Prospectus Awazel Waterproofing Industries Company€¦ · Arabian Waterproo˜ng Industries Company (Awazel) (“the Company” or “the Issuer”) is a Saudi joint stock company

Financial Advisor, Lead Manager, Institutional Bookrunner and Underwriter

Receiving Agents

Arabian Waterproo�ng Industries Company (Awazel) (“the Company” or “the Issuer”) is a Saudi joint stock company under Commercial Registration No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) and Ministerial Resolution No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G).

The Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000). The capital was formed from in-kind cash equivalents and cash shares of equal value and registered in Commercial Register No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) with a capital of twelve million Saudi Riyals (SAR 12,000,000). On 21/01/1402H (corresponding to 18/11/1981G) the Company increased its capital to fourteen million Saudi Riyals (SAR 14,000,000) by increasing the cash portion by two million Saudi Riyal (SAR 2 million) divided into fourteen thousand (14,000) cash shares of cash value of SAR 1,000 each, paid by the partners based on their ownership ratios. On 23/04/1413H (corresponding to 20/10/1992G), the Company increased its capital to thirty million Saudi Riyals (SAR 30,000,000) by capitalizing sixteen million Saudi Riyals (SAR 16,000,000) from retained earnings according to the last approved budget for the year 1991G. The capital was divided into thirty thousand (30,000) shares of equal value of (SAR 1,000) each. On 11/09/1425H (corresponding to 25/10/2004G), the partners decided to transform the Company into a Saudi closed joint stock company with a capital of sixty �ve million Saudi Riyals (SAR 65,000,000). The partners also decided in the same decision to increase the Company›s Share Capital to sixty �ve million Saudi Riyals (SAR 65,000,000).

The Minister of Commerce and Investment issued the Ministerial Decision No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G) announcing the transformation of the Company into a closed joint stock company with a capital of sixty �ve million Saudi Riyals (SAR 65,000,000) divided into one million and three hundred thousand (1,300,000) shares at a nominal value of �fty Saudi Riyals (SAR 50) per share. The capital of the Company was increased by capitalization of thirty �ve million Saudi Riyals (SAR 35,000,000) from the retained earnings account. New investors were also entered as shareholders in the Company through a private placement of shares.

On 17/08/1428H (corresponding to 10/09/2006G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to eighty one million two hundred and �fty thousand Saudi Riyals (SAR 81,250,000). The increase was covered by capitalization of sixteen million and two hundred and �fty thousand Saudi Riyals (SAR 16,250,000) from the retained earnings account.

On 23/08/1428H (corresponding to 05/09/2007G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and eight million three hundred and thirty three thousand two hundred and eighty Saudi Riyals (108,333,280) �nanced from the retained earnings by issuing one new share for each holder of three previous shares registered in the Company›s records at the end of the day of the meeting.

On 27/06/1429H (corresponding 01/07/2008H), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and �fty one million six hundred and sixty six thousand �ve hundred and ninety Saudi Riyals (SAR 151,666,590) �nanced from the retained earnings by issuing four new share for each holder of ten previous shares registered in the Company›s records at the end of the day of the meeting.

On 04/08/1430H (corresponding to 26/07/2009G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and eighty-one million nine hundred and ninety nine thousand eight hundred and ten Saudi Riyals (SAR 181,999,810) �nanced from the retained earnings by issuing one share for each holder of �ve previous shares registered in the Company›s records at the end of the day of the meeting.

On 16/12/1436H (corresponding to 29/9/2015G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s capital to two hundred and seventy-two million nine hundred and ninety-nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) by granting one free share for each two shares held by the registered shareholders on the date of the Extraordinary General Assembly meeting. The proposed capital increase shall be covered by transferring twenty three million nine hundred and ninety nine thousand nine hundred and seventy Saudi Riyals (SAR 23,999,970) from the retained earnings and transfer an amount of (SR 67,000,000) from the statutory reserve item as at the date of the audited �nancial statements ended on 31 March 2016G. The fractures of shares are aggregated and sold to shareholders.

The Company›s current Share Capital stands at two hundred and seventy-two million nine hundred and ninety nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) divided into twenty seven million two hundred and ninety-nine hundred and seventy-eight shares (27,299,978) with a nominal value of ten Saudi Riyals (SAR 10) per share.

The Initial Public O�ering (the “O�ering”) of eight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Ordinary Shares (the “O�er Shares”) and each is (“an O�er Share”) with a fully paid nominal value of ten Saudi Riyals (SAR 10) per share and at an O�er Price of SAR([•]) each, representing thirty percent (30%) of the issued Share Capital of the Company, is directed at and may be accepted by two tranches of investors:

Tranche (A): Institutional Investors consisting of a number of institutions and companies including investment funds (the “Institutional Investors”) (see section 1 (“De�nitions and Abbreviations”). The number of O�er Shares to be allocated to Institutional Investors is eight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Shares, representing 100% of the O�er Shares. In the event that Individual Investors (as de�ned in Tranche (B) below) subscribe to all the O�er Shares allocated to them, the Institutional Bookrunner has the right, subject to the Capital Market Authority›s (“CMA”) consent, to reduce the number of O�er Shares allocated to Institutional Investors to six million and �ve hundred and �fty one thousand and nine hundred and ninety �ve (6,551,995) Shares, representing up to 80% of the O�er Shares. Eighty percent (80%) of the Tranche (A) O�er Shares are to be allocated to investment funds, which percentage shall be subject to adjustment, in the event that other institutions, excluding investment funds, do not fully subscribe to the remaining twenty percent (20%) of the O�er Shares allocated to them, or in the event that the mutual funds do not subscribe to the full portion allocated to them

eighty percent (80%). The shares will be allocated to Tranche (A) in accordance with the coordination between the �nancial advisor and the Company using the discretionary allocation mechanism.

Tranche (B): Individual Investors including Saudi Arabian natural persons, including Saudi women who are divorced or widowed and who have children by a non-Saudi husband who may subscribe to O�er Shares in the name(s) of any of those children who are minors for her bene�t provided that any such woman provides evidence that she is the child›s mother and that she is widowed or divorced, in addition to GCC natural investors (collectively “Individual Investors” and severally an “Individual Investor”) (all of them with the Institutional Investors are “Subscribers”). The subscription by a person in the name of his divorced wife shall be deemed invalid and in such cases, the relevant regulations shall be enforced against that person. A maximum of (1,637,999) Shares representing up to 20 % of the O�er Shares shall be allocated to Individual Investors. If the Individual Investors do not subscribe to the full amount of O�ered Shares allocated to them, the Bookrunner may, subject to the CMA›s consent, reduce the number of O�ered Shares to match the number actually subscribed to by the Individual Investors.

The O�er Shares are being sold by the Selling Shareholders, whose names appear on pages 32 (collectively, the “Selling Shareholders”), who collectively own 100% of the Company’s pre-O�ering Shares. Upon completion of the O�ering, the Selling Shareholders will collectively own 70% of the Company’s Share Capital and will consequently retain a controlling interest in the Company. The proceeds from the O�ering, after deducting the O�ering expenses (the “Net Proceeds”), will be distributed to the Selling Shareholders on a pro-rata basis based on each Selling Shareholder›s percentage of ownership in the O�er Shares being sold in the O�ering and the Company will not receive any part of the Net Proceeds (see section 8 (“Use of Proceeds”). The Underwriter has committed to fully underwrite the O�ering (see section 12 “Underwriting"). The persons whose names are included in the Prospectus as Company Shareholders as indicated on page (32) of the Prospectus shall be restricted from disposing of their Shares for six (6) months starting from the date on which trading of the O�er Shares commences on Tadawul (“Lock-in Period”) Following the end of their respective Lock-in Periods, they may only dispose of their respective Shares after obtaining the approval of the CMA. The names of the Substantial Shareholder who own 5% or more in the Company’s share Capital are listed on page (36) of this Prospectus.

The O�ering will commence on 10/02/1439H (corresponding to 30/10/2017]G) and will remain open for a period of seven (7) days up to and including16/02/1439H (corresponding to 05/11/2017G) (the “O�ering Period”). Subscription to the O�er Shares can be made through branches of the selling agents (“Selling Agents”) listed on pages (viii) during the O�ering Period (see “Key Dates and How to Apply” Section and Section 15 “Subscription Terms and Conditions”). Subscribers of Institutional tranche may subscribe to the O�er Shares through the Bookrunner during the Bookrunning process that takes place prior to o�ering to Individual Investors.

Each Individual Investor who subscribes to the O�er Shares must apply for a minimum of ten (10) O�er Shares. The minimum allocation per Subscriber is (10) O�er Shares, while maximum number of O�er Shares that may be allocated for a Subscriber is two hundred and �fty thousan (250,000) shares. The balance of the O�er Shares (if any) will be allocated to subscribers on a pro-rata basis based on the number of O�er Shares they subscribed for. In the event that the number of Individual Subscribers exceeds ([•]) ([•]), the Company will not guarantee the minimum allocation of ten (10) O�er Shares per Subscriber, and the O�er Shares will be allocated equally between all Subscribers. If the number of Subscribers exceeds ([•]) ([•]), the Company will not guarantee the minimum allocation of (10) O�er Shares per Subscriber and the allocation will be determined in accordance with the recommendation of the Company and the Financial Advisor. Excess subscription monies, if any, will be refunded to the Subscribers without any charge or withholding by the Selling Agents. Noti�cation of the �nal allotment and refund of excess subscription monies, if any, will be made by 23/02/1439H (corresponding to 12/11/2017G) (see subsection entitled “Allocation and Refund” in Section 15 (“Subscription Terms and Conditions”).

The Company has one class of shares. Each Share entitles its holder to one vote, and each shareholder has the right to attend and vote at a General Shareholders Assembly (“General Meeting”). No Shareholder bene�ts from any preferential voting rights. The O�er Shares shall be entitled to receive dividends declared by the Company from the date of this Prospectus and during subsequent �scal years (see section 7 (”Dividend Policy”).

Prior to the O�ering, there has been no public market for the Shares in Saudi Arabia or elsewhere. An application has been made to the CMA for the admission of the Shares to the Saudi Stock Exchange (Tadawul). All supporting documents required by the CMA have been supplied, and all relevant approvals pertaining to this O�ering have been granted. Trading in the O�er Shares on the Saudi Stock Exchange (the “Exchange” or the “Tadawul”) is expected to commence shortly after the �nal allocation of the O�er Shares and the satisfaction of necessary conditions and procedures (see the section “Key Dates for Investors and How to Apply”). Following the trading of Shares on the Exchange (Tadawul), Saudi nationals as well as non-Saudi individuals who are residents in the Kingdom, companies, banks and funds and nationals of other GCC countries, will be permitted to trade in the Shares. Moreover, Quali�ed Foreign Investors (“Quali�ed Foreign Investors”) and approved QFI Clients (“Approved QFI Clients”) will be permitted to trade in the Shares in accordance with Rules for Quali�ed Foreign Financial Institutions Investment in Listed Shares. Furthermore, non-Saudi natural persons who are not residents in the Kingdom and institutions incorporated outside the Kingdom (“Foreign Investors”) are permitted to acquire an economic interest in the Shares by entering into a swap agreement with a person authorized by the CMA to acquire, hold and trade in shares on Tadawul on behalf of a Foreign Investor (the “Authorized Person”). Under such swap agreements, the Authorized Person will be the registered legal owner of such Shares.

