Escolar Documentos
Profissional Documentos
Cultura Documentos
2014
Contents
The Board of Directors’ Report 6
The members of the Board of Directors as well as me are pleased to submit the annual
report for the fiscal year ended December 31, 2014.
The year 2014 was a good year for the petrochemical industries’ sector where the products’
maintained good prices and the global demand for them continued, but the prices started
to go down affected in the fourth quarter of the year by the global drop of oil prices.
The Company’s results indicate an unprecedented rise in profits from SAR714 million in
2013 to SAR933 million in 2014, which is attributed to the improved projects of the Na-
tional Petrochemical Company (Petrochem). The construction works of the Company’s
fourth project (Petrochemical Processing Company) for producing nylon 6.6 and some
conversion products were completed so as to commit to the terms of the gas allocation
issued by the Ministry of Petroleum and Mineral Resources, noting that the Company will
face challenges in such industries because of high production capacities, global products’
competitiveness, difficulty of marketing, and profit marginality. The Company will con-
tinue to achieve its objectives, namely maximizing its shareholders’ return, increasing the
saudization rate in its projects, and paying attention to security and safety in its facilities.
Finally, I would on my own behalf and on the behalf of the Board of Directors members to
thank with much appreciation the Custodian of the Two Holy Mosques and his wise gov-
ernment for its continuous support to industrial Sector.
Board Chairman
Hamad Bin Saud Al-Sayari
Members of the Board of Directors Saudi Industrial Investment Group
Mr. Ibraheem bin Abdul Aziz Altouk Mr. Hatem bin Ali Aljaffali Dr. Abdulrahman bin Sulaiman Alrajhi
Mr. Saleh bin Aid Alhusayni Mr. Saad bin Ali Alkatheeri His Excellency Mr. Sulaiman
bin Abdulrahman Alkouwaiz
Mr. Ahmed bin Mohammed Abeed bin Zakr Mr. Sulaiman bin Mohammed Almendeel
(Managing Director)
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The Saudi Industrial Investment Group SIIG was established by the resolution of the Ministry of Com-
merce and Industry no.291 dated 29th of JumadaII,1416 AH (November 23, 1995AD); it is a Saudi joint
stock company based in Riyadh, Saudi Arabia, and commercially registered under no.1010139946 on
Shaaban10, 1416 AH(January 1, 1996AD) with a capital of SAR4,500 million. The Company is en-
gaged in developing the industrial base in the Kingdom – particularly the petrochemicals – together
with exporting those to foreign markets and allowing the private sector to join other industries us-
ing petrochemical products. The Company has obtained the required licenses from the competent
authorities, as most of the Company's operating revenues come from this activity.
Second: SIIG’s Projects:
1. Saudi Chevron Phillips Company(SCP):
SCP is a limited liability company registered in Jubail, Saudi Arabia, under no. 2055003839 on Safar
22, 1417AH (July 8, 1996 AD) and with a capital of SAR 655 million. It is a 50-50 joint venture company
between the Saudi Industrial Investment Group (SIIG) and Arabian Chevron Phillips Petrochemical
Company (Ltd.). SCP is located in Jubail Industrial City and it started production in 2000; it produces
Benzene, Cyclohexane and Motor Gasoline.
The SCP’s total sales in 2014 were SAR 6,285 million compared to SAR 6,479 million in 2013. SCP
achieved net profits of SAR 1,089 million in 2014 compared to SAR 1,349 million in 2013. The follow-
ing is the geographical distribution of the SCP’s revenues in 2014:
2%
18%
GCC
40%
KSA
Europe
Asia 40%
The following chart illustrates price comparison in SCP products’ prices since the beginning of 2013
until the end of 2014:
Cyclohexane
Dollar / Ton 2013 2014
1800
1600
Benzene 1400
1200
1000
Motor Gasoline 800
600
400
200
0
1 2 3 4 5 6 7 8 9 10
11 12 1 2 3 4 5 6 7 8 9 10
11 12
9
10
The JCP’s total sales in 2014 were SAR 7,265 million compared to SAR 6,765 million in 2013. JCP
achieved net profits of SAR 130 million in 2014 compared to SAR 400 million in 2013. The following
is the geographical distribution of the JCP’s revenues in 2014:
11%
Asia
81%
KSA
Europe 17%
The following chart illustrates the difference in JCP products’ prices since the beginning of 2013 until
the end of 2014:
Petrochem is a Saudi joint stock company based in Riyadh, Saudi Arabia, and commercially regis-
tered under no.1010246363 on the 8thof Rabi’ Al-Awwal, 1429AH (March 16, 2008) with a capital of
SAR4,800 million. The SIIG owns 50% of the shares of the National Petrochemical Company (Petro-
chem). The Petrochem is liable for financial responsibilities as loans and guarantees for its project
(Saudi Polymers Company) and the SIIG acts as the guarantor of certain obligations of Petrochem.
The Petrochem is engaged in developing, establishing, operating, managing and maintaining pet-
rochemical, gas and oil plants as well as other industries, and wholesale and retail trade of the petro-
chemical materials and products and their derivatives. Petrochem total sales amounted to SAR 7,859
million in 2014 compared to SAR4, 437 million in 2013. Petrochem achieved net profits of SAR774
million in 2014 compared to a loss of SAR (66) million in 2013. Petrochem is limited to its investments
in its subsidiary, namely:
SPCo is a limited liability company in Jubail, Saudi Arabia, commercially registered under no.
