Annual Report - OMAN CEMENT COMPANY · The Annual Report supported by the Statement of Financial Position and Statement of Comprehensive Income along ... Cement Company LLC in joint

OMAN CEMENT COMPANY (S.A.O.G.)

Annual ReportF o r t h e y e a r e n d e d 3 1 s t D e c e m b e r 2 0 1 7

C.R. No. 1061232 - 1978

P.O. Box : 560, Ruwi, Postal Code 112

Tel. : (968) 24437070 (Exchange), 24437788 (Sales)

Fax : (968) 24437777 (Corporate), 24437799 (Marketing)

E-Mail : [email protected]

Web site : http://www.omancement.com

Year Established : 1978

Installed Capacity : 2.6 million MT clinker / 3.6 million MT cement

Paidup capital : R.O. 33,087,271

ISO 9001 : 2008 CERTIFIED CO.CER. NO.: IND10.7100 ISO 14001 : 2004 CERTIFIED CO.CER.NO.: IND10.7570

American Petroleum Institute Certified CompanyLicense No. 10A-0059

008

008

14001

Contents

Page

Board of Directors 1

Board of Director’s report 2-5

Management discussion and analysis report 6-9

Report of factual findings on the corporate governance reporting 10

Corporate governance report 11-19

PART (B)

Independent auditor’s report 1-5

Statement of financial position 6

Statement of comprehensive income 7

Statement of changes in shareholders’ equity 8

Statement of cash flows 9

Notes to the financial statements 10-39


PART (A)


PART (A)

1

OMAN CEMENT COMPANY (S.A.O.G.)OMAN CEMENT COMPANY (S.A.O.G.)

Board of Directors

Chief Executive OfficerMr. Salim Abdullah Al Hajri

Auditors

MOORE STEPHENSMoore Stephens LLC2nd floor, Bank Melli Iran Building, CBDP.O. Box 933, Ruwi, Postal Code 112,Sultanate of Oman

Tel. + 968 24812041Fax + 968 24812043

Dr. Abdullah Abbas Ahmed Chairman

Mr. Kumail Majid Al Moosawi Vice Chairman

Mr. Ismael Khamis Abdulla Al Harrasi Member

Mrs. Najat Ali Al Lawatia Member

Mr. Hussain Mohammed Redha Ali Member

Mr. Talal Issa Al Harrasi Member

Mr. Selim Ismail Hanafi Member

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57.548 Million as against the sales of RO. 56.604 Million during the previous year, being higher by RO. 0.944 Million (1.67%).

(ii) The Profit before tax for the year ended 31st December 2017 stands at RO. 12.820

Million as compared to RO. 14.483 Million during the previous year 2016 registering a decrease of RO. 1.663 Million (-11.48%). The decrease is primarily due to lower average sales realization on selling price, increase in gas and electricity tariff and increase in some other components of the cost.

(iii) The profit after tax for the year ended on 31st December 2017 is RO. 9.592 Million

as against RO. 12.876 Million during the previous year 2016 being lower by RO. 3.284 Million (25.50%) The decline in post-tax profit is due to implementation of changes in income tax laws increasing the rate of Income Tax from 12% to 15% and abolishing basic exemption of RO. 30,000/- granted earlier. The deferred tax has also been adjusted resulting in a major increase in deferred tax liability, thereby requiring a major additional provision for income tax and adverse impact on post tax profit.

3. INVESTMENTS:

Company’s surplus funds remained invested in fixed deposits, bonds, sukuks and other listed/ unlisted securities to achieve optimum return on investments. Company has continued to have discretionary portfolio management agreements with four companies appointed as Portfolio Managers to handle part of its investments in shares.

4. CORPORATE GOVERNANCE:

The company has complied fully with the requirements of the Corporate Governance. In this regard reference may be made to:

(i) Management Discussion and Analysis Report, which gives in detail the company’s

performance and expansion program.

(ii) Report on corporate governance.

The above two reports demonstrate the company’s determination to follow the best management practices.

5. ASSOCIATE COMPANY: Mondi Oman LLC:

The associate company has reported profit during the year 2017. Share of profit amounting to RO. 266,659/- (previous year RO. 208,652/-) has been suitably accounted for in the financial statements of the Company.

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BOARD OF DIRECTORS’ REPORT Respected Shareholders, On behalf of the Board of Directors of Oman Cement Company (SAOG), I am pleased to welcome you to the Company’s General Assembly in its 40th Annual Ordinary Meeting. The Annual Report supported by the Statement of Financial Position and Statement of Comprehensive Income along with the Auditor’s Reports presented before you shows the Company’s achievements during the financial year ended December 31, 2017. During the year 2016, Oman Cement Company had registered a new Company, namely Al Wusta Cement Company LLC in joint venture with Raysut Cement Company (SAOG). Al Wusta Cement Company LLC has now been allotted 500,000 Sq. Mtr of land by Special Economic Zone Authority of Duqm (SEZAD) for setting-up of a new cement plant in Duqm and Al Wusta Cement Company LLC has signed a usufruct agreement with SEZAD in this regard. Company has continued its efforts to overcome the adverse impact of steep rise in prices of some major elements of cost, with better cost management and sustained efforts to improve productivity during the period. The Company continues to be an ISO 9001-2008 and ISO 14001-2004 certified Company. It has also API Spec 10A (American Petroleum Institute) quality monogram certification for manufacturing and sale of Oil Well Cements. 1. PRODUCTION:

(i) Clinker Production & Import: Company has produced a total quantity of 2,344,588 MTS of Clinker during the year as against 2,123,350 MTS during the previous year 2016, being higher by 221,238 MTS (10.42%). No import of Clinker has been made during the year. It had imported 200,024 MTS of Clinker during the previous year.