Application has been made to the CMA for admission of the Shares to the Saudi Stock Exchange (Tadawul) and all requirements have been met.

The “Important Notice”, page i and section 2 (“Risk Factors”) of this Prospectus should be considered carefully prior to making a decision to invest in the O�er Shares.

This Prospectus includes information given in compliance with the Listing Rules of CMA. The Directors, whose names appear on page (d), collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and con�rm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. CMA and the Saudi Stock Exchange do not take any responsibility for the contents of this Prospectus, do not make any representation as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this ProspectusThis uno�cial English translation of the o�cial Arabic Prospectus is provided for information purposes only. The Arabic prospectus published on the CMA’s website (www.cma.org.sa) remains the only o�cial, legally binding version and shall prevail in the event of any con�ict between the two texts.This Prospectus is dated 11/01/1439H (corresponding 01/10/2017G)

Prospectus Awazel Waterproofing Industries CompanyA Saudi Joint Stock Company in accordance with the Commercial Registration No 1010039827, dat-ed 14/08/1401H (corresponding to 17/06/1981G) and the Ministerial Resolution number 1247, dated 26/01/1426H (corresponding to 07/03/2005G)

Sale of eight million one hundred and eighty nine thousand nine hundred and ninety four (8,189,994) Shares representing 30% of Awazel Waterproo�ng Industries Company (Awazel) Capital through an Initial Public O�ering at an O�er Price of SAR (•) per Share

O�ering Period: Seven (7) days starting from 10/02/1439H (corresponding to 30/10/2017G) to 16/02/1439H (corresponding to 05/11/2017G)

ii

Important NoticeThis Prospectus contains detailed information relating to the Company and the Offer Shares. When applying for the Offer Shares, investors will be treated as applying solely on the basis of the information contained in this Prospectus, copies of which are available for collection from the Company, the Lead Manager, the Selling Agents or by visiting the websites of the Company (www.awazel.com), the CMA (www.cma.org.sa) or the Financial Advisor and Lead Manager (www.riyadcapital.com).

Riyadh Capital Company (“Riyadh Capital”) has been appointed by the Company to act as a financial advisor in respect of the Offering (the “Financial Advisor”). Riyadh Capital has also been appointed as Lead Manager (“Lead Manager”), Institutional Bookrunner (and Underwriter (“the Underwriter”) in relation to the Offering under this Prospectus. (See Section 12 entitled “Underwriters”).

This Prospectus includes information given in compliance with the Listing Rules of the CMA. The Directors, whose names appear in page (iv) collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. While the Company has made all reasonable enquiries as to the accuracy of the information contained in this Prospectus as at the date hereof, a substantial portion of the information in the Prospectus which is relevant to the market and industry in which the Company operates is derived from external sources, and while neither the Company nor any of the its advisors, whose names appear on page (vi) of this Prospectus has any reason to believe that any of the market and industry information is materially inaccurate, neither the Company nor any of the Advisors has independently verified such information, and no representation or assurance is made with respect to the accuracy or completeness of any of this information.

The information contained in this Prospectus is subject to change. In particular, the actual financial condition of the Company and the value of the Offer Shares may be adversely affected by future developments in inflation, interest rates, taxation or other economic, political and other factors, over which the Company has no control. Neither the delivery of this Prospectus nor any oral or written information in relation to the Offer Shares is intended to be, or should be construed as or relied upon in any way as, a promise, affirmation or representation as to future earnings, results or events.

The Prospectus is not to be regarded as a recommendation on the part of the Company, its Board Members or the Selling Shareholders or any of their advisors to participate in the Offering. Moreover, information provided in this Prospectus is of a general nature and has been prepared without taking into account individual investment objectives, financial situation or particular investment needs. Prior to making an investment decision, each recipient of this Prospectus is responsible for obtaining independent professional advice in relation to the Offering and for considering the appropriateness of the information herein, with regard to individual objectives, financial situations and investment needs.

The Offering is being made to, and is only capable of acceptance by (A) the Institutional Investors including a number of establishments, companies and investment funds, (see Section 1 “Definitions ad Abbreviations” in this Prospectus) and (B) individual Subscribers including natural persons of Saudi Arabia including Saudi female divorcee or widow who has children form a marriage to a non-Saudi. She can subscribe on behalf of those children to her account given that she provides proof of motherhood. The subscription by a person in the name of his divorced wife shall be deemed invalid and in such cases, the relevant regulations shall be enforced against that person.

The distribution of this Prospectus and the sale of the Offer Shares in any other country except Saudi Arabia or is expressly prohibited. The Company, Selling Shareholders, and Financial Advisor require recipients of this Prospectus to inform themselves and strictly observe any regulatory restrictions relating to the Offer Shares.

Market and Industry DataInformation on the market and sector in which the Company operates contained in this Prospectus was provided by the market research and sector Advisor (“Market and Sector Advisor”) which is Frost & Sullivan. This study covers the period from 2009G to 2014G.

Frost & Sullivan is an independent consulting firm engaged in professional consultancy, research, design and implementation of field surveys and feasibility studies. Frost & Sullivan was incorporated in 1960 and headquartered in New York, USA. It has offices in most of the world. It employs a team of consultants specializing in the development and implementation of strategies, performance management and improved sustainable profitability.

The Company believes that the data and information obtained or extracted from the market report prepared by the Market Advisor is reliable, but none of the Company, the Directors, or the Advisors have independently verified such information and data, and no guarantee can be provided as to its accuracy or completeness.

It should be noted that neither the Market Advisor nor any of its shareholders or members of its Board of Directors or their relatives have any shares or interests of any kind in the Company or any if its affiliates or subsidiaries. The Market Advisor has given its written consent to use the market research data in the form and manner contained in this Prospectus and has not withdrawn such consent until the date of this Prospectus.

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Financial InformationThe special-purpose financial statements prepared for the financial year ended 31 March 2014 and the consolidated, preform and audited financial statements of the Company for the financial years ended 31 March 2014, 2016 and 2016 and the notes thereto are prepared in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) by the Company’s certified auditor, PricewaterhouseCoopers. The consolidated audited financial statements of the Company for the year ended 31 March 2017 and the accompanying notes have been prepared in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) by the Company’s certified auditor Ernst & Young and partners. The Company publishes its financial statements in Saudi Riyals.

The financial and statistical information contained in this Prospectus is subject to rounding. Accordingly, where numbers have been rounded up or down. There may be minor differences between the figures set out in the Prospectus and the audited financial statements.

Forecasts and Forward Looking Statements Forecasts set forth in this Prospectus have been prepared on the basis of certain stated assumptions provided by the Company based on its experience in the Market as well as publically available data. Future operating conditions may differ from the assumptions used and consequently no affirmation, representation or warranty is made with respect to the accuracy or completeness of any of these forecasts. The Company confirms that the statements included in this Prospectus is based on the necessary professional care.

Certain statements in this Prospectus are, or may be deemed to be, “forward‐looking statements”. Such statements can generally be identified by their use of forward‐looking words such as “intends”, “plans”, “estimates”, “believes”, “expects”, “anticipates”, “may”, “will”, “should”, “expected”, “would be”, or the negative thereof or other variations of such terms or comparable terminology. These forward‐looking statements reflect the current views of the Company with respect to future events, and are not a guarantee of future performance. Many factors could cause the actual results, performance or achievements of the Company to be significantly different from any future results, performance or achievements that may be expressed or implied by such forward‐looking statements. Some of the risks and factors that could have such an effect are described in more detail in other sections of this Prospectus (see section 2 (“Risk Factors”). Should any one or more of the risks or uncertainties materialize or any underlying assumptions prove to be inaccurate or incorrect, actual results may vary materially from those described in this Prospectus.

Subject to the requirements of the Listing Rules, the Company must submit a supplementary Prospectus to the CMA if, at any time after the Prospectus has been published and before the admission of the Offer Shares to listing, the Company becomes aware that (A) there has been a significant change in any material information contained in the Prospectus or any document required by the Listing Rules, or (B) additional significant matters have become known which would have been required to be included in the Prospectus. Except in the aforementioned circumstances, the Company does not intend to update or otherwise revise any industry or market information in this Prospectus, whether as a result of new information, future events or otherwise. As a result of the foregoing and other risks, uncertainties and assumptions, the forward‐looking events and circumstances discussed in this Prospectus might not occur in the way the Company expects, or at all. Prospective investors should consider all forward looking statements in light of these explanations and should not place undue reliance on forward‐looking statements.

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Corporate Directory

Board MembersTable (1): Board of Directors

N NameRe

pres

ente

d

Post

Nat

iona

lity

Age

Capa

city

DirectOwnership

IndirectOwnership

Dat

e of

Mem

bers

hip

Pre-

Off

erin

g

Post

-Off

erin

g

Pre-

Off

erin

g

Post

-Off

erin

g

1Dr. Walid Bin Sulaiman Abanami

Chairman of the Board

In his personal capacity

Saudi 50Non-Exec-utive and Independent

1.85% 1.30% 0% 0% 22/9/2014G

2 Firas Ali Ibra-him Al Suqair

Deputy Chairman


Saudi 49 Executive 5.47% 3.83% 0% 0% 22/9/2014G

3Mansour Ali Ibrahim Al Suqair

MemberIn his personal capacity


4 Naser Ali Ibra-him Al Suqair Member



5Mohammed Abdulaziz Al Bahar

Member

Boubyan Petro-chemical Co.

Kuwaiti 55

Non-Exec-utive and Non-Inde-pendent

20.78% 14.55% 0% 0% 22/9/2014G

6Turki Naser Mohammed Al Motawwaa



0.95% 0.67% 0% 0% 22/9/2014G

7Ibrahim Ali Ibrahim Al Suqair

Managing Director


Saudi 54 Executive 6.73% 4.71% 0.36% 0.25% 22/9/2014G

8Jamal Abdul-rahman Al Zamil



0.40% 0.28% 0% 0% 22/9/2014G

9 Tarek Bin Mut-laq Al Mutlaq Member



0% 0% 0.12% 0.08% 20/7/2016G

Source: The Company

* Under the Company’s By-Laws and the provisions of the current Companies Law, the Board members have shares as a Membership Guarantee in the Company in a nominal value of forty thousand Saudi Riyals (SAR 40,000) per member.

