.78 31,200,000 34.78
Mustafa Mukhtar Ali Al Lawati 11,247,040 12.54 11,247,040 12.54
Hussain Salman Al Lawati 10,978,130 12.24 10,938,130 12.19
53,425,170 59.56 53,385,170 59.51
b) Share premium
Share premium represents the excess of amounts received over the nominal value of shares issued to shareholders
during 1998.
c) Legal reserve
As required by Article 106 of the Commercial Companies Law of 1974 of Sultanate of Oman, 10% of the net profit
of the Parent Company is to be transferred to a non-distributable legal reserve until the amount of the legal reserve
becomes equal to one-third of the Parent Company’s issued share capital. The Company has discontinued such
transfers as the reserve has reached the statutory minimum of one third of the capital.
As the subsidiary has incurred a loss during the year, no transfer has been made to the legal reserve.
The balance at the end of the year in the Group’s legal reserve represents the amounts relating to the Parent Company.
OCI ANNUAL REPORT 2010
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56 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
18 SHARE CAPITAL AND RESERVES (continued)
d) General reserve
This reserve represents a distributable reserve initially created at 31 December 2001, to address any impact of
unforeseen events in view of the Parent Company’s growing operations. 10% of the net profit of the Parent Company
has been transferred to this reserve during the year.
e) Dividend per share
i) During the year, dividends of 30 baisas (2009: 20 baisas) per share totaling RO 2,691,000 (2009: RO 1,794,000)
relating to the year 2009 were declared and paid.
ii) The Board of Directors have recommended a dividend of 40 baisas (2009: 30 baisas) per share for the year 2010
amounting to RO 3,588,000 (2009: RO 2,691,000), subject to the approval of the shareholders at the forthcoming
Annual General Meeting.
19 TERM LOANS
2010 2009
Group Parent Company Group Parent Company
RO RO RO RO
Non-current liabilities
Loans from commercial banks 10,246,218 495,500 6,551,438 1,496,500
Government soft loan -- -- 250,000 250,000
10,246,218 495,500 6,801,438 1,746,500
Deferred government grant -- -- (21,633) (21,633)
10,246,218 495,500 6,779,805 1,724,867
Current liabilities
Loans from commercial banks 1,001,000 1,001,000 1,001,000 1,001,000
Government soft loan 250,000 250,000 250,000 250,000
1,251,000 1,251,000 1,251,000 1,251,000
Deferred government grant (7,282) (7,282) -- --
1,243,718 1,243,718 1,251,000 1,251,000
Total term loans 11,489,936 1,739,218 8,030,805 2,975,867
Loans are stated at amortised cost subsequent to initial recognition.
Loans availed by the Parent Company from commercial banks include a loan denominated in US Dollars of RO 1,496,500
(2009 – RO 2,497,500) repayable in five semi annual installments of RO 499,500 each up to February 2012. The loans
are secured by a registered mortgage over the Parent Company’s property, plant and equipment acquired with the loan
proceeds. The loan agreements contain restrictive covenants that relate to the disposal of the Parent Company’s property,
plant and equipment. The loans carry interest at commercial rates.
The subsidiary company has drawn US denominated loan of RO 9,750,718 (2009: RO 5,054,938) out of the sanctioned loan
amount of RO 12,900,000 as at the reporting date. The loan is repayable in 12 equal half yearly installments commencing:
y 42 months from the date of drawdown; or
y 24 months from the date of commercial operation, whichever is earlier.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
19 TERM LOANS (continued)
Accordingly the entire amount is classified under non-current liabilities. This term loan is secured by:
y A first ranking legal mortgage over the existing and future lease hold (leasehold rights) and building at Sohar
y A first ranking commercial mortgage on plant and machinery and other assets registered with the ministry of
Commerce and Industry and
y Endorsement of insurance policy
The Government soft loan is secured by a registered mortgage of the Parent Company’s property, plant and equipment and
endorsement of the insurance policy in respect of the property, plant and equipment of the Parent Company in favour of the
bank and the Government of the Sultanate of Oman. The loan agreements contain restrictive covenants that relate amongst
others to the disposal of the Parent Company’s property, plant and equipment and the compliance to certain stipulated ratios.
