2006_Bamburi AR06

8/7/2019 2006_Bamburi AR06

http://slidepdf.com/reader/full/2006bamburi-ar06 1/38

8/7/2019 2006_Bamburi AR06


[

Consolidated Highlights

Five-Year Per omance Review Value Added Statement

The Company . Corporate in ormation

2. Vision, values and ambitions3. Top 0 shareholders4. La arge Group5. Board pictures and pro les6. Chairman’s Letter7. Management’s discussion and analysis o

nancial condition and results o operations8. Corporate Governance and

Corporate Social Responsibility9. Notice o Annual General Meeting

Financial Statements

0. Report o the Directors. Statement o Directors Responsibilities

2. Independent Auditors’ Report3. Consolidated income statement4. Consolidated balance sheet5. Company balance sheet6. Consolidated statement o changes in equity 7. Company statement o changes in equity 8. Consolidated cash fow statement9. Accounting policies

20. Notes to the nancial statements

Notes

Proxy orm

2

47

90

238

22

26

33

36373839404

4243444549

70

71

TEAM ACHIEVEMENT: We believe that in business, as in sport, success depends on the per ormance o individuals and teams, and that the talent and contribution o each employee is magnifed by e ective teamwork. That is why we ocuson attracting the best talent, developing potential and recognizing both individual excellence and team e ort.

Game a ter game, we keep fghting or better results.

8/7/2019 2006_Bamburi AR06


2006 2005 ChangeShs’millions, except per shareamounts and employees

Turnover 16,723 14,534 15%

Operating pro t 3,987 3,334 20%

Pro t a ter tax 2,799 2,155 30%

Dividend per share (KShs) - declared 5.5 5.3 4%

Earnings per share (KShs) - basic and diluted 7.2 5.5 30%

Cash generated rom operations 4,927 3,592 37%

Total assets 18,513 15,332 21%

Shareholders Funds 13,017 10,679 22%

Number o employees ,059 ,022 4%

Turnover or the Group grew 15% as a result o strong market demand across all markets in East A ricaand better ocus on new export markets.

We aced an increasingly challenging cost environment with rapid increase in power tari s (especiallyn Uganda), uel, transport and raw material prices. Notwithstanding this, the Group improved operating

pro ts by 20% through operational per ormance improvements and bene ts rom cost saving initiatives.Our initiatives ocusing on productivity improvement and alternative uel usage are paying o .

Our improved per ormance during the year increased both the group’s cash fow position as well as totalhareholders’ unds.

Consolidated Highlights Consolidated Highlights

8/7/2019 2006_Bamburi AR06


Five-Year Per ormance Review Five-Year Per ormance Review

8/7/2019 2006_Bamburi AR06


Value Added Statement

Together we are a winning team.

Financial Flows to our Stakeholders in 2006

a) The data used in this value added statement comes rom the Group consolidated fnancial statements, with the exception othe data marked with a *, which has been estimated. * * this amount include dividend rom other companies (25M).

b) Taxes comprise direct and indirect taxes.

8/7/2019 2006_Bamburi AR06


[ 8 ]

EXECUTIVE DIRECTORS

M Puchercos - Group Managing

Director - French

D Njoroge - Gener al Ma nager,

Hima Cement Ltd

A Sigei - Group Finance Director

NON EXECUTIVE DIRECTORS

R Kemoli - Chairman

J C Hillenmeyer - French

S W Karanja

A Hadley - British

R Lumbasyo

E Leo - South A rican

C C Kisire

S M’Mbijjewe

SECRETARY

Ms M W Nderitu

Kenya-Re Towers, Upper Hill

P.O. Box 10921 - 00100

Nairobi

REGISTERED OFFICE

Kenya-Re Towers, Upper Hill

P.O. Box 10921 - 00100

Nairobi

REGISTRARS

Chunga Associates

P.O. Box 41963 - 00100

Nairobi

AUDITORS

Deloitte & Touche

Certi ed Public Accountants (Kenya)

“Kirungii”, Ring Road

Westlands

P.O. Box 40092 - 00100

Nairobi

PRINCIPAL BANKERS

Barclays Bank o Kenya Limited

Nkrumah Road Branch

P.O. Box 90182

Mombasa

Citibank N A

Nyerere Avenue

P.O. Box 83615

Mombasa

Standard Chartered Bank Uganda Limited

Speke Road Branch, 5 Speke Road

P.O. Box 7111

Kampala

The CompanyCORPORATE INFORMATION

Together Everyone Achieves More. Anonymous.

8/7/2019 2006_Bamburi AR06


Our Vision by 20 0 To be the leading market and end user oriented Cement Company across Eastern A rica, with astrong and clear dedication to our communities.

Our Ambitions

Sa ety, Health and Environment We are dedicated to the health and sa ety o our people; through training, our employees, contractorsand business partners will apply Best Practises. We care or our communities and preserve theenvironment.

Innovation We are committed to growing our turnover through introduction o new and innovative products,while cementing a culture o innovation within the organisation.

Sustainable Market Leadership We are No. 1 in the Eastern A rica market, with strong sales to the inland export markets.

A pro table enterprise We have protected our pro tability by enhancing internal e ciencies and innovation while ul lling ouraim to make cement a ordable.

Team Achievement We are ocused on attracting the best talent, developing their potential and rewarding both individualexcellence and team e ort.

Our Values The Bamburi brand stands or commitment to excellence and the values o the group are expressedin the ‘La arge Way’.

The La arge Way Courage, integrity, commitment, consideration or others and an overriding concern or the group’sinterest are the oundations o our management philosophy. Every employee is expected todemonstrate commitment to these values. We will achieve them by:

Making our people success ul

• Expecting people to give their best.• Leading by example.• Achieving greater results through teamwork.Focusing on per ormance improvement• Resulting rom actions o all.• Making per ormance a daily commitment.• Sharing systems and tools.with a multi-local organisation• Building on our local and global strengths.• Making our Business Units success ul by leveraging the resources o a

decentralised organisation.• Sharing clear proces ses and a limited number o respected and known rules.

The Company

Number o shares % o sharesShareholder

1. Fincem Holding Limited 106,360,798 29.30

2. Kencem Holding Limited 106,360,797 29.30

3. B oard o Trustees NSSF 60,529,522 16.68

4. B amcem Holding Limited 50,000,000 13.78

5. Baloobhai Chhotabhai Patel 3,820,105 1.05

6. Barclays (Kenya) Nominees Ltd (A/c 1256) 1,701,300 0.47

7. Old Mutual Li e Assurance Company Limited 1,322,740 0.36

8. Kenya Reinsurance Corporation Limited 1,071,543 0.30

9. Kenya Commercial Bank Nominees Ltd (A/c 769G) 934,150 0.26

10. Kenya Commercial Bank Nominees Ltd (A/c 744) 900,000 0.25

Total o 0 above 333,000,955 9 .75

2601 other shareholders 29,958,320 8.25

Total shareholding 362,959,275 00

Top 10 Shareholders

8/7/2019 2006_Bamburi AR06


[ 3 ]

uri Cement Limited is a subsidiary o the La arge Group. La arge is the world leader in buildingals, and holds top ranking positions in all three o its businesses: Cement, Aggregates & Concreteypsum.

a arge Group is present in 70 countries with 71,000 employees. Its sales or 2006 amounted to 16.9Euros (2005: 14.5 Billion Euros). The Cement division has operations in 46 countries, selling a large

o cement, hydraulic binders and lime. La arge has over 166 cement plants throughout the world.

igures or La arge or 2006

idated16.9 Billion Euros

ing income: 2.8 Billion Euros

nt Division2006: 9.6 billion Eurosorce 2006: 41,191 people

ge is the only company in the construction materials sector to be listed in the 2007 ‘100 GlobalSustainable Corporations in the World’. La arge is dedicated to ensuring that its growth comes

a strategy o sustainable development: its expertise combines industrial e ciency, valuen, respect or individuals and cultures, environmental protection and the conservation o naturalces and energy.

uri Cement Limited derives tremendous advantages rom being part o the La arge group,ing access to cutting edge technologies or cement manu acture, management and technicalrt.

arge Group

Solomon W. Karanja

Antony Hadley

Michel Puchercos

David Njoroge

Sheila M’Mbijjewe

Elmore Leo

Albert Sigei

Jean-Claude Hillenmeyer

Chris Kisire

Rachel Lumbasyo

Richard Kemoli

Board o Directors(From le t to right)

8/7/2019 2006_Bamburi AR06


[ 6 ]

JEAN-CLAUDEHILLENMEYER (70) (AC)is a graduate engineer romEcole Centrale des Arts etM an u ac tu r es , P ar i s a ndholds an MBA rom “Institutd’Administration des Enter-prises”.He is the acting Chairman o the Audit Committee. He hasheld several positions in the

La arge group both in France and internationally be oreretiring in August 1999 and is currently an independentconsultant. He has 45 years o experience in the cementindustry which has been very valuable to Bamburi CementLimited as it goes through change.

CHRIS C. KISIRE (40) (AC)i s a h ol de r o B ac he l or oCommerce, Accounting Majorand a Masters o Business & Administration degrees both rom the University o Nairobi.He also holds a Certi ed Public Accountant o Kenya, CPA (K)quali cation and a member o the Institute o Certi ed Public Accountants o Kenya (ICPAK).

Mr Kisire was appointed to the Board on 1 October 2004.He is currently the Group Finance Director o StandardGroup Limited. He has worked or more than teen yearsin nance and administration both locally and internationally(Zimbabwe, Uganda and United Kingdom).

SHEILA M’MBIJJEWE(49) (AC)is a Chartered AccountantICAEW, and a CPA Kenya.Sheila’s previous jobs have in-cluded the Finance Directorposition at PricewaterhouseC-oopers, Stagecoach Interna- tional, and most recently withStandard Chartered Bank Ke-nya. She is currently a member

o the Bamburi Audit Committee and the Board. She is alsoa member o the Monetary Policy Advisory Committee o the Central Bank o Kenya.

RACHEL LUMBASYO(56) (AC)has a Bachelor o Commercedegree (Accounting option) r om th e U ni ve rs it y oNairobi and has a CPA (III) Kquali cation. Rachel worked in various senior audit positions in the O ce o the Controller and Auditor General Kenya, rom1975 to 1989 when she le t as

Assistant Director o Audit. She then joined the NationalSocial Security Fund in March 1989 as the Chie Internal Auditor. She has worked i n the Fund as the Internal Audit

Manager and Deputy Managing Trustee. In December 2005she was appointed the Managing Trustee and a membero the NSSF Board. Rachel is also a member o the VAT Tribunal.

MICHEL PUCHERCOS(49) (AC ED)is a graduate o the EcolePolytechnique (1976) and theEcole Nationale du Génie Rural,des Eaux et des Forêts (1981).Michel started his career in theFrench Ministry o Agriculturein 1982-1989. He has servedas Director o Strategy andSupplies in Orsan, a La arge

subsidiary rom 1989-1992. In addition, he has worked insenior executive positions in a number o Agro- Food andChemical Industries in Europe as ollows: rom 1992-1994 in

Jungbunzlauer SA as Executive President, rom 1994-1996as General Manager o the Cana group and rom 1996-1998 Doux, as Executive Vice President o this leadingEuropean group specializing in poultry.Michel returned to La arge in 1998 when he was appoint-ed as Director o Strategy and In ormation Systems o theGypsum division o La arge. In 2003, he moved to the Ce-ment Division as Director o Cement strategy, until his re-assignment to Bamburi Cement as Managing Di rector inSeptember 2005.