** The dates mentioned in this table are the dates of appointment in the current posts stated in the same table. The CVs of Board members shows the date of start of appointment of each of them in the Company whether in the Board or any other post that precedes such posts. (For more information, please refer to sub-section 5-2 “Board of Directors” of this Prospectus.

*** The indirect ownership for Ibrahim Ali Al Suqair is related to his minors Hatoun Ibrahim Al Suqair who owns 50,000 shares and Ali Ibrahim Al Suqair who owns 50,000 shares. The Indirect ownership for Tarek Mutalq Al Mutlaq is related to his ownership in Al Mutlaq Group.

v

Company Address

Waterproofing Insulation Industries Company (Awazel)

Riyadh

P.O. Box 2955, Riyadh, 11461

Kingdom of Saudi Arabia

Tel: +966 (11) 478 2876

Fax: +966 (11) 478 1078

Website: www.awazel.com

Email: [email protected]

Company Authorized Representatives

Firas Ali Ibrahim Al Sugair

Board Member


P.O. Box 2955, Riyadh, 11461


Tel: +966 50 556 2666

Fax: +966 (11) 478 1078



Ibrahim Ali Ibrahim Al Sugair

Managing Director


BO Box 2955, Riyadh, 11461


Tel: +966 50 546 7056

Fax: +966 (11) 498 1707



Board secretary

Aladin Barghuth

Board Secretary


P.O. Box 2955, Riyadh, 11461


Tel: +966 50 5467054

Fax: +966 (11) 498 1707



Stock Market

Saudi Stock Exchange (Tadawul)

Abraj Atta’awuneya

700 King Fahad Road

P.O. Box 60612 Riyadh 11555


Tel: +966 (11) 218 1200

Fax: +966 (11) 218 1220

Website: www.tadawul.com.sa

E-mail: [email protected]

vi

AdvisorsFinancial Advisor, Institutional Bookrunner and Lead Manager

Riyadh Capital Company

Takhasosi Street - Prestige Centre Building

P.O. Box 21116, Riyadh 11475


Tel: +966 (11) 486 5696

Fax: +966 (11) 486 5908

Website: www.riyadcapital.com


Legal Advisor

Mohammed Aldhabaan & Partners

In association with Eversheds Sutherland

Office 11 Office Huses

Al Orouba Road

P.O. Box 245555, Riyadh 11312

Tel: +966 (11) Kingdom of Saudi Arabia

Fax: +966 (11) 2816611

Website: www.aldhabaan.eversheds.com


financial Due Care Advisor

KPMG Al Fozan and Partners

KPMG Tower

Salahuddein Road

P.O. Box 92876, Riyadh 11663


Tel: +966 (11) 8748500

Fax: +966 (11) 8748600

Website: www.kpmg.com.sa


Market and Industry Research Advisor

Frost & Sullivan

210 PT Building, Internet City, Dubai

P.O. Box 502395

Dubai, UAE

Tel: +971 (4) 4331893

Fax: +971 (4) 4278784

Website: ww2.frost.com


vii

Current Certified Officer for the year ended on 31 March 2017

Ernest & Young

Olaya, King Fahd Road

P.O. Box 2732, Riyadh 11461


Tel: +966 (11) 2734740

Fax: +966 (11) 2734730

Website: www.ey.com


Previous Certified Officer for the years ended on 31 March 2014, 2015 & 2016

PricewaterhouseCoopers

King Fahd Road



Tel: +966 (11) 2110400

Fax: +966 (11) 4651663

Website: www.pwc.com


Note: All the aforementioned Advisors/consultants have given and not withdrawn their written consent for the appearance of their names and logos and inclusion of their statements in the form and context set out in this Prospectus; and do not themselves, or any of their relatives or affiliates have any shareholding or interest of any kind in the Company or any of its subsidiaries/affiliates as at the date of this Prospectus

Underwriter

Riyad Capital Company


P.O. Box 21116, Riyadh 11475


Tel: +966 (11) 486 5696

Fax: +966 (11) 486 5908

Websitewww.riyadcapital.com


viii

Receiving Agents

Riyad Bank

King Abdul-Aziz Road

P.O. Box 22622, Riyadh 11614


Tel: +966 (11) 401 3030

Fax: +966 (11) 404 2618

Website: www.riyadhbank.com


Saudi British Bank (SABB)

Prince Abdul‐Aziz Ben Moosaed bin Jalawi Street


Saudi Arabia

Tel: 966 (11) 405 0677

Fax: 966 (11) 405 0660

Website: www.sabb.com


Samba Financial Group, Main branch

King Abdulaziz Road - Riyadh


Saudi Arabia

Tel: +966 (11) 477 4770

Fax: +966 (11) 479 9402

Website: www.samba.com

E-Mail: [email protected]

Al Rajhi Bank

Olaya Road



Tel: +966 (11) 2116000

Fax: +966 (11) 4600705

Website: www.alrajhibank.com.sa


Banque Saudi Fransi

Ma’ather Road

P.O. Box: 56006, Riyadh 11554


Tel.: +996 (11) 4042222

Fax: +966 (11) 4042311


Website: www.alfransi.com.sa

ix

Company Bankers

Arab National Bank

P.O. Box 56921, Riyadh 11564


Tel: +966 (11) 402 9000

Fax: +966 (11) 402 7747

Website: www.anb.com.sa





Saudi Arabia

Tel: 966 (11) 405 0677

Fax: 966 (11) 405 0660



Alawwal Bank

Head Office, Riyadh

Dhabab Street

P.O. Box: 1476, Riyadh 11431


Tel: +966 (11) 401 0288 / 4067888

Fax: +966 (11) 403 1104

Website: www.alawwalbank.com


x

Summary of the OfferingThis summary of key information is intended to provide a brief overview of the information contained in detail in this Prospectus. As such, it does not contain all of the information that must be taken into consideration upon taking a decision to invest in the Company’s Shares. Any decision to invest in the Offer Shares by prospective investors should be based on a consideration of this Prospectus as a whole. In particular, it is important to carefully consider the “Important Notice” and “Risk Factors”, prior to making any investment decision in the Offer Shares.

The Company

Arabian Waterproofing Industries Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000).

On 11/09/1425H (corresponding to 25/10/2004), the partners decided to transform the Company into a Saudi closed joint stock company with a capital of sixty five million Saudi Riyals (SAR 65,000,000. The partners also decided in the same decision to increase the Company’s capital to sixty flve million Saudi Riyals (SAR 65,000,000).

The Minister of Commerce and Investment issued Ministerial Decision No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G) announcing the transformation of the Company into a closed joint stock company with a capital of sixty million Saudi Riyals (SAR 65,000,000) divided into one million and three hundred thousand (1,300,000) shares at a nominal value of fifty Saudi Riyals (SAR 50) per share. The capital of the Company was increased by capitalization of thirty five million Saudi Riyals (SAR 35,000,000) from the retained earnings account. New investors were also entered as shareholders in the Company through a private placement of shares. The Company’s Share Capital stands at two hundred and seventy-two million nine hundred and ninety-nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) divided into twenty seven million two hundred and ninety-nine hundred and seventy-eight shares (27,299,978) with a nominal value of ten Saudi Riyals (SAR 10) per share.

Company Business Activities

Following are the main activities of the Company according to its By-Laws:

1- Production of insulation and waterproofing materials from asphalt or petrochemical base in the form of rolls, sheets or adhesives of different types;

2- Production of all types of oxidized & reformed asphalt grades used in roads and insulation;

3- Production of all types of emulsions, paints, compounds & pastes where petroleum & additives are part of their fabrication;

4- Production of chemical additives to improve cement mixture properties to make them waterproofing;

5- Production of all types of thermal & acoustic insulator;

6- Production of special packages of the Company products;

7- Marketing the Company products inside & outside Saudi Arabia, including acquisition & management of means of transportation where possible;

8- Acquisition & construction of real estates & warehouses for showcasing, storing & selling the Company products and managing their businesses including the head office projects, branches & housing the Company employees;

9- Acquisition & execution of necessary projects for supplying the Company with its required raw materials;

10- Importing the required raw material for the Company business; and

11- Trading & fabricating all types of building materials including revetment material for construction facades with stones, ceramic & glass as well as with insulated metal sheets…etc.

Substantial Shareholders

Significant shareholders who own more than 5% of the Company’s capital are

1- Boubyan Petrochemical Company

2- Ibrahim Ali Ibrahim Al-Suqair

3- Haila Abdul Rahman Issa Al - Rumaih

4- Samama Investment Company

5- Nasser Ali Ibrahim Al-Suqair

6- Firas Ali Ibrahim Al-Suqair

7- Mansour Ali Ibrahim Al-Suqair

8- Suqair Ali Ibrahim Al-Suqair

9- Rumaih Ali Ibrahim Al-Suqair

The following table lists the Key Shareholders, their Shares and Shareholding before and after the Offering

xi

Key Shareholders, their Shares and Shareholding before and after the Offering

N ShareholdersPre Offering Post Offering

No. of Shares

per-centage Value (SAR) No. of

Sharesper-

centage Value (SAR)

1Boubyan Pet-rochemical Company

5,672,036.00 20.78% 56,720,360.00 3,970,424 14.54% 39,704,240

2Ibrahim Ali Ibrahim Al-Suqair

1,837,547.00 6.73% 18,375,470.00 1,286,282 4.71% 12,862,820

3Haila Abdul Rahman Issa Al - Rumaih

1,783,023.00 6.53% 17,830,230.00 1,248,115 4.57% 12,481,150

4Samama Investment Company

1,736,949.00 6.36% 17,369,490.00 1,215,863 4.45% 12,158,630

5Nasser Ali Ibrahim Al-Suqair

1,663,740.00 6.09% 16,637,400.00 1,164,617 4.26% 11,646,170

6 Firas Ali Ibra-him Al-Suqair 1,493,919.00 5.47% 14,939,190.00 1,045,742 3.83% 10,457,420

7Mansour Ali Ibrahim Al-Suqair

1,493,919.00 5.47% 14,939,190.00 1,045,743 3.83% 10,457,430

8Suqair Ali Ibrahim Al-Suqair

1,386,798.00 5.08% 13,867,980.00 970,759 3.56% 9,707,590

9 Rumaih Ali Ibrahim Al-Suqair

1,386,795.00 5.08% 13,867,950.00 970,757 3.56% 9,707,570

Total 18,454,726 18% 184,547,260 12,918,308 47% 129,183,082

Share Capital Two million nine hundred and ninety-nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780)

Total Number of Company Shares twenty seven million two hundred and ninety-nine hundred and seventy-eight shares (27,299,978)

Nominal Value Ten Saudi Riyals (SAR 10) per share

Offeringeight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Ordinary Shares Ordinary Shares with a fully paid nominal value of Ten Saudi Riyals (SAR 10) per share, representing thirty percent (30%) of the Company’s Share Capital.

Number of offered shares (8,189,994)Ordinary Shares fully paid.