(ii) Cement Production:

Company has produced 2,476,609 MTS of Cement during the year as against 2,309,317 MTS produced during the previous year 2016, which is higher by 167,292 MTS (7.24%).

2. TURNOVER & PROFIT:

(i) Company achieved a sale of 2,479,210 MTS of Cement during the year which is higher by 178,919 MTS (7.78%) as against the sale of 2,300,291 MTS of cement during the previous year 2016. In value terms, the sales for the period is RO.

Board of Directors’ Report

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57.548 Million as against the sales of RO. 56.604 Million during the previous year, being higher by RO. 0.944 Million (1.67%).

(ii) The Profit before tax for the year ended 31st December 2017 stands at RO. 12.820

Million as compared to RO. 14.483 Million during the previous year 2016 registering a decrease of RO. 1.663 Million (-11.48%). The decrease is primarily due to lower average sales realization on selling price, increase in gas and electricity tariff and increase in some other components of the cost.

(iii) The profit after tax for the year ended on 31st December 2017 is RO. 9.592 Million

as against RO. 12.876 Million during the previous year 2016 being lower by RO. 3.284 Million (25.50%) The decline in post-tax profit is due to implementation of changes in income tax laws increasing the rate of Income Tax from 12% to 15% and abolishing basic exemption of RO. 30,000/- granted earlier. The deferred tax has also been adjusted resulting in a major increase in deferred tax liability, thereby requiring a major additional provision for income tax and adverse impact on post tax profit.

3. INVESTMENTS:

Company’s surplus funds remained invested in fixed deposits, bonds, sukuks and other listed/ unlisted securities to achieve optimum return on investments. Company has continued to have discretionary portfolio management agreements with four companies appointed as Portfolio Managers to handle part of its investments in shares.

4. CORPORATE GOVERNANCE:

The company has complied fully with the requirements of the Corporate Governance. In this regard reference may be made to:

(i) Management Discussion and Analysis Report, which gives in detail the company’s

performance and expansion program.

(ii) Report on corporate governance.

The above two reports demonstrate the company’s determination to follow the best management practices.

5. ASSOCIATE COMPANY: Mondi Oman LLC:

The associate company has reported profit during the year 2017. Share of profit amounting to RO. 266,659/- (previous year RO. 208,652/-) has been suitably accounted for in the financial statements of the Company.

Board of Directors’ Report (continued)

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6. DIVIDEND POLICY:

The Company adopts a balanced shareholders dividend policy based on the results achieved taking into consideration the circumstances of the industry and market as well as the investors expectation and also with consideration to transfer to reserves to strengthen Company’s competitive position in the market and to ensure a consistent dividend pay out. The dividends declared by the Company during last five years are indicated in the table given below:

Year 2012 2013 2014 2015 2016

Dividend % on Paid up Capital 35% 35% 30% 30% 30% 7. INTERNAL CONTROL:

The internal control systems of the Company are being assessed regularly for effectiveness.

8. MARKET DEMAND & FUTURE OUTLOOK:

With the company’s well structured pricing policy, we hope that even with the continued competition, company will continue to do well in retaining its market share.

9. EXPANSION, MODERNIZATION AND UPGRADATION:

(i) The project of Upgradation of Pollution Control Equipment for Line-2 to further reduce the dust emission level as part of the company’s continues effort towards environmental improvement is nearing completion.

(ii) The company has hired the services of a consultant to study and eliminate the bottlenecks in the existing plant for plant performance enhancement. Based on their study report and recommended jobs, offers received in this regard against a tender for EPC contract are being evaluated.

(iii) To increase the packing and loading capacity, the company has awarded an EPC Contract for installation of new Rotopacker and vacuum type Truck Loading machine at a total cost of USD 4.0 Million. The project is expected to be completed in the first quarter of the year 2018.

( iv) In order to improve the performance of power plant and achieve higher efficiency and

cost reduction in its operations, a decision has been taken to up-grade the Power Plant with the latest technology turbine.


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10. CORPORATE SOCIAL RESPONSIBILITY:

On its Corporate Social responsibility initiative, the company continues to recognize its responsibility towards environment, societal and economical stewardship and in this direction Board has approved a CSR Policy. On environmental aspects, the company has been putting its efforts in this direction by demonstrating exceptional care for its communities by taking care of various aspects of resource conservation, energy efficiency and pollution prevention initiatives. While, the company has already modernized its 1st production line (Kiln) pollution control equipment thereby reducing its stack emission below 30 mgm per cubic meter, the process to modernize its 2nd production line to reduce emission is nearing completion. Several training programs have been organized by the company for its employees on health, safety and environmental awareness.