DAVID NJOROGE (36) (ED)is a holder o a Bachelor oCommerce degree, Account-ing major and is a Certi edPublic Accountant. He has at- tended managerial, nancialand leadership related cours-es’ both locally and internationally including sessions inINSEAD.He joined the company in 1999

as Finance Manager a position he held until 2002 when hewas promoted to Group Finance Director. In April 2006, hewas assigned to Hima Cement Ltd as General Manager.He is also a director at the Nairobi Stock Exchange wherehe chairs the nance committee. He has several yearsexperience in nance and control.

ALBERT SIGEI(34) (AC, ED)has a degree in MechanicalEngineering rom the Univer-sity o Nairobi and is a Char- tered Certi ed Accountant. Healso holds a Higher Diploma inin ormation systems manage-ment and quali cation in in or-mation systems audit. He hasattended various training ses-

sions, including an International Leadership DevelopmentProgramme at Insead, one o Europe’s leading businessschools. He joined Bamburi group in May 2002 as GroupController. Be ore joining Bamburi Cement, Albert workedwithin the risk management and nancial audit service oPriceWaterhouseCoopers (PwC) or ve and a hal years,both in Nairobi and London.

RICHARD KEMOLI (7 ) (NE)holds a Bsc(Econ) rom Mak-erere University, Kampala andstudied or a Diploma in Man-agement Studies at RegentStreet Polytechnic (now Uni- versity o Westminster, Lon-don).He is also a member o the Institute o Directors, Lon-don.He is the Chairman o the

ri Cement Limited Board o Directors. He has 33experience with Commonwealth Development

ations - East A rica Region and is a director incompanies.

ANTONY HADLEY (48) (NE)i s t he R e gi o na l P re s id e ntL A FA RG E A r i ca . H e i s aMechanical Engineer whograduated rom London’sImperial College in 1980. For18 years, Tony worked in the oilindustry or Schlumberger inmany roles, living and workingin North and South America,Europe and A rica.

In 1999, he joined Blue Circle Industries in the U.K. withresponsibility or A rica. Following the acquisition o BlueCircle by La arge in 2001, Tony was appointed as Regional

President or La arge (A rica Operations). La arge hascement manu acturing operations in Nigeria, Benin,Cameroon, Kenya, Uganda, Tanzania, Zimbabwe, Zambia,Malawi and South A rica.

ELMOR LEO (63) (NE)holds a Bachelor o Commercedegree rom the University oPretoria and a Masters o Busi-ness Administration degree rom the same university.He is the Managing Directoro La arge South East A rica.H e h a s s e rv ed i n v a ri o uspositions within the Group andhas experience spanning over

rs in the cement industry.

SOLOMON W.KARANJA (70) (NE)is a BA graduate o MakerereUniversity and holds an MA rom University o London.Hehas worked as a Deputy to the University o East A rica,Registrar, and was the rstKenyan University o Nairobi,Registrar. Subsequently heheld the position o Executive

man, East A rica Portland Cement Company oryears a ter which he was appointed Executive

an National Bank o Kenya in 1987.

served as Chairman Kenya Gol Union and MuthaigaClub as well as a Director Muthaiga Country Club andan Fidelity Shield Insurance Company.s served on a number o Government appointedssions into the a airs o the university and isly on the University Inspection Board recently setthe President to review the operations o the publicvate universities in Kenya.

MERCY NDERITU (4 ) (CS)is an LLB degree holder rom the University o Nairobi andhas an LLM rom the WidenerUniversity School o Law inDelaware. She worked as aLegal Assistant in law rms inNairobi or three years andsubsequently held variousp os i ti on s a s a n i n h ou s elawyer in Esso Kenya Limited

and Mobil Oil Kenya Limited or a cumulative period o 10 years. She joined Bamburi Cement Limited in 2005. Mercyis an Advocate o the High Court o Kenya (admitted to thebar in 1991) and also a Certi ed Public Secretary.

ard o Directors Pro les

KEY: NE= Non-Executive Director, AC= Audit Committee, ED= Executive Director, CS=Company Secretary

8/7/2019 2006_Bamburi AR06


The year 2006 presented our business with several challengesstarting with the drought in the earlier part o the year in variousparts o East A rica, rising ood and uel prices which increasedthe infationary pressures in Kenya (14.5%) and Uganda (11.3%).

As a result o low water levels, power generation in Ugandadropped drastically and thermal generators were installed

to provide emergency relie , driving up the cost o power by 146% within the year. There was also insu fcient improvementin long haul transport acilities.

Meeting our Financial Goals in a Challenging EnvironmentDespite these challenging constraints, we were able todeliver acceptable per ormance compared to la st year. Somehighlights by way o example are:• Increased cement production by 8% while our consolidated

sales grew by 10% to Kshs 16.7 billion,• Increased in profts be ore tax by 22% to Kshs 3.8 billion• Critical strategizing and mobilizing or growth to meet the

rising demand or cement in the region,• Enhanced the sa ety o our industrial operations as well as

improved sa ety on the road,• Demonstrated our commitment to the communities and to the

environment through various Corporate Social Responsibility projects undertaken in the year. In recognition o some o

this work, Bamburi received a prestigious internationalHabitat conservation award in 2006 - the frst on the A ricancontinent - or environmental stewardship and protection o native biodiversity.

To mitigate the increased pressure on operating costs, welaunched a cost saving initiative called Excellence 2008, whoseaim is to ocus and accelerate actions wit h greatest potential

or saving costs. Key areas o this initiative include productivity improvements, alternative uels and optimization o materialadditives.

The strong ocus on these initiatives produced good resultsin 2006 and demonstrates the great potential o our peopleand organization to deliver strong results even in a challengingeconomic environment.

Chairman’s Letter

Mobilizing or expansion to serve growing marketOur markets in East A rica continue to show high growth, averaging 8-10% over the past 5 years.This is not surprising, as political stability returns to the region, economic activity is rejuvenated.The outlook remains good. Estimates or economic growth in Kenya and Uganda or 2006 are 6%and 4.5% respectively. In rastructure projects will need to be accelerated i the targeted growthrates are to be achieved going orward. In Uganda, increasing power generation remains a toppriority with 2 major hydro-electric dams due or construction commencing 2007. We are optimistic

that our governments will accelerate e orts to improve the regional in rastructure or industry andcommerce.

In 2006, we devoted our energies to fnalize plans to increase production capacity in Uganda. Wehave obtained approval rom the authorities and expect to break ground or our new plant soon. Thegroup is well geared to meet expected growth in demand.

Leveraging growth through innovation We are committed to o ering more value to our customers through new solutions and new productsdeveloped rom an intimate understanding o our customers needs. In Kenya, we success ully championed the use o concrete electricity poles, as durable and environmentally riendly alternative

to tree posts. In Uganda we had great success demonstrating the suitability o cement or roadstabilization. In addition, working through the East A rica Cement Producers Association (E ACPA),we supported the construction o the frst ever concrete road (Mbagathi Road) in Kenya to showcase

the unique benefts o c oncrete roads.

Across the Eastern A rica region, we run a Mason’s Partnership program in which we organizeregular seminars or one o our key consumer groups – the building masons. Through theseseminars we listen, learn and gain valuable insights to leverage in new product development. In oursubsidiary, Bamburi Special Products, we have an important vehicle or introducing new products

to the market.

We continue to realize innovation in our industrial and internal operations, where the benefts arereal improvement in the productivity and e fciency o our operations. Our pioneering work with theuse o biomass as an alternative energy source is a sterling example. We believe that innovation willremain vital or us to sustain our c ompetitive advantage within the region.

Commitment to sa ety, health, our communities and environmentOur commitment to sa e operations remains as strong as ever. We have launched a new Health

and Sa ety Policy across the group to give new impetus to our sa ety ambitions. At the center o oure orts is t he commitment o each individual employee and business partner. We require every oneo our employees and contractors to commit to contribute to a sa e environment at work throughresponsible behaviour and active engagement o other workers. The main initiative in the year wasa road sa ety campaign that we launched in Kenya and Uganda to address the risks we ace in

transporting our products.

We take seriously our responsibilities as a member o the communities where we operate. We aremajor contributors in the areas o environmental protection, health and education. Our unique GreenSchools projects in Kenya and Uganda promote tree planting. To date over 250,000 trees have beenplanted and 126 water tanks installed. In Uganda, we launched an Ant i Retroviral Treatment (ART)program through which our employee community is able to access ree HIV drugs. We continue tosupport young promising students in our communities with education bursaries.

8/7/2019 2006_Bamburi AR06


We are proud to initiate new economic opportunities spurred by innovation in our plants. The use o alternative uel sources (biomass) resulted in new income sources and improved quality o li e oro ee growers, local traders and transporters. In 2006, La arge Ecosystems pioneered a projectBio uels) to develop tree plantations in proximity to our plant and we are optimistic that t he project

will provide more work and micro enterprise opportunities or our communities. Over 100 temporary mployees rom the neighboring communities have already been engaged through t his initiative.

Building our long-term competitive advantagen 2007 we expect per ormance to beneft rom the market growth outlook and urther productivity mprovements. We continue to explore new sources o energy in order to save costs and contributeo environment protection in the present and the uture.

What we have achieved so ar is the result o the dedicated e orts o all our people. In 2006 wemade changes to our organization to improve the e ectiveness o resource sharing in East A rica.We are now more integrated and work closely as one business across East A rica. We have great

people across the region and are committed to developing everyone to their ullest potential. Theper ormance o our people, both individually and working together as robust teams across EastA rica and the La arge group, is what distinguishes our immense capabilities.

n conclusion, I want to commend all our sta in East A rica or their dedicated and unwaveringwork or the company. My vocabulary is insu fcient to express the gratitude I eel to the Board o Directors or their stead ast support and positive contribution to company deliberations. I believewe are on the right path – building partnerships with our customers, creating innovative products,making our organization more e ective, reducing costs, planning or expansion and developing thealents o our people. All these initiatives will solidi y our competitive advantage resulting in bettereturns or our shareholders and stakeholders.

Sincerely,

RICHARD KEMOLICHAIRMAN

Alone we can do so little; together we can do so much. Helen Keller.

8/7/2019 2006_Bamburi AR06


We have a road map or sa ety improvement and in 2006 our ocus was on road sa ety. Road sa etyremains a major challenge or our operations. We launched a Road Sa ety campaign in both Kenyaand Uganda through which we plan to improve sa ety awareness, driving behaviour and reduce roadaccidents. We are committed to diverting our material shipments rom road to rail to minimise exposure to accidents on the road. We have on-going discussions with the new Railways concessionaire (Ri t Valley Railways) to increase our tra c on rail, and we are optimistic that management o the railwaynetwork will improve.

Sales The Group recorded an 11% increase in turnover compared to 2005 as our sales ocus and uniquegeographical presence enabled us to take advantage o all opportunities in the market. Sales grewstrongly on the back o overall cement market expansion in the region. Domestic sales in Kenya weresluggish in the rst hal o the year, partly due to the regional drought and related impacts on disposableincomes. But demand picked up in the second hal o the year, to record the growth noted above.

Market growth in Uganda was also strong at 9.5%. By leveraging on our unique regional presence, wewere able to serve the growing demand in Uganda and to increase our exports to other inland A ricamarkets. We reorganised our sales and marketing teams to consolidate our strong position and exploitnew market opportunities. Our ocused e ort resulted in improved penetration to Tanzania, Rwanda,Burundi and South Sudan, a 30% increase in exports volumes.