Percentage of Offer Shares to the total number of Company Share

The Offer Shares represent thirty percent (30%) of the issued share capital of the Company

Offer Price SAR [•] per Offer Share

Total Value of Offer Shares SAR [•]

Use of Proceeds

The total proceeds from the Offering are estimated to be SAR [•] (net after deducting the Offering expenses of [•] Saudi Riyals (SAR [•]), will be distributed to the Selling Shareholders on pro rata basis according to the number of Offer Shares held by each Selling Shareholder. The Company will not take any amount of the Offering Proceeds. (For further information on the use of proceeds, see section 12 (“Use of Proceeds”).

Number of Offer Shares Underwritten (8,189,994) Shares

Total Amount Underwritten SAR [•]

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Targeted Investors

Tranche (A): Institutional investors consisting of a number of institutions and companies including investment funds (see section 1 (“Definitions and Abbreviations”) in this Prospectus.

Tranche (B): Individual Investors including Saudi Arabian natural persons, including Saudi women who are divorced or widowed and who have children by a non-Saudi husband who may subscribe for Offer Shares in the name(s) of any of those children who are minors for her benefit provided that any such woman provides evidence that she is the child’s mother and that she is widowed or divorced, , in addition to GCC natural investors. The subscription by a person in the name of his divorced wife shall be deemed void and in such cases, the relevant regulations shall be enforced against that person.

Number of Offer Shares available to each of the targeted investors

Number of Offer Shares available to Institutional Investors

8,189,994 Ordinary Shares, representing 100% of the Offer Shares. In the event that Individual Investors (as defined in Tranche (B) above) subscribe to the Offer Shares, the Institutional Bookrunner has the right, subject to CMA’s consent, to reduce the number of Offer Shares allocated to Institutional Investors to six million and five hundred and fifty one thousand and nine hundred and ninety five (6,551,995) Ordinary Shares, representing up to 80% of the total of the Offer Shares.

Number of Offer Shares available to Individual Investors

A maximum of 1,637,999 Ordinary Shares representing up to forty percent 20% of the Offer Shares shall be allocated to Individual Investors

Method of subscription for each category of targeted Investors

Subscription Method for Institutional Investors

Institutional Bookrunner will provide Subscription Application Forms to the subscribing Institutional Investors during the Bookbuilding process.

Subscription Method for Individual Investors

Subscription Application Forms will be available during the Offering Period at the branches of the Lead Manager and Selling Agents. Subscription Application Forms should be completed in accordance with the Instructions set out in section 15 (“Subscription Terms and Conditions”). Individual Investors who have recently participated in previous initial public offerings in Saudi Arabia are able to subscribe through the Internet, phone and automated teller machines (“ATMs”) or throw any of the branches of the Selling Agents that offer some or all of these subscription channels to their customers, provided that: (1) the subscriber must have a bank account at the Selling Agents which offer such services; and (2) there should have been no changes in the personal information of the Subscriber since he has participated in a recent subscription.

Minimum Number of Offer Shares to be applied for by each category of targeted Investors

Minimum Number of Offer Shares to be applied for by Institutional Investors

(100,000) of the Offer Shares

Minimum Number of Offer Shares to be applied for by Individual Investors

(10) Ordinary Shares

Minimum Subscription Amount by each category of targeted Investors

Minimum Subscription Amount for Institutional Investors

SAR. [•]

Minimum Subscription Amount for Individual Investors

SAR. [•]

Maximum Number of Offer Shares to be applied for by each category of targeted Investors

Maximum Number of Offer Shares to be applied for by Institutional Investors

(1,346,998) of the Offer Shares

Maximum Number of Offer Shares to be applied for by Individual Investors

(250,000) Shares

Maximum Subscription Amount by each category relevant to the number of shares offered for each targeted category of investors

Maximum Subscription Amount for Institutional Investors

SAR. [•]

Maximum Subscription Amount for Individual Investors

SAR. [•]

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Allocation of Offer Shares to each category of targeted Investors

Allocation of Offer Shares to Institutional Investors

The shares will be allocated to Institutional Investors by the Institutional Bookrunner after completion of the subscription by Individuals as deemed appropriate by the Financial Advisor in coordination with the Issuer using the discretionary allocation mechanism.The number of Offer Shares to be allocated to Institutional Investors is 8,189,994 Ordinary Shares, representing 100% of the Offer Shares. In the event that Individual subscribe to the Offer Shares, the Institutional Bookrunner has the right, subject to CMA’s consent, to reduce the number of Offer Shares allocated to Institutional Investors to six million and five hundred and fifty one thousand and nine hundred and ninety five (6,551,995) Ordinary Shares, representing up to 80% of the total of the Offer Shares, after completion of the subscription by the Individuals. eighty percent (80%) of the Tranche (A) Offer Shares are to be allocated to investment funds, which percentage shall be subject to adjustment, in the event that other institutions, excluding investment funds, do not fully subscribe to the remaining twenty percent (20%) of the Offer Shares allocated to them, or in the event that the mutual funds do not subscribe to the full portion allocated to them eighty percent (80%).

Allocation of Offer Shares to Individual Investors

Allocation is expected to take place by 23/02/1439H (corresponding to 12/11/2017G).The minimum allocation per Subscriber is (10) Offer Shares, while maximum number of Offer Shares that may be allocated for a Subscriber is (250,000) Shares. The balance of the Offer Shares (if any) will be allocated to subscribers as proposed by the Issuer and the Financial Advisor. In the event that the number of the Individual Subscribers exceeds [•], the Company will not guarantee the minimum allocation, and the Offer Shares will be allocated equally between Individual Subscribers. The allocation of Offer Shares to Individual Tranch will be determined in accordance with the recommendation of the Company and the Financial Advisor.

Refund of Excess Subscription Monies

Excess subscription monies, if any, will be refunded to the Subscribers without any charge or withholding by the Lead Manager or Selling Agents. Notification of the final allotment and refund of subscription monies, if any, will be made by 23/02/1439H (corresponding to 12/11/2017G) (see Section 15 entitled “Subscription Terms and Conditions - Allocation and Refund”.

Offering PeriodThe Offering will start on by 10/02/1439H (corresponding to 30/10/2017G) and will last for (7) calendar days, up to and including the last day of the offering closing on by 16/02/1439H (corresponding to 05/11/2017G).

Shares’ DividendsThe Offering Shares will be entitled to receive their portion of any dividends declared by the Company for the period from the date of this Prospectus and for the following financial years. (see section 7 “Dividends Policy” of this Prospectus)

Voting Rights

The Company has only one class of Shares. No Shareholder shall have any preferential voting rights. Each of the Shares entitles its holder to one vote. Each shareholder has the right to attend and vote at a General Shareholders Assembly. (See subsections “Summary of By-Laws” and “Description of Shares-Voting Rights” of Section 11 “Legal Information” in this Prospectus.

Lock-up Period/ Restrictions on Dealings with Shares

The persons whose names are included in the Prospectus as Company Shareholders as indicated on page (iv) of the Prospectus shall be restricted from disposing of their Shares for six (6) months starting from the date on which trading of the Offer Shares commences on Tadawul (“Lock-in Period”). After the expiry of this period, they may dispose of their Shares subject to the CMA’s prior consent.

Listing and Trading of Shares

Prior to the Offering, there has been no public market for the Shares in the Kingdom or elsewhere. An application has been made to the CMA for the admission and listing of the Shares on the Exchange (Tadawul), All relevant regulatory approvals pertaining to the Offering have been granted. Trading in the Offer Shares is expected to commence on the Exchange soon after the final allocation of the Offer Shares (see the (“Key Dates for Investors and Subscription Procedures”) section in this Prospectus).

Risk Factors

Certain risks are relating to an investment in the Offer Shares. These risks can be generally categorized into: (i) risks related to the operations of the Company and its affiliates; (ii) risks related to the market; and (iii) risks related to the Ordinary Shares. These risks should be considered carefully prior to making an investment decision in the Offer Shares (see section 2 (“Risk Factors”)).

Costs

Costs associated with the Offering are estimated at approximately (SAR [•]), including the fees of each of the Financial Advisors, the Lead Manager, the Underwriter, the Receiving Agents, the Legal Advisor, the Financial Due Diligence Advisor, and the Market Consultant, as well as marketing expenses, printing and distribution expenses and other related expenses connected to the Offer. The Selling Shareholders will be responsible for all such costs, which will be deducted from the proceeds.

Note: It is important to carefully consider the “Important Notice” (page ii) and section 2 (“Risk Factors”) of this Prospectus prior to making any investment decision regarding the Offer Shares.

xiv

Key Dates for Subscribers and Subscription ProceduresExpected Offering Timetable

Event Dates

Subscription periodSubscription Period starts on 10/02/1439H (corresponding to 30/10/2017G) and lasts for (7) days and ends at the end of 16/02/1439H (corresponding to 05/11/2017G).

Subscription period for Institutional Investors and Bookrunning

Subscription Period for Institutional Investors starts on 25/01/1439H (corresponding to 15/10/2017G) and lasts for (8) days and ends at the end of 02/02/1439H (corresponding to 22/10/2017G).

Last date for submission of the Subscription Application Forms by the Institutional Investors based on the shares allocated for every one of them.

On 11/02/1439H (corresponding to 31/10/2017G).

Last date for payment of the Subscription monies by the Institutional Investors based on the shares allocated for every one of them.

On 16/02/1439H (corresponding to 05/11/2017G).

Last date for submission of the Subscription Application Forms and payment of subscription monies for Individual Investors On 16/02/1439H (corresponding to 05/11/2017[G).

Expected announcement date for allocation of Offer Shares On 23/02/1439H (corresponding to12/11/2017[G).

Refund of Any Subscription Monies (in the event of oversub-scription) On 23/02/1439H (corresponding to 12/11/2017G).

Expected Date of Commencement of Trading on the Stock Exchange

Trading in the Offer Shares is expected to commence on the Saudi Stock Exchange after fulfilling all relevant legal requirements. Trading will be announced through the national newspapers and the Exchange’s website (www.tadawul.com.sa).

Note: The above timetable and dates therein are indicative. Actual dates will be announced through Saudi Arabic newspapers, on the Tadawul website (www.tadawul.com.sa) and on CMA’s website (www.cma.org.sa).

How to ApplySubscription to the Offer Shares is directed at and may only be accepted by:

Tranche (A): Institutional Investors: Subscription to the Offer Shares in this tranche is directed to, and may only be accepted by, institutions, including investment funds (see Section 1 (“Definitions and Abbreviations”) for more information). These Institutional Investors may apply in accordance with the conditions set for in this Prospectus. The Institutional Investors can obtain the Subscription Application Forms from the Institutional Bookrunner.