The company has continued to make sustained efforts to improve the work environment to be safe and healthy. Company has taken up training of its employees in a major way both within the country as well as abroad to upgrade their knowledge and skill. It has also taken care of health of not only its employees but also majority of their family members through health insurance policy. An employee benevolent fund takes care of assistance to employees in time of need. Company also has a liberal policy for granting donations for social and charitable purposes. Company supports building of new Mosques by way of providing free of charge cement. Total donations made by the company for charitable, social and religious purposes during the year amount to RO. 216,757/- (previous year - RO 157,990).

The company remains confident that it will be able to maintain the progress achieved during the year with excellence. The confidence and encouragement extended to the Board by the Government of the Sultanate of Oman and the shareholders is highly appreciated and the staff and management of the company pray Almighty Allah to continue to guide H.M. Sultan Qaboos Bin Said, Sultan of Oman, for the common welfare of the country. Kumail Majid Al Moosawi Vice Chairman of the Board of Directors


.

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1.2. The Company believes in adoption of best management practices and has

over the years successfully implemented the principles of good corporate governance.

1.3 The performance highlights of the Company are given below:

1.3.1 Production:

The plant’s annual installed designed capacity is now 2.6 Million Tons of Clinker and 3.6 Million Tons of Cement in a year. The capacity could not be utilized to the full extent primarily due to competitive market scenario restricting the sales. The results of the operation for the year are as follows:

Clinker Production 2,344,588 tons Cement Production 2,476,609 tons

1.3.2 Marketing:

Though the demand for cement in Oman continues to remain good and is expected to remain at 2017 levels, unreasonably low priced cement being supplied by competitors remains a major challenge.

i) Break-up of OCC cement sales in 2017 is given below.

(in MTS)Local Sales 2,448,229Export Sales (Oilwell cement) 30,981 Total 2,479 210

ii) Company has continued in the year 2017 also its efforts to develop

newer markets for its Oil Well Cement Class A & G. OWC is sold locally and exported.

iii) Barring any unforeseen circumstances, the Company is confident

of continuing to retain its market share in Oman. 1.3.3 Personnel: Omanisation & Training: The percentage of Omanisation is 71.9%.

The Company during the year continued with its special emphasis on training for Omani employees. Highlights of these are;

a) 15 employees were sent abroad for various training

Contd……3

MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED 31ST DECEMBER 2017

1. Oman Cement Company SAOG (OCC) was established in the year 1978 as part

of the renaissance initiated by His Majesty Sultan Qaboos bin Said.

Cement plant with a clinker capacity of 600,000 MTS per annum was commissioned in the year 1983 and subsequently due to increased demand for the cement in the region, plant capacity was expanded to 1.2 Million tons per annum in the year 1998, which enabled OCC to produce 1.26 Million tons of cement. Company has further increased its clinker production capacity from 1.2 Million MTS to 2.4 Million MTS per annum with the installation of a new Kiln in the year 2011. After commissioning of Kiln-1 with an upgraded capacity of 2,700 TPD during the year 2014, Clinker production capacity of the company has further increased by 210,000 MTS per annum to reach 2.6 Million MTS per annum. Further with the commissioning of new cement mill in the year 2016 with a capacity of 150 TPH, company can now produce 3.6 MTS of cement in a year.

OCC manufactured following types of cement during 2017:

i) Ordinary Portland Cement (OPC) in accordance with Omani Standard specification No. OS7:2001 OPC, European/British Standard BS-EN 197-1:2011 and American Standard ASTM C-150/C-150M-15.

ii) Moderate Sulphate Resistant (MSRC) in accordance with ASTM C-I50/C-

150M-15 Type-II

iii) Sulphate Resistant Cement (SRC) in accordance with ASTM C-150/C-150M-15 and BS EN197-1:2011 CEM 1-SR5-4Q-5N.

iv) Oil well cement Class “G” Grade HSR (OWC”G”) in accordance with

American Petroleum Institute (API) Spec 10A – December 2010, and v) Oil well cement Class “A” (OWC”A”) in accordance to American Petroleum

Institute (API) Spec 10A – December 2010.

All the raw material required for production of clinker is from within the country. 1.1 The shareholding pattern of the company as at 31st December 2017, is as

follows:

S.No Shareholder % of Holding 1. Oman Investment Fund 53.67 2. Civil Service Employee’s Pension Fund 8.90 3. Public Authority of Social Insurance 6.75 4. Ministry of Defense Pension Fund 4.12 5. Pension Funds and other Funds 18.45 6. Individuals/Corporate and others 8.11 Total 100.00

Contd……2

Management Discussion and Analysis Reportfor the year ended 31st December 2017

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1.2. The Company believes in adoption of best management practices and has

over the years successfully implemented the principles of good corporate governance.