2055008886 on the 29th of Dhul-Qa’dah, 1428 AH (December 9, 2007) with a capital of SAR4,800
million. The National Petrochemical Company (Petrochem) owns 65% and Arabian Chevron Phillips
Petrochemical Company (Ltd.) 35%. SPCo is located in Jubail Industrial City where it produces the
following products:
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Ethylene 1,220
Propylene 440
Polyethylene 1,100
Polypropylene 400
Hexane-1 100
The commercial operation began in the fourth quarter of 2012 and the Company markets the prod-
ucts within the Kingdom. The Gulf Polymers Distribution Company (GPDC) sells the products in for-
eign markets. Petrochem 65% and Arabian Chevron Phillips Petrochemical Company (Ltd.) 35% own
GPDC. GPDC was established in 2011 as a limited liability company registered in the free zone of
Dubai Airport, United Arab Emirates, with a capital of AED 2 million. Its activity is limited to storing
and selling polymers outside the Kingdom and which produced by SPCo. The total sales of the SPCo
in 2014 amounted to SAR 7,224 million compared to SAR 4,547 million in 2013. SPCo achieved net
profits of SAR 1,178 million compared to a net loss of SAR (45.4) million in 2013. The geographical
distribution of the sales of SPCo in 2014 is as follows:
The chart below shows Petrochem’s ownership percentage in the project as well as the major share-
holders’ percentages in Petrochem. The SPCo’s ownership distribution is as follows:
9%
Asia
34%
Europe
KSA 57%
General
Saudi Industrial
Organization Public Pension
Investment Group Public 17.6%
for Social Agency 16.2%
50%
Insurance 16.2%
National Arabian
Petrochemical Chevron Phillips
Company Petrochemical
(Petrochem) 65% Company 35%
Saudi Polymers
Company SPCo
It is a limited liability company in Jubail, Saudi Arabia, commercially registered under no.2055013878
on Shaaban29,1432 AH(July 30, 2011) with a capital of SAR1,894million. It is a 50-50 joint venture
company between the Saudi Industrial Investment Group and Arabian Chevron Phillips Petrochemi-
cal Company (Ltd.). This conforms to the terms of the gas allocation issued by the Ministry of Petro-
leum and Mineral Resources, as SIIG and its partner, Arabian Chevron Phillips Petrochemical Com-
pany (Ltd.), have implemented ten projects, the first of which targets the production of nylon 6, 6
in the Kingdom in addition to several converting projects to produce numerous products required
for consumers’ needs. The project will be established on an area of 510,000 square meters in Jubail
Industrial City. The PCC’s products are shown in the following table:
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Productive capacity
Plant Products
(1000 tons)
Nylon 6,6 50
Insulators, fibers, tires, hoses,
clothes, bags
Nylon Compounding 20
The conversion plants started operation in 2014, and the nylon 6.6 plant as well as the nylon com-
pounding are expected to start operation during 2015, with an estimated total cost of SAR (2.900
million). Estimates and forecasts of these projects refer to the difficulty in achieving good profit
margins as a result of the high production capacities, global products’ competitiveness, difficulty of
marketing and lack of consumers for the produced quantities in the region. However, the project
administration seeks to build a good fundamental base for such industries and attract international
companies to these industries to involve in partnerships and agreements beneficial to the Com-
pany’s investments.
5. Projects’ Integration:
The three projects (SCP, JCP, and SPCo) are integrated to each other where they produce different
products with a total capacity up to 6,400 thousand tons. Some of these products are consumed
internally to produce value-added products, where the quantities available for sale, both locally and
internationally, are 3,800 tons per year:
Cyclohexane 290 KTA Benzene 835 KTA
Natural
SCP
Gasoline
MoGas 780 KTA
SPCo
ll Risks of feedstock supply, and meeting the terms of the supply of feedstock agreement with
Aramco.
ll Global economy status that may reduce the demand for the Company’s products, and that may
be reflected on the price of products.
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ll High competitiveness in the market by which the Company is affected in terms of supply and
demand.
ll Risks of operational performance level which include many techniques and equipment that
may be subject to shut down and failure.
ll Human resources’ risks associated with the instability of the Saudi efficiencies regarding the
development and continuation of the Company’s performance.
ll Environmental risks associated with the petrochemical industries such as pollution and their
consequent fines and costs.
ll Uncertainties associated anti-dumping issues in markets where the Company sells its products.
Balance Sheet:
(Balance Sheet) in millions of Saudi Riyals 2014 2013 2012* 2012* 2011 2010
Total liabilities & Shareholders’ equity 26,350.3 25,374.0 24,468.3 26,236.4 25,668.3 23,674.3
* 2012 results were presented by using the equity method and Proportionate Consolidation method to facilitate comparison.
Income Statement:
Applied accounting policy Equity method Proportionate Consolidation
General, administrative and marketing (806.6) (572.1) (215.0) (366.0) (189.3) (143.4)
expenses
Income (loss) of the main operations 2,096.9 1,034.9 131.7 153.8 593.0 500.6
Other revenues (expenses), net 7.4 (57.8) 67.8 64.2 19.8 21.1
Income (loss) before minority interest 1,932.1 774.2 177.6 177.6 592.1 500.3
and Zakat
Minority interest shares in the net (prof- (872.0) 43.2 453.2 453.2 43.7 14.0
its) loss of the subsidiaries
Earnings per share in Saudi riyals 2.07 1.59 1.20 1.20 1.17 0.90
* 2012 results were presented by using the equity method and Proportionate Consolidation method to facilitate comparison.