The Government soft loan include an amount of RO 250,000 (2009 – RO 500,000), availed in 2005, disbursed by a commercial
bank in Oman and is repayable in annual installments of RO 250,000 each.
The amortised cost of the Government soft loan has been determined by the management using the effective interest rate
method. The effective interest rate adopted was 6% per annum. The Government subsidy on loans is recognised in the
statement of financial position as ‘deferred Government grant’ and amortised over the life of the loans to which the subsidy
relates on a systematic basis in the same periods in which the loan is repaid. The amortisation of the deferred Government
grant for the year 2010 amounted to RO 7,282 (2009 - RO 21,633).
The following further note applies:
The maturity profile of the non-current portion of term loans based on the remaining period to maturity from the statement
of financial position date is as follows:
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Between 1 and 2 years 495,500 495,500 1,724,867 1,724,867
Between 2 and 5 years 9,750,718 -- 5,054,938 -
10,246,218 495,500 6,779,805 1,724,867
20 BANK BORROWINGS
2010Group
2010Parent Company
2009Group
2009Parent Company
RO RO RO RO
Overdrafts 202,299 202,299 3,499,651 3,499,651
Loans against trust receipts 28,856,230 28,856,230 22,064,039 22,064,039
Short term loans 11,141,715 11,141,715 8,911,800 8,911,800
40,200,244 40,200,244 34,475,490 34,475,490
Loans against trust receipts (LTRs) are secured by a first charge over all the current assets including inventories and
receivables. The Parent Company avails short-term loans from commercial banks for a period ranging from 30 to 180 days
(2009 – same period). Bank borrowings carry interest at commercial rates.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
21 TRADE AND OTHER PAYABLES
Group2010
Parent Company Group2009
Parent Company RO RO RO RO
Trade payables 24,079,495 18,507,695 10,209,456 9,754,202
Other payables 2,867,890 1,824,890 642,597 567,046
Accruals 3,672,757 3,210,902 2,783,435 2,722,250
Employees’ end of service benefits (note 9 b) 784,435 772,545 665,174 658,092
31,404,577 24,316,032 14,300,662 13,701,590
Other payables of the group, includes an amount of RO 1,177,210 (2009 – RO 218,432) that relates to commodity future
contracts that is more fully explained in note 28 to the financial statements.
Other payables of the parent company, includes an amount of RO 923,842 (2009 – RO 218,432) that relates to commodity
future contracts that is more fully explained in note 28 to the financial statements.
22 BASIC EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the net profit of the Group and Parent Company for the year attributable
to the shareholders of the Parent Company, by the weighted average number of shares outstanding during the year.
Group2010
Parent Company Group2009
Parent Company
Net profit for the year (RO) 8,165,441 8,260,091 6,674,049 6,724,615
Weighted average number of shares outstanding during the year 89,700,000 89,700,000 89,700,000 89,700,000
Basic earnings per share (RO) 0.091 0.092 0.074 0.075
As the Group and Parent Company does not have any dilutive potential shares, the diluted earnings per share is the same
as the basic earnings per share.
23 NET ASSETS PER SHARE
Net assets per share, is calculated by dividing the equity attributable to the shareholders of the Group and Parent Company
at the reporting date by the number of shares outstanding.
Group2010
Parent Company Group2009
Parent Company
Net assets (in RO) 45,043,398 45,338,500 40,353,636 40,424,871
Number of shares outstanding at the reporting date 89,700,000 89,700,000 89,700,000 89,700,000
Net assets per share (in RO) 0.502 0.505 0.450 0.451
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
24 SEGMENTAL REPORTING
The group and its subsidiary manufactures electrical cables and conductors as per different specifications based on market
requirements. The subsidiary has commenced commercial operations in the current year. Accordingly, specific segmental
information in respect of parent company and its subsidiary has not been provided. A substantial portion of the products
are sold for use within Middle East and North Africa (MENA) and international markets.
