SAUDI CEMENT COMPANY (A Saudi Joint Stock Company) Annual Report 2014 For the 56 th Ordinary General Assembly Meeting to be Held on March 17, 2015, (16 th Jumada I, 1436) = 1 =
SAUDI CEMENT COMPANY HEAD OFFICE Saudi Cement Company 3964-King Saud Alamamra Unit No. 1 Dammam 32415-7102 Telephone : (013) 835 8000 Fax : (03) 834 3091 e-mail : scc@saudicement.com.sa website : www.saudicement.com.sa HOFUF PLANT Telephone Fax e-mail : (013) 533 2222 : (013) 533 1437 : scc@saudicement.com.sa AIN DAR PLANT Telephone Fax e-mail : (013) 566 0600 : (013) 566 1992 : scc@saudicement.com.sa RIYADH OFFICE Telephone Fax e-mail : (011) 477 3021 : (011) 478 0362 : scc@saudicement.com.sa BANKS Riyad Bank National Commercial Bank Saudi Hollandi Bank Samba Financial Group Al Bank Al Saudi Al Fransi Saudi British Bank (SABB) Al Rajhi Bank Al Bilad Bank AL-Jazeera Bank AUDITORS Dr. Mohamed Al-Amri & Co. = 2 =
2014 Board of Directors Report For the 56 th Ordinary General Assembly Meeting to be Held On March 17, 2015 ( 16 th Jumada I, 1436 ) = 3 =
Chairman Sheikh Khaled Abdulrahman Al-Rajhi Managing Director Dr. Walid Ahmed Juffali Members: BOARD OF DIRECTORS Sheikh Mohammed S. Balghonaim Sheikh Khaled Abdulrahman Al-Abdulkarim Mr. Fahad Abdullah Al Saleh Sheikh Sami Ali Juffali Mr. Hamad Abdulla Olayan Dr. Abdulrahman Suleiman Al-Rajhi Mr. Mohammed Ali Al Garni Mr. Ahmed Mohmmed Al Omran Mr. Mohammed Abdulkarim A. El-Khereiji = 4 =
Board of Directors Statement Respected Shareholders, The Board of Directors welcomes you to the 56 th Ordinary General Assembly Meeting of Saudi Cement Company (SCC) and thanks you for attending this meeting. The Board is pleased to present to you the Annual Report for the year ended December 31, 2014 together with the Financial Statements and the Auditors Report related to that year. = 5 =
PRODUCTION: Clinker Production: Total quantity of clinker produced during 2014 amounted to 8,599,000 tons compared to a quantity of 8,905,685 tons for 2013 i.e. a decrease of (306,685) tons or approximately (3,, 4%). The production from kilns No. 6, 7 and 8 during the year achieved production efficiency in excess of each kiln s designed capacity. On the other hand, total clinker production for all cement companies in the Kingdom during 2014 reached about 57.6 million tons in comparison with 54.2 million tons for 2013, i.e. an increase of about 6.3 %. Cement Production: Cement production for 2014 totaled 8,042,659 tons in comparison with 8,794,258 tons for 2013, i.e. a decrease of (751,599) tons or approximately (8, 5%). Cement grinding and dispatch were mainly conducted at Hofuf Plant. Also, Ain Dar cement grinding and dispatch facilities were partially utilized for meeting cement sales by rail and additional requirements of the local market. Clinker Stock: The clinker inventory as of December 31, 2014 amounted to 3,240,146 tons, in comparison with a quantity of 2,182,062 tons as of December 31, 2013, i.e. an increase of 1,058,084 tons or approximately 48,5%. On the other hand, clinker inventory for all cement companies in the Kingdom soared to historical levels by the end of 2014, reaching 21.6 million tons, an increase of 6.8 million tons and 47% compared to the end of 2013. The escalation in clinker inventory was due to slower pace of growth of domestic demand during 2014 than CAGR of the preceding seven years, increase in local production quantities, and clinker importation in compliance with the directions of the Ministry of Trade and Industry. Operation and Maintenance: SCC continued highly efficient operation and maintenance by improving the time available for operation and increasing the daily production volume, which contributed positively to reduction of cost per ton. SCC has maintained its supremacy in producing its high quality types of cement products, and has the capability and flexibility to produce other types of cement, if that proves to be economically viable. = 6 =
MARKETING: Introduction: The pace of growth of cement demand in Saudi Arabia was slower during 2014 than CAGR of the preceding seven years due to the negative impact of work force shortage on the building and construction activity. Accordingly, the total local cement sales quantity reached around 56.5 million tons, in comparison with a total demand of 55.25.2 million tons for 2013 i.e. an increase of just 1.3 million tons or approximately 2.4%. Total cement sales (local & export) for the year 2014 amounted to 57.2 Million tons. Sales: SCC s local cement sales volume for 2014 was 7,551,953 tons in comparison with 8,559,636 tons for 2013 i.e. a decline of (1,007,683) tons or (11.8%).Total local & export cement sales volume for 2014 amounted to 7,972,414 tons in