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The rise in the Company’s profits during 2014 is caused by an increase in the SIIG’s share of
Petrochem profits; the SIIG’s share of the achieved profits in Petrochem in 2014 amounted to
SAR 387 million compared to a loss of SAR (33) million in 2013. This is due to the regular operation
Future Prospects:
In general, the petrochemical market in the first three quarters of 2014 showed some increase in
demand because of a slight improvement in the global economic situation. With regard to the fu-
ture prospects concerning the Company’s project products’ prices in the global markets; it is difficult
to predict them in the meantime given their relation to a number of economic factors, the most
important of which is oil prices, which declined sharply in the fourth quarter of 2014. This, in turn,
affected all petrochemical products in general. With low products’ prices, however, the profit margin
is still positive regarding the Company’s projects. The company will devote its efforts in its projects
to achieve better revenues in 2015 through regular operations, production and sales in its projects.
According to the Company bylow, the distribution of annual net profits of the Company takes place
2. Retaining 10% net profits as a statutory reserve. The Ordinary General Assembly may cease this
3. From the remaining profit, 5% of the paid up capital is distributed as down payment to shareholders.
4. Then 10% of the remaining quantum is allocated to the board of director’s remuneration.
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Petrochemical industry is known to be a fluctuating one by virtue of the change in the global prod-
ucts’ prices. Accordingly, it is difficult to predict the Company’s profits for the coming years, as this re-
quires reviewing the dividends’ policy periodically. In addition, the growth of the Company’s invest-
ments may require partial or complete self-financing from the Company’s cash flows, noting that
the Company aims at continuing and increasing the annual distributions to shareholders, whenever
achieved. The following table shows the profits’ balance:
* The SIIG’s share in Petrochem is 50%, and Petrochem’s share in the Saudi Polymers Company is 65%
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Hatem Bin Ali Al Jaffali Board Chairman of Al Wataniya Insurance Company (Al Wataniya)
Sulaiman Abdul Rahman Al Board member of Saudi Arabian Mining Company (Ma’aden)
Qwaiz Board member of Etihad-Etisalat Company (Mobily)
Board chairman of Hassana Investment Company
During 2014
Member’s name Total attendees
April 30 September 3 December 18
Ibrahim Altouq O P O 1
Hatem Al Jaffali O P P 2
Sulaiman Al Qwaiz P P P 3
Saleh Al Hussaini P P P 3
Saad Al Kathiry P P P 3
Sulaiman Al Mandeel P P P 3
c. Remuneration and benefits paid to the Board Members and Senior Ex-
ecutives:
Five senior executives who
Executive Non-execu- received the highest bonuses and
Statement board mem- tive board compensations + chief executive Total
bers members officer and financial manager if
they were not included
The Board of Directors decided SAR two hundred thousand as a ceiling for each
member’s remuneration.
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* All shares belong to the GOSI, noting that Mr. Suleiman Al Qwaiz does not own any shares personally.
** All shares belong to the PPA, noting that Mr. Saad Al Kathiry does not own any shares personally.
A description of any interest pertaining to the Board members, their wives and dependent children
in the shares of the subsidiary (Petrochem) in 2014 as follows:
Note: There are no debt instruments for the Board members in the Company or its subsidiaries.
It is a description of any interest pertaining to the senior executives, their wives and dependent chil-
dren in the Company’s shares (Saudi Group) in 2014 as follows:
A description of any interest pertaining to the senior executives, their wives and dependent children
in the shares of the subsidiary (Petrochem) in 2014as follows:
Note: There are no debt instruments for the senior executives of the Company or its subsidiaries.
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f. Board Committees:
Audit Committee:
The Committee held four meetings in 2014, and its tasks are as follows:
ll Studying the initial and annual financial statements before approval and publishing.
ll Verifying the sufficiency of the regulatory activities’ designed for the Company and their effi-
ciency in an appropriate manner.
ll Evaluating the efficiency of the Company’s estimate of the important and potential risks and
how to monitor and face those risks.
ll Appointing internal auditors, verifying their independence and authorizing the internal audit
plan in the Company.
The Audit Committee consists of three members who all have practical and professional experience
qualifying them to participate actively in the works of the Audit Committee. They are as follows:
Executive Committee:
The Committee held one meeting during the fiscal year 2014, and its tasks are as follows:
ll The Executive Committee carries out the same tasks of the Board of Directors in case of inabil-
ity to hold the Board meeting for any reason whatsoever.
ll After each meeting, the Committee submits a report to the Board of Directors stating all the
actions it takes during the meeting.
ll Whenever needed, the Committee may ask independent consultants to make specialized stud-
ies helping the Committee carry out its tasks and determine their fees.
Committee Members:
ll Recommending the nomination for the Board of Directors’ membership, taking into account
not to nominate any person who previously has been convicted of a crime involving a violation
of honor.
ll Reviewing the required needs annually, namely the appropriate skills for the Board member-
ship and preparing a description of the capabilities and qualifications required for the Board
membership, including the identification of the time that to be allocated by the member for
the Board duties.
ll Reviewing the Board structure and submitting recommendations regarding the possible
changes.
ll Identifying the points of weakness and strength of the Board and suggesting their solutions in
accordance with the Company’s interest.
ll Ensuring the independence of the independent members on annual basis and there is no con-
flict of interest in the participation of a board member in the Board of another company.
ll Developing clear policies for the remuneration of the Board members and senior executives as
well as making use of performance-related criteria in identifying those benefits.