Industrial Per ormance At all our plants, we improved per ormance in terms o cement production and plant reliabilit y in 2006. Wemade signi cant improvements in the year by optimizing our material usage ratios and by increasing thealternative uel usage. The gains in productivity were vital in o setting adverse cost pressures particularlyon uel and power prices.

MombasaIn 2006 cement production improved 9% as mill utilization increased to serve increasing demand orcement. Kiln reliability improved, but we were behind last year on clinker production due to slightlyreduced kiln output. As part o our plans to improve kiln e ciency, we will make a signi cant sustaininginvestment in the replacement o kiln cooler system in 2007.

NairobiCement production at the Nairobi grinding plant increased 7% to meet the increased domestic and

export demand. We made signi cant improvements to productivity in the year by optimizing cementitiousadditions and migrating rom CEM II to CEM IV cement.

KaseseCement production improved 7% despite increased problems with power quality and supply. To alleviate the power situation, we commissioned a KShs 110 million generator in November to provide alternativesupply during power outages. We also made gains in the use o alternative uels, which partiall y o set theincrease in uel and power prices.

Management’s Discussion and Analysis o Financial Conditionand Results o OperationsThe Economy The Kenyan economy remained buoyant in 2006, achieving 6.0% GDP growth (2005: 5.8%) despiteadverse impacts o drought/ amine that characterised the rst hal o the year. The growth was drivenby mainly the tourism, telecommunication, horticultural and manu acturing sectors. In addition, theGovernment is implementing various development programmes, especially ree primary education andoads rehabilitation, which remain key or continued economic growth. Infation in the year rose to 14.5%2005: 10.3%) mainly driven by volatile uel and ood prices.

Uganda GDP growth at 4.5% was below prior year (5.3%). The decline is attributed to the acute powerhortages during the year brought about by a drop in water levels at the main hydro power dam.

Emergency thermal generators were commissioned towards end o the year, but being more costlyources o power, they resulted in sharp tari increases (114% by end o the year). Escalating power anduel prices contributed to the high infation estimated at 11.3% (2005: 3.5%).

n the wider region, Rwanda and Burundi were admitted into the East A rican Community. Both countriesemain key export markets, and we expect that the integration will urther improve trade and business

opportunities or the group.

The economic outlook or the region remains positive; political settlement in South Sudan; the searchor peace in northern Uganda; the prospects or oil exploration in western Uganda; the robust tourism

ector in Kenya – all provide strong grounds or optimism. Development o the in rastructure in the regionemains a priority in order to support economic growth. We are hope ul that the Governments in theegion will accelerate improvements to the transport sector. In Uganda accelerating the construction o

new hydro power dams is vital to improve the country’s economic competitiveness.

Construction SectorCement demand in the region continued to be strong, spurred by the strong economic growth notedarlier. Across the region, investment is growing in housing and rehabilitation or expansion o existing

public in rastructure. In Kenya, we have a conducive climate or the individual home builder and privatedeveloper particularly in orm o relatively low interest rates and availability o mortgage products.

The private home builder is also a key cement market segment in Uganda. There has been a sustainednvestment in new commercial building and hotels, and an increase in public construction projectsncluding rehabilitation o road and airport acilities, in preparation or the Commonwealth Heads o

Government summit scheduled or October 2007.

Public projects will also contribute to the high cement market growth rates in 2007. The development ooad in rastructure in the region is a priority or regional development. In conjunction with the East A rican

Cement Producers Association (EACPA), we supported the construction o the rst ever concrete roadMbagathi Road) in Kenya to demonstrate their suitability or the region. We are committed to realising

new uses or our cement and cement related products through innovation.

Health and Sa ety t is our commitment to be among the best organizations internationally in sa ety per ormance. We recentlyenewed our sa ety policies, placing the commitment and contribution o each individual employee and

our contractor partners at the centre o all e orts and providing clearer rules or sa ety behaviour. Eachmployee and contractor signed up to the new policy, committing to contribute to a sa e environmenthrough responsible behaviour and active engagement o one another.

8/7/2019 2006_Bamburi AR06


A job worthdoing is worthdoing together.

Anonymous.

nvestmentsThe group recognizes the contribution o structural improvement to pro tability and continues to makenvestments to improve e ciency. Over KShs 750 million was spent in 2006 on di erent sustaining andmprovement investment projects.

The Group has also committed to invest over KShs 6 billion to double capacity in Uganda over the next 2years. In both Kenya and Uganda, we continue to work closely with other stakeholders to mitigate impacto power supply issues.

Human Resources and OrganizationDuring the year we optimised our Organisation structures in East A rica in line with our ambition to operateas one e ective Business Unit, operating seamlessly across the region.

We also reorganized our Sales and marketing teams to consolidate and position ourselves or urthergrowth. Our people are energized around our vision, “ …to be the leading market and end-user orientedCement Company across Eastern A rica, with a strong and clear dedication to our communities…”

We have continued to invest in our people, with training ocused on technical and management skillsdevelopment. In this endeavor, we tap into the huge potential and experiences in the La arge group.

Bamburi Special ProductsBamburi Special Products (BSP) Ltd is a subsidiary o Bamburi Cement Ltd manu acturing concretepaving blocks and other cement products. The company produces paving blocks under the brand nameBamburiblox.” It continues to be a crucial support or our product development and marketing activities.

La arge Eco SytemsLa arge Eco Systems manages the Group’s various land properties (including limestone reserves)ecuring them or the uture. The company is responsible or rehabilitating exhausted quarries. Landeserves and rehabilitated quarries around our plants are o vital strategic signi cance to the group.

The land is maintained in active use as eco-tourism/educational attractions, showcasing not only thecompany’s commitment towards sustainable development and respect or the environment, butproviding also social amenities or our communities. The work done by La arge Ecosystems has beenecognized in numerous international awards including, in 2006 - the prestigious international Habitat

conservation award or environmental stewardship and protection o native biodiversity.

Outlook

The Group looks ahead to a robust year with construction activities expected to remain avourable inall our markets. We anticipate all Group companies to report sound growth on the back o a vibrantmarket.

We hope that urgent steps will be taken by governments in the region to improve the operatingnvironment, especially the power situation in Uganda and transport in rastructure in both countries. The

Company will continue pursuing innovative steps to serve the diversi ed needs o our customers and totrengthen its leadership position.

8/7/2019 2006_Bamburi AR06


Nomination and Remuneration Committee This committee comprises o three members o the board and is responsible or appraising theper ormance o senior management sta , including the Chie Executive. It reviews human resourcespolicies, and advises the Board on matters relating to remuneration or senior management and boardmembers. It is also responsible or the scrutiny and recommendation o potential candidates or theappointment to the board. It has one scheduled meeting in a year, but also convenes when there is need to ll any casual vacancy arising in the board.

Asset Disposals Committee The committee is responsible or the disposal o the Group’s non-operating assets. It is charged withensuring that the process o disposal is air, pro essional and e cient as instructed by the board. Thiscommittee has 2 members and its chair is a member o the Audit Committee.

Executive Committee The Managing Director chairs an East A rican Executive management committee, which comprises theexecutive directors. The committee meets at least once a month and its mandate is to deal with policy,operational issues, and to improve communication and co-ordination through the various companiesin the group. In order to ensure that ull attention is given to all business segments and location theexecutive committee holds its meetings on a rotational basis at all the company’s business locations inEast A rica.

Planning and Control There is a comprehensive management cycle system that includes the long-term strategic plan, medium term per ormance improvement plan, organisation and human resource review and the budgets. Thestrategic plan gives the group long-term direction while the per ormance plan enables management to ocus on key actions to achieve our strategy. The budget or annual business plan is approved by theBoard in December each year and must be consistent with the strategic and per ormance plan. Atevery board meeting, management accounts containing actual versus budgeted results and revised orecasts or the year are reviewed by the Board. These monthly management accounts analyse andexplain variances against plan and report on key indicators.

There is a clear de ned organisational structure within which individual responsibilities are identi ed inrelation to internal controls. The structure is complemented by policies, and management operates thebusiness in compliance with these policies. The policies include guidelines or authorisation and approvalo revenue and capital expenditure.

The group has de ned procedures and controls to ensure the reporting o complete and accurateaccounting in ormation. These cover systems or obtaining authority or major transactions and orensuring compliance with laws and regulations that have signi cant nancial implications. Proceduresare also in place to ensure that assets are subject to proper physical controls and that the businessremains appropriately structured to ensure adequate segregation o duties.

We have also ully adopted International Financia l Reporting Standards (IFRS) in line with the requirementso the Institute o Certi ed Public Accountants o Kenya. This should enhance the readership andunderstanding o published accounts or shareholders and other users.

Share movementOver the year 6,099,142 shares were sold in the stock market out o a total o 362,959,275 shares.

ntroductionOur Board and Executive committee are committed to managing business at the highest standardso corporate governance. The role o the Board is to: assist in determining the Group direction andtrategy; monitor the achievement o business objectives; ensure the Group meets its responsibilities tots shareholders and that the control environment adequately protects the Group’s assets against majorisks it aces.

The directors are responsible or maintaining the Group’s systems o internal control. These controls aredesigned both to sa eguard the Group’s assets and ensure the reliability o nancial in ormation usedwithin the business and or publication. The controls are designed to provide reasonable assuranceagainst material misstatement or loss. The key eatures o the governance structure and processes andhe internal nancial control systems, which operated satis actorily throughout the period covered by thenancial statements, are described below.

Corporate GovernanceBoard o DirectorsThe Board comprises eleven directors, three o whom are executive directors while eight are non-xecutive. The board is chaired by an independent and non-executive director Among the non-executive

directors, our are independent directors. In addition to seeking a air balance between executive andnon-executive directors, the appointment o board members also takes cognisance o the need or agood mix o skills, experience and competencies required in the various elds o expertise, or e ectivemanagement o the group’s business. In the Bamburi Board ve directors have nancial skills whilst vehave gained experience and skill rom work in the cement industry.

The board meets at least once every quarter. This program notwithstanding, whenever there is need toransact urgent business, a meeting is convened. To ensure that all matters requiring the attention o the

board are given ull and un ettered attention, the board has our standing committees.

Audit CommitteeThe audit committee plays the key role o rein orcing best practice in corporate governance particularlyn the areas o internal controls and risk management. It does this by regularly reviewing relevant

company in ormation to gain assurance that proper in ormation and control systems are in place; and

hat the company’s business and that o its subsidiaries is conducted in an economically sound andthical manner. The Audit Committee will act in an advisory capacity to the Board in such a manner as toncrease con dence in the internal control environment. Its main duties are:

1. to ensure that the systems o internal control are soundly conceived and e ectively administeredand seek assurance that control systems are regularly monitored;

2. to de ne responsibilities o the internal control unction;3. to review the extent o compliance agains t policies, procedures and laws4. to review nancial s tatements and interim resul ts and annual pl an budget and schedules or the

coming year5. Discussin g the mandate and reviewing the ndings o internal and external auditors.

Corporate Governance and Social Responsibility

8/7/2019 2006_Bamburi AR06


HealthIn March 2006 16 emale spouses o our employees in Mombasa were trained as peer educators inHIV/AIDS issues. Under the leadership o the senior clinical o cer in the community, peer educators heldmonthly meetings to discuss HIV issues with ellow emale spouses rom April to October in the year. These meetings have led to increased employee spouse visits at the VCT centre at the Mombasa plantclinic.