Geographic information
Revenues from external customers
Group2010
Parent Company Group2009
Parent Company RO RO RO RO
Oman 93,886,110 93,886,110 68,160,890 68,160,890
Middle East and North Africa (MENA) 96,356,966 91,969,550 82,461,272 82,461,272
Others 10,641,746 5,895,119 4,980,904 4,980,904
Total 200,884,822 191,750,779 155,603,066 155,603,066
25 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
Contingent liabilities
Group2010
Parent Company Group2009
Parent Company RO RO RO RO
Letters of credit 16,938,644 14,776,362 12,096,376 8,707,162
Letters of guarantee 9,821,318 9,821,318 5,566,641 5,566,641
26,759,962 24,597,680 17,663,017 14,273,803
Capital Commitments
a) Authorised and contracted 1,957,231 1,624,393 2,390,610 404,274
b) At the reporting date, the Parent Company has commitment of RO 323,340 (2009: RO 1,275,000) against uncalled
share capital of OAPIL, the subsidiary.
26 RELATED PARTY TRANSACTIONS
The Group has entered into transactions with Directors and entities in which certain Directors of the Parent Company and the
subsidiary have an interest. In the ordinary course of business, the Group sells goods to related parties and procures goods
and services from related parties. These transactions are entered into on terms and conditions, which the Directors believe
could be obtained on an arms’ length basis from independent third parties.
During the year the related party transactions, which are subject to shareholders’ approval at the forthcoming Annual
General Meeting, are as follows:
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
26 RELATED PARTY TRANSACTIONS (continued)
Group
2010 2009
Sales and other income
Purchases and other expenses Others
Sales and other income
Purchases and other expenses Others
RO RO RO RO RO RO
Associated companies 776,780 1,254,554 -- 344,597 1,538,683 --
Shareholders -- 1,663 -- -- 4,537 132,900
Other related parties 4,835,706 383,275 -- 3,609,910 60,399 --
5,612,486 1,639,492 -- 3,954,507 1,603,619 132,900
Parent
2010 2009
Sales and other income
Purchases and other expenses Others
Sales and other income
Purchases and other expenses Others
RO RO RO RO RO RO
Associated companies 776,780 1,254,554 -- 344,597 1,538,683 --
Shareholders -- 1,663 -- -- 4,537 132,900
Other related parties 4,835,706 3,032,084 -- 3,609,910 60,399 --
5,612,486 4,288,301 -- 3,954,507 1,603,619 132,900
Compensation of key management personnel
The key management personnel compensation for the year comprises:
Group Parent company
2010 2009 2010 2009
RO RO RO RO
Short term employment benefits 845,049 800,366 845,049 800,366
End of service benefits 33,259 17,004 33,259 17,004
Directors’ meeting attendance fees 9,700 9,650 9,700 9,650
Directors’ remuneration [see note below] 190,300 190,350 190,300 190,350
1,078,308 1,017,370 1,078,308 1,017,370
Apart from specific bonus provisions to certain top management, the Company makes an overall provision for employees’
bonus each year. Of the amounts so provided in the previous year, amounts paid to key management personnel are
included in short term employment benefits. The Directors’ remuneration and employees’ end of service benefits are
included under other payables.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
26 RELATED PARTY TRANSACTIONS (continued)
Amounts due from related parties at the reporting date are as follows:
2010 2009
GroupParent
Company Group Parent Company
RO RO RO RO
Associate 99,226 99,226 645 645
Other related parties 1,565,060 1,266,576 990,038 990,038
1,664,286 1,365,802 990,683 990,683
Amounts due to related parties:
2010 2009
GroupParent
Company Group Parent Company
RO RO RO RO
Associate 63,921 63,921 101,527 101,527
Other related parties 11,278 1,344,406 3,123 3,123
75,199 1,408,327 104,650 104,650
The amounts due from and due to related parties are on normal terms of credit and consideration to be settled in cash.