comparison with 8,757,826 tons for 2013, i.e. a decrease of (785,412) tons or (9%). Exports: The total exported quantities during 2014 were 420,461 tons, compared to 198,190 tons in 2013, i.e. an increase of 222,271 tons or approximately 112.2%. The above increase was attributed mainly to rising Company s sales in the kingdom of Bahrain. Principal Activity: Saudi Cement Company s (SCC s) principal and sole activity is confined to the manufacture and trading of cement and cement related products. Hence, the company does not carry out any other activity, nor does it produce any other products. Plans, Decisions & Future Expectations: Currently, SCC has no expansion plans for its production facilities due to adequacy of production capacity kingdom wise for several future years. Further, clinker inventory levels for cement companies has reached historical heights whose utilization may require considerable time. (a) Stoppage of old Kilns (1,2,3): The Board of Directors decided on 16/5/1435 (17/3/2014) to stop permanently old production lines 1, 2, 3 in Hofuf Plant with a total capacity of 1,325 clinker per day due to oldness, higher operating costs, and lower environmental efficiency. It is worth mentioning that these Kilns were re-operated on 22/12/2012 to meet growing cement demand and market pressures at the time. However, since the need for their re-operation has ceased to exist for now and future, a decision was made to eternally close these kilns and remove them from the plant site. = 7 =
(b) Rehabilitation of Klins (4, 5): Rehabilitation and operation of Kiln 4 and 5 at Hofuf plant with the installed capacity of 3,000 ( Three thousands ) tons of clinker per day was forecasted during the third quarter of 2014. However, the company announced on 27.11.1435 (22/09/2014) completion of these rehabilitation works, and the decision to refrain from operating these kilns for the time being due to high levels of Clinker inventory kingdom-wise at the end of August 2014 of about 19.8 million tons, absence of any real growth in demand Kingdom-wise during the period up to August 2014 compared with the corresponding period of the previous year, and a decline in the company's sales volume during the same period of approximately 14%. The feasibility of operating these Kilns shall be re-considered whenever market conditions warrant that. (C) Concentrating Cement Grinding Capacity at Hofuf Plant: Currently, SCC mainly utilizes its grinding facilities at Hofuf Plant and, partially depends on the grinding facilities at its Ain Dar Plant to cater for cement Rail dispatches and any rising demand in the local market. SCC, however, aims to concentrate its grinding operations at Hofuf Plant only in order to cut costs and better serve its customers. Accordingly, a contract was signed for laying of new full- facility rail tracks capable of handling up to 70 railway wagons at Hofuf plant with a total cost of SR 38 million and expected completion date of November 2015. Another contract with a total cost of SR 84 million and expected completion date of January 2016 was signed for constructing a cement loading facility for serving these new tracks,. The above projects require raising the operational efficiency of grinding facility at Hofuf plant to higher levels in order to compensate for Ain Dar plant s old grinding facility which will be stopped ( due to high operating cost and in order to save on additional clinker transportation charges from Hofuf plant to Ain Dar plant) and improve the cement quality and meeting MEPA s environmental requirements. Accordingly, the Board of Directors had already resolved to add two new mills with total designed capacity of approximately 440 ton/hour. The technical offers from qualified contractors were received and the final evaluation of the technical offers shall be completed during 2015. Risks facing the Company: Like other cement companies in Saudi Arabia, SCC faces some operational risks such as the possibility of fluctuations in the prices of raw materials and other production input. In addition, the Company faces the kingdom s macroeconomic risk and its associated volatilities like other domestic companies, which may result in decline in cement demand. However, due to the expected continuation of high government spending (as was reflected in the 2015 Government Budget), it is highly unlikely that such risks will materialize. = 8 =