Tranche (B): Individual Investors: Subscription to the Offer Shares in this tranche is directed to, and may only be accepted by, Saudi nationals, including women who are divorced or widowed and have children by a non-Saudi husband who may subscribe for Offer Shares in the name(s) of any of those children who are minors for her benefit (provided that any such woman provides evidence that she is the child’s mother and that she is widowed or divorced) in addition to the natural GCC investors. The subscription by a person in the name of his divorced wife shall be deemed invalid and, in such cases, the relevant regulations shall be enforced against that person. The Individual Investors can obtain the Subscription Application Forms from the Lead Manager and branches of the Selling Agents. Subscription may also be made through the Internet, banking phone or ATMs at any of the Selling Agents, which offer such services to the subscribers provided that the following requirements are satisfied:

1- the subscriber must have a bank account at the Selling Agents which offer such services; and

2- there should have been no changes in the personal information of the Subscriber by way of exclusion or addition of any member of his family since he has participated in a recent subscription.

Subscription Application Forms must be completed in accordance with the instructions mentioned under section 15 “Subscription Terms and Conditions” of this Prospectus. Every subscriber must agree on all relevant items in the Subscription Application Form. The Company reserves the right to reject, in full or in part, any Application for New Shares that does not comply with any of the Subscription terms or requirements. In the event a subscriber subscribed twice, the second application shall become cancelled and void and the first one will be valid. No amendment or withdrawal can be made to the Subscription Application Form after submission to the Selling Agents. Once submitted, a Subscription Application Form shall represent a legally binding contract between the applicant and the Company (Please see section 15 “Subscription Terms and Conditions” of this Prospectus).

xv

Summary of Key InformationThis summary of key information is intended to provide a brief overview of the information contained in this Prospectus. As such, it does not contain all of the information that may be important to prospective investors. Accordingly, this summary must be read as an introduction to this Prospectus, and recipients of this Prospectus are advised to read the entire Prospectus in full and any decision to invest in the Offer Shares by prospective investors should be based on a consideration of this Prospectus as a whole. Expressions and abbreviations in this prospetus shall have the meaning assigned to them in Section 1 “Expressions and Abbreviations” and elsewhere in the Prospectus.

1- The Company

1-A Overview

Arabian Waterproofing Industries Company (Awazel) (“the Company” or “the Issuer”) is a Saudi joint stock company under Commercial Registration No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) and Ministerial Resolution No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G).

The Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000). The capital was formed from in-kind cash equivalents and cash shares of equal value and registered in Commercial Register No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) with a capital of twelve million Saudi Riyals (SAR 12,000,000). On 21/01/1402H (corresponding to 18/11/1981G) the Company increased its capital to fourteen million Saudi Riyals (SAR 14,000,000) by two million Saudi Riyal (SAR 2 million) in cash divided into fourteen thousand (14,000) cash shares each of cash value of SAR 1,000, paid by the partners based on their ownership ratios.

On 23/04/1413H (corresponding to 20/10/1992G), the Company increased its capital to thirty million Saudi Riyals (SAR 30,000,000) by capitalizing sixteen million (SAR 16,000,000) from retained earnings according to the last approved budget for the year 1991G. The capital was divided into thirty thousand (30,000) shares of equal value of (SAR 1,000) each. On 11/09/1425H (corresponding to 25/10/2004G), the partners decided to transform the Company into a Saudi closed joint stock company with a capital of sixty five million Saudi Riyals (SAR 65,000,000). The partners also decided in the same decision to increase the Company’s capital to sixty five million Saudi Riyals (SAR 65,000,000).

The Minister of Commerce and Investment issued the Ministerial Decision No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G) announcing the transformation of the Company into a closed joint stock company with a capital of sixty five million Saudi Riyals (SAR 65,000,000) divided into one million and three hundred thousand (1,300,000) shares at a nominal value of fifty Saudi Riyals (SAR 50) per share. The capital of the Company was increased by capitalization of thirty five million Saudi Riyals (SAR 35,000,000) from the retained earnings account. New investors were also entered as shareholders in the Company through a private placement of shares.

On 17/08/1428H (corresponding to 10/09/2006G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company’s Capital to eighty one million two hundred and fifty thousand Saudi Riyals (SAR 81,250,000). The increase was covered by capitalization of sixteen million and two hundred and fifty thousand Saudi Riyals (SAR 16,250,000) from the retained earnings account.

On 23/08/1428H (corresponding to 05/09/2007G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company’s Capital to one hundred and eight million three hundred and thirty three thousand two hundred and eighty Saudi Riyals (108,333,280) financed from the retained earnings by issuing one new share for each holder of three previous shares registered in the Company’s records at the end of the day of the meeting.

On 27/06/1429H (corresponding 01/07/2008H), the Extraordinary General Assembly of the Company decided to approve the increase of the Company’s Capital to one hundred and fifty one million six hundred and sixty six thousand five hundred and ninety Saudi Riyals (SAR 151,666,590) financed from the retained earnings by issuing four new share for each holder of ten previous shares registered in the Company’s records at the end of the day of the meeting.

On 04/08/1430H (corresponding to 26/07/2009G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company’s Capital to one hundred and eighty-one million nine hundred and ninety nine thousand eight hundred and ten Saudi Riyals (SAR 181,999,810) financed from the retained earnings by issuing one share for each holder of five previous shares registered in the Company’s records at the end of the day of the meeting.

On 16/12/1436H (corresponding to 29/9/2015G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company’s Capital to two hundred and seventy-two million nine hundred and ninety-nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) by granting one free share for each two shares held by the registered shareholders on the date of the Extraordinary General Assembly meeting. The proposed capital increase shall be covered by transferring (SAR 23,999,970) from the retained earnings and transfer an amount of (SR 67,000,000) from the statutory reserve item as at the date of the audited financial statements ended on 31 March 2016G. The fractures of shares are aggregated and sold to shareholders.

xvi

The Company’s current Share Capital stands at two hundred and seventy-two million nine hundred and ninety nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) divided into twenty seven million two hundred and ninety-nine hundred and seventy-eight shares (27,299,978) with a nominal value of ten Saudi Riyals (SAR 10) per share.

Company Ownership Structure before and after the OfferingTable (2): Company Ownership Structure

No Shareholders

Pre Offering Post Offering

No. of Shares

Percent-age

% of Indirect Owner-ship *

Value (SAR)

No. of Shares

Percent-age


Value (SAR)

1Boubyan Petrochemical Company

5,672,036 20.78% 0.00% 56,720,360 3,970,424 14.54% 0.00% 39,704,240


1,837,547 6.73% 0.36% 18,375,470 1,286,282 4.71% 0.25% 12,862,820


1,783,023 6.53% 0.00% 17,830,230 1,248,115 4.57% 0.00% 12,481,150


1,736,949 6.36% 0.00% 17,369,490 1,215,863 4.45% 0.00% 12,158,630

5 Nasser Ali Ibra-him Al-Suqair 1,663,740 6.09% 0.00% 16,637,400 1,164,617 4.27% 0.00% 11,646,170

6 Firas Ali Ibra-him Al-Suqair 1,493,919 5.47% 0.00% 14,939,190 1,045,742 3.83% 0.00% 10,457,420


1,493,919 5.47% 0.00% 14,939,190 1,045,743 3.83% 0.00% 10,457,430

8 Suqair Ali Ibra-him Al-Suqair 1,386,798 5.08% 0.00% 13,867,980 970,759 3.56% 0.00% 9,707,590


1,386,795 5.08% 0.00% 13,867,950 970,757 3.56% 0.00% 9,707,570

10 Lolwa Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

11 Noura Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

12 Munira Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

13 Fatima Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

14 Huda Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

15 Sarah Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

16

Waleed Su-laiman Abdul Mohsen Aba-Nami

506,292 1.85% 0.00% 5,062,920 354,404 1.30% 0.00% 3,544,040

17Al Mutlaq Group Com-pany

436,295 1.60% 0.00% 4,362,950 305,407 1.12% 0.00% 3,054,070

18Yazid Sulaiman Abdulhamsin Aba-Nami

397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230

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No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares

Percent-age


Value (SAR)

19

Mohammed Sulaiman Abdulhamsen Aba-Nami

397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230

20Moudi Saleh Abdullah Al Mesfer

312,071 1.14% 0.00% 3,120,710 218,450 0.80% 0.00% 2,184,500

21

Turki Nasser Mohammed Al Mutawa Al Otaibi

260,316 0.95% 0.00% 2,603,160 182,221 0.67% 0.00% 1,822,210

22 Sulaiman Al Qweiz 218,145 0.80% 0.00% 2,181,450 152,702 0.56% 0.00% 1,527,020

23 Abdullah bin Saad Al Rashed 218,145 0.80% 0.00% 2,181,450 152,702 0.56% 0.00% 1,527,020

24

Essam Moham-med Khairi Qabbani Hold-ing Company

209,999 0.77% 0.00% 2,099,990 146,999 0.54% 0.00% 1,469,990

25Reham Sulaiman Aba-Nami

198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

26Reem Sulaiman Aba-Nami

198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

27 Amal Sulaiman Aba-Nami 198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

28Sultana Sulaiman Aba-Nami

198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

29 Mai Sulaiman Aba-Nami 198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

30Hana Abdul-rahman Al Suqair

150,000 0.55% 0.00% 1,500,000 105,000 0.38% 0.00% 1,050,000


109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

32Hisham Ab-dulrahman Al Zamil

109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

33 Saad Abdelmo-hsen Swailem 65,444 0.24% 0.00% 654,440 45,811 0.17% 0.00% 458,110

34 Hatoun Ibra-him Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000

35 Hadeel Ibrahim Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000

36 Ali Ibrahim Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000

37Ibrahim Abdulmohsen Al - Swailem

43,629 0.16% 0.00% 436,290 30,540 0.11% 0.00% 305,400

38Salwa Abdul - Mohsen Al - Swailem

21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710

xviii

No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares

Percent-age


Value (SAR)

39Muna Abdul - Mohsen Al - Swailem

21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710

40Iptihaj Abdul Mohsen Al - Swailem

21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

41Amal Abdul Mohsen Al - Swailem

21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

42Ibtisam Abdulmohsen Swailem

21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

43 public - - - 8,189,994 30.00% 81,899,943

Total 27,299,978 27,299,978 100% 272,999,780 27,299,978 100% Source: The Company

* Share fractions were rounded to the nearest integer

* The indirect ownership for Ibrahim Ali Al Suqair is related to his minors Hatoun Ibrahim Al Suqair who owns 50,000 shares and Ali Ibrahim Al Suqair who owns 50,000 shares.

** the main activities of the Company are Production of insulation and waterproofing materials from asphalt or petrochemical base in the form of rolls, sheets or adhesives of different types; all types of oxidized & reformed asphalt; all types of emulsions, paints, compounds & pastes where petroleum & additives are part of their fabrication; and all types of thermal & acoustic insulator. The activities of the subsidiaries in the Kingdom include the production and sale of all construction materials, including materials for cladding, stone and marble facades. The activity of the subsidiaries outside the Kingdom is the distribution and sale of the products of the insulation industries and the stone and marble industries outside the Kingdom.