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Committee Members:
1. Ibrahim Bin Abdul Aziz Al Touq (Committee Head).
ll Developing plans pertaining principles and criteria of the Company’s social responsibility con-
tribution.
ll Develop and follow-up the programs in which the company participates to plant profound
feelings among its employees towards the company social responsibility.
ll Activate the Company’s role in adopting the social responsibility policies, initiatives and pro-
grams towards its shareholders, customers and suppliers as well as towards the environment
and society as a whole in order to support and enhance the Company’s reputation.
ll Submit recommendation to the board on the annual budget of the company social contribu-
tion.
Committee Members:
1. Saleh Bin EidAl Hussaini (Committee Head).
Under the auspices of the Company in 2014, and in collaboration with the Institute of Public Ad-
ministration, it was approved to establish training and educational programs along with a variety of
workshops for the beneficiaries of several charities.
Deduction taxes - -
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The following table shows the rest of the guidance rules stated in the corporate governance
regulation:
The Company adopts the standard voting method as per the company’s
Adoption of cumulative voting laws issued by the Ministry of Commerce; the Company articles of associa-
tion do not include the cumulative voting.
Moreover, the Board of the Capital Market Authority issued the resolution no.(3-40-2012) on
30/12/2012 which necessitates developing a corporate governance regulation for the Company. On
22/06/2013, the Company Board of Directors adopted a corporate governance regulation through
the inclusion of regulations required by the Authority and which have already been approved in one
regulation. Their approval was recommended by the General Assembly on 30/04/2014.
Eleventh: General Disclosures:
ll The Company has potential liabilities in respect of a letter of guarantee issued by a local bank
for the Ministry of Petroleum and Mineral Resources pertaining to the Petrochemical Process-
ing Company. The guarantee value amounted to SAR 947 million.
ll The Company has potential liabilities in respect of a letter of guarantee issued by a local bank
for the lenders’ agent of the Saudi Polymers Company. The guarantee value amounted to SAR
734 million.
ll The Company issued a bank guarantee in favor of the Department of Zakat and Income worth
SAR 24 million to cover its appeal against the primary Committee’s resolution in the Depart-
ment of Zakat and Income for the year 2002 and 2003.
ll The Company issued a bank guarantee in favor of the Department of Zakat and Income worth
SAR11million to cover its appeal against the Committees’ resolution in the Department of Za-
kat and Income for 2004 and until 2006.
ll No any person or party informed the company about any personal interest in the share catego-
ries that entitled the right to vote in the fiscal year 2014.
ll The Company has not issued or granted debt instruments convertible into shares, or any op-
tion or subscription rights’ memorandums or any similar rights during the fiscal year 2014.
ll The Company has not issued or granted conversion or subscription rights under convertible
instruments in 2014.
ll The Company was not subject to any penalties, sanctions or precautionary restrictions of the
Capital Market Authority or any other supervisory or regulatory or judicial body in 2014, but
the Capital Market Authority on 9/2/2015 announced the issuance of a CMA Board resolution
to impose a penalty of SR 10,000 (Ten Thousand Saudi Riyals) on Saudi Industrial Investment
Group due to its violation of clause (A) of Article (40) of the Listing Rules. The company did
not clearly mention in its preliminary financial results announcement for the second quarter
of 2014 all the reasons affecting the decrease in the Net profit of the second quarter of 2014
compared to the same quarter of the previous year and compared to the previous quarter of
the same year.
ll There are no arrangements or waiver agreements under which a Board member or a senior
executive waiver any salary or compensation.
ll There are no arrangements or waiver agreements under which one of the Company’s share-
holders waiver his rights in profits.
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The Board reviewed the audit committee’s report on the audit results submitted by the internal au-
ditor. No fundamental matters have come to the surface; in addition, the internal regulatory system
turns out to be operating properly.
2. The system of internal control is sound in design and has been effectively implemented.
4. There is no substantial interest for the members of the Board of Directors, chief executive of-
ficer, financial manager or senior executives in the Company’s contracts except what has been
disclosed in the item: transactions with related parties in this report.
2. Report of the Board of Directors for the fiscal year ending on 31/12/2014.
3. Releasing the liability of the Board of Directors for the fiscal year ending on 31/12/2014.
4. Appointing the auditor nominated by the Audit Committee for the fiscal year 2015 as well as
determining his fees.
5. Recommending the Board of Directors to distribute the dividends totaling SAR 450 million,
one Saudi Riyal per share (i.e. 10% of the nominal capital) to the Company’s shareholders reg-
istered in (Tad awul) records at the end of the day of the Assembly meeting.
6. Payment of SAR (1.8) million as a remuneration to the members of the Board of Directors, SAR
200 thousand for each member for the fiscal year ending on 31/12/2014.
7. The businesses and contracts conducted during the year ending on 12/31/2014 between Al
Jubail Chevron Phillips Company (subsidiary) and the Arabian Chemical Company, Ltd. (Latex)
whose Board of Directors is chaired by Mr. Hatem Al Juffali will be considered transactions with
related parties and will be licensed for one more year, where the Al Jubail Chevron Phillips
Company conducted transactions and commercial contracts - without preferential terms - for
selling styrene to (Latex) Company. The total transactions during 2014 amounted to SAR 48.6
million and the selling price was that of the Asian market minus the shipping cost, which is the
usual market price for such agreements in the local market.