Schedule of 5 years Balance Sheets : Description (SR 000 s) Years 2014 2013 2012 2011 2010 Current Assets 1,229,469 986,408 801,607 936,095 870,476 Non-Current Assets 3,254,971 3,384,487 3,531,555 3,662,824 3,746,197 Total Assets 4,484,440 4,370,895 4,333,162 4,598,919 4,616,673 Current Liabilities 1,063,700 841,467 767,386 824,477 735,555 Non-Current Liabilities 211,410 320,982 407,922 492,177 509,880 Total Liabilities 1,275,110 1,162,449 1,175,308 1,316,654 1,245,435 Paid up Capital 1,530,000 1,530,000 1,530,000 1,530,000 1,530,000 Reserves 835,000 835,000 835,000 729,075 645,953 Retained Earnings 844,330 843,446 792,854 1,023,190 1,195,285 Shareholders Equity 3,209,330 3,208,446 3,157,854 3,282,265 3,371,238 Total Liabilities & Shareholders Equity 4,484,440 4,370,895 4,333,162 4,598,919 4,616,673 Schedule of 5 years Income Statements : Description (SR 000 s) Years 2014 2013 2012 2011 2010 Sales 2,024,587 2,187,255 2,203,447 1,716,095 1,526,151 Cost of Sales (795,530) (902,993) (974,237) (765,095) (757,245) Gross profit 1,229,057 1,284,262 1,229,210 951,000 768,906 Admin & Selling Exps. (105,614) (97,887) (87,153) (85,928) (87,518) Operating Income 1,123,443 1,186,375 1,142,057 865,072 681,388 Other Income/(Expenses) (12,432) (15,344) 395 (12,508) (4,950) Zakat (36,927) (47,239) (40,663) (21,337) (16,911) Net Income 1,074,084 1,123,792 1,101,789 831,227 659,527 = 9 =
Geographical analysis of Sales Revenue for2014: The greater portion of Company s sales were made within Saudi Arabia, and a small portion was exported in accordance with the limits imposed by the authorities. Portland cement exports were confined to the Kingdom of Bahrain. The following table shows the geographical analysis of Company s sales revenue for 2014: SR (000's) Details 2014 2013 Local Market 1,919,453 2,126,651 Export Market 105,134 60,604 Total 2,024,587 2,187,255 Material Differences in Operating Results: (SR 000) Details 2014 2013 % of change Operating Profit 1,123,443 1,186,375 (5.3) The decrease in operating profits compared to the previous year was due to decrease in cement sales due to decline in local demand in addition to increase in selling and distribution expenses. Departure from Accounting Standards: There was not any departure from accounting standards issued by the Saudi Organization of Certified Public Accountants. Subsidiary Companies: There were no subsidiary companies. Dividend Policy: The Company distributes the annual net profit after deducting all general and administrative expenses and all other costs and provision for Zakat as follows: 1. 10% of the net profit is set aside to formulate the Statutory Reserve, and it is the right of the Ordinary General Assembly to stop contribution to that reserve when it reaches 50% of the paid up capital. The 54 th Ordinary General Assembly held on 08 Jumada1 1434 corresponding to 20 March 2013 ratified stopping of appropriation to Statutory Reserve since it had reached 50% of paid- up capital. 2. It is also the right of the Ordinary General Assembly based on Board of Directors recommendation, to set aside not less than 5% of the net profit to formulate an agreeable Reserve. 3. Distribute out of the remaining profit the first portion of dividend to shareholders representing 5% of paid up capital. 4. After all the above appropriations, appropriate a maximum of 10% of the remaining profit as Directors remuneration to the Board Members, but not to exceed the maximum limit of SR 200,000 to each member. 5. Subsequently, It is possible to distribute all (or part of ) the remaining profit as additional Dividend to Shareholders, or carry it forward (totally, or partially) to next year, in accordance with Board of Directors recommendation. = 10 =
Appropriation Account: During its meeting on 30/07/1435 (29/05/2014) the Board of Directors has decideds to distribute interim dividend for the first half of the year 2014 at the rate of Saudi Riyals Three and half (SR3.5) per share representing 35% of nominal paid up capital and totaling SR. 535.5 million to shareholders registered on Tadawul as at close of market on Tuesday 04/09/1435 (01/07/2014) and payment of this interim dividend started on Tuesday 07/09/1435 (09/07/2014). Also, in accordance with Article (46) of the Company By Laws, the Board of Directors recommends to your General Assembly the approval of its recommendation at its Meeting dated 16 Rabi II,1436 corresponding to 05 February 2015 to distribute interim dividends for the second half of 2014 at the rate of Saudi Riyals two and half (SR2.5) per share representing 25% of nominal paid up capital and totaling SR382.5 million to shareholders registered on Tadawul records as at close of market on the day of this shareholders ordinary general assembly meeting on16 Jumada 1 1436 (17 March 2015). If your General Assembly approve this distribution, the total dividend for the year 2014 will hence be Saudi Riyals Six (SR6) per share i.e. 60% of nominal paid up capital. Below is the recommended profit appropriation: (SR 000s) Net profit 1,074,084 Less: Statutory Reserve ---- Less: First portion of dividend to shareholders of 5% of paidup capital (SR1,530 millions) 1,074,084 76,500 997,584 Less: Directors remunerations 2,200 995,384 Add: Profits brought forward from previous year 305,746 Less: Additional dividend to shareholders of 55% of paid up capital (SR1,530 millions) 1,301,130 841,500 Balance to be carried forward to next year 459,630 Interest in voting shares held by persons (other than directors, senior executives and their relatives) per Article 45: None. = 11 =