Antiretroviral drugs continue to be supplied to the eligible HIV positive employees and their dependants.In addition, counselling is provided or people who are tested irrespective o outcome at the Clinic and VCT centre.

The company embarked on a programme to enable employees obtain treated mosquito bed nets.During the year 232 nets were sold to employees under this scheme. In line with preventive measureswith regard to malaria, 140 company sta houses in Mombasa were sprayed with residual mosquitorepellents.

In order to enhance sa ety and health practices as a way o li e, a Knowledge, Attitude, Practices andBehaviour (KAPB) survey or HIV/AIDS and malaria was launched and carried out in Bamburi and itssubsidiaries in November 2006 with a commendable 80% participation rate.

RehabilitationDuring 2006 we carried out success ul restoration o nearly twenty hectares o quarry land in addition to the management the existing parks - Haller Park and Forest Trails. With over 400 species o indigenous trees the parks contribute signi cantly to the protection o Kenya’s unique coastal fora. The diverseecosystems that have been created are an important showcase o our environmental responsibility.June 3rd, 2006 was used to mark the World Environment Day. We organised tree planting activities at theSouth and North quarries in Mombasa. A total o 2,300 Casuarin a seedlings were planted in both quarriesby school children and invited guests and 3,000 seedlings given away to the public to plant at home.

A new project that aims at producing uel wood as an alternative energy source was started during the year. The primary objectives o this project are to establish uel wood plantations on Bamburi’s miningreserve land and in disused quarries not set aside or biodiversity conservation, in order to produce uel wood or burning in the cement plant. The uel wood is a carbon-neutral uel, and will contributesigni cantly to the Group’s ossil uel substitution programme.

The project will also enhance stakeholder relations through the involvement o local communities.Communities and other external land owners will be encouraged to plant trees or later sale to Bamburias wood uel. At the end o the 2006, over hal a million seedlings had been produced in readiness orplanting in 2007.

In November 2006 Bamburi received international certi cation or habitat creation at the MombasaQuarries through the Wildli e Habitat Council. This certi cation is or two years, and was made a ter a site visit by auditors and a submitted application. In addition the Presidents Award “In honour o outstandingcommitment to community service, conservation education and environmental stewardship” was alsogiven on the same day by the Council. This award makes Bamburi’s quarries the rst Wildli e HabitatCouncil certi ed program on the A rican continent.

Health and Sa ety We are committed to providing a healthy and sa e work environment or all our employees and businesspartners, and in turn expect all our employees to contribute to creating this environment throughesponsible behaviour. Everyone is also expected to demonstrate that health and sa ety are core valuesn all aspects o our business through action and elt leadership.

We recently re-launched our group health and sa ety policy to provide resh impetus to our e orts. Thenew policy explicitly includes eleven health and sa ety policy rules. All employees and contractors areommitted to actively engage each other towards achieving our ambition o being among the sa est

organizations in the world. Line management is responsible or health and sa ety implementation,ommunication and compliance.

We launched a Road Sa ety campaign in 2006 to enhance a sa e driving culture and to gain transporters’ommitment to road sa ety. The campaign was launched at all our sites in Kenya and Uganda, and the

primary target are drivers, transporters and employees. De ensive driving training and certi cation hasbecome a minimum criterion or all contracted drivers. While we have seen improved driving behaviornd reduction in the atalities on the road in 2006, we are committed to minimizing the risks and tottaining nil road atalities.

Community ProgrammesEducationOne o our initiatives in the education sector alls under our Bursary Scheme set up in 1998 to assistundergraduate students in our National Universities. The bursary supports students rom the areas inwhich we operate who have been o ered places in our National Universities. This programme has 10tudent bene ciaries who are studying in the public universities. Our ocus on education saw us continueo support a number o students in various schools in Kenya by paying their school ees.

n addition, we have an internship program, in which we provide eld attachment opportunities withinour organisation to better prepare the students or the work environment. In tandem with this we haveecently launched an apprenticeship training scheme in which we will sponsor technical apprentices tohe National Polytechnics to enable them enhance their knowledge and skills relevant to the current anduture needs o our plant operations and the country. We expect that within the next our years, we will

have supported twenty students through this programme.

n 2006 50 students rom various East A rican universities joined our subsidiary La arge Eco Systems onattachment training in ecology, wildli e, sheries, orestry, tourism and management. We also held our

rst undergraduate eld course in Restoration Ecology in Haller Park as a module in Princeton University’semester abroad programme in the Ecology and Evolutionary Biology Programme. Eight Americantudents and two o our sta participated in the 3 week eld course that examined the e ectiveness

o restoration practices at La arge Eco Systems. Four Masters Degrees were also earned through eldprojects at La arge Eco Systems by students at Cran eld University’s Center or ecological restoration inhe UK. These students conducted research examining the impact o Bamburi’s Green Schools Project

on sanitation, uel wood production, education and water e ciency in the Kwale District. The GreenSchools Project is discussed urther below.

Corporate Social Responsibility

8/7/2019 2006_Bamburi AR06


Employees o Bamburi in the last quarter o 2006 made cash donations amounting to Kshs 2,063,413 to three charitable institutions in the country: the SOS Children Village in Buruburu Nairobi received Kshs1,102,141, the Wema Centre in Mombasa was the recipient o Kshs 805,331 and the Tom Mboya CerebralPalsy Unit also o Mombasa, received Kshs 155,940.

Some other notable donations made were to the Mwembe Tanganyika street paving project in Mombasa, the Green Belt Movement, to the Alliance Francais e Nairobi and to the Kenya Red Cross National FamineRelie Fund. In the latter instance ve million shillings was donated towards short and long term relieinitiatives under the management o the Red Cross.

Hima CementHealth and Sanitation A ocus area in Uganda has been the provision o toilet acilities in various parts o the country to improvesanitation. During the year the company donated and commissioned toilet acilities at various communityinstitutions.

On 2nd August 2006 Hima Cement Ltd launched an Anti Retroviral Therapy (ART) programme in Hima,in partnership with the Government o Uganda, the International Medical Group (IMG) and USAID. Thisprogramme involves counseling and testing o employees, dependants and community members andwhere deemed clinically bene cial, the provision o ree drugs. A Post -Test Club acilitated by our stamembers gives support to those in the community who have been tested or HIV.

Hima Cement Ltd received an award in recognition o best practice in Corporate Social Responsibility or2006 rom the Uganda Manu acturers Association.

Community mobilization The socio economic set up at the Kasese, West Uganda - where our Hima plant is located - has providedunique opportunities to interact with the wider community. The company has marked some days in the year as Community days, during which community members are mobilized to participate in a variety oactivities that touch on a spectrum o health and sanitation issues. The themes or the community daysin 2006 have been HIV prevention, drug abuse, sa e water and sanitation.

EnvironmentIn the area o environment and sanitation, the company started the Green Schools Project in Kasesearea. The objectives are similar to those at Bamburi Cement Ltd. The pilot scheme covers seven schoolsidenti ed in Kasese and Kampala districts. Participating schools will bene t rom pit latrines, desks andwater tanks.

Other community initiatives The company donated seedlings to schools in Kasese district and to the World Wildli e Federation (WWF) or planting in designated areas around Kasese district. The company also donated cement to variousinstitutions or development o classroom blocks and places o worship.

Haller Park une 2nd, 2006 was a memorable day that saw the launching o the “Owen & Mzee” book, a bestelling children’s book that is primarily attributable to the sustainable development e orts o Bamburin Mombasa.

The extraordinary duo o Owen and Mzee (Hippo and Tortoise) has become a major attraction at theHaller Park getting both national and international attention. A souvenir 25 shilling postage stamp with theduo was launched in the year. The Owen & Mzee Book has won several accolades, the latest one beinghe 2007 “Notable Book Award” rom the American Library Association.

The Green Schools ProjectThe Green Schools project ocuses on providing clean water and tree seedlings or planting to schoolsn arid and semi-arid areas with the aim o eventually creating a sustainable source o drinking water andrewood. It was started in 2003 and has continued to make good progress. Bamburi provides a water

ank design concept and up to ve thousand tree seedlings to each school or phased planting.

The goal is to ensure that each “Green School” pupil will plant trees that will oster growth o orests andustenance o rewood or cooking. The tanks which collect rainwater provide access to sa e wateror drinking and preparation o meals in schools. The project has a total o 96 schools participating inour provinces in Kenya: Coast, Eastern, Ri t Valley and Western. To date a total o 252,523 trees have

been planted.

Baobab TrustBamburi is one o the donors o the Baobab Trust, an organization that is involved in sustainabledevelopment work.

The Trust demonstrates sustainable arming techniques and other community initiatives in partnershipwith donors such as the UNDP and the Haller Foundation. Some notable events in its calendar were theopening o a community library at the Nguuni Wildli e Sanctuary in October and hosting a Farmers OpenDay at its Mtopanga arm in conjunction with the Ministry o Agriculture In November. In SeptemberBamburi, together with the Baobab Trust and various hotels, the community, schools and other keytakeholders, participated in the Annual International Coast Cleanup during which several kilometres o

beach ront were cleaned.

Baobab Trust has also been pivotal in marine li e conservation particularly with regard to the turtle. TheTrust assists in protecting turtle nests, and maintains its own hatchery where the turtle eggs can be

ncubated a ter being removed rom unsa e nest sites. The Trust also works with local shing communitieso create awareness o the conservation programme.

Other Community Initiatives

Over the year the company interacted and gave nancial support to various worthy causes. In the spirit oaring or our communities Bamburi sta members rom the Nairobi Grinding Plant donated a cheque o

Kshs 101,000 and 40 desks to Mlolongo Primary School Athi River in June. This is a school where materialupport and cash donations by the Nairobi Grinding Plant have been complemented by other Kenya

Association o Manu acturers (KAM) members Athi River chapter.

8/7/2019 2006_Bamburi AR06


Notice O Annual General Meeting

NOTICE IS HEREBY GIVEN that the 56th AnnualGeneral Meeting o the Shareholders o BamburiCement Limited will be held in Mombasa at theNyali Beach Hotel, on Wednesday 30th May 2007at 3.00 pm. or the ollowing purposes:

1. To table the proxies and to note the presenceo a quorum.

2. To read the notice convening the meeting.

3. To receive the Chairman’s statement, theReport o the Directors, and the Audited Accounts or the year ended 31 December2006.

4. To declare dividends:a) To rati y the payment o the rst and second

interim dividends o 40% each per ordinaryshare paid in April and September 2006.

b) To declare a nal dividend payment o 30% perordinary share or the year ended 31 December2006.

5. To approve Directors’ ees or 2006 andincrease Directors ees in 2007.

6. To re-elect directors:In accordance with the Company’s Articles o

Association R Kemoli, T Hadley, C Kisire and SM’Mbijjewe retire by rotation and being eligible,o er themselves or re-election.

7. To note that Deloitte and Touche continue ino ce as Auditors in accordance with Section159 (2) o the Companies Act and to authorize

the Directors to x their remuneration or 2007.

Special Business8. To elect Directors:

Special notice having been given pursuant toSections 142 and 186(5) o the Companies Act(Cap 486), to propose the ollowing resolutionas an Ordinary Resolution:

“That Mr Solomon Karanja, who attained theage o 70 years on 16 September 2006 and MrJean-Claude Hillenmeyer who attained the ageo 70 years on 4 February 2007, be re-electedas directors o the Company.”