1.3 The performance highlights of the Company are given below:

1.3.1 Production:

The plant’s annual installed designed capacity is now 2.6 Million Tons of Clinker and 3.6 Million Tons of Cement in a year. The capacity could not be utilized to the full extent primarily due to competitive market scenario restricting the sales. The results of the operation for the year are as follows:

Clinker Production 2,344,588 tons Cement Production 2,476,609 tons

1.3.2 Marketing:

Though the demand for cement in Oman continues to remain good and is expected to remain at 2017 levels, unreasonably low priced cement being supplied by competitors remains a major challenge.

i) Break-up of OCC cement sales in 2017 is given below.

(in MTS)Local Sales 2,448,229Export Sales (Oilwell cement) 30,981 Total 2,479 210

ii) Company has continued in the year 2017 also its efforts to develop

newer markets for its Oil Well Cement Class A & G. OWC is sold locally and exported.

iii) Barring any unforeseen circumstances, the Company is confident

of continuing to retain its market share in Oman. 1.3.3 Personnel: Omanisation & Training: The percentage of Omanisation is 71.9%.

The Company during the year continued with its special emphasis on training for Omani employees. Highlights of these are;

a) 15 employees were sent abroad for various training

Contd……3

Management Discussion and Analysis Report (continued)for the year ended 31st December 2017

MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED 31ST DECEMBER 2017

1. Oman Cement Company SAOG (OCC) was established in the year 1978 as part

of the renaissance initiated by His Majesty Sultan Qaboos bin Said.

Cement plant with a clinker capacity of 600,000 MTS per annum was commissioned in the year 1983 and subsequently due to increased demand for the cement in the region, plant capacity was expanded to 1.2 Million tons per annum in the year 1998, which enabled OCC to produce 1.26 Million tons of cement. Company has further increased its clinker production capacity from 1.2 Million MTS to 2.4 Million MTS per annum with the installation of a new Kiln in the year 2011. After commissioning of Kiln-1 with an upgraded capacity of 2,700 TPD during the year 2014, Clinker production capacity of the company has further increased by 210,000 MTS per annum to reach 2.6 Million MTS per annum. Further with the commissioning of new cement mill in the year 2016 with a capacity of 150 TPH, company can now produce 3.6 MTS of cement in a year.

OCC manufactured following types of cement during 2017:

i) Ordinary Portland Cement (OPC) in accordance with Omani Standard specification No. OS7:2001 OPC, European/British Standard BS-EN 197-1:2011 and American Standard ASTM C-150/C-150M-15.

ii) Moderate Sulphate Resistant (MSRC) in accordance with ASTM C-I50/C-

150M-15 Type-II

iii) Sulphate Resistant Cement (SRC) in accordance with ASTM C-150/C-150M-15 and BS EN197-1:2011 CEM 1-SR5-4Q-5N.

iv) Oil well cement Class “G” Grade HSR (OWC”G”) in accordance with

American Petroleum Institute (API) Spec 10A – December 2010, and v) Oil well cement Class “A” (OWC”A”) in accordance to American Petroleum

Institute (API) Spec 10A – December 2010.

All the raw material required for production of clinker is from within the country. 1.1 The shareholding pattern of the company as at 31st December 2017, is as

follows:

S.No Shareholder % of Holding 1. Oman Investment Fund 53.67 2. Civil Service Employee’s Pension Fund 8.90 3. Public Authority of Social Insurance 6.75 4. Ministry of Defense Pension Fund 4.12 5. Pension Funds and other Funds 18.45 6. Individuals/Corporate and others 8.11 Total 100.00

Contd……2

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2.3 Company has hired the services of a consultant for appraising the performance of the Board impartially and independently with benchmark and the standard set for the purpose as required by the Code of Corporate Governance. The consultancy firm has submitted its report which has been made part of AGM agenda item.

2.4 Profile of top five management executives:

Sl.

No. Name of executive Designation Qualification Professional

experience

1 Jamal Shamis Al Hooti Up to 28 Feb. 2017

Former Chief Executive Officer

B.Sc. (Geology), P.G.(Diploma)

42 years

2 Salim Abdullah Al Hajry w.e.f. 1st September 2017

Chief Executive Officer

B.Sc. (Mech), MBA 31 years

3 Deepak Dikshit Chief Finance Officer

CA, LLB, BA 38 years

4 Dr M N Verma General Manager Manufacturing

B.Sc. (Chem), Ph.d 41 years

5 Zaid Al Siyabi Assistant General Manager-Engg.

B.Sc. (Mech) 27 years

6 Hilal Al Dhamri Senior Manager Production

B.Sc (Chem), MSc (Chem)

17 years

3. Brief descriptions of terms of reference of Board Committees:

3.1 Executive Committee:

3.1.1 Setting credit and marketing and pricing policies

3.1.2 Review of operational budget of the company before submission to Board of Directors and approving amendments during the year.

3.2 Investment Committee:

3.2.1 Committee formulates investment strategy of the company for effective deployment of its investment portfolio to maximize returns while ensuring safety of investment in terms of policy of the company.

3.3 With effect from 26th December 2017,above two committees have been

reconstituted and combined as Investment and Executive Committee for better efficiency.

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b) Employees are encouraged to pursue university degree and post

graduate courses in local institutions. During the year, four employees have been sponsored partially by the company to pursue the courses.

c) Company also conducted in-house training and local courses to

upgrade supervisory, technical and managerial skills of the employees. More than 473 employees benefited from the in-house training.