Interests, Rights of Board Members, and their relatives in the Shares of Saudi Cement Company: Name Beginning of the year No. of Shares End of the year Change (Share) Percentage of change Khalid Abdulrahman Al Rajhi 12,338,507 12,338,507 - - Walid Ahmed Juffali 4,500 4,500 - - Mohammed S. Balghonaim 202,684 202,684 - - Khalid Abdulrahman Al Abdulkarim 17,137 17,137 - - Fahad Abdullah Al Saleh 1,500 1,500 - - Sami Ali Al Juffali 1,500 1,500 - - Hamad Abdulla Olyan 1,500 1,500 - - Abdulrahman Suleiman Al Rajhi 1,000 1,000 - - Mohammed Ali Al Garni 1,500 1,500 - - Ahmed Mohammed Alomran Non- Owner Non- Owner - - Mohammed Abdulkarim A. El Khereiji 1,056,937 1,056,937 - - Remarks: 1. There are no listed debt instruments or convertible debts instruments of the Company. 2. There are no contractually based securities, subscription rights, warrants or similar rights in the shares of the Company. Interests and Rights of Executive Management, and their relatives in Shares of Saudi Cement Company: Name No. of Shares Beginning of the year End of the year Change (Share) Percentage of change Mr. Hussain Bin Mansi Naser Abu Taki Sales Manager 14,700 14,700 - - = 12 =
Loans: The following table illustrates the total SIDF and local banks Islamic Tawarruq loans, their movements during the year 2014 and the outstanding balances as at the end of 2014: The Bank Duration Continued Loans Balance as of 01/01/2014 Used during the year Repaid during the year SR Million Balance as of 31/12/2014 SAMBA Revolving N/A 425 275 200 500 SFB Revolving N/A 0 100 0 100 Al-Bilad Revolving N/A 0 250 250 0 SIDF Eight Years 596 335 0 100 235 Total 596 760 625 550 835 SCC would like to express its thanks and gratitude to SIDF management and staff for their sincere endeavors to support SCC s objectives, and also thank the management and staff of the above local banks for the great confidence placed in our Company, and look forward to continued mutually beneficial relationships. Board Members Meetings and Attendance: The Board of Directors held 4 (four) meetings during 2014, with the following attendance record: Attendance register Name of Board Member 6/2/2014 17/3/2014 29/5/2014 20/11/2014 Khaled Abdulrahman Al-Rajhi Walid Ahmed Juffali X Mohammed S. Balghonaim Khalid Abdulrahman Al Abdulkarim X Fahad Abdullah Al Saleh Sami Ali Juffali X X X X Hamad Abdulla Olayan Abdulrahman Sulaiman Al-Rajhi Mohammed Ali Al Garni Ahmed Mohammed Al-Omran Mohammed Abdulkarim A. El-Khereiji Attending X Absent = 13 =
Works or Contracts of the Company in which a Board Member, CEO, or CFO or any party related to any of them have an interest: The Company has awarded the contract for 2014 insurance services (excluding medical insurance) to Wataniya Insurance Company (a related party to Dr. Walid Ahmed Juffali, who s a Board Member of Wataniya Insurance Company) after winning the bid that was invited during 2013. The total insurance premiums that have accrued on the various insurance policies during 2014 amounted to about SR. 7.8 million including marine insurance on Company imports and rail cement cargos, as well as insurance covers on additions to tangible assets during the year. Outstanding Regulatory Payments: (SR 000) Details Years 2014 2013 Zakat & Income Tax 36,927 37,892 General Organization for Social Insurance 861 627 Raw Materials Exploitation Fees 47,283 52,423 Thrift Saving Program for SCC employees: The Company contributes to a Thrift Savings Program for its employees that was approved by the then Ministry of Labor & Social Affairs on 11/05/1414 corresponding to 27/10/1993 in order to motivate employees to exert their best efforts in serving the Company, and increase their loyalty. The following is the movement of the Thrift Saving Program During the year. Description Amounts in SR Balance at the beginning of the year 7,285,799 Additions during 2014 2,614,217 Deletions during 2014 2,041,276 Balance at the end of the year 7,858,740 Board of Directors Declarations: The Board of Directors declares that: A Proper books of account have been maintained; B The system of internal control is sound in design, and has been effectively implemented; and C - There are no significant doubts about the Company's ability to continue as a going concern. = 14 =