8. The financial transactions conducted during the year ending on 31/12/2014 with the National
Petrochemical Company (Petrochem) will be considered transactions with related parties and
will be licensed for one more year, given the fact that the Saudi Industrial Investment Group
is a main shareholder in Petrochem with a share of 50%. The transactions represented financ-
ing, common services and bank guarantee commissions, without preferential terms. The to-
tal transactions with Petrochem in 2014 amounted to SAR 27.6 million. In addition, the Saudi
Group invested in the sukuks issued by Petrochem in 2014 by SAR 130 million.
9. Electing the Board of Directors for its next session which will begin on 01/07/2015.
Finally, the Board of Directors would like to thank with much appreciation the Custodian of the Two
Holy Mosques and his wise government for its continuous support to industrial sector and to all
sectors.
Board of Directors
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Saudi Industrial Investment Group
and Its Subsidiary
(A Saudi Joint Stock Company)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
35
36
INDEX PAGE
Auditors’ report 37
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4 1,798,773 1,509,892
Time deposits 559,000 -
Accounts receivable 988,614 688,024
Cash margins, prepayments and other assets 5 121,659 115,409
Amounts due from related parties 6 113,815 152,922
Inventories 7 1,243,139 930,957
TOTAL CURRENT ASSETS 4,825,000 3,397,204
NON-CURRENT ASSETS
Employees loans 5 49,713 28,572
Deferred charges 8 51,468 74,786
Investments in jointly controlled projects 9 3,154,039 3,233,928
Subordinated loans to jointly controlled projects 10 534,375 270,000
Property, plant and equipment 11 17,735,737 18,369,579
TOTAL NON-CURRENT ASSETS 21,525,332 21,976,865
TOTAL ASSETS 26,350,332 25,374,069
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable 213,705 244,262
Accrued liabilities and other liabilities 12 379,423 381,116
Amounts due to related parties 6 123,618 98,631
Current portion of long term loans 13 1,145,503 925,504
Short term loans - 600,000
Zakat 14 249,355 176,635
TOTAL CURRENT LIABILITIES 2,111,604 2,426,148
NON-CURRENT LIABILITIES
Term loans 13 10,822,328 11,967,831
Sukuk 15 1,070,000
Subordinated loan from non-controlling partner in a
16 1,131,797 1,131,797
subsidiary
Employees’ terminal benefits 34,861 22,064
TOTAL NON-CURRENT LIABILITIES 13,058,986 13,121,692
TOTAL LIABILITIES 15,170,590 15,547,840
EQUITY
SHAREHOLDERS’ EQUITY
Share capital 17 4,500,000 4,500,000
Statutory reserve 526,987 433,654
Retained earnings 1,786,459 1,398,259
TOTAL SHAREHOLDERS’ EQUITY 6,813,446 6,331,913
Non-controlling interests 4,366,296 3,494,316
TOTAL EQUITY 11,179,742 9,826,229
TOTAL LIABILITIES AND EQUITY 26,350,332 25,374,069
The accompanying notes from 1 to 28 form an integral part of these consolidated financial statements.
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
The accompanying notes from 1 to 28 form an integral part of these consolidated financial statements.
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40
OPERATING ACTIVITIES
Income before zakat 1,060,179 817,404
Adjustments for:
Depreciation and amortization 825,865 819,419
Employees’ terminal benefits, net 12,797 7,613
Work in progress written off - 62,396
Gain from disposal of property, plant and equipment (125) -
Share in earnings of jointly controlled projects, net (604,491) (880,562)
Non-controlling interest share in net income (loss) of the subsidiaries 871,980 (43,254)
2,166,205 783,016
Changes in operating assets and liabilities:
Accounts receivable (300,590) (445,643)
Cash margins, prepayments and other current assets (27,391) (34,268)
Inventories (312,182) (501,857)
Related parties, net 64,094 67,310
Accounts payable (30,557) (46,095)
Accrued liabilities and other liabilities (1,693) 254,968
Zakat paid (54,126) (55,866)
Net cash from operating activities 1,503,760 21,565
INVESTING ACTIVITIES
Addition of property, plant and equipment (168,705) (583)
Proceeds from disposal of property, plant and equipment 125 -
Additions of investment in jointly controlled projects - (361,873)
Dividends received from a jointly controlled project 684,380 918,750
Time deposits (559,000) -
Net cash (used in) from investing activities (43,200) 556,294
FINANCING ACTIVITIES
Repayments of term loans, net (925,504) (565,040)
Sukuk 1,070,000 -
Proceeds from (repayments of ) short term loan (600,000) 600,000
Subordinated loan to jointly controlled projects (264,375) (195,000)
Board of directors’ remuneration (1,800) (1,800)
Subordinated loan from non-controlling partner in a subsidiary company - 367,500
Dividends paid (450,000) (450,000)
Net cash used in financing activities (1,171,679) (244,340)
INCREASE IN CASH AND CASH EQUIVALENTS 288,881 333,519
Cash and cash equivalents at the beginning of the year 1,509,892 1,176,373
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 1,798,773 1,509,892
NON CASH TransAction
Property, plant and equipment transferred from project under
- 860,161
construction (note 11)
The accompanying notes from 1 to 28 form an integral part of these consolidated financial statements.