1-B Major activities of the Company

Following are the main activities of the Company:





5- Production of all types of thermal & acoustic insulator;







xix

1-C Company Products

The Following Figure illustrates the Company products

Figure 1: Company Products.

Advanced Membrane Manufacturing Co

Membrane modi�ed with polypropylene

(plastic) (APP)

Oxidized membranes and others

Self-Adhesive Membranes

Company’s ProductsSubsidiariesProducts

Al-Takamul Stone Factory Co. for Stone

and Marble

Al - Sultan Contracting, Trading

& Industry Co

Non-bituminous Membranes (polymeric)

Special-form plastic �lms(Dimple Board)

Natural StoneNatural Stone

Membrabes

Bituminous Membranes

Bituminous Liquids

Primer

Damp Coat

Liquid Asphalt

Amended Road Asphalt

Non-Bituminous Liquids

Polypropylene

Liquids/FluidsOther Products

Membrane Modi�ed with stearine, butadiene

and stearine (SBS)

Protection Boards


Source: The Company

2- The Company’s Vision, Mission and Strategies

2-A Vision

Constant pursuit to achieve leadership in the waterproofing industry in the Middle East.

2-B Mission

� Endeavour to develop products to meet customer expectations and find innovative solutions to waterproofing problems.

� Maintain a distinguished relationship with customers, society and the environment.

� Achieve profitable financial returns for the shareholders of the Company.

2-C Strategies

Arabian Waterproofing Industries Co. seeks to be the main manufacturer of all forms of insulation waterproofing products in in the Kingdom and other GCC states by working on the following areas;

Bituminous water insulation activity � Continue to lead in this sector and maintain market share.

� Support strategic customer and facilitate their needs.

xx

� Increase interest in products relating to road activity.

Building chemicals � Deepening the industrial system to introduce local manufacturing in the field of building chemicals and work to

partner with international companies in this field.

� Introducing a department in the Company to market these materials and provide support to their customers.

Thermal insulation � The Company intends to enter the field of manufacturing thermal insulation by implementing the projectors

mentioned in the future projects section. The Company intends also to search for companies and acquisitions in this field.

Stone and marble finishes/cladding � Carrying out expansions and developing planned production.

Deepening the spread of sales through: � Entering into partnerships or acquisitions with other producers

� Work to spread outside the Gulf States.

� Implementing the governance regulations and maximizing the use of professional development of employees and their loyalty to the Company.

3- Competitive advantages, Prospects and Strengths � Using the latest manufacturing and production equipment at strategic locations owned by the Company.

� The financial strength and distinguished performance of the Company and subsidiaries.

� Ability to maintain and develop administrative, technical and financial competencies.

� strong Experiences and competencies of the senior management team in the field of manufacturing and trading of insulation materials and their deep understanding of the market data.

� Robust relationships with a diverse number of clients that have been built over a long period of time.

� The strength of negotiation power in the provision of raw materials due to the volume of monthly orders and excellent relationship with suppliers.

� Attention to the annual planning of the Sales, Production and Warehouses Departments. Plan is followed weekly and monthly and compared with the budget and market requirements and is modified using the latest planning program (SAP), which the Company started to use at the beginning of 2015G.

� Benefiting from the accumulated experience of the Company thanks to the good management of stores and control raw materials costs.

� Provide free transportation and delivery to all customers throughout the Kingdom.

� Provide after sales services such as consultancy services in the installation process.

� The Company conducts (training courses and seminars) to introduce new products.

� The Company remains one of the largest producers of waterproofing materials in the region.

2- Market and Industry Information

The Arabian Waterproofing Industries Company has appointed Frost & Sullivan to conduct a study on the waterproofing and thermal insulation market on a global level in general and in the Middle East in particular. All information was obtained from the market report prepared by them.

Frost & Sullivan is a market research consulting firm focuses on the preparation of feasibility studies and market reports in various sectors.

Unless otherwise stated, information on the insulation market was obtained from a report prepared by Frost and Sullivan. Frost and Sullivan gave, and has not withdrawn, their written consent to the use of the report in the format and context set forth in this Prospectus. Neither Frost & Sullivan, nor its employees, or any of their relatives or subsidiaries, has no interest whatsoever in the Company.

xxi

Overview of the Kingdom’s EconomyThe Kingdom’s GDP grew at a CAGR of 4.2% for the period from 2010 to 2015G. The table below shows the economic indicators of the Saudi economy for the period from 2010 to 2015G.

Key Financial Indicators in the Kingdom of Saudi Arabia 2010-2015G

201520142013201220112010Key Indicators

31.630.829.929.228.427.5Population Estimates (million)

(200.5)276.6507.9617.9594.5250.3Current Account (SAR billion)

2.22.73.52.93.73.8Inflation (%)

2422.52826.92,791.302,752.302,510.701,975.50Nominal GDP (SAR billion)

615.91,044.301,156.401,247.401,117.80741.6Actual public revenues (SAR billion)

978.141,109.90976873.3826.7653.9Actual Public Expenditures (SAR billion)

5.71.62.153.055.48.5Ratio of public debt to GDP (%)Source: SAMA

Waterproofing:Water insulation systems and materials can be classified as shown in the following figure:

Waterproofing systems and materials

Polymer membranes Bituminous membranes

• Polyvinyl chloride (PVC) membranes

• Ethylene propylene diner monomer (EPDM) membranes

• Thermoplastic polyolefin (TPO) membranes

• Membrane modified with polypropylene (plastic) (APP)

• Membrane Modified with stearine, butadiene and stearine (SBS)

• Oxidized membranes and others

Other systems Liquid membranes

• Crystalline

• Cement

• Mixing systems and others

• Polyurethane systems

• Bituminous emulsions

• Acrylic systems, and others

Source: Frost and Sullivan

Thermal Insulation:Thermal insulation systems and materials can be classified as shown in the following figure

Thermal insulation systems and materials

Other systems Polyurethane (PU) Systems

• Different fibers based on cellulose wood

• Composite systems

• Perlite/ Cellular Glass

• Polyurethane foam

• Polyurethane Iso Cyanurate foam

• Polyurethane spraying systems

Extruded Polystyrene (XPS) Mineral wool

Expanded polystyrene (EPS)• Rock wool (stone wool)

• Glass wool


Factors affecting the water and thermal insulation industry from an economic perspective:

� The continued growth in construction sector in the GCC Countries is contributed to:

� Growing population

� The major events in the region - Expo 2020 in Dubai-UAE and the 2022 World Cup in Qatar, continue to attract investment for the construction sector, especially in the hospitality and retail sectors.

� The increased allocations by GCC governments in their budgets for infrastructure developments, leading to increased construction activities in the airports and high-speed trains, and roads

� Increased awareness of water insulation systems and modern products among consultants.

� The technical regulation of the Saudi Organization for Standardization, Metrology and Quality No. 2856 imposes on

xxii

all private buildings the installation of insulation in accordance with the values of the heat transfer factor specified effective 2014 as the first phase. As part of the second phase, from 2017 onwards, these values will become more stringent, as government buildings must adhere to the values of the heat transfer factor for the second phase.

Summary Financial InformationThe selected financial information presented below should be read together with the audited financial statements for the financial years ended 31 December 2014G, 2015G, 2016G in accordance with SOCPA standards, in each case, the notes thereto, all of which are included elsewhere in the Prospectus.

Table (3): The most significant financial indicators (SAR’000)

Year ending 31 MarchSAR’000

2017G2016G2015G2014G

Indicators relating to the Income Statement

341,026413,279416,810 374,334 Sales

(214,970)(265,569)(288,542)(275,038)Costs of Sales

126,055147,710128,268 99,296 Gross profit

(27,000)(26,611)(22,108)(19,469)Selling and marketing expenses

(21,574)(23,615)(19,632)(17,718)General and administrative expenses

77,48097,483 86,527 62,108 Operating income

4,8715,511 (10,939)2,817 Other income (expenses), net

82,352102,994 75,588 64,925 Income before zakat and minority interests

(9,376)(9,371)(7,410)(7,200)Zakat

72,97593,623 68,178 57,725 Income before minority interest

217 (733)(1,234)(69,435)Minority Interests

73,19292,889 66,943 57,656 Net income

Indicators relating to the Statement of Financial Position

363,212 342,313 337,258 311,703 Total current assets

119,357 123,321 115,609 92,880 Total non - current assets

482,570 465,635 452,868 404,583 Total assets

48,496 61,404 65,823 56,624 Total current liabilities

11,158 8,815 6,808 1,017 Total non-current liabilities

59,655 70,220 72,631 57,642 Total liabilities

422,914 395,414 380,236 346,637 Total equity

482,570 465,635 452,868 404,583 Total equity and liabilities

Indicators relating to Cash Flow Statement

58,577 107,040 80,803 41,476 Net cash flows from operating activities

(5,721)(18,148)(32,907)32,903 Net cash flows from investing activities

(45,179)(78,343)(28,947)(37,506)Net cash flows from financing activities

137,040 129,664 119,189 101,254 Cash and cash equivalents at the end of the year

xxiii

2017G2016G2015G2014GKey Performace Indicators

37.0%35.7%30.8%26.5%Gross profit margin

21.5%22.5%16.1%15.4%Net profit margin

7.49 5.57 5.12 5.50 Current assets / current liabilities

12.4%15.1%16.0%14.2%Total Liabilities / Total Assets

14.1%17.8%19.1%16.6%Total Liabilities / Total Equity

17.3%23.5%17.6%16.6%Return on equity

15.2%19.9%14.8%14.3%Return on assets

-21.2%-0.9%10.2%-Revenue growth rate

-26.9%27.9%13.9%-Net income growth rateSource: Financial statements prepared for the special purpose and the consolidated and audited financial statements of the Company

Table of Contents1. Definitions and Abbreviations 1

2. Risk Factors 4

2-1 Risks Related to Company’s Business, Subsidiaries and Operations 4

2-2 Risks related to the Market and Sector 12

2-3 Risks Associated with IPO Shares 31

3. Market and Industry Overview 14

3-1 Overview of the GCC economy 14

3-2 Drivers of demand for insulation materials 15

3-3 Waterproofing 15

3-4 Thermal Insulation 19

3-5 Analysis of competition 22

4. Company Overview and Business 42

4-1 Introduction 24

4-2 Company’s Share Capital’s Main Developments 24

4-3 Legal Structure of the Company and Its Subsidiaries 26

4-4 Subsidiaries 26

4-5 The Company’s assets inside and outside the Kingdom 29

4-6 Changes in the Company’s ownership 29

4-7 Ownership Structure of the Company Shares Pre-Offering and Post-Offering 34

4-8 Shareholders holding 5% or more of the Company’s shares 36

4-9 Information about the companies owning shares in the Company 37

4-10 General nature of the Company’s business and description of the main products 39