1.3.4 Financial:

a) Profit before tax during the year 2017 is RO. 12.820 Million, compared to RO 14.483 Million during previous year, showing a decrease of RO 1.663 Million (-11.48%). The decrease is primarily due to lower average sales realization and increase in Energy tariff.

b) Status of Company’s profits, dividends declared and paid up equity

capital for 5 years is as under: (RO. Million)

Year 2013 (restated)

2014

2015

2016

2017

Profit before Tax 16.786 14.943 13.147 14.483 12.820 Profit after Tax 15.086 13.149 11.703 12.876 9.592 Dividend 11.580 9.926 9.926 9.926 * 9.926 Dividend % 35% 30% 30% 30% * 30% Paid up Capital 33.087 33.087 33.087 33.087 33.087

* As recommended by the Board c) Company’s surplus funds remained invested in Fixed Deposits,

Bonds, Sukuk, and Subordinated Loans of banks and equity share capital of companies. Company also has discretionary portfolio management agreements with four companies to handle part of its investments in shares.

2. Company sold 3,342.5 MTS of cement at concessional price to employees

who were constructing their own houses. Further, company donated 7,843 MTS of cement for construction of Mosques and other religious facilities.

3. Risk, opportunities and threats:

Major hike in gas prices implemented from 1st January 2015 with a progressive increase every year will continue to have a major impact on our performance.. Similarly, the revised electricity tariff which took effect in 2017 increasing the cost substantially and increase in cost of some other elements is also seen as a major challenge in the forthcoming years.

Contd……4


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: 4 : Further, over supply situation created by inflow of large quantity of cement from neighboring countries at lower prices continues to remain a threat and has created strain on selling prices and market share of the Company. In addition to this with expected commissioning of a few new cement plants in the country in near future the competition will further intensify. Despite of the challenges ahead, the Company is committed to meet challenges by adopting a strategy of dynamic pricing and effective measures of cost control and achieving higher capacity utilization and improved productivity.

SALIM ABDULLA AL HAJRI Chief Executive Officer


SALIM ABDULLAH AL HAJRIChief Executive Officer

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CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDING 31ST DECEMBER 2017

1. Company’s Philosophy: The company is committed to the highest standards of corporate governance in all its activities. The company has in placedetailed corporate governance policies which are being followed to enhance the shareholders and other stakeholders value and with a view to continuously improve and increase transparency, disclosure, control and compliance with laws and regulations and the principles of corporate governance required under the code of corporate governance issued by Capital Market Authority.

2. Board of Directors & Committee membership:

Name Position Independent /Nominee

Membership of Board in other SAOG

Cos. Chairman Member

Dr. Abdullah Abbas Ahmed Chairman of the Board and Executive Committee

Nominee , representing OIF - -

Mr. Kumail Majid Al Moosawi

Vice Chairman of the Board & Executive Committee & Member of Tender Board, Human Resources Committee, Investment Committee, and Nomination & remuneration Committee.

Independent - 1

Mr. Mubarak Suleiman Al Mantheri Tenure up to 10.12 2017

Chairman of Investment Committee and Member of Board and Audit Committee.

Nominee. Representing Government

- -

Mr. Ismael Khamis Abdulla Al Harrasi

Chairman of Human Resources Committee and Member of Board, Executive Committee, Tender Board and Nomination and Remuneration Committee.

Independent - -

Mr. Hamdan Mohamed Saleh Al Wahaibi Tenure up to 10.12.2017

Chairman of Nomination & Remuneration Committee and Member of Board, Audit Committee and Investment Committee.

Nominee, Representing Government

- -

Dr. Ali Salim AlI Al Rajhi Tenure up to 10.12.2017

Chairman of Tender Board and Member of Board, Executive Committee, Investment Committee and Human Resources Committee


- -

Mrs. Najat Ali Al Lawatia

Chairperson of Audit Committee and Member of Board

Independent - 1

Mr. Hussain Mohammed Redha Ali w.e.f. 10.12.2017.

Member of the Board, Member of Investment & Executive Committee, Member of Nomination & Remuneration Committee and Human Resource Committee

Nominee , representing OIF - 2

Mr. Talal Issa Al Harrasi w.e.f. 18.12.2017

Member of the Board, Member of Audit Committee and Member of Tender Board


Mr. Selim Ismail Hanafi w.e.f. 10.12.2012

Member of the Board, Member of Investment & Executive Committee, Member of Tender Board


Note: All Board and Committee Members are non-executive

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2.1.Number of Meetings attended by Board of Directors & Committees members :