Corporate Governance: SCC has already prepared its own Corporate Governance Charter, which was approved by the Board of Directors on 22 nd of Safar 1430 corresponding to 17/2/2009. SCC is currently applying all the Corporate Governance Regulations provisions, except for the following: No. Pertinent Article/Para Reasons for non-adoption 1 2 3 6/(b) Cumulative voting method shall be applied for the election of Board Members 6/(d) Investors who are legal persons and who act on behalf of others - e.g. investment funds- shall disclose in their annual reports their voting policies, actual voting, and ways of dealing with any material conflict of interests that may affect the practice of the fundamental rights in relation to their investments. 10/(e) Outlining a written policy that regulate the relationship with stakeholders with a view to protecting their respective rights; in particular, such policy must cover..etc. will be applied once it becomes mandatory. Not mandatory by regulation beside non-availability of mechanism for execution so far. Not mandatory by regulation and the policy is under preparation 4 12/(i) Legal person who is entitled under the Company s Articles of Association to appoint representatives in the Board of Directors, is not entitled to vote on the appointment of other members of the Board of Directors. Will be applied once it becomes mandatory. Board Members Holding Directorships in other Saudi listed Companies: The following Board Members hold directorship in other joint stock companies: Name of Board Member Name of Listed Company Khaled Abdulrahman Al-Rajhi - Al-Bilad Bank - Saudi United Company for Co- operative Insurance Walaa - Takween Advanced Industries Co. - Wataniya Cooperative Insurance Company-KSA. Walid Ahmad Juffali - Ibrahim Juffali & Brothers (Closed Joint Stock Company) KSA Khaled Abdulrahman Al-Abdulkarim - Samba Financial Group Sami Ali Juffali - Ibrahim Juffali & Brothers (Closed Joint Stock Company) KSA Hamad Abdullah Olyan (Representative of Saudi Cement Company) Dr. Abdulrahman Sulaiman Al Rajhi Mohammed Ali Al Garni (Representative of Saudi Cement Company) Ahmed Moahmmed Al-Omran Mohammed A. Al- Khereiji - United Cement Company (Bahraini Closed Joint Stock Company ) - Group International Cement Company(Kuwaiti Closed Joint Stock Company ) - Advanced Educational Company (Closed Joint Stock Company) - Saudi Industrial Investment Group (Closed Joint Stock Company) - Al-Rajhi Brothers Group Company (Closed Joint Stock Company) - Syuop Arabian Company (Closed Joint Stock Company) - United Cement Company (Bahraini Closed Joint Stock Company ) - Group International Cement Company(Kuwaiti Closed Joint Stock Company) - Samba Financial Group - Ace Arabia Cooperative Insurance Co. - Saudi Paper Manufacturing Co. = 15 =
Board Membership & classification: The Board of Directors consists of eleven (11) members, and their classification for 2014 was as follows: Name of Board Member Designation Classification Khaled Abdulrahman Al-Rajhi Chairman Non-Executive Walid Ahmed Juffali Board Member & Managing Director Executive Mohammed S. Balghonaim Board Member Independent Khaled Abdulrahman Al-Abdulkarim Board Member Independent Fahad Abdullah Al Saleh * Board Member Non-Executive Sami Ali Juffali Board Member Independent Hamad Abdulla Olayan Board Member Non-Executive Abdulrahman Suleiman Al-Rajhi Board Member Non-Executive Mohammed Ali Al Garni Board Member & Chief Executive Officer Executive Ahmed Mohammed Al-Omran** Board Member Non-Executive Mohammed A. El-Khereiji Board Member Independent * Representative of General Organization for Retirement. ** Representative of the General Organization for Social Insurance effective. Audit Committee: The Audit Committee s members are: Hamad Abdulla Olayan Chairman Mohammed A. Al- Khereiji Member Dr. Ahmad Abdulla Al Maghamis Member The committee has performed its duties and responsibilities through Six meetings held during the year. Its most important duties and responsibilities are: Discussions of the interim and yearly Financial Statements before being reported to the Board of Directors; recommendations to the Board for appointment, demission and determining the fees of the External Auditors; follow up of the work of the appointed External Auditors; studying the internal control system and giving a written report of its opinion & recommendations in this regard; supervising the company internal audit department and studying its reports and following up on the implementation of corrective actions of all observations