9. To transact any other business o the Companyo which due notice has been received.

By order o the Board

Ms. Mercy W NderituSecretary14 March 2007

A member entitled to attend and vote at the abovemeeting is entitled to appoint a proxy, who neednot be a member o the Company, to attend and vote in his stead. Proxy orms must be lodged at the registered o ce o the Company, not less than48 hours be ore the time o the meeting. A proxy orm is provided with this report.

The Secretary,Bamburi Cement Ltd.Corporate O ces6th foor, Kenya-Re Towers,Upper Hill,o Ragati Road PO Box 10921,00100 NAIROBI, KENYA.

Individual commitment to a group e ort – that is what makes a teamwork, a company work, a society work, a civilization work. Vince Lombardi.

8/7/2019 2006_Bamburi AR06


Report o the directors 36

Statement o directors’ responsibilities 37

Independent auditors’ report 38

Consolidated income statement 39

Consolidated balance sheet 40

Company balance sheet 4

Consolidated statement o changes in equity 42

Company statement o changes in equity 43

Consolidated cash fow statement 44

Accounting policies 45

Notes to the nancial statements 49

Financial StatementsFOR THE YEAR ENDED 3 DECEMBER 2006

8/7/2019 2006_Bamburi AR06


Statement o Directors’ Responsibilities

The Companies Act requires the directors to prepare nancial statements or each nancial year whichgive a true and air view o the state o a airs o the group and o the company as at the end o the nancial year and o the operating results o the group or that year. It also requires the directors to ensure that thegroup and the company keep proper accounting records, which disclose with reasonable accuracy atany time the nancial position o the group and the company. They are also responsible or sa eguarding the assets o the group.

The directors are responsible or the preparation and air presentation o these nancial statements inaccordance with International Financial Reporting Standards. This responsibility includes: designing,implementing and maintaining internal controls relevant to the preparation and air presentation o nancial statements that are ree rom material misstatement, whether due to raud or error, selectingand applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The directors accept responsibility or the annual nancial statements, which have been prepared usingappropriate accounting policies supported by reasonable and prudent judgements and estimates, incon ormity with International Financial Reporting Standards and in the manner required by the Companies Act. The directors are o the opinion that the nancial statements give a true and air view o the state o the nancial a airs o the group and o the company and o the group’s operating results. The directors urther accept responsibility or the maintenance o accounting records which may be relied upon in thepreparation o nancial statements, as well as adequate systems o internal nancial control.

Nothing has come to the attention o the directors to indicate that the company and its subsidiaries willnot remain going concerns or at least the next twelve months rom the date o this statement.

M. Puchercos A. SigeiDirector Director

13 February 2007 13 February 2007

Report o the Directors

The directors present their report together with the audited nancial statements or the year ended 31December 2006.

PRINCIPAL ACTIVITIESThe Group is primarily engaged in the manu acture and sale o cement and cement related products.The Group also owns and manages a world class nature and environmental park developed romehabilitated quarries.

Shs’millionRESULTSGroup pro t be ore tax 3,838Tax (1,039)

Group pro t a ter tax 2,799

Attributable to:Equity holders o Bamburi Cement Limited 2,614Minority interest 185

2,799

DIVIDENDSDuring the year two interim dividends amounting to Shs 1,452 million (2005: Shs 1,923 million) were paid.The directors recommend that a nal dividend o Shs 1.50 per share be paid to shareholders. This dividends subject to approval by shareholders at the Annual General Meeting to be held on 30 May 2007.

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group’s activities expose it to a variety o nancial risks, including credit risk and the e ects o changesn debt and equity market prices, oreign currency exchange rates and interest rates. The Group’s overallisk management programme ocuses on the unpredictability o nancial markets and seeks to minimise

potential adverse e ects on its nancial per ormance within the options available in Kenya and Ugandao hedge against such risks.

The Group has e ective policies in place to ensure that credit sales are made to customers with anappropriate credit history.

DIRECTORS

The present board o directors is shown on page 2. The ollowing changes took place during the year:Mr Mbuvi Ngunze resigned on 1 March 2006, while Mr Albert Sigei was appointed the Group nancedirector on the same date.

AUDITORSDeloitte & Touche, having expressed their willingness, will continue in o ce in accordance with Section159 (2) o the Companies Act.

By Order o the BoardSecretaryNairobi13 February 2007

8/7/2019 2006_Bamburi AR06


Consolidated Income StatementFOR THE YEAR ENDED 31 DECEMBER 2006

2006 2005Notes Shs’million Shs’million

Sales 1(c) 16,488 14,393Other operating income 4 173 97Investment revenue 5 62 44

16,723 14,534

Change in inventory o nished goods (165) 374Cost o raw materials and consumables 6 (8,264) (7,632)Sta costs 7 (1,581) (1,448)Depreciation 14 (646) (668) Amortisation 16 (27) (29)Other operating costs 8 (2,053) (1,797)

Operating pro t 9 3,987 3,334

Finance costs 10 (149) (187)

Pro t be ore tax 3,838 3,147

Tax 11 (1,039) (992)

Pro t or the year 2,799 2, 55

Attributable to:

Equity holders o Bamburi Cement Limited 2,614 2,004Minority interest 185 151

2,799 2, 55

Earnings per share – basic and diluted 12 Shs 7.20 Shs 5.52

Dividends:

First interim dividend paid in the year 13 726 653Second interim dividend paid in the year 13 726 1,270Final dividend proposed 13 545 -

,997 ,923

Independent Auditors’ Report to the Members o Bamburi Cement LimitedWe have audited the nancial statements o Bamburi Cement Limited and its subsidiaries set out onpages 39 to 69 which comprise the consolidated and company balance sheets as at 31 December 2006,and the consolidated income statement, consolidated and company statements o changes in equityand consolidated cash fow statement or the year then ended, together with the summary o signi cantaccounting policies and other explanatory notes. We have obtained all the in ormation and explanationswhich, to the best o our knowledge and belie , were necessary or the purposes o our audit.

Respective responsibilities o directors and auditorsAs indicated on page 37, the company’s directors are responsible or the preparation and air presentationo these nancial statements in accordance with International Financial Reporting Standards and theprovisions o the Kenyan Companies Act. This responsibility includes: designing, implementing andmaintaining internal controls relevant to the preparation and air presentation o nancial statements thatare ree rom material misstatement, whether due to raud or error, selecting and applying appropriateaccounting policies, and making accounting estimates that are reasonable in the circumstances. Ouresponsibility is to express an opinion on these nancial statements based on our audit.

Basis o opinionWe conducted our audit in accordance with International Standards on Auditing. Those standardsequire that we comply with ethical requirements and plan and per orm the audit to obtain reasonable

assurance as to whether the nancial statements are ree rom material misstatement.

An audit involves per orming procedures to obtain audit evidence about the amounts and disclosures inhe nancial statements. The procedures selected depend on our judgment and include an assessment

o the risk o material misstatement o the nancial statements, whether due to raud or error. In makinghose risk assessments, we considered internal controls relevant to the group’s preparation and air

presentation o the nancial statements in order to design audit procedures that are appropriate in theircumstances, but not or the purpose o expressing an opinion on the e ectiveness o the group’snternal control. An audit also includes evaluating the appropriateness o accounting policies used and theeasonableness o accounting estimates made by directors, as well as evaluating the overall presentation

o the nancial statements.

We believe that our audit provides a reasonable basis or our opinion.

Opinionn our opinion:

a) proper books o account have been kept by the company and the company’s balance sheet is inagreement therewith;

b) the nancial statements give a true and air view o the state o a airs o the company and o thegroup at 31 December 2006 and o the pro t and cash fows o the group or the year then endedin accordance with International Financial Reporting Standards and comply with the KenyanCompanies Act

Deloitte & Touche

Certi ed Public Accountants (Kenya)

Kirungii”, Ring Road, Westlands

P.O. Box 40092 - 00100, Nairobi

8/7/2019 2006_Bamburi AR06


Company Balance SheetFOR THE YEAR ENDED 31 DECEMBER 2006


ASSETSNon current assetsProperty, plant and equipment 14 7,114 6,721Operating lease rentals 15 1 1Intangible assets 16 54 63Capital work in progress 17 438 182Investments in subsidiaries 18 968 968Other equity investments 19 2,610 1,803

11,185 9,738Current assetsInventories 21 1,795 1,403 Trade and other receivables 22 1,382 1,037Cash and cash equivalents 23 1,463 680

4,640 3,120Total Assets 5,825 2,858

EQUITY AND LIABILITIESCapital and reservesShare capital 24 1,815 1,815Capital redemption reserve 25 2 2Revaluation surplus 25 2,743 2,417Fair value surplus 25 2,264 1,457Retained earnings 5,216 4,307

12,040 9,998

Non-current liabilitiesDe erred tax 26 1,542 1,402Provision or liabilities and charges 27 332 296

1,874 1,698Current liabilities Trade and other payables 28 1,669 987 Tax payable 153 94Provision or liabilities and charges 27 69 61Unclaimed dividends 30 20 20

1,911 1,162Total equity and liabilities 5,825 2,858

The nancial statements on pages 39 to 69 were approved by the board o directors on 13 February 2007and were signed on its behal by:


Consolidated Balance SheetFOR THE YEAR ENDED 31 DECEMBER 2006


ASSETSNon current assetsProperty, plant and equipment 14 9,395 9,080Operating lease rentals 15 9 9ntangible assets 16 56 72

Capital work in progress 17 643 350nvestments in subsidiaries 18 1 1

Other equity investments 19 2,610 1,803Goodwill 20 217 217

12,931 11,532Current assetsnventories 21 2,385 2,027

Trade and other receivables 22 1,137 853Tax recoverable 11(c) 3 -Cash and cash equivalents 23 2,057 920

5,582 3,800Total Assets 8,5 3 5,332

EQUITY AND LIABILITIESCapital and reservesShare capital 24 1,815 1,815Capital redemption reserve 25 2 2Revaluation surplus 25 2,965 2,821Fair value reserve 25 2,264 1,457Translation reserve 25 (70) (338)Retained earnings 13 6,041 4,922Shareholders’ unds 13,017 10,679Minority interest 719 602

13,736 11,281

Non-current liabilitiesDe erred tax 26 1,951 1,932Provision or liabilities and charges 27 368 342

2,319 2,274

Current liabilitiesTrade and other payables 28 2,187 1,168Tax payable 11(c) 167 108Borrowings 29 - 417Provision or liabilities and charges 27 84 64Unclaimed dividends 30 20 20

2,458 1,777Total equity and liabilities 8,5 3 5,332

The nancial statements on pages 39 to 69 were approved by the board o directors on 14 February 2007nd were signed on its behal by:


8/7/2019 2006_Bamburi AR06


8/7/2019 2006_Bamburi AR06


Notes to the Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2006

ACCOUNTING POLICIESThe nancial statements are prepared in accordance with International Financial Reporting

Standards.

The accounting policies adopted in the preparation o these nancial statements remain unchanged rom the previous years. The group’s principal accounting policies are set out below:

Adoption o new and revised international nancial reporting standardsAt the date o authorisation o these nancial statements, the ollowing Standards and Interpretations

were in issue but not yet e ective:

IFRS 7 on Financial Instruments DisclosuresIFRS 8 on Operating SegmentsIFRIC 8 - Scope o IFRS 2IFRIC 9 Reassessment o Embedded DerivativesIFRIC 10 Interim Financial Reporting and Impairment

The adoption o these standards and interpretations, when e ective, will have no material impact on the nancial statements o the group.