There have been no guarantees given in respect of amounts due from or due to related parties. An amount of RO 881,424
(2009 – RO 327,417) due from a related party is secured by a credit instrument and the balance amounts are unsecured.
At the reporting date, the entire due from related parties are due from two related parties (2009 - two related parties).
Amounts due from related parties and from associate are neither past due nor impaired and are estimated as collectible
based on historical experience. There has been no impairment assessed on dues from related parties and the associate and
accordingly no allowance for credit losses against these dues has been considered necessary.
27 LEASES
The Parent Company has leased land for factory premises, at Rusayl, from the Public Establishment for Industrial Estates
(PEIE), under agreements that expire over periods ranging up to 1 January 2031. Payment of lease rentals to PEIE in respect
of the plot that expires on 22 June 2026 will commence after 2 June 2011 as the lease rentals until that date will be set off
against certain amounts due to the Parent Company for having developed the land. The subsidiary has entered into a lease
agreement on 6 January 2009 in respect of the land used for factory premises, which is valid until 5 January 2034. At the
reporting date future minimum lease commitments under non-cancelable operating leases were as follows:
Group2010
Parent Company Group2009
Parent Company
RO RO RO RO
Less than one year 75,917 30,917 51,691 30,917
Between one and five years 350,937 170,937 341,959 161,959
More than five years 1,535,867 725,868 1,615,281 760,281
1,962,721 927,722 2,008,931 953,157
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
28 CUMULATIVE CHANGES IN FAIR VALUES
The following summarises the cumulative changes in fair values as of reporting date:
2010Group
2010Parent Company
2009Group and Parent Company
RO RO RO
Unrealised (loss) / gain relating to:
Hedging commodity and currency future contracts (maturing within 12 months) (see note below)
(1,052,312) (923,094) (244,649)
Fair value of investments available for sale [note 13] 10,499 10,499 6,461
Others 151,274 151,274 132,329
(890,539) (761,321) (105,859)
The following further note applies:
Any positive or negative fair value adjustments of commodity future contracts designated as cash flow hedges will be included in the subsequent period on the maturity of the contracts, as cost of inventories and ultimately as cost of sales in the income statement (see also note 16).
The cumulative change in fair value relating to the unrealised loss in commodity future contracts of RO 1,053,060 (2009 - RO 218,432) is mainly on account of differences between the original values of the future commodity contracts entered into by the Group in the normal course of business and the market value of these contracts as at the reporting date attributable to equity holders of the parent company. RO 124,150 attributable to non controlling interest is disclosed separately in statement of changes in equity as a component of non controlling interests.
The cumulative change in fair value relating to the unrealised loss in commodity future contracts of RO 923,842 (2009 - RO 218,432) is mainly on account of differences between the original values of the future commodity contracts entered into by the parent company in the normal course of business and the market value of these contracts as at the reporting date.
The reported fair value changes on account of commodity future contracts mentioned above, does not have an impact on the year 2010 profitability, as it relates to the cost of purchase in the year 2011.
29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT
The Group’s principal financial liabilities other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to raise finances for the group’s operations. The group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments, held to maturity investments and enters into derivative transactions.
The Group’s activities expose it to various financial risks, primarily being, market risk (including currency risk, interest rate risk, and price risk), credit risk and liquidity risk. The Group’s risk management is carried out internally in accordance with the policies approved by the Board of Directors.
Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity risk. Financial instruments affected by market risk include loans and borrowings, deposits,
available-for-sale investments, and derivative financial instruments.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates.
The Group is exposed to interest rate risk on its interest bearing assets and liabilities (short term bank deposits, held to
maturity investments, bank borrowings and term loans). The management manages the interest rate risk by constantly
monitoring the changes in interest rates and availing lower interest bearing facilities.