Name of Board members NO. MEETINGS ATTENDED

AGM BM IC AC NRC HRC TB

Dr. Abdullah Abbas Ahmed - 7 - - - - -

Mr. Kumail Majid Al Moosawi 1 8 4 - 1 3 4

Mr. Mubarak Suleiman Al Mantheri 1 7 4 5 - - -

Mr. Ismael Khamis Al Harrasi 1 7 - 4 1 3 1

Mr. Hamdan Mohamed Saleh Al Wahaibi

1 7 4 1 1 - 3

Dr. Ali Salim AlI Al Rajhi 1 7 4 - - 3 4

Mrs. Najat Ali Al Lawatia - 8 - 6 - - -

Mr. Hussain Mohammed Redha Ali - 1 - - - - -

Mr. Talal Issa Al Harrasi - 1 - 1 - - -

Mr. Selim Ismail Hanafi - 1 - - - - -

AGM – Annual General Meeting, BM – Board meeting,IC – Investment committeemeeting, AC – Audit Committee meeting, NRC – Nomination, Remuneration Committee meeting, HRC- Human Resources committee meeting, TC – Tender Board committee meeting 2.2 Details of meeting held during the year 2017 are as follows:

Meeting

Number of Meetings during 2017

Dates of the Meeting

Annual General Meeting (Ordinary) 1 21/03

Board of Directors 8 15/02, 22/03, 27/04, 21/06,25/07, 31/07, 25/10, and 26/12

Investment Committee 4 22/03, 03/04, 30/05, and 07/06, Audit Committee 6 13/02, 24/04, 24/07, 24/10, 07/11,

and 26/12Nomination, Remuneration Committee 1 05/04

Human Resources Committee 3 06/03, 13/06, and 12/11

Tender Board 4 12/01, 27/03, 04/04 and 03/10

Corporate Governance Report (continued)for the year ending 31st December 2017

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3.4 Audit Committee:

The terms of reference include matters as specified under Code of Corporate Governance issued by Capital Market Authority (CMA)vide Circular references E/4/2015 dated 22 July 2015, E/4/2016 dated 18 April 2016 and E/10/2016 dated 1 December 2016 and Executive Regulation of Capital Market Law under the Decision No. 1/2009 dated 18 March 2009 (collectively “the Code”) including but not limited to the followings –

3.4.1 Reviewing audit plan and results of the internal and external audit

3.4.2 Assess the effectiveness of the Company’s system of internal control over its operations and

ensuring adoption of appropriate accounting policies and principles leading to fairness in financial statements.

3.4.3 Oversight of financial statements in general and with particular reference to review of annual

and quarterly financial statements before issue

3.4.4 Serving as a channel of communication between external auditors and the board and also internal auditors and the board.

3.4.5 Reviewing risk management policies.

3.5 Tender Board :

Tender Board has been constituted to review and approve or recommend to the Board of Directors for approval of purchases of materials or procurement of services or new projects. Tender Board assists the Board of Directors on issues relating to procurement of materials and services, vendor development and related functions.

3.6 Human Resources Committee:

The Human Resources Committee has been constituted to bring about effective implementation of human resources strategy of the company to realize its vision and mission. The committee will oversee formulation of strategies and policies relating to talent management, recruitment and retention of employees, reward and remuneration, performance management and employees relations.

3.7 Nomination and Remuneration Committee:

The Committee has been established with the aim of assisting the general meeting in nomination of proficient directors and election of the most fit for the purpose. The committee assist the Board in selecting the appropriate and necessary executive for Executive Management.


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3.4 Audit Committee:

The terms of reference include matters as specified under Code of Corporate Governance issued by Capital Market Authority (CMA)vide Circular references E/4/2015 dated 22 July 2015, E/4/2016 dated 18 April 2016 and E/10/2016 dated 1 December 2016 and Executive Regulation of Capital Market Law under the Decision No. 1/2009 dated 18 March 2009 (collectively “the Code”) including but not limited to the followings –

3.4.1 Reviewing audit plan and results of the internal and external audit

3.4.2 Assess the effectiveness of the Company’s system of internal control over its operations and

ensuring adoption of appropriate accounting policies and principles leading to fairness in financial statements.

3.4.3 Oversight of financial statements in general and with particular reference to review of annual

and quarterly financial statements before issue

3.4.4 Serving as a channel of communication between external auditors and the board and also internal auditors and the board.

3.4.5 Reviewing risk management policies.

3.5 Tender Board :

Tender Board has been constituted to review and approve or recommend to the Board of Directors for approval of purchases of materials or procurement of services or new projects. Tender Board assists the Board of Directors on issues relating to procurement of materials and services, vendor development and related functions.

3.6 Human Resources Committee:

The Human Resources Committee has been constituted to bring about effective implementation of human resources strategy of the company to realize its vision and mission. The committee will oversee formulation of strategies and policies relating to talent management, recruitment and retention of employees, reward and remuneration, performance management and employees relations.

3.7 Nomination and Remuneration Committee:

The Committee has been established with the aim of assisting the general meeting in nomination of proficient directors and election of the most fit for the purpose. The committee assist the Board in selecting the appropriate and necessary executive for Executive Management.

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3.8 With effect from 26th December 2017, the functions of Human Resources Committee and Nomination & Remuneration Committee have been combined and it has been reconstituted as Nomination, Remuneration and Human Resource Committee in order to streamline its functions and efficiency.

4. Nomination of the Board of Directors:

The Company follows the guidelines and the procedures as contained in the Articles of Association and relevant rules and law in this regard. In line with the relevant provisions of Share Transfer Agreement between Ministry of Finance and Oman Investment Fund, Oman Investment Fund hasnominated four directors on the Board of Directors. Three Directors were elected by the private shareholders at the Annual General Meeting held on 20th March 2016 in accordance with the rules and laws prevalent at the time of election. All the directors other than nominee directors are due for retirement/re-election at the Annual General Meeting to be held in 2019.