(a) Basis o preparationThe nancial statements are prepared under the historical cost convention as modi ed by the

revaluation o certain property, plant and equipment, and the carry ing o available- or-sale investmentsat air value.

(b) ConsolidationSubsidiary undertakings, which are those companies in which the parent company, directly or

indirectly, has an interest o more than one hal o the voting rights or otherwise has power to exercisecontrol over the operations, are consolidated. Subsidiaries are consolidated rom the date on whiche ective control is trans erred to the Group and consolidation ceases rom the date o disposal. All inter-company transactions, balances and unrealised gains on transactions between groupcompanies are eliminated; losses are also eliminated unless cost cannot be recovered. Wherenecessary, accounting policies or subsidiaries have been changed to achieve consistency with thepolicies adopted by the parent company.

The income statement o the oreign subsidiary is translated at average exchange rate or the year

and the balance sheet at the year end rate. The resulting di erences arising rom translation are dealtwith in the translation reserve.

A listing o the subsidiaries in the group is provided in Note 18.

(c) Revenue recognitionSales are recognised upon dispatch or sel collection or else on delivery o products to customers

or per ormance o service. The sales are stated net o VAT and discounts, and a ter eliminating saleswithin the Group.

Interest income is recognised as it accrues, unless its collectability is in doubt. Dividends receivableare recognised as income in the period in which they are declared by investee companies.

Consolidated Cash Flow StatementFOR THE YEAR ENDED 31 DECEMBER 2006


OPERATING ACTIVITIESCash generated rom operations 33 4,927 3,592nterest received 5 37 16nterest paid 10 (47) (35)

Taxation paid 11(c) (1,213) (1,116)

Net cash generated rom operating activities 3,704 2,457

NVESTING ACTIVITIESPurchase o property, plant and equipment, intangible

assets and expenditure on capital work in progress 17 (766) (512)Proceeds rom disposals o property, plant and equipment 2 86Dividends received 5 25 -

Net cash used in investing activities (739) (426)

FINANCING ACTIVITIESDividends paid to group shareholders 13 (1,452) (2,055)Dividends paid to minority interest - (83)

Net cash used in nancing activities (1,452) (2,138)

NCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 1,513 (107)

MOVEMENT IN CASH AND CASH EQUIVALENTSBalance at start o year 503 632ncrease/(decrease) or the year 1,513 (107)

Exchange adjustment 41 (22)

Balance at end o year 23 2,057 503

8/7/2019 2006_Bamburi AR06


1 ACCOUNTING POLICIES (Continued)Depreciation is calculated on the straight line basis to write down the cost o each item o

property plant and equipment, or the revalued amount, to its residual value over its expecteduse ul li e as ollows:Buildings, plant and machinery 14 - 22 yearsEquipment and mobile plant 3 - 10 yearsResidential buildings 40 years

Freehold land is not depreciated as it is deemed to have an in nite li e.

Where the carrying amount o an asset is greater than its estimated recoverable amount, it is writtendown immediately to its recoverable amount.

(g) LeasesLeases are classi ed as nance leases whenever the terms o the lease trans er substantially all risks

and rewards o ownership to the Group or the company as the lessee. All other leases are classi edas operating leases.

Rentals payable under operating leases are amortised on the straight line basis over the term o therelevant lease.

(h) GoodwillGoodwill arising on consolidation represents the excess o the cost o acquisition over the air value o

the group’s share o the net assets o the acquired subsidiary as at the date o acquisition. Goodwillis initially recognised as an asset at cost and is subsequently measured at cost less any accumulatedimpairment losses.

For the purpose o impairment testing, goodwill is allocated to the cash generating units expected to bene t rom the synergies o the combination. Cash generating units to which goodwill has beenallocated are tested or impairment annually. I the recoverable amount o the cash generating unitis less than the carrying amount o the unit, the impairment loss is allocated to reduce the carryingamount o the goodwill allocated to the unit. An impairment loss recognised or goodwill is notreversed in a subsequent period.

(i) InventoriesInventories o consumables and spare parts are stated at weighted average cost less provision or

obsolete and slow moving items. All other inventories are stated at the lower o cost and net realisable value. Cost includes direct cost and appropriate overheads and is determined on the rst-in rst-outmethod.

(j) Trade receivablesTrade receivables are carried at amortised invoice amounts less an estimate made or doubt ul

receivables based on a review o all outstanding amounts at the year end. Bad debts are written oin the year in which they are identi ed as irrecoverable.

(k) Employee entitlementsEmployee entitlements to long service awards are recognised when they accrue to employees. A

provision is made or the estimated liability or long-service awards as a result o services renderedby employees up to the balance sheet date.

Notes to the Financial Statements (Continued)FOR THE YEAR ENDED 31 DECEMBER 2006


1 ACCOUNTING POLICIES (Continued)d) Translation o oreign currencies

Transactions in oreign currencies during the year are converted into Kenya Shillings at rates ruling at the transaction dates. Assets and liabilities at the balance sheet date which are expressed in oreigncurrencies are translated into Kenya Shillings at rates ruling at the balance sheet date. The resultingdi erences rom conversion and translation are dealt with in the income statement in the year inwhich they arise.

e) InvestmentsThe company has classi ed its investments into available- or-sale investments and originated loans.

Management determines the appropriate classi cation o its investments at the time o purchaseand re-evaluates such designations on a regular basis as ollows:

(i) Investments intended to be held or an inde nite period o time, but which may be sold in response to needs or liquidity or changes in interest rates, are classi ed as available- or-sale. Theseinvestments are included in non-current assets unless management has the express intentiono holding the investment or less than 12 months rom the balance sheet date or unless they willneed to be sold to raise operating capital.

(ii) Non-equity investments purchased in the primary market (i.e. directly rom the issuers) areclassi ed as originated loans.

All purchases and sales o investments are initially recognised at cost on the trade date, which is the date a company within the group commits to purchase or sell the asset. Cost o purchaseincludes transaction costs.

Available- or-sale investments are subsequently carried at air value, whilst originated loans arecarried at amortised cost using the e ective yield method.

Unrealised gains and losses arising rom changes in the air value o available- or-sale investmentsare dealt with in a separate reserve in the statement o changes in equity. On disposal, the entirerealised gain or loss is recognised in the income statement.

) Property, plant and equipmentAll property, plant and equipment are initially recorded at cost. Freehold land and buildings are

subsequently restated to revalued amounts, based on valuations by independent external valuers,

less subsequent depreciation. Plant and machinery is revalued internally on the basis o a valuationmodel prescribed by engineers and consultants at the technical centre o the ultimate shareholder. The valuations are carried out approximately once every ve years. All other property, plant andequipment are stated at historical cost less depreciation.

Increases in the carryi ng amount arising on revaluation are credited to a revaluation reserve. Decreases that o set previous increases o the same asset are charged against the related revaluation reserve;all other decreases are charged to the income statement. Each year the di erence betweendepreciation based on the revalued carrying amount o an asset (the depreciation charged to the income statement) and depreciation based on the asset’s original cost is trans erred rom therevaluation reserve to retained earnings.

8/7/2019 2006_Bamburi AR06



1 ACCOUNTING POLICIES (Continued)Any impairment losses are recognised as an expense immediately. Where an impairment loss

subsequently reverses, the carrying amount o the asset is increased to the revised estimate o itsrecoverable amount. A reversal o an impairment loss is recognised as income immediately.

(q) ComparativesWhere necessary, comparative gures have been adjusted to con orm with changes in presentation

in the current year.

2 Critical judgements in applying the entity’s accounting policiesIn the process o applying the groups accounting policies, management has made estimates and

assumptions that a ect the reported amounts o assets and liabilities within the next nancial year.Estimates and judgements are continually evaluated and are based on historical experience and other actors, including expectations o uture events that are believed to be reasonable under the circum-stances. The key areas o judgement in applying the group’s accounting policy are dealt with below:

Inventories provisionManagement makes provisions or spares that exceed the set maximum level based on the usage o

the inventory by comparing items in stock with the recent past consumption. The maximum level isdetermined by taking into consideration the leadtime, the speci ed order quantity, the source o thespares and usage rate.

Impairment lossesAt each balance sheet date, the group reviews the carrying amounts o its tangible and intangible

assets to determine whether there is any indication that those assets have su ered an impairmentloss. I any such indication exists, the recoverable amount o the asset is estimated in order todetermine the extent o the impairment loss. Where it is not possible to estimate the recoverableamount o an individual asset, the group estimates the recoverable amount o the cash generatingunit to which the asset belongs.

Any impairment losses are recognised as an expense immediately. Where an impairment losssubsequently reverses, the carrying amount o the asset is increased to the revised estimate oits recoverable amount. A reversal o an impairment loss, other than that arising rom goodwill, isrecognised as income immediately.


1 ACCOUNTING POLICIES (Continued)The estimated monetary liability or employees’ accrued leave entitlements at the balance sheet

date is recognised as an expense accrual.

l) TaxationCurrent taxation is provided on the basis o the results or the year, as shown in the nancial statements,

adjusted in accordance with tax legislation.

De erred tax is provided, using the liability method, or all temporary di erences arising between the tax bases o assets and liabilities and their carrying values or nancial reporting purposes.

De erred tax assets are only recognised to the extent that it is probable that uture taxable pro ts willbe available against which the temporary di erences can be utilised.

m) Retirement b ene ts ob ligatio nsThe group operates a de ned contribution pension scheme or eligible non-unionisable employees.

The scheme is administered by an independent investment management company and is undedby contributions rom the group companies and employees. The Group also makes contributions to the statutory de ned contribution schemes in the two countries where operations are based.

Unionisable sta who retire on attaining the age o 55 years or are declared redundant are eligible ora service gratuity based on each employee’s length o service with the group, as provided or in the trade union agreement.

The group’s obligations to the sta retirement bene ts plans are charged to the income statementas they all due or in the case o service gratuity as they accrue to each employee.

n) Restructuring provisionsRestructuring provisions mainly comprise employee termination payments and are recognised in the

period in which the company becomes legally or constructively committed to payment. Employee termination bene ts are recognised only a ter either an agreement is in place with the appropriateemployee representatives speci ying the terms o redundancy and numbers o employees a ected,or a ter individual employees have been advised o the speci c terms. Costs related to the ongoingactivities o the company are not provided or in advance.

o) Dividends payable

Dividends payable on ordinary shares are charged to retained earnings in the period in which theyare declared. Proposed dividends are not accrued or until rati ed in an annual general meeting.

p) ImpairmentAt each balance sheet date, the group reviews the carrying amounts o its tangible and intangible

assets to determine whether there is any indication that those assets have su ered an impairmentloss. I any such indication exists, the recoverable amount o the asset is estimated in order todetermine the extent o the impairment loss. Where it is not possible to estimate the recoverableamount o an individual asset, the group estimates the recoverable amount o the cash generatingunit to which the asset belongs.