For every 0.5% change in interest rate, the impact on the income statement will be approximate to RO 210,000 (2009 – RO
200,000) based on the level of borrowing at the reporting date.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group operates in international markets and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the US dollar, Euros, Pound sterling and all GCC currencies.
The majority of the Group’s financial assets and financial liabilities are either demoninated in local currency (Rials Omani)
or currency fixed against Rials Omani. Term loan is due in US Dollars. As the Omani Rial is pegged to the US Dollar, balances
in US Dollars are not considered to represent significant currency risk Hence the management believes that there would not
be a material impact on the profitability if these foreign currencies weakens or strengthens against the Omani Rials with
all other variables held constant.
Commodity price risk
The group is affected by the volatility of certain commodities. Its operating activities require the ongoing purchase and
manufacturing of electric cables and therefore require a continuous supply of copper, aluminum and steel. Due to the
significantly increased volatility of the price of the underlying, the group’s Board of Directors has developed and enacted a
risk management strategy regarding commodity price risk and its mitigation.
To manage metal price fluctuation risk, the management uses futures contracts to hedge any significant risks arising from
fluctuations in metal prices. Future contracts have maturities of less than one year after the reporting date. Hence the
management believes that there would not be a material impact on the profitability if these commodity prices weakens
or strengthens.
Equity price risk
The Group is exposed to price risk related to quoted investments held by the Group and traded in organized financial
markets. To manage its price risk arising from investments in equity, the management continuously monitors the market
and the key factors that effect stock market movements. The management believes that the impact of price fluctuation on
the quoted investments will not be material considering the amount of quoted investments at the reporting date.
Credit risk
Credit risk primarily arises from credit exposures to customers, including outstanding receivables and committed transactions.
The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers requiring credit over a certain amount. The group seeks to limit its credit risk with respect to
banks by only dealing with reputable banks and with respect to customers by setting credit limits for individual customers
and monitoring outstanding receivables.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (Continued)
Capital management
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern and
benefit other stake holders. The management’s policy is to maintain a strong capital base so as to maintain creditor and
market confidence and to sustain future development of the business.
Management is confident of maintaining the current level of profitability by enhancing top line growth and prudent cost
management. The group is not subject to externally imposed capital requirements.
There has been no change in the group’s objectives, policies or process during the year ended 31 December 2010 and 31
December 2009.
Liquidity risk
The group maintains sufficient and approved bank credit limits to meet its obligations as they fall due for payment and is
therefore not subjected to significant liquidity risk.
The table below summarises the maturities of the group and parent company’s undiscounted financial liabilities based on
contractual payment dates.
Parent Company
At 31 December 2010Less than 3
months 3 to 6 months 6 months to 1
yearMore than
1 year Total
RO RO RO RO RO
Trade and other payables 18,129,667 58,212 49,533 272,973 18,510,385
Taxation 1,157,249 - - - 1,157,249
Term loans 536,425 - 769,601 505,161 1,811,187
Short term loan 11,217,959 - - - 11,217,959
Overdraft 202,299 - - - 202,299
Loans against trust receipts 28,978,094 4,684 - - 28,982,778