41
Attributable to the shareholders’ equity
Share Statutory Retained Shareholders’ Non-controlling
Amounts in sr ’000 Total
capital reserve earnings equity total Interest
Balance as at 31 december 2012 4,500,000 362,245 1,207,389 6,069,634 3,537,570 9,607,204
Saudi Industrial Investment Group and Its Subsidiary
The Company is engaged in enhancing the growth and development of the industrial base of the
Kingdom, mainly the petrochemicals industry, opening more channels for the exportation of the
products and more ways for private sector in the Kingdom to enter into other industries by using
petrochemical products after obtaining the required licenses from the relevant authorities.
2. BASIS OF CONSOLIDATION
These consolidated financial statements include the financial statements of the Company and its
subsidiary (the “Group”), as adjusted by the elimination of significant inter-Group balances and
transactions.
The financial statements of the subsidiary are prepared using accounting policies which are consis-
tent with those of the Company. The financial statements of the subsidiary company are consolidat-
ed from the date on which the Company is able to exercise effective management control over the
subsidiary company. A subsidiary is an entity in which the Company has a direct or indirect equity
investment of more than 50% or over which it exercise effective management control.
Non-controlling interest in the net assets of consolidated subsidiary is identified separately from
the Company’s shareholder equity therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the non-controlling interest’s share of
changes in equity since the date of the combination.
Shareholding %
Shareholding %
National Petrochemical Company (“Petrochem”) is a Saudi joint stock company registered in the
Kingdom of Saudi Arabia under commercial registration number 1010246363 dated 8 Rabi Awal
1429H (corresponding to 16 March 2008), and was formed pursuant to the ministry of commerce
and industry`s resolutions numbered 53/Q dated 16 Safar 1429H, (corresponding to 23 February
2008). Petrochem is engaged in the development, establishment, operation, management and
maintenance of petrochemical, gas, petroleum and other industrial plants, wholesale and retail trad-
ing in petrochemical materials and products, owning land, real estate and buildings for its benefits.
Is a mixed limited liability company, registered in Jubail in the Kingdom of Saudi Arabia under reg-
istration number 2055008886 dated 29 Dhu Al Qedah1428H (corresponding to 9 December 2007).
SPCo is engaged in production and sale of ethylene, propylene, hexene, gasoline, polyethylene, poly-
propylene and polystyrene. At 1 October 2012, SPCo completed its trial operation and announced
the commercial production.
SPCo plant (the “plant”) has faced certain interruption in production during 2013 due to certain
technical problems in certain production units. Further, an unscheduled disruption of production
has been announced during March 2014 for 10 days due to disruption in its feedstock supply.
Is a free zone limited liability company registered in the Dubai Airport Free Zone dated 12 Rabi Awal
1432 H (corresponding to 15 February 2011). GPDCo activity is restricted to selling and storing of
SPCo’s polymer products.
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Accounting convention
The consolidated financial statements are prepared under the historical cost convention.
Use of estimates
The preparation of the consolidated financial statements in conformity with generally accepted ac-
counting principles requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consoli-
dated financial statements and the reported amounts of revenues and expenses during the report-
ing period. Actual results may vary from these estimates.
Accounts receivable
Accounts receivable are stated at the invoiced amount less an allowance for any uncollectible
amounts. An estimate for doubtful debt is made when the collection of the receivable amount is
considered doubtful. Bad debts are written off as incurred.
Inventories
Inventories are stated at the lower of cost and market value. Cost is determined as follows:
Raw materials, spare parts and catalysts - purchase cost on a weighted average basis.
Deferred charges/amortization
Deferred charges comprise agency and upfront fees on term loans and are amortized over the pe-
riod of the related loans. The amortization is capitalized in the cost of the plant under construction,
until the project is ready for its intended use, and thereafter, is charged to the interim consolidated
statement of income.
Deferred charges may include also, turnaround costs which are deferred and amortized over the
period until the date of the next planned turnaround. Should unexpected turnaround occur prior
to the previously envisaged date of planned turnaround, then the previously unamortized deferred
costs are immediately expensed and new turnaround costs are deferred and amortized over the
period likely to benefit from such costs.
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
The estimated useful lives for the calculation of depreciation are as follows:
Years Years
Work in progress appears at cost until the asset is ready for its intended use, thereafter; it is capital-
ized on the related assets. Work in progress include the cost of contractors, materials, services, bor-
rowing, salaries and other direct costs and overhead allocated on systematic basis.
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Borrowing costs that are directly attributable to the construction of an asset are capitalized up to the
stage when substantially all the activities necessary to prepare the qualifying asset for its intended
use are completed, and thereafter, is charged to the consolidated statement of income.
Impairment of assets
The Group periodically reviews the carrying amounts of its long term tangible assets to determine
whether there is any indication that those assets have suffered an impairment. If such indication ex-
ists, the recoverable amount of the asset is estimated in order to determine the extent of the impair-
ment. Where it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash generating unit to which the asset belongs.
If the recoverable amount of an asset or cash generating unit is estimated to be less than its carry-
ing amount, the carrying amount of the asset or cash generating unit is reduced to its recoverable
amount. Impairment is recognized in the consolidated statement of income.
Where an impairment subsequently reverses, the carrying amount of the asset or the cash generat-
ing unit is increased to the revised estimate of its recoverable amount, so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impair-
ment been recognized for the asset or cash generating unit in prior years. A reversal of impairment
is recognized as income immediately in the consolidated statement of income.
Liabilities are recognized for amounts to be paid in the future for goods or services received, wheth-
er billed by the supplier or not.
Provisions
Provisions are recognized when an obligation (legal or constructive) arising from a past event, and
the costs to settle these obligation are both probable and may be measured reliably.