8/7/2019 2006_Bamburi AR06



Group Group2006 2005

Shs’million Shs’million

4 Other Operating IncomePro t on disposal o property, plant and equipment 2 27Miscellaneous income 171 70

73 97

5 Investment RevenueInterest income 37 16Dividends income 25 28

62 44

6 Cost O Raw Materials And ConsumablesRaw materials and packaging 4,647 4,456Fuel costs 1,548 1,431Repairs and maintenance 858 816Electricity 1,211 929

8,264 7,632

7 Sta CostsThe ollowing items are included within sta costs:Salaries and wages 1,148 1,046Sta wel are costs 286 263Retirement bene ts costs 147 139

,58 ,448

The number o persons employed by the groupat the year end was: Numbers NumbersFull time 848 838Casuals and contractors 211 184

,059 ,022


3 Segment In ormationThe group is organised on a regional basis into two main geographical segments:• Kenya• Uganda

Both geographical segments are mainly involved in the manu acture and sale o cement. Hence theprimary reporting ormat below is the only one presented.

Kenya Uganda GroupYear ended 3 December 2006 Shs’million Shs’million Shs’millionRevenues 10,847 5,641 16,488Operating pro t 3,269 7 8 3,987

Segment assets 14,579 3,717 18,296Non-segment assets 217

Total assets 8,5 3

Segment liabilities 3,797 960 4,757Non-segment liabilities 20

Total liabilities 4,777

Kenya Uganda GroupShs’million Shs’million Shs’million

Year ended 3 December 2005Revenues 8,784 5,609 14,393Operating pro t 2,554 780 3,334

Segment assets 11,700 3,415 15,115Non-segment assets 217

Total assets 5,332

Segment liabilities 2,864 1,167 4,031

Non-segment liabilities 20

Total liabilities 4,05

Segment assets consist primarily o property, plant and equipment, intangible assets, inventories,receivables and operating cash, and mainly exclude investments. Segment liabilities compriseoperating liabilities and exclude items such as dividends payable and certain corporate borrowings.

Sales revenue reporting is based on the country in which the production acility is located. Totalassets are shown by the geographical area in which the assets are located.

8/7/2019 2006_Bamburi AR06




11 Tax (Continued) Shs’million Shs’million(b) Reconciliation o Expected Tax Based

on Accounting Pro t to Tax ChargePro t be ore tax 3,838 3,147

Tax calculated at the domestic rates applicable o 30% 1,152 944Tax e ect o :Income not subject to tax (8) (15)Expenses not deductible or tax purposes 30 32Underprovision o current ta x in prior years 7 -Under prov is ion o de err ed ta x in pr ior yea rs (142) 2Overseas tax charged on dividends - 29

Actual tax charge ,039 992

(c) Tax MovementAt beginning o the year:Payable 108 161

Taxation charge 1,269 1,063Taxation paid (1,213) (1,116)At end o the yearNet tax payable 64 08

Compr is in g:Payable 167 108Recoverable (3) -

64 08



Shs’million Shs’million8 Other Operating Costs

Distribution costs 653 612Pro essional ees 368 327Telecommunication costs 164 121Transport and travelling costs 176 149Promotion, marketing and donation costs 152 144Rentals, security and business licences 215 202Other o ce costs 231 221Other costs 94 21

2,053 ,797

9 Operating Pro tThe operating pro t is arrived at a ter charging:Sta costs (note 7) 1,581 1,470Depreciation (note 14) 646 668Amortisation o intangible assets (note 16) 27 29Directors’ emoluments:- Fees 6 6- Other emoluments 86 88Auditors’ remuneration 7 8

0 Net Finance CostsNet oreign exchange losses (102) (152)Interest expense (47) (35)

( 49) ( 87)

Tax a) Tax Charge

Current taxation based on the adjusted pro t at 30% 1,262 1,034Underprovision o current ta x in prior years 7 -Over sea s ta x ch arged on di vidends rec ei va ble - 29

Total current tax charge 1,269 1,063

De erred tax credit (note 26) (372) (73)Underprovision o de erred tax in prior years (note 26) 142 2

Net de erred tax credit (230) (71)

Total tax charge ,039 992

8/7/2019 2006_Bamburi AR06



4 Property, Plant and Equipment(a) Group

Land and O ce

residential Plant and equipment Mobile

buildings machinery and tools plant Total

Shs’million Shs’million Shs’million Shs’million Shs’million

Cost or valuationAt 1 January 2005 1,345 10,525 562 938 13,370Exchange adjustment* (76) (395) (24) (25) (520)Additions - 364 68 10 442Disposals (48) (12) (224) (268) (552)Impairment - (187) - - (187)

At 31 December 2005 1,221 10,295 382 655 12,553

At 1 January 2006 1,221 10,295 382 655 12,553Exchange adjustment* 7 41 2 6 56Additions - 347 60 64 471Disposals - (6) - (17) (23)Revaluation (91) 9,214 - - 9,123

At 31 December 2006 1,137 19,891 444 708 22,180

De pr eci ati on1 January 2005 176 2,074 430 814 3,494Exchange adjustment* (22) (71) (16) (20) (129)Charge or the year 31 541 50 46 668On disposals (11) (4) (214) (264) (493)I mpairment - (67) - - (67)

At 31 December 2005 174 2,473 250 576 3,473

1 January 2006 174 2,473 250 576 3,473Exchange adjustment* 3 7 2 2 14Charge or the year 26 531 53 36 646

On disposals - (5) - (17) (22)Revaluation (13) 8,687 - - 8,674

At 31 December 2006 190 11,693 305 597 12,785

Net book valueAt 3 December 2006 947 8, 98 39 9,395

At 3 December 2005 ,047 7,822 32 79 9,080


2 Earnings Per ShareBasic and diluted earnings per share is calculated by dividing the net pro t attributable to sharehold-

ers by the weighted average number o ordinary shares in issue during the year, as shown below:

2006 2005Net pro t a tt ributable to shareholders (Shs mil lion) 2,614 2,004Weighted average number o ordinary shares (million) 363 363Basic and diluted earnings per share (Shs) 7.20 5.52

There were no potentially dilutive shares outstanding at 31 December 2006 and 31 December 2005. There were no discontinued operations.


3 Retained Earnings and Dividends Shs’million Shs’millionBalance at beginning o year 4,922 4,368Net pro t attributable to members o the parent entity 2,614 2,004Payment o dividends (1,452) (1,923)Trans er rom proper ties revaluation reser ve 171 201Translation (loss)/gain (214) 272

6,04 4,922

On 13 April 2006, a rst interim dividend o Shs 2 per share representing an amount o Shs 726 millon(2005: Shs 653 million) was paid. The second interim dividend o Shs 2 per share totalling to Shs 726million (2005 – 1,270 million) was paid on 20 September 2006.

In respect o the current year, the directors propose that a nal dividend o Shs 1.50 per share,representing a total sum o Shs 545 million, be paid. This dividend is subject to approval byshareholders at the Annual General Meeting and has not been included as a liability in these nancialstatements.

Payment o dividends is subject to withholding tax at a rate o 10% or non-resident shareholders and5% or resident shareholders.

8/7/2019 2006_Bamburi AR06



14 Property, Plant and Equipment (Continued)The Group’s land, buildings, plant, and machinery were revalued on 1 January 2006. Land and

buildings were valued by independent valuers. The valuation o plant and machinery was carriedout internally based on a valuation model prescribed by engineers and consultants at the technicalcentre o the ultimate shareholder.

Land and buildings were revalued on the basis o open market value. Plant and machinery wererevalued on a depreciated replacement cost basis.

Plant and machinery, o ce equipment and mobile plant with a cost o Shs 700 million (2005: Shs 578million) were ully depreciated as at 31 December 2006. The normal annual depreciation charge on these assets would have been Shs 146 million (2005: Shs 123 million).

I the property, plant and equipment were stated on the historical cost basis, the amounts would beas ollows:

Group Group Company Company

2006 2005 2006 2005

Shs’million Shs ’mil li on Shs’million Shs ’mil li on

Cost 9,140 8,194 5,970 5,850Accumulated depreciation (3,674) (3,170) (2,757) (2,528)

Net book value 5,466 5,024 3,2 3 3,322

5 Operating Lease Rentals

Net carrying amount at 1 January 9 11 1 1Exchange adjustment - (2) - -

Balance as at 3 December 9 9

The operating lease rentals relate to leasehold land, mainly raw materials quarries located in Mombasaand Nairobi in Kenya and Kasese in Uganda.


14 Property, Plant and Equipment (Continued)*The exchange adjustment arises rom the translation o the values relating to assets held by a

subsidiary, Himcem Holdings Limited.Plant and machinery, o ce equipment and mobile plant with a cost o Shs 935 million (2005: Shs 662

million) were ully depreciated as at 31 December 2006. The normal annual depreciation charge on these assets would have been Shs 192 million (2005: Shs 148 million).

Land and residential buildings include reehold land worth Shs 443 million (2005 : Shs 527 million)located in Mombasa and limestone deposits worth Shs 115 million (2005 : Shs 121 million) in Kasese,Uganda.

b) Company Land and O ce

residential Plant and equipment Mobile

buildings machinery and tools plant Total

Shs’million Shs’million Shs’million Shs’million Shs’million

Cost or valuationAt 1 January 2005 807 7,937 404 757 9,905Additions - 125 42 - 167Disposals (32) (4) (209) (255) (500)Revaluation - (187) - - (187)

At 31 December 2005 775 7,871 237 502 9,385

At 1 January 2006 775 7,871 237 502 9,385Additions - 130 17 - 147Disposals - - - (17) (17)Revaluation (60) 9,458 - - 9,398

At 31 December 2006 715 17,459 254 485 18,913

DepreciationAt 1 January 2005 30 1,651 336 693 2,710Charge or the year 8 422 26 28 484On disposals (3) (1) (208) (251) (463)Revaluation - (67) - - (67)

At 31 December 2005 35 2,005 154 470 2,664

At 1 January 2006 35 2005 154 470 2,664Charge or the year 8 422 30 18 478On disposals - - - (17) (17)Revaluation (13) 8,687 - - 8,674

At 31 December 2006 30 11,114 184 471 11,799

Net book valueAt 3 December 2006 685 6,345 70 4 7, 4

At 3 December 2005 740 5,866 83 32 6,72

8/7/2019 2006_Bamburi AR06


6 Intangible Assets – Computer So tware Group Company Shs’million Shs’million

CostAt 1 January 2005 319 235Additions 53 52Disposal (3) (2)Exchange adjustment (13) -

At 31 December 2005 356 285

At 1 January 2006 356 285Additions 12 11Exchange adjustment 3 -

At 31 December 2006 371 296

A mo rti sat io nAt 1 January 2005 270 206Charge or the year 29 19Disposal (2) (3)Exchange Adjustment (13) -

At 31 December 2005 284 222

At 1 January 2006 284 222Charge or the year 27 20Exchange Adjustment 4 -

At 31 December 2006 315 242

NET BOOK VALUEAt 3 December 2006 56 54

At 3 December 2005 72 63

7 Capital Work in Progress

Capital work in progress relates primarily to plant modi cations in progress at year end. No depreciationhas been charged on this expenditure.


2006 2005 2006 2005


At 1 January 350 347 182 254Additions 766 512 414 148Trans ers to property plant and equipment (471) (442) (147) (167)Trans ers to intangible assets (12) (53) (11) (53)Exchange Adjustment 10 (14) - -

At 3 December 643 350 438 82


8 Investments in SubsidiariesDetails o the subsidiaries in the group are provided below:


Holding 2006 2005 2006 2005

%Shs’million Shs ’mil li on Shs’million Shs ’mil li on

Simbarite Limited 100 - - 53 53Less: impairment provision - - (22) (22)

- 31 31

Bamburi Special Products Ltd 100 - - 20 20Bamburi Cement Ltd, Uganda 100 - -Himcem Holdings Ltd,Channel Islands 100 - - 911 911La arge Ecosystem Ltd 100 - - 5 5Diani Estate Ltd 100 1 1 1 1Whistling Pines Ltd 100 - - - -Kenya Cement Marketing Ltd 50 - - - -Portland Mines Ltd 50 - - - -Seruji Management Ltd,Channel Islands 100 - - - -

968 968

Except where indicated above, the subsidiaries are incorporated in Kenya.