4-11 Sales volume of the Company and its subsidiaries by type of product 47

4-12 Raw materials needed to manufacture the Company’s products 48

4-13 Raw materials needed to manufacture the subsidiaries’ products 48

4-14 The Factory needs of electricity and water 84

4-15 Companies and investments waived during the previous three fiscal years 49

4-16 Major Clients 49

4-17 Research and Development Activities 50

4-18 Quality Department 05

4-19 Future Plans 50

4-20 Competitive advantages and strengths 52

4-21 Safety and Security 53

4-22 Employees 53

5. Organization Structure 55

5-1 Organization Strucure 55

5-2 Board of Directors 55

5-3 Executive Management 62

5-4 Contracts and Remunerations of Board Members and Executive Managers 68

5-5 Corporate Governance 68

5-6 Undertakings of Board Members after the Offering and Listing 69

5-7 Conflict of Interests 69

5-8 Internal Committees and Their Responsibilities 70

6. Financial information and management discussion and analysis 72

6-1 Board of Directors’ Declaration of the financial information 72

6-2 Capital Increase 73

6-3 Key factors affecting the results of operations 74

6-4 Company Overview 74

6-5 Summary of Significant Accounting Policies 75

6-6 Income Statement 80

6-7 Statement of Financial Position 115

6-8 Statement of Cash Flows 140

6-9 Capitalization And Indebtedness 144

6-10 Related Party Transactions 145

6-11 Subsequent events 147

6-12 The Company’s Plan To Apply International Accounting Standards 147

7. Dividend Distribution Policy 151

8. Use of Proceeds 152

9. Expert Statements 153

10. Declarations 154

11. Legal Information 157

11-1 The Company 157

11-2 Shareholding Structure 158

11-3 Subsidiaries/Affiliates 160

11-4 Basic Licenses and Approvals 162

11-5 Summary of By-Laws 163

11-6 Summary of Meterial Contracts 172

11-7 Insurance 177

11-8 The Company’s real estate assets 179

11-9 Agreements with related parties 180

11-10 Trade Marks 181

11-11 Lawsuits, Claims and Statutory Procedures 181

11-12 Description of Shares 181

11-13 The participation of Directors in other companies that perform similar or competitive business for the Company 183

12. Underwriting 186

12-1 Name and address of Underwriter 186

12-2 Summary of Underwriting Agreement 186

13. IPO Expenses 187

14. Exemptions 188

15. Subscription Terms and Conditions 189

15-1 Subscription to Offer Shares 189

15-2 Allocation and Refunds 192

15-3 Times and Circumstances when Listing may be Suspended or Cancelled 192

15-4 Approvals and decisions under which shares are offered 194

15-5 Lock-up period 194

15-6 Subscribers Acknowledgments 194

15-7 Shares Register and Transaction Arrangements 194

15-8 Saudi Stock Exchange 194

15-9 Trading in the Company’s Shares 194

15-10 Miscellaneous 195

16. Documents Available for Inspection 196

17. Consolidated Financial Statements and Audor’s Report 197

Index of TablesTable (1): Board of Directors iv

Table (2): Company Ownership Structure xvi

Table (3): The most significant financial indicators (SAR’000) xxii

Table (4): Major Economic Indicators in the GCC States, 2014 14

Table (5): Key Financial Indicators in the Kingdom of Saudi Arabia 2010-2015G 14

Table (6): The contribution of the building and construction sector to the GDP at current prices, 2014G 14

Table (7): GCC Investments in Construction Projects, 2010-2014 (US $ Billion) 15

Table (8): Analysis of the Market Size of Waterproofing Materials in the Gulf Region by Country and Type of Product 17

Table (9): Analysis of Market Size of Water Insulation Materials in the Gulf Region by Type of Product and Final Use, 2014G 17

Table (10): Demand for Waterproofing Materials in the GCC Countries, 2010-2014 18

Table (11): Demand on Waterproofing Materials in the GCC Countries by Product, 2010 - 2014 18

Table (12): Trends in pricing water insulation materials in the GCC Countries, 2014 18

Table (13): Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Country and Type of Product, 2014G 20

Table (14): Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Type of Product and Final Use, 2014 20

Table (15): Demand for Thermal Insulation Materials in the Gulf Countries by Product, 2009 - 2014 21

Table (16): Demand for Heat Insulation Materials in the Gulf Countries by Product, 2010 -2014 21

Table (17): Trends in pricing thermal insulation materials in the GCC Countries, 2014 21

Table (18): Production capacity of Awazel compared to its competitors, 2014G 22

Table (19): Production/Absorbing Capacity of Membrane Producers, 2010-2014 22

Table (20): Market share of membrane producers in the Gulf, 2014 22

Table (21): Market share of Awazel Co. by country- for all types of waterproofing, 2014 23

Table (22): Most significant changes in the Company’s Capital and legal form 25

Table (23): Information about subsidiaries outside the Kingdom 27

Table (24): Information about subsidiaries inside the Kingdom 27

Table (25): Net profit of subsidiaries for the last four years (SAR in thousands) 28

Table (26): Net Value of Fixed Assets in the Arabian Waterproofing Co. Inc. inside and outside the Kingdom and the ratio of assets outside the Kingdom to the total fixed assets of the Company as at 31 March 2015, 2016 and 2017. 29

Table (27): Net Value of Current Assets in the Arabian Waterproofing Co. Inc. inside and outside the Kingdom and the ratio of assets outside the Kingdom to the total current assets of the Company as at 31 March 2015, 2016 and 2017 29

Table (28): Net Asset Value of the Arabian Waterproofing Co. Inc. in and outside the Kingdom and the ratio of assets outside the Kingdom to Total Assets of the Company as at 31 March 2015, 2016 and 2017 29

Table (29): Ownership structure of the Company when it was established as a limited liability company with a value of SAR 1,000 per share 29

Table (30): Ownership Structure of the Company dated 21/1/1402H (corresponding to 18/11/1981) with a value of SAR 1,000 per share 30

Table (31): Ownership structure of the Company under the second amendment to the Company’s Articles of Association with a value of SAR 1,000 per share 30

Table (32): Ownership Structure of the Company on 08/02/1412H (corresponding to 18/08/1991) under the third amendment to the Company’s Articles of Association with a value of SAR 1,000 per share 30

Table (33): Ownership structure of the Company on 08/02/1412H (corresponding to 18/8/1991) with a value of SAR 1,000 per share. 30

Table (34): Ownership structure of the Company on 23/4/1413H with a value of SAR 1,000 per share. 31

Table (35): Ownership Structure of the Company under the Decree of Distribution of estate No. 8/16 issued on 8/1/1420H with a nominal value of SAR 500 per share 31

Table (36): Ownership Structure of the Company on 11/09/1425H (corresponding to 25/10/2004) when converted into a Closed Joint Stock Company with a nominal value of SAR 50 per share 31

Table (37): Company’s current ownership structure with nominal value per share of SAR 10 32

Table (38): Ownership Structure of the Company Shares Pre-Offering and Post-Offering 34

Table (39): Details of Shareholders with direct ownership of 5% or more of the Company’s shares 36

Table (40): A list of the owners of 5% or more in Boubyan Petrochemical Company 37

Table (41): Ownership structure of Samama Investment Company 37

Table (42): Ownership Structure of Al-Mutlaq Group Company 38

Table (43): Ownership Structure of Essam Qabbani Holding Company 38

Table (44): Description of production lines/units of the Company’s factories 41

Table (45): Description of production lines/units of subsidiaries’ factories 42

Table (46): Summary of the most important developments witnessed by the Riyadh Factory-1 42

Table (47): Production capacity and absorbing capacity of Riyadh factory-1 and production quantities for the period from 2014 to 2017G 43

Table (48): Summary of the most important developments witnessed by the Riyadh Factory-2 43

Table (49): Production capacity and absorbing capacity of Riyadh factory-2 and production quantities for the period from 2014 to 2017G 44

Table (50): Summary of the most important developments witnessed by Jeddah Factory 44

Table (51): Production capacity and absorbing capacity of Jeddah Factory and production quantities for the period from 2014 to 2017G 44

Table (52): The production capacity and capacity of Al-Sultan Factory-1 and production quantities for the period from 2014 to 2017G 45

Table (53): The production capacity and capacity of Al-Sultan Factory-2 and production quantities for the period from 2014 to 2017G 45

Table (54): Sales volume of Awazel Company (Insulation Materials) by type of product for the financial years ended 31 March 2014, 2015, 2016 and 2017. 47

Table (55): Sales volume of the subsidiaries (stones) in the Kingdom by Type of product for the financial years Ended 31 March 2014, 2015, 2016 and 2017. 47

Table (56): The Company’s sales to the top ten customers in the years 2014, 2015, 2016 and 2017 (thousand Saudi Riyals) 49

Table (57): Company Projects 51

Table (58): The Company’s competitors in the GCC region, as at 31 March 2017 52

Table (59): Company’s Major Export Markets 53

Table (60): Number of Employees in the Company for the Years 2014, 2015, 2016 and 2017G 53

Table (61): Staff details per department 54

Table (62): *Details of Employees in Subsidiaries Outside the Kingdom as at 31 March 2017 54

Table (63): Board Members. 57

Table (64): Executive Management of the Company 62

Table (65): Remunerations, Salaries and Benefits Received by the Board and Senior Management Personnel during the Fiscal Years Ended 31 March 2014G, 2015G, 2016G, 2017G. 68

Table (66): Summary of the Company Contracts with Senior Management Personnel 68

Table (67): Audit Committee Members 70

Table (68): Nominations and Remunerations Committee Members 71

Table (69): Investment and Business Development Committee Members 71

Table (70): Substantial changes in the capital of subsidiaries 73

Table (71): Affiliates /Subsidiaries 74

Table (72): Effect of Accounting Adjustment 76

Table (73): Effect of the Accounting adjustment 76

Table (74): Consolidated statement of income for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G 80

Table (75): Key profitability ratios 86

Table (76): Consolidated net sales by company for the years ended on 31 March 2014G, 2015G, 2016G and 2017G: 88

Table (77): Net Sales of Awazel * by Product for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 91

Table (78): The Company’s Consolidated Sale Costs by Item for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 92

Table (79): Consolidated gross profit for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G. 96

Table (80): Ratio of the gross profit of each subsidiary to the total profit of the Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 97

Table (81): Consolidated expenses for the Company’s sale and marketing during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 99

Table (82): Consolidated Sale and Marketing Expenses by Company during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 101

Table (83): The Company’s General and administrative expenses for the fiscal years ended on March 2014G, 2015G, 2016G and 2017G. 103

Table (84): Company’s Salaries, wages and benefits during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 104

Table (85): Other Consolidated Expenses and Other Income of the Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 107

Table (86): (Expenses) / Other Consolidated Income by Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 109

Table (87): The Company Consolidated Zakat Expenses for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 110

Table (88): Share of minority interests in net income before the Company’s consolidated minority interests for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 111