Zakat is provided in accordance with the Regulations of the Department of Zakat and Income Tax
(DZIT) in the Kingdom of Saudi Arabia and on accrual basis. The provision is charged to the con-
solidated statement of income. Differences, if any, resulting from the final Zatat assessments are
adjusted in the year of their finalization. The foreign partner in Petrochem’s subsidiaries is subject to
income tax which is included in non-controlling interest in the consolidated financial statements, if
exist.
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
Fair value
The fair value of commission-bearing items are estimated based on discounted cash flows using
commission rates for items with similar terms and risk characteristics.
Statutory reserve
In accordance with Saudi Arabian Regulations for Companies, the Company must transfer 10% of
its net income in each year to the statutory reserve. The Company may resolve to discontinue such
transfers when it builds up a reserve equal to one half of the capital. The reserve is not available for
distribution.
Dividends
Final dividends are recognized as liabilities at the time of their approval by the shareholders’ General
Assembly. Interim dividends are recorded as and when approved by the Board of Directors.
Revenue recognition
Sales represent the invoiced value of goods supplied by the Group during the year and is recognized
when the significant risks and rewards of the ownership of the goods have passed to the buyer and
the amount of revenue can be measured reliably normally on the delivery to the customer. Other
income is recognized when earned.
The Group share in the jointly controlled projects result is accounted under equity method.
Expenses
Selling and marketing expenses are those that specifically relate to delivery and marketing of the
products. All other expenses –except cost of sales- are allocated on a consistent basis to general and
administration expenses in accordance with allocation factors determined as appropriate by the
management.
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Foreign currencies
Transactions in foreign currencies are translated into Saudi Riyals at the rate prevailing at the date of
those transactions. Monetary assets and liabilities denominated in foreign currencies at the consoli-
dated balance sheet date are retranslated at the rate prevailing at that date. All differences are taken
to the consolidated statement of income.
Assets and liabilities of the consolidated subsidiaries denominated in foreign currencies are trans-
lated into Saudi Riyals at exchange rates prevailing at the consolidated balance sheet date. Revenues
and expenses of the consolidated subsidiaries denominated in foreign currencies are translated into
Saudi Riyals at average exchange rates during the year. Component of equity, other than retained
earnings, are translated at the rates prevailing at the date of their occurrence. Exchange differences
arising from such translations, if material, are included in the cumulative translation adjustment ac-
count under equity in the consolidated balance sheet.
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing products
or services (a business segment) or in providing products or services within a particular economic
environment (a geographic segment), which is subject to risks and rewards that are different from
those of other segments. The Head Office segment incorporates the financial information related to
activities under construction.
1,798,773 1,509,892
121,659 115,409
(*) Employees loans are commission free housing loans for eligible Saudi employees in the company
and in the subsidiary companies to purchase or construct their own residential units and are secured
by mortgage over property purchased under employees home ownership program. Such loans are
repayable in monthly installments over a maximum period of 15 years.
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
A Amounts
substantial portion
in SR ’000 of sales of Saudi Chevron Philips, Jubail Chevron Philips (jointly controlled
Amount of transactions
Non-controlling partner in a
- 367,500
subsidiary company Proceeds from subordinated loan
projects) and GPDCo were made through an affiliated company of the non-controlling partner (the
Marketer”) under a marketing agreement. Upon delivery of the product to the Marketer, sales are
recorded at provisional prices. The provisional prices are subsequently adjusted to actual selling
prices as received by the Marketer from its customers. Adjustments are recorded on a quarterly basis
as they are reported by the Marketer. The prices and terms of the transactions are approved by the
management of the companies.
Amounts due from / to related parties are shown in the consolidated balance sheet.
7. INVENTORIES
Amounts in SR ’000 2014 2013
1,243,139 930,957
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8. DEFERRED CHARGES
Deferred charges consists of agency and upfront fees on the term loan and amortized over the pe-
riod of the related loans, as follow:
Cost
Amortization
(*) During the year, the Group has announced the commencing of operation of some plants of the
project.
The following summarize the investments movement during the year ended at 31 December:
Addition - 361,873
534,375 270,000
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11. PROPERTY, PLANT AND EQUIPMENT
Furniture and
Plant & Leasehold Work in Total Total
Amounts in SR ’000 Buildings office equip- Platinum Vehicle
equipment improvement Progress(*) 2014 2013
ment
Cost:
At the beginning of the year 18,473,343 679,954 143,862 24,462 29,971 1,048 - 19,352,640 18,491,896
Saudi Industrial Investment Group and Its Subsidiary
379,423 381,116
Term loans represent the outstanding balances from the loan facilities obtained from the following
parties to finance the construction work of the plant:
Outstanding Balance
11,967,831 12,893,335
The securities of these loans include the pledging and assignment of the property and equipment
and bank accounts of the related projects and Petrochem. These loans carry commission at normal
commercial rates for loans with similar risks. The Borrowing Company are required to comply with
certain covenants under all the loan facility agreements.