5. Remuneration matters:

(a) A remuneration of RO. 150,000/- to the Board of Directors for the year 2017 is proposed at

the current AGM for the approval of shareholders.

(b) Meeting attendance fees to the members of Board / Board Sub-Committees in aggregate during the financial year ended 31st December 2017 amounts to RO.49,800/-. An amount of RO. 140,000/- has been paid in 2017 to Board Members as remuneration for the year 2016 as approved in the AGM during 2017.

(c) An amount of RO. 26,649/- was incurred towards Directors’ travelling and other expenses

during the year in performance of official work.

(d) Remuneration of top five employees of the company for 2017 including salary, allowances, benefits, incentive and other benefits amounts to RO. 478,489/-.

(e) Performance bonus is paid to the employees based on their performance evaluation on

various attributes like productivity, safety, quality etc.

(f) Service contracts are usually for a period of one year and unless terminated by either of the party is automatically renewed for a further period of one year. Notice period for termination of contract is 1 / 3 months. Gratuity payment is made in accordance with Labour Law and Social Security Law of Sultanate of Oman.


Page 5 of 9

3.8 With effect from 26th December 2017, the functions of Human Resources Committee and Nomination & Remuneration Committee have been combined and it has been reconstituted as Nomination, Remuneration and Human Resource Committee in order to streamline its functions and efficiency.

4. Nomination of the Board of Directors:

The Company follows the guidelines and the procedures as contained in the Articles of Association and relevant rules and law in this regard. In line with the relevant provisions of Share Transfer Agreement between Ministry of Finance and Oman Investment Fund, Oman Investment Fund hasnominated four directors on the Board of Directors. Three Directors were elected by the private shareholders at the Annual General Meeting held on 20th March 2016 in accordance with the rules and laws prevalent at the time of election. All the directors other than nominee directors are due for retirement/re-election at the Annual General Meeting to be held in 2019.

5. Remuneration matters:

(a) A remuneration of RO. 150,000/- to the Board of Directors for the year 2017 is proposed at

the current AGM for the approval of shareholders.

(b) Meeting attendance fees to the members of Board / Board Sub-Committees in aggregate during the financial year ended 31st December 2017 amounts to RO.49,800/-. An amount of RO. 140,000/- has been paid in 2017 to Board Members as remuneration for the year 2016 as approved in the AGM during 2017.

(c) An amount of RO. 26,649/- was incurred towards Directors’ travelling and other expenses

during the year in performance of official work.

(d) Remuneration of top five employees of the company for 2017 including salary, allowances, benefits, incentive and other benefits amounts to RO. 478,489/-.

(e) Performance bonus is paid to the employees based on their performance evaluation on

various attributes like productivity, safety, quality etc.

(f) Service contracts are usually for a period of one year and unless terminated by either of the party is automatically renewed for a further period of one year. Notice period for termination of contract is 1 / 3 months. Gratuity payment is made in accordance with Labour Law and Social Security Law of Sultanate of Oman.

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6. Compliance by the company:

i) Company has complied with relevant provisions of Capital Market Authority on Corporate Governance.There were no penalties or strictures imposed on the company by MSM/CMA during the last 3 years.

ii) Introduction of new Code of Corporate Governance necessitated the need of restructuring

the functions of some of the Board Committees. This was achieved by reconstituting the committees with revised terms of reference and nomenclature. Functions of HR committee and Nomination and Remuneration Committee overlapped in several aspects though they functioned concurrently during part of the year. The functions have now been combined by the Board as functions of the reconstituted committee named as Nomination, Remuneration and HR Committee. While Nomination and Remuneration Committee had one meeting during the year, the HR Committee had three meetings and the combined number of meetings of these committees meet the specified minimum number stated in the Code of Corporate Governance.The annual plan for recruitment and restructuring of manpower and omanization as well as succession plan for critical positions is under finalization of the restructured committee.

iii) The composition of the audit committee, comprising the chairperson as independent

director and two directors representing Government of Oman (non-independent), was finalized before the new code of corporate governance came into force. The composition has been reviewed by the board in alignment with the requirement of having majority of the independent directors in the committee and the composition has been amended suitably. One of the meeting of the audit committee, attended by two directors, one representing Ministry and other one as independent director, was proceeded with though only one of the two independednt directors attended the meeting.

7. Means of communication with the shareholders and investors:

7.1 Quarterly results are published in 2 leading newspapers, one in Arabic and one in English. Copies are made available to shareholders on request.

7.2 The results are posted in Muscat Security market site at www.msm.gov.om 7.3 Also the website of the Company, www.omancement.com gives details of the operations of

the company. 7.4 Management Discussion and Analysis Report forms part of the annual report for the year

2017.