Amount due to related parties 1,134,797 223,164 6,932 909 1,365,802
61,356,490 286,060 826,066 779,043 63,247,659
At 31 December 2009Less than 3
months 3 to 6 months 6 months to 1
yearMore than
1 year Total
RO RO RO RO RO
Trade and other payables 10,634,839 195,637 743,170 1,948,490 13,522,136
Taxation 750,495 -- -- 48,274 798,769
Term loans 619,399 -- 797,247 1,818,757 3,235,403
Short term loan 8,974,659 -- -- -- 8,974,659
Overdraft 3,499,651 -- -- -- 3,499,651
Loans against trust receipts 22,207,891 -- -- -- 22,207,891
Amount due to related parties 93,498 7,160 -- 3,992 104,650
46,780,432 202,797 1,540,417 3,819,513 52,343,159
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (Continued)
Group
At 31 December 2010Less than 3 months 3 to 6 months
6 months to 1 year
More than 1 year Total
RO RO RO RO RO
Trade and other payables 25,206,322 58,212 49,533 272,973 25,587,040
Taxation 1,157,249 - - - 1,157,249
Term loans 536,425 - 769,601 10,255,879 11,561,905
Short term loan 11,217,959 - - - 11,217,959
Overdraft 202,299 - - - 202,299
Loans against trust receipts 28,978,094 4,684 - - 28,982,778
Amount due to related parties - 24,833 6,932 909 32,674
67,298,348 87,729 826,066 10,529,761 78,741,904
At 31 December 2009Less than 3 months 3 to 6 months
6 months to 1 year
More than 1 year Total
RO RO RO RO RO
Trade and other payables 11,233,911 195,637 743,170 1,948,490 14,121,208
Taxation 750,495 -- 48,274 798,769
Term loans 538,233 -- 750,500 1,746,500 3,035,233
Short term loan 8,946,610 -- -- -- 8,946,610
Overdraft 3,499,651 -- -- -- 3,499,651
Loans against trust receipts 22,170,950 -- -- -- 22,170,950
Amount due to related parties 93,498 7,160 -- 3,992 104,650
47,233,348 202,797 1,493,670 3,747,256 52,677,071
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664,
286
1,36
5,80
299
0,68
399
0,68
31,
664,
286
1,36
5,80
299
0,68
399
0,68
3
Cash
and
ban
k ba
lanc
es2,
462,
617
1,96
9,16
43,
107,
428
2,36
8,69
62,
462,
617
1,96
9,16
43,
107,
428
2,36
8,69
6
Inve
stm
ent
in a
ssoc
iate
-71
2,51
3-
729,
533
-71
2,51
3-
729,
533
Tota
l55
,846
,873
52,2
77,7
6146
,310
,646
46,1
85,5
8655
,846
,873
52,2
77,7
6146
,310
,646
46,1
85,5
86
Fin
anci
al li
abili
ties
Trad
e an
d ot
her
paya
bles
31,4
04,5
7724
,316
,032
14,3
00,6
6213
,701
,590
31,4
04,5
7724
,316
,032
14,3
00,6
6213
,701
,590
Due
to
rela
ted
part
ies
75,1
991,
408,
327
104,
650
104,
650
75,1
991,
408,
327
104,
650
104,
650
Ban
k bo
rrow
ings
40,2
00,2
4440
,200
,244
34,4
75,4
9034
,475
,490
40,2
00,2
4440
,200
,244
34,4
75,4
9034
,475
,490
Taxa
tion
1,15
7,24
91,
157,
249
798,
769
798,
769
1,15
7,24
91,
157,
249
798,
769
798,
769
Term
loan
s11
,489
,936
1,73
9,21
88,
030,
805
2,97
5,86
711
,489
,936
1,73
9,21
88,
030,
805
2,97
5,86
7
Tota
l84
,327
,205
68,8
21,0
7057
,710
,376
52,0
56,3
6684
,327
,205
68,8
21,0
7057
,710
,376
52,0
56,3
66
OCI ANNUAL REPORT 2010
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67
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
30 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
y Cash and short-term deposits, trade receivables, trade payables, and other current liabilities approximate their
carrying amounts largely due to the short-term maturities of these instruments.
y Long-term fixed-rate and variable-rate receivables / borrowings are evaluated by the group based on parameters such
as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics
of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these
receivables. As at 31 December 2010, the carrying amounts of such receivables, net of allowances, are not materially
different from their calculated fair values.
y Fair value of quoted instruments is based on price quotations at the reporting date. The fair value of unquoted
instruments, loans from banks and other financial liabilities as well as other non-current financial liabilities is
estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and
remaining maturities.
y Fair value of available-for-sale financial assets are derived from quoted market prices in active markets, if available.
y Fair value of unquoted available-for-sale financial assets is disclosed in note 13.