Himcem Holdings Limited has a 70% holding in its subsidiary, Hima Cement Limited, a companyincorporated in Uganda.

9 Other Equity InvestmentsThese represent Available-For-Sale investments, which are restated to air value annually at the close

o business on 31 December. For investments traded in active markets, air value is determined byre erence to Stock Exchange quoted bid prices. For other investments, air value is determined by

re erence to the current market or similar instruments or by re erence to the discounted cash fowso the underlying net assets.

The market value o the quoted equity shares at 31 December 2006 was Shs 2,610 million(2005: Shs 1,803 million).


8/7/2019 2006_Bamburi AR06



22 Trade And Other Receivables Group Group Company Company

2006 2005 2006 2005


Trade receivables 499 542 244 316Prepayments and deposits 97 42 76 24Other receivables 219 153 189 104Receivables rom related companies (Note 34) 322 116 873 593

, 37 853 ,382 ,037

23 Cash and Cash EquivalentsCash at bank and on hand 937 556 658 316Short term bank deposits 1,120 364 805 364

2,057 920 ,463 680

The weighted average e ective interest rate earned on short-term bank and related party depositsduring the year was 3.5% (2005-2.5%). The short-term deposits mature within three months.

For the purposes o the cash fow statement, cash and cash equivalents comprise cash in hand,deposits held at call with banks and investments in money market instruments, net o bank overdra ts.In the balance sheet, bank overdra ts are included in borrowings, under current liabilities. The yearend cash and cash equivalents comprise the ollowing:

Company Company

2006 2005

Shs’million Shs ’mil li on

Deposits, bank balances and cash (as above) 2,057 920Bank overdra ts (note 29) - (417)

2,057 503


19 Other Equity Investments (Continued)The movement in available- or-sale investments is as ollows:

Group and Company 2006 2005


At 1 January 1,803 734Fair value gain 807 1,069

At 3 December 2,6 0 ,803

The air value gains and losses on Available-For- Sale investments aredealt with in a separate reserve in the statement o changes in equity.

20 GoodwillCostAt beginning o the year 217 503Elimination o accumulated amortisation - (286)

217 217

A mo rti sat io nAt 1 January - 286Elimination o accumulated amortisation - (286)

At 31 December - -

Net carrying value 2 7 2 7

The goodwill arose rom the acquisition o a subsidiary, Hima Cement Limited, in 1999. During thecurrent nancial year, the Group assessed the recoverable amount o goodwill and determined that the goodwill was not impaired.

2 Inventories Group Group Company Company

2006 2005 2006 2005


Raw materials 410 198 326 186Consumables and spare parts 1,015 1,107 720 815Finished goods 652 487 515 257Fuel and packaging 307 233 234 144Other 1 2 - 1

2,385 2,027 ,795 ,403

8/7/2019 2006_Bamburi AR06


8/7/2019 2006_Bamburi AR06



29 Borrowings (Continued)The weighted average interest rates incurred on borrowing acilities during the year were:


2006 2005 2006 2005

- bank overdra ts – local currencies 7.9% 16% - 12.75%- bank loans – local currencies 7.8% 8.5% - 8.5%

Borrowing acilitiesThe group has the ollowing undrawn borrowing acilities with it’s bankers:


2006 2005 2006 2005


F lo at in g ra te- expiring within one year 937 746 292 617

The borrowing acilities are annual acilities that were subject to review at various dates during the year 2006. They consist o overdra ts, letters o credit and guarantees.

30 Unclaimed DividendsGroup and Company 2006 2005


At start o year 20 152Declared and paid in the year 1,452 1,923Dividends claimed (1,452) (2,055)

At end o year 20 20

3 Contingent LiabilitiesGuarantees to the group’s bankers in avour o sta 78 89Bonds issued by the group’s bankers in avouro Kenya Revenue Authority 954 482

Tax demand by Uganda Revenue Authority - 106B on ds i ss ue d by t he gr ou p’s b an ke rs i n a vo ur o s up pl ie rs 138 91Insurance bond issued to Uganda Revenue Authority 100 100

,270 868

The guarantees issued by the group’s bankers in avour o the Kenya Revenue Authority are part o the bank acilities disclosed in note 29 above and are issued in the normal course o business.


27 Provisions or Liabilities and ChargesGroup

Restructuring, Long

site restoration Service service 2006 2005

& litigation gratuity awards Total Total

Shs’million Shs’million Shs’million Shs’million Shs ’mil li on

At start o year 43 317 46 406 306Additional provisions 7 58 8 73 126Utilised during the year - (22) (5) (27) (26)

At end o year 50 353 49 452 406Less: current portion (50) (34) - (84) (64)

Non current portion - 3 9 49 368 342

Company

At start o year 42 269 46 357 259Additional provisions 6 43 9 58 124Utilised during the year - (8) (6) (14) (26)

At end o year 48 304 49401 357Less: Current portion (48) (21) - (69) (61)

Non-current portion - 283 49 332 296

28 Trade and Other PayablesGroup Group Company Company

2006 2005 2006 2005


Trade payables 1,415 473 1,209 435Accrued expenses 453 557 389 451Other payables 114 138 41 65

Amounts due to related companies (Note 34) 205 - 30 36

2,187 1,168 1,669 987

29 BorrowingsThe borrowings are made up as ollows:

Bank overdra t - 4 7 - -

8/7/2019 2006_Bamburi AR06



34 Related PartiesThe ultimate parent o the group is La arge SA, incorporated in France. There are other companies which

are related to Bamburi Cement Limited through common shareholdings or common directorships.

In the normal course o business the group sells cement to an associate o its ultimate share-holder. These sales represented approximately 13% o the group’s sales volume during the year(2005: 12%).

The company receives technical assistance rom the majority shareholder, which is paid or under a ve year agreement.

The ollowing transactions were carried out with related parties during the year.

Group 2006 2005


Sales o goods and services 1,206 417Purchases o goods and services 292 153

Sales and purchases to/ rom related parties were made on terms and conditions similar to thoseo ered to major customers or available rom major suppliers.

Outstanding balances arising rom sale and purchase o goods and services to/ rom relatedcompanies at the year end.


2006 2005 2006 2005

Receivables rom related parties 322 116 319 114Receivables rom subsidiaries - - 554 479

322 6 873 593

Payables to related parties 205 - 30 36

Short term cash deposits 897 289 582 289

The short term deposits are held with the principal shareholder’s central treasury department at terms similar to those o ered by other nancial institutions.


32 Capital CommitmentsCapital expenditure contracted or at the balance sheet date but not recognised in the nancial

statements is as ollows:

Group 2006 2005


Commitments or the acquisition o property, p la nt an d eq ui pm en t 72 35

Capital expenditure authorised but not contracted or at the balances heet date :

Commitments or the acquisition o property, plant and equipment 8,973 5,288

33 Cash Generated rom OperationsReconciliation o pro t be ore tax to cash generated rom operations:

Pro t be ore tax 3,838 3,147

Adjus tments or :Depreciation (note 14) 646 668Amortisation o intangible assets (note 16) 27 29Pro t on disposal o property, plant and equipment (1) (27)Pro t on disposal o intangible assets - (1)Interest income (note 5) (37) (16)Dividend income (note 5) (25) (28)Interest expense (note 10) 47 35

4,495 3,807Changes in working capital balancesIncrease in inventories (348) (131)(Increase)/decrease in trade and other receivables (280) 8Increase in provisions or liabilities and charges 45 97Increase/(decrease) trade and other payables 1,015 (189)

Cash generated rom operations 4,927 3,592

The exchange movements attributable to movement o workingcapital are as ollows:

Inventories 10 (17)Trade and other receivables 4 (5)Trade and other payables 4 (7)Provisions or liabilities and charges (1) 3

7 (26)

8/7/2019 2006_Bamburi AR06




34 Related Parties ( Continued)

Key management compensationThe remuneration o directors and other members o key management during the year were

as ollows:

Group 2006 2005


Salaries and other short-term employment bene ts 86 84Post-employment bene ts 6 4

92 88

Directors’ remunerationFees or services as a director 6 6Other emoluments 92 88

98 94

35 Operating Lease CommitmentsLease payments committed under operating leases:

Not later than 1 year 55 55Later than 1 year but not later than 5 years 63 35

118 90

36 Financial InstrumentsAt the year end the group had a number o o balance sheet fnancial instruments. These are:

• Forward contracts entered into with nancial institutions to purchase United States dollars orwardagainst the Uganda shillings. At 31 December 2006, the company had our orward contracts totaling US$ 4.6 m (United States dollars our million and six hundred thousand) o maturitiesranging between 74 days and 163 days and at rates UGX/US$ (Uganda Shilling to the UnitedStates dollar) o between UGX1818/1 US$ to 1837/1US$. The orward contracts were enteredinto as hedges against Hima Cement Limited’s uture payments denominated in United StatesDollars rom March 2007 to June 2007.

• The group had entered into a uel SWAP contract with nancial institutions, through the treasurydepartment o its ultimate shareholder, to x the uel Platt price at US$ 331.5 per MT, or 935MT per month rom January 2007 to December 2007. The uel SWAP contract was entered intoas a hedge against adverse uel prices or the company uel oil purchases used in the cementmanu acture process in all plants i.e. Hima, Nairobi and Mombasa plants. The hedge covered60% o estimated purchases o uel oil in 2007.

37 Country o IncorporationThe company is incorporated and domiciled in Kenya under the Companies Act.

38 Currency The individual nancial statements o each group entity are presented in the currency o the primary

economic environment in which the entity operates (its unctional currency). For the purpose o theconsolidated nancial statements, the results and nancial position o each entity are presented inKenya Shillings million (Shs’ million), which is the unctional currency o the group, and the presentationcurrency or the consolidated nancial statements.

8/7/2019 2006_Bamburi AR06


Proxy Form

The Secretary,Bamburi Cement Ltd.Corporate O ces6th foor, Kenya-Re Towers,Upper Hill, o Ragati RoadPO Box 10921, 00100NAIROBI, KENYA.

I/We

O

a member o Bamburi Cement Limited hereby appoint

o

or in his/her place THE CHAIRMAN OF THE MEETING as my/our proxy and/or representative, to vote at his/her discretion or me/us and on my/our behal at the Annual General meeting, to be held on Wednesday 30th May 2007 and at every adjournment thereo .

AS WITNESS my/our hand(s) this day o 2007.

(Usual signature)Proxy orms must reach the registered o ce o the company by 5.00 pmMonday 28th May, 2007.

Notes

8/7/2019 2006_Bamburi AR06


Staple here Staple here

Proxy FormFOR THE YEAR ENDED 31 DECEMBER 2006

2 Fold here

2 Fold here

A x stamp

The Secretary,Bamburi Cement Ltd.Corporate O ces6th foor, Kenya-Re Towers,Upper Hill, o Ragati RoadPO Box 10921, 00100NAIROBI, KENYA.

8/7/2019 2006_Bamburi AR06


Documents

2006_Bamburi AR06