in the internal audit reports. Nominations & Remunerations Committee: The Nominations & Remunerations committee s members are: Dr. Walid Ahmed Juffali Chairman Mohammed S. Balghonaim Member Khaled Abdulrahman Al-Abdulkarim Member The committee has performed its duties and responsibilities through one meetings held during the year. The most important duties and responsibilities of the Committee are: recommend to the Board nomination of members. Review the structure of the Board and annually review the capabilities and qualifications of its members and recommend possible changes that can be made for the Company s benefit. Set clear policies for the compensation & remuneration of the Board members and the Executive Management on the basis of their performance ensuring that the compensation and rewards are adequate to retain qualified persons as well as to attract qualified people and are = 16 =
compatible with the market s competitive levels of compensation and rewards. Verify annually the independence of the independent Board members and, lack of any conflict of interest for members holding directorship in other companies. Board of Directors Remuneration and Other Compensation paid during 2014: The Chairman and members of the Board of Directors did not receive any remuneration or other compensations during 2014 except as detailed below: Saudi Riyal Name of Board Member Yearly Remuneration Other compens-- ations Khaled Abdulrahman Al-Rajhi 200,000 12,000 212,000 Walid Ahmed Juffali 200,000 219,590 419,590 Mohammed Abdulkarim A. El-Khereiji 200,000 12,000 212,000 Mohammed S. Balghonaim 200,000 17,400 217,400 Total Abdulla Abdulrahman Al-Suhibani 150,000 16,050 166,050 Khaled Abdulrahman Al-Abdulkarim 200,000 12,000 212,000 Fahad Abdullah Al Saleh 200,000 21,400 221,400 Sami Ali Juffali 200,000 13,060 213,060 Hamad Abdulla Olayan 200,000 12,000 212,000 Abdulrahman Suleiman Al-Rajhi 200,000 17,400 217,400 Ahmed Mohammed Al-Omran 50,000 5,350 55,350 Mohammed Ali Al Garni 200,000 12,000 212,000 Highest Remunerations & Compensations paid during 2014 to Top Five Executives: The following schedule shows details of highest remunerations & compensations paid to the top five executives, including both CEO and CFO: Description Amounts In SR (000's) Annual Salaries & compensation 3,385 Annual Allowances 3,313 Annual Bonus 4,107 Annual Performance Incentives 5,020 = 17 =
Fine imposed by the Capital Market Authority: The Capital Market Authority (CMA) imposed on 14/11/1435 (08/09/2014) a fine of SR 10.000 (Ten Thousand Saudi Riyals) on SCC for violation of clause (A) of Article (40) of the Listing Rules and clause (8) of the Special Instructions for listed companies Announcements of their the financial results due to SCC s failure to disclose all the material reasons leading to the decline of Q4 2013 net profit in comparison with the corresponding period of the previous year while announcing its interim financial results for the period ending on 31/12/2013 on 14/01/2014. The Capital Market Authority (CMA) demanded discussion of the subject of the fine during the next Board meeting and reporting to the (CMA) the actions taken about it. The Board of Directors discussed the fine issue during its subsequent meeting held on 27/01/1436 (20/11/2014). The Board has directed the company s executive management to ensure adherence to disclosing all materials reasons affecting the results, as well as compliance with all rules and regulations of CMA in future. The CMA were duly informed about this outcome. Results of Annual Audit of the effectiveness of internal control procedures: The Internal Audit Department of the Company implements continuous operational audits to ensure the effectiveness of internal control system and procedures in safeguarding the Company s assets, and assess operational risks and the adequacy of performance effectiveness. These internal operational audits did not show any material weakness in the internal control system of the Company, and found that the internal control procedures were operating effectively. In addition, the External Auditors usually conduct an evaluation of that system as part of their audit of the Company s financial statements, whereby they are enabled access to all the minutes of the internal audit committee as well as reports of the internal audit department for the period subject to their examination. Environmental Protection and Pollution Control: SCC has intensified its efforts with the concerned authorities for implementing measures to improve its facilities and promote a better environment. In this regard, the design for the two new production lines has taken into consideration the latest technologies for