y The group enters into derivative financial instruments with various counterparties, principally financial institutions
with investment grade credit ratings. Derivatives valued using a valuation techniques with market observable inputs
are mainly, foreign exchange forward contracts and commodity forward contracts. The most frequently applied
valuation techniques include forward pricing using present value calculations. The models incorporate various inputs
including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and
forward rate curves of the underlying commodity.
y As at 31 December 2010, the marked to market value of derivative asset position is net of a credit valuation adjustment
attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on
the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments
recognised at fair value.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
As at 31 December, the group had unquoted available for sale investments which are carried at cost as described in note
13 and are under level 3 fair value measurement category.
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68 OCI ANNUAL REPORT 2010
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29OCI ANNUAL REPORT 2010
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
30 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Assets measured at fair value
31 Dec 2010 Level1 Level2 Level3
RO RO RO RO
Parent Company
Investment in an associate 712,513 -- -- 712,513
Available-for-sale investments 523,043 13,043 -- 510,000
Group
31 Dec 2010 Level1 Level2 Level3
RO RO RO RO-- --
Available-for-sale financial assets 523,043 13,043 -- 510,000
31 Dec 2009 Level1 Level2 Level3
RO RO RO RO
Parent Company
Investment in an associate 729,533 -- -- 729,533
Available-for-sale investments 9,005 9,005 --
Group
Investment in an associate
Available-for-sale financial assets 9,005 9,005 -- --
Liabilities measured at fair value
31 Dec 2010 Level1 Level2 Level3
RO RO RO RO
Parent Company
Commodity and currency forward contract 923,842 -- 923,842 --
Group
31 Dec 2010 Level1 Level2 Level3
RO RO RO RO
Commodity and currency forward contract 1,177,210 -- 1,177,210 --
Group and Parent Company
31 Dec 2009 Level1 Level2 Level3
RO RO RO RO
Commodity and currency forward contract 244,649 -- 244,649 --
During the reporting period ended 31 December 2010, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurements.
Liabilities measured at fair value
During the reporting period ended 31 December 2009, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurements.
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Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
31 KEY SOURCES OF ESTIMATION UNCERTAINTY
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 :
Impairment of accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer
probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not
individually significant, but which are past due, are assessed collectively and a provision applied according to the length of
time past due.
At the reporting date, gross trade accounts receivable were RO 45,360,366 (2009: RO 39,854,378), and the provision for
doubtful debts was RO 800,000 (2009: RO 800,000). Any difference between the amounts actually collected in future
periods and the amounts expected will be recognised in the income statement.
Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is
made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis.
Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision
applied according to the inventory type and the degree of ageing or obsolescence, based on anticipated selling prices.
At the reporting date, gross inventories were RO 41,056,772 (2009: RO 25,835,599) with provisions for old and obsolete
inventories of RO 800,000 (2009: RO 800,000) respectively. Any difference between the amounts actually realised in future
periods and the amounts expected will be recognised in the income statement.
Useful lives of property, plant and equipment
The group’s management determines the estimated useful lives of its property, plant and equipment for calculating
depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear.
Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where
the management believes the useful lives differ from previous estimates.
Impairment of equity investments
The group treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline
in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘sig-
nificant’ or ‘prolonged’ requires judgment, which is critically evaluated by the group on a case to case basis.
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70
Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010
31 KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Taxes
Uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income.
Given the wide range of business relationships and nature of existing contractual agreements, differences arising between
the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments
to tax income and expense already recorded. The group establishes provisions, based on reasonable estimates, for possible
consequences of finalisation of tax assessments of respective group companies. The amount of such provisions is based
on various factors, such as experience of previous tax assessments and differing interpretations of tax regulations by the
taxable entity and the responsible tax authority.
32 COMPARATIVE AMOUNTS
Certain of the corresponding figures for 2009 have been reclassified in order to conform with the presentation for the
current year. Such reclassifications do not affect previously reported profit or shareholder’s equity.