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
14. ZAKAT
Charge for the year
Zakat charge for the year amounting to SR 126.8 million (2013: SR 103.3 million) consists of provision
for the current year and as follows:
126,846 103,325
Status of assessments
The company has filed zakat returns with the Department of Zakat and Income Tax (“DZIT”) for all
prior years up to 2013. The DZIT has raised the zakat assessments up to 2006 and the Company has
agreed on DZIT`s assessments up to 2001. The Company has filed an appeal against the assessments
for the years 2002 and 2003 before Higher Appeal Committee against certain items disallowed by
DZIT which resulted in a difference of SR 24.4 million. The Higher Appeal Committee issued its ruling,
reducing the claim amount to SR 12.4 million and the company has filed an appeal against the ruling
before the Board of Grievances. Also the company appealed before The Preliminary Appeal Com-
mittee against zakat assessments for the years 2004 to 2006 against disallowance of certain items
which resulted in a difference of SR 17.5 million, The Committee issued its ruling, reducing the claim
to SR 16.8 M. The Company has paid the amount of SR 5.7 million and appealed before the Higher
Appeal Committee against the amount of SR 11.1 million. As per the management’s assessment, the
Company has made adequate provision against items under appeals.
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As For Petrochem, Zakat returns have been filed with the Department of Zakat & Income Tax (DZIT)
for all prior years up to 2013, and zakat was settled accordingly. The DZIT has raised zakat assess-
ment for the year 2008 which resulted a difference of SR 53 million. The Higher Appeal Committee
has issued its ruling during the current year in the favor of Petrochem.
Petrochem and its zakat consultant have filed an appeal against the claim for the year 2010 which
resulted in a difference of SR 74.42 million. The Committee has issued its ruling, reducing the claim
by the amount of SR 74.10 million. The Company and DZIT appealed against the ruling before The
Higher Appeal Committee. The management believes that the ultimate outcome of this appeal will
be in the favor of Petrochem.
Also Petrochem and its zakat consultant have filed an appeal against the claim for the year 2012
which resulted in a difference of SR 35 million. The management believes that the provision made is
adequate to cover any differences that may arise from this claim.
As for SPCo, zakat returns have been filed with the DZIT for previous years up to 2013. The DZIT has
raised the zakat assessment for 2008. Final assessments for the years from 2009 to 2013 have not
been raised yet by DZIT.
As for GPDCo, the company registered in Dubai Airport Free Zone, and is exempted from income tax.
15. SUKUK
On 25 Shaban 1435H, (corresponding to 23 June 2014), Petrochem (a subsidiary) issued Sukuk
amounting to SR 1.2 billion at a par value of SR 1,000,000 each with no discount or premium. The
Sukuk issuance bears a variable rate of return at (SIBOR) plus 1.7% margin, payable semi-annually.
The Sukuk is due at maturity at par value on its expiry date of 20 Shawal 1440 H (corresponding 23
June 2019).
Sukuk balance of SR 1,070 million in these consolidated financial statements represents issued Su-
kuk value after eliminating the value of the Group investment in these Sukuk.
1,131,797 1,131,797
Saudi Industrial Investment Group and Its Subsidiary
(A Saudi Joint Stock Company)
492,555 310,568
314,041 261,541
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7,409 (57,844)
(*)This amount related to studies of certain conversion projects which have been written off by the
management because they are not viable and have no future benefits.
Petrochemical Conversion
Engaged in nylon 6.6 production, nylon compounds, and other by-products.
Company (“PCC”)
Head office Represents Head Office operation and related activities under construction.
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For the year ended 31 December 2014
Elimination and
reconciliation
Amounts in SR ’000 SCP JCP Petrochem PCC Head office Total
of financial
statements
Sales - - 7,858,516 - - - 7,858,516
Saudi Industrial Investment Group and Its Subsidiary
Net income (loss) 567,407 65,174 774,451 (28,090) (58,387) (387,222) 933,333
Total assets 1,038,283 1,209,374 21,996,850 906,383 6,931,274 (5,731,832) 26,350,332
Total liabilities - - 15,182,924 - 117,827 (130,161) 15,170,590
For the year ended 31 December 2013
Elimination and
reconciliation
Amounts in SR ’000 SCP JCP Petrochem PCC Head office Total
of financial
statements
Sales - - 4,436,677 - - - 4,436,677
(A Saudi Joint Stock Company)
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in for-
eign exchange rates. The Group did not undertake significant transactions in currencies other than
Saudi Riyal, Euros and US Dollars during the year. As the Saudi Riyal is pegged to US Dollar, the Group
is not exposed to significant currency risk.
Credit risk
Credit risk is the risk that one party will fail to discharge an obligation and will cause the other party
to incur a financial loss. The Group seeks to limit its credit risk with respect to customers by setting
credit limits for individual customers and constantly monitoring outstanding receivables balances.
As the balance sheet date, no significant concentration of credit risk where identified by manage-
ment
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commit-
ments associated with financial instruments. The Group manages their liquidity risk by ensuring the
availability of bank facilities and monitoring cash flows in a regular basis. The Group’s terms of sales
require amounts to be paid within 7 to 90 days of the date of sale. Trade payables are normally
settled within 30 to 45 days of the date of purchase.
The shareholders have approved this proposal during the general assembly dated 1 Rajab 1435H
(corresponding to 30 April 2014).
On 26 Safar 1436H (corresponding to 18 December 2014) the board of directors recommended the
general assembly to distribute cash dividends at 10% of the par value of share (SR 1 per share) for the
year ended 2014, with total dividends of SR 450 million.
The consolidated financial statements have been approved by the board of directors on 4 Jumada
Al-Awal 1436H (Corresponding to 23 February 2015).
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www.siig.com.sa
P.B. 99833 Riyadh 11625
Kingdom of Saudi Arabia
Tel: +966 (11) 279 2522
Fax: +966 (11) 279 2523
info@siig.com.sa
Z company 477 00 33