dust collection that will lead to the highest standards in environmental protection and pollution control, which surpass MEPA s requirements. Meanwhile, the Company has replaced the Electrostatic Precipitators (EPs) for kiln 6 with Bag House filters, hence completing the whole dust emission control system at SCC s plant to reach the least dust pollution levels for all its facilities as required by the authorities. It should also be noted that all new projects to improve performance will incorporate the latest sophisticated equipment for controlling dust emissions. Hiring and Training of Saudi Nationals: SCC implemented technical and administrative training courses during 2014, for 181 of its Saudi employees. Additionally, SCC carried out co-operative training for college and university students, as well as its students summer training programs. SCC continued in its implementation of technical and administrative training courses to help in qualifying the employees and improve their efficiency. The percentage of Saudi workforce as at the end of 2014 has reached 52.3%. SCC have sought to reinforce its Saudization plan as a national strategic goal and is continuing that quest. = 18 =
Social Responsibility: The Company believes that it no longer relies only on its financial position for building its reputation, but also on carrying out its social responsibility towards its local community. This social responsibility includes providing employment to neighboring communities as well as protecting the environment. Accordingly, these communities could harvest the fruits of supporting it and embrace its facilities and plants in spite of the absence of commercial relationships. The Company's carrying out of some social activities reflects its identity, national belonging, and its leading role in its local community, so that the latter acknowledges its existence and values its contributions. Also the Company emphasizes integrating its employees contribution in some of its social responsibility programs. The Saudi Cement Company, during the year 2014, presented direct support to the following societies: Social Charitable Societies:- Benevolence Charitable Society in Eastern Province, Benevolence Charitable Society in Al Ahsa Province, Charitable Holy Qura'an Memorization Society in Eastern Province, Charitable Holy Qura an Memorization Society in Al Ahsa Province, Al Omran Charitable Society, Fatat Al Ahsa Charitable Society, Al Oyoon Charitable Society, Al Helailah Charitable Society, Al Mouwasat Charitable Society, Al Foddol Charitable Society, Al Mansourah Charitable Society, Charitable Women Society for Social Services, Qafelat El Khair Society for Social Services, Benevolence Charitable Society in El Kalabiah, El Bataliah Charitable Society, Al Morah Charitable Society, El Tarf Charitable Society, El Jesha Charitable Society, El Jaffer Charitable Society., Specialized Charitable Societies:- Prince Sultan Disabled Rehabilitation Center in Eastern Province, Anti-Smoking Charitable Society in Al Ahsa, Al Rahma Charitable Medical Society, Saudi Charitable Society for Cancer Patients Care, Charitable Anti Drugs Society, Saudi Charitable Diabetics & Endocrinology Society, Anti Smoke Charitable Society in Dammam, Charitable Disabled Care & Rehabilitation Society, Charitable Marriage Facilitation & Family Care Society. In addition to that, your company has sponsored many occasions and ceremonies including the sponsoring of We are All Producers Program that was organized by Al Ahsa Girl Society, participation in Gulf Traffic Campaign for the Year 2014 in collaboration with General Directorate of Traffic, sponsoring the Distinguished Employees Honoring Ceremony in Saudi Railway Organization, participation in the awareness Campaign in collaboration with General Directorate of Anti Drugs in Al Ahsa Governorate, participation in supporting the National Day Ceremony Fund of Al Ahsa Governorate Emarah and also participation in supporting the (Railway Magazine) of the Saudi Railway Organization. etc. Accidents & Casualty Center in the National Guard Hospital- Al Ahsa: Based on your company s social responsibility towards the community, the Extraordinary General Assembly held on 4/6/1431H (18/5/2010) approved the recommendation of SCC s Board of Directors for allotting an amount of SR 50 million ( Fifty Million Saudi Riyals only ) from the Conventional Reserve for the construction of Causalities & Accidents Center in King Abdul Aziz Hospital of the National Guard Health Affairs in Al Ahsa Governorate. Since the Health Affairs have started the execution of the project, and following a visit to the project site by some Company s officials, the Executive Management has signed a (contract for donating the construction of Causalities and Accidents Center in King Abdul Aziz Hospital in Al Ahsa) on 23/6/2014. Accordingly, the payment shall be effected through 5 equal instalments during the years 2015 and 2016. It is planned that the project shall be completed on 16/10/2016. = 19 =