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8. Market Share Price Data:

8.1 The company’s High/Low price each month during 2017 is given below:

Month Low Price (RO) High Price (RO)

Jan-17 0.476 0.500

Feb-17 0.486 0.498

Mar-17 0.480 0.504

Apr-17 0.454 0.482

May-17 0.448 0.480

Jun-17 0.440 0.470

Jul-17 0.434 0.446

Aug-17 0.420 0.436

Sep-17 0.396 0.420

Oct-17 0.404 0.426

Nov-17 0.410 0.412

Dec-17 0.402 0.410

8.2The performance of the company’s share as compared with the broad based index of MSM and the index of industrial sector is given below:

0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1,000.000

2,000.000

3,000.000

4,000.000

5,000.000

6,000.000

7,000.000

8,000.000

9,000.000SHARE

PRICES

I N

D I

C E

S

MSM Index MSM Industrial Index OCC Share prices


Page 7 of 9




Jan-17 0.476 0.500

Feb-17 0.486 0.498

Mar-17 0.480 0.504

Apr-17 0.454 0.482

May-17 0.448 0.480

Jun-17 0.440 0.470

Jul-17 0.434 0.446

Aug-17 0.420 0.436

Sep-17 0.396 0.420

Oct-17 0.404 0.426

Nov-17 0.410 0.412

Dec-17 0.402 0.410


0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1,000.000

2,000.000

3,000.000

4,000.000

5,000.000

6,000.000

7,000.000

8,000.000

9,000.000SHARE

PRICES

I N

D I

C E

S


Page 7 of 9




Jan-17 0.476 0.500

Feb-17 0.486 0.498

Mar-17 0.480 0.504

Apr-17 0.454 0.482

May-17 0.448 0.480

Jun-17 0.440 0.470

Jul-17 0.434 0.446

Aug-17 0.420 0.436

Sep-17 0.396 0.420

Oct-17 0.404 0.426

Nov-17 0.410 0.412

Dec-17 0.402 0.410


0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1,000.000

2,000.000

3,000.000

4,000.000

5,000.000

6,000.000

7,000.000

8,000.000

9,000.000SHARE

PRICES

I N

D I

C E

S


٨.٢ The performance of the company’s share as compared with the broad based index of MSM and the index of industrial sector is given below:

0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1,000.000

2,000.000

3,000.000

4,000.000

5,000.000

6,000.000

7,000.000

8,000.000

9,000.000SHARE

PRICES

I N

D I

C E

S


Page 7 of 9




Jan-17 0.476 0.500

Feb-17 0.486 0.498

Mar-17 0.480 0.504

Apr-17 0.454 0.482

May-17 0.448 0.480

Jun-17 0.440 0.470

Jul-17 0.434 0.446

Aug-17 0.420 0.436

Sep-17 0.396 0.420

Oct-17 0.404 0.426

Nov-17 0.410 0.412

Dec-17 0.402 0.410


0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1,000.000

2,000.000

3,000.000

4,000.000

5,000.000

6,000.000

7,000.000

8,000.000

9,000.000SHARE

PRICES

I N

D I

C E

S


18


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8.3 Distribution of shareholding as at 31st December 2017.

Number of Shares Range

No. of No. of Shares

% of Shareholders Shares

1-10,000 3,125 6,586,342 1.99 10,001-50,000 405 9,758,147 2.95 50,001-100,000 53 4,161,514 1.26 100,001-500,000 70 16,564,883 5.01 500,001-1,000,000 13 9,390,089 2.84 1,000,001-10,000,000 17 44,622,595 13.48 Above 10,000,000 4 239,789,140 72.47

Total 3,687 330,872,710 100.00

8.4 There are no outstanding GDR’s/ADR’s/Warrants or any other convertibleinstrument which are likely to have an impact on equity.

9. Professional Profiles of Auditors:

Moore Stephens LLC commenced practise in 1988. Over the years, the practice has developed considerably and now services a number of clients, including major listed companies, Groups, government organisations and Ministries providing either audit, tax or management consultancy services. The local staff strength is around 45, most of whom are qualified Chartered Accountants, internal auditors and information systems auditors.

Since Moore Stephens London was founded 100 years ago, the Moore Stephens International Limited network has grown to be one of the largest international accounting and consulting groups worldwide. Moore Stephens International is regarded as one of the world's major accounting and consulting networks consisting of 276 independent firms with 626 offices and 27,997 people across 108 countries.

10. Audit fees of the Company and Subsidiaries:

The audit fee (including fee for Corporate Governance Report) payable to M/s. Moore Stephens LLC, the Auditors of the Company, amounts to RO.10,000/- (Rials Omani Ten Thousand only) for the year 2017.


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11. The financial statements of the Company are being prepared in line with applicable standards and

rules. The internal control systems of the Company are being assessed regularly for effectiveness, efficiency and adequacy of the system of Internal Control. The Company does not have any material issues, which may affect the continuation of the Company and its ability to continue production operations during the next financial year.

Kumail Majid Al Moosawi Vice Chairman of the Board of Directors


PART (B)


6


Financial Statements for the year ended 31 December 2017

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Financial statements for the year ended 31 December 2017

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Documents

Annual Report - OMAN CEMENT COMPANY · The Annual Report supported by the Statement of Financial Position and Statement of Comprehensive Income along ... Cement Company LLC in joint