Quality Certificates: SCC continued its application of, and compliance with, international Quality Management Systems, and maintained its ISO 9001:2008 certifications obtained from specialized and accredited German Company (TUV NORD) for the Hofuf and Ain Dar Plants. This reaffirms the commitment of SCC towards the full compliance and implementation of the quality management programs in all its internal administration and production / technical processes with the purpose of attaining the desired level of efficiency, effectiveness, and continuous improvement for all SCC s different operating sectors and functional lines. Also, SCC continued to comply with quality standards of the Saudi Arabian Standards Organization (SASO), as well as the special quality requirements of some neighboring GCC countries. SCC is currently pursuing a new (CE) Certification of Conformity issued by the Belgian Certification Body (BE-CERT), which is required by European countries, for its products from Hofuf Plant to replace the previously granted certification to Ain Dar Plant. Furthermore, SCC continued to comply with the quality specifications of the American Petroleum Institute (API) for its oil-well cement product. Board of Directors' Recommendations: The Board of Directors recommends your adoption of the following resolutions:- 1) Approve the Board of Directors Annual Report for year 2014. 2) Approve the Financial Statements and the External Auditors' report for the year ended December 31, 2014. 3) Absolve the members of the Board of Directors from all responsibilities and obligations related to the year ended 31/12/2014. 4) Approve the Board of Directors' recommendations for distribution of dividends for the year 2014 at the rate of SR6 per share representing 60% of the nominal value of the share and a total amount of SR918 million ( Nine hundred eighteen million ), of which SR 3.5 per share representing 35% of the nominal value of the share and a total amount of SR 535.5 million was already distributed for the first half of the year, Entitlement to the second half dividend of SR2.5per share representing 25% of the nominal value of the share and a total amount of SR382.5 million shall be to shareholders on Tadawul s records at market close on the date of this General Assembly meeting. 5) Approve the disbursement of SR 2,200,000 (Two Million Two Hundred Thousand) as director s remunerations at the rate of SR. 200,000 (Two Hundred Thousand) per director for the financial year 2014. 6) Approve the appointment of Company s External Auditors, as recommended by the Audit Committee, for the audit of 2015 financial statements and review of quarterly interim financial statements and determine their fees or select other auditors. = 20 =
Conclusion: The Board of Directors expresses its appreciation and gratitude to all SCC shareholders for their confidence and support, and prays to God Almighty for His Blessings to our country and to our leaders, His Majesty the Custodian of the Two Holy Mosques King Salman Ibn Abdulaziz Al-Saud, and HRH Mugrin Ibn Abdulaziz Al- Saud Crown Prince and Deputy prime minister, and HRH Mohammed bin Naif Ibn Abdulaziz Al-Saud deputy crown prince and second deputy prime minister. The Board of Directors also extends its thanks and gratitude to all government departments and private sector entities and to all SCC s customers and suppliers for their continuous support; and, last but not least, to the Company employees for their continued efforts and their will to serve the Company most efficiently and diligently. May God bless you all. The Board of Directors = 21 =
KILNS PRODUCTION CAPACITIES (OPERATING & SUSPENDED) Clinker Annual Rated Capacity (tons) 11,200,000 Kilns Tons per day 2 x 10.000 Tons per day 1 x 3500 Tons per day 6 x 1500 Tons per day 1 x 725 Tons per day 2 x 300 Cement Annual Grinding Capacity (tons) 11,500,000 Mills (Cement) Tons per hour 3 x 280 Tons per hour 2 x 160 Tons per hour 3 x 120 Tons per hour 2 x 80 Cement Mills of old lines will be used to grind quantities in excess of the grinding capacity of the new Mills Type of Cement Produced Ordinary Portland Cement (ASTM Type 1 Specification) Sulphate Resisting Cement (ASTM Type V Specification) Oilwell Cement (API Class G Specification) Under API License to use API Monogram Special Cement of any type & Specification as per market demand = 22 =