Table (89): Company’s net income for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 112

Table (90): Statement of financial position as at 31 March 2014G, 2015G, 2016G and 2017G 115

Table (91): Main balance sheet ratios as at 31 March 2014G, 2015G, 2016G and 2017G 117

Table (92): Current Assets at 31 March 2014G, 2015G, 2016G and 2017G 117

Table (93): Cash and cash equivalents as at 31 March 2014G, 2015G, 2016G and 2017G 118

Table (94): Consolidated financial statements of the Company’s cash with the banks by company as at 31 March 2014G, 2015G, 2016G and 2017G. 119

Table (95): Receivables, prepayments and other consolidated assets of the Company as at 31 March 2014G, 2015G, 2016G and 2017G. 119

Table (96): Net receivables of the Company on 31 March 2014G, 2015G, 2016G and 2017G 120

Table (97): Net receivables by company on 31 March 2014G, 2015G, 2016G and 2017G 121

Table (98): Provision for Doubtful Debts as at 31 March 2014G, 2015G, 2016G and 2017G 121

Table (99): The aging of the Company’s commercial debtors as at 31 March 2017G. 122

Table (100): Accounts receivable to related parties as at 31 March 2014G, 2015G, 2016G and 2017G 122

Table (101): Prepaid expenses and other assets as at 31 March 2014G, 2015G, 2016G and 2017G 122

Table (102): Consolidated Company’s stock as at 31 March 2014G, 2015G, 2016G and 2017G 124

Table (103): Inventories by Company as at 31 March 2014G, 2015G, 2016G and 2017G 125

Table (104): Non-current assets of the Company as at 31 March 2014G, 2015G, 2016G and 2017G 126

Table (105): Non-current assets by company as at 31 March 2014G, 2015G, 2016G and 2017G 126

Table (106): Investment properties at 31 March 2014G, 2015G, 2016G and 2017G 127

Table (107): Available for sale investments for the Company as at 31 March 2014G, 2015G, 2016G and 2017G 128

Table (108): Property, plant and equipment as at 31 March 2014G, 2015G, 2016G and 2017G 128

Table (109): Company Expansion Plan after the date of this Prospectus 130

Table (110): Current Liabilities as at 31 March 2014G, 2015G, 2016G and 2017G 131

Table (111): Payables as at 31 March 2014G, 2015G, 2016G and 2017G 131

Table (112): Accrued expenses and other current liabilities of the Company as at 31 March 2014G, 2015G, 2016G and 2017G. 132

Table (113): Zakat payable by the Company as at 31 March 2014G, 2015G, 2016G and 2017G. 133

Table (114): The Company’s Non-current liabilities as at 31 March 2014G, 2015G, 2016G and 2017G 133

Table (115): Employees’ end of service benefits as at 31 March 2014G, 2015G, 2016G and 2017G 134

Table (116): Employees’ end of service benefits and bonuses by the Company as at 31 March 2014G, 2015G, 2016G and 2017G. 135

Table (117): Equity as at 31 March 2014G, 2015G, 2016G and 2017G 136

Table (118): Changes in shareholders’ equity as at 31 March 2014G, 2015G, 2016G and 2017G 136

Table (119): The Company’s historical profits during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 139

Table (120): Company Working Capital as at 31 March 2014G, 2015G, 2016G and 2017G 139

Table (121): Summary of the Statement of Cash Flows for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 140

Table (122): Cash flow from operating activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G 141

Table (123): Cash Flow used in Investment Activities for the Fiscal years Ended on 31 March 2014G, 2015G, 2016G and 2017G. 143

Table (124): Cash flow from financing activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 144

Table (125): Company Consolidated capitalization and debt for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. 144

Table (126): Company Related party transactions of the Company as at 31 March 2014G, 2015G, 2016G and 2017G. 145

Table (127): Due from related parties as at 31 March 2014G, 2015G, 2016G and 2017G. 145

Table (128): Due to related parties as at 31 March 2014G, 2015G, 2016G and 2017G 146

Table (129): Transactions with related parties as at 31 March 2014G, 2015G, 2016G and 2017G. 146

Table (130): Effect of the shift on the statement of income in the fiscal years ended on 31 March 2015G, 2016G and 2017G. 148

Table (131): Effect of the transformation on the statement of financial position in the fiscal years ended on 31 March 2015G, 2016G and 2017G. 149

Table (132): Profits Declared during the Years 2014G, 2015G, 2016G and 2017G in Saudi Riyals 151

Table (133): Company Ownership Structure before and after the Offering 158

Table (134): Subsidiaries/Affiliates 160

Table (135): Beneficially Owned Companies 161

Table (136): Basic Licenses and Approvals 162

Table (137): Summary of material contract terms 172

Table (138): Company’s lease Contracts 173

Table (139): Lease Contracts of Affiliate (Subsidiaries)* 174

Table (140): Terms of the Credit Facilities Agreement with the Saudi British Bank 176

Table (141): Terms of the Credit Facilities Agreement with Al Awwal Bank 176

Table (142): Summary of details of private loans and facilities 177

Table (143): Insurance Contracts 177

Table (144): Directly or indirectly owned assets by the Company 179

Table (145): Summary of related parties’ agreements as at 31 March 2017 (SAR) 180

Table (146): Summary of Directors’ Statements who hold other positions or have direct shareholding in companies conducting similar business or that may compete with the Company’s business 183

Index of FiguresFigure 1: Company Products. xix

Figure 2: The Company’s Structure 26

Figure 3: The Company’s Products 39

b- Al-Sultan Factory-2 45

Figure. 4: Organizational Structure of the Company 55

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1. Definitions and Abbreviations

Underwriting Agreement The underwriting agreement between the Company and the Underwriter

Management The Management of the Company

Listing Listing of the Offering Shares in the Exchange and, where applicable, submission of the registration and admission application.

Subscription Application Form The application form submitted by the subscriber to purchase the offered shares

Shares 27,299,978 Shares in the Company, fully paid, with a nominal value of SAR ([•])[•] per share.

Offered Shares 8,189,994 Shares in the Company

Board MembersThe members of the board of directors of the Company who have been appointed by the Extra-ordinary General Meeting, whose names appear in the Section entitled “the Organization Structure”, page (57) of this Prospectus.

Relatives The husband, wife and minor children

Saudi Aramco The Saudi Arabian Oil Company, a limited liability company, established by Royal Decree No. M/8, dated 04/04/1409H

Tadawul or the Exchange An automatic system to buy and sell Saudi shares

Official Gazette Um Al Qura, the official Gazette of the Government of Saudi Arabia

Shareholders Meeting Shareholders meeting of the Company’s shareholders

Ordinary General Meeting An Ordinary General Assembly of the Shareholders

Extra-ordinary General Meeting An extra-Ordinary General Assembly of the Shareholders

Public Including Institutional Investors and Individual Investors who have the right to subscribe to the Offer Shares.

Selling Agents The Selling Agents whose names are listed in page (vii) of this Prospectus

Government The Government of Saudi Arabia

SAR or SR Saudi Arabian Riyal, the official currency of Saudi Arabia

QR Qatari Riyal, the official currency of the State of Qatar

KD Kuwaiti Dinar, the official currency of the State of Kuwait

AED AED, the official currency of United Arab Emirates

Offer Price SAR [••] per Offer Share

Market or Capital/Financial Market Saudi Financial Market

Person A natural or legal person

The Company Waterproofing Insulation Industries Company (Awazel) A Saudi Joint Stock Company in accordance with the Commercial Registration No 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G).

Affiliates

Meant to be:

1- Waterproofing (Awazel) International - Qatar

2- Waterproofing (Awazel) International Company

3- Waterproofing (Awazel) Kuwait for Building Materials Co

4- Advanced Membrane Manufacturing Company

5- Al-Sultan Contracting, Trade and Manufacturing Company

6- Takamul Stone for Marble Company

7- Waterproofing (Awazel) International Company, Indonesia (this company was wound up in April 2016)

Offering Subscription to 8,189,994 shares, representing to 30% of the Company’s Share Capital

The Plant The Plant belongs to and owned by the Company

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Related Party

Means in the Listing Rules and in the List of Expressions used in CMA’s laws and regulations the following:

1- affiliates of the issuer (Company). An affiliate means “a person who controls another person or is con-trolled by that other person, or who is under common control with that person by a third person. In any of the preceding, control could be direct or indirect“;

2- substantial shareholders of the issuer (the Company) who owns 5% or more in the Company’s shares;

3- directors and senior executives of the Issuer (the Company);

4- directors and senior executives of affiliates of the Issuer (the Company);

5- directors and senior executives of substantial shareholders of the Issuer (the Company);

6- the Legal Advisor and the Financial Advisor to the Issuer (the Company);

7- any relatives of persons described at (1), (2), (3), (4)or (5) above;

8- any company controlled by any person described at (1), (2), (3), (4), (5), (6) or (7) above.

Control

The ability to influence the actions or decisions of another person, directly or indirectly, alone or in com-bination with a relative or an affiliate, through any of the following:

(A) Possession of 30% or more of the voting rights in the Company;

(B) The right to appoint 30% or more of the members of the management team. The term “Control” is interpreted accordingly.

Offering PeriodThe period which will commence on 10/02/1439H (corresponding to 30/10/2017G) and will continue for a period of (7) days up to and including the last day of the Offering on 16/02/1439H (corresponding to 05/11/2017G).

Lock up or Restriction Period

The persons whose names are included in the Prospectus as Company Shareholders as indicated on page (iv) of the Prospectus shall be restricted from disposing of their Shares for six (6) months starting from the date on which trading of the Offer Shares commences on Tadawul (“Lock-in Period”). After the expiry of this period, they may dispose of their Shares subject to the CMA’s consent.

Listing Rules in the Main Market

The Listing Rules issued by CMA pursuant to Article 6 of Capital Market Law promulgated by Royal Decree No M/30, dated 2/6/1424H (corresponding to 31/7/2003G and amended by CMA’s Board resolution number 1-64-2016, dated 19/8/1437H (corresponding to 26 May 2016G)

The Rules Regulating Investments by Qualified Foreign Institutional Inves-tors in Listed Securities

The Rules Regulating Investments by Qualified Foreign Financial Investors in Listed Securities issued by the CMA’s Board pursuant to Resolution No. 1-42-2015 dated 15/07/1436H (corresponding to 04/05/2015G) pursuant to the Capital Market Law promulgated by Royal Decree No. (M/30) dated 28/06/1424H (corre-sponding to 31/07/2003G), as amended by Resolution No. 3-104-2016 dated 05/11/1437H (correspond-ing to 08/08/2016G) issued by the CMA’s Board

Approved Client

The approved Qualified Foreign Investor’s client in accordance with the rules governing the investment of foreign financial institutions in the shares listed by the Capital Market Authority’s board pursuant to Resolution No. 1-42-2015 dated 15/7/1436H (corresponding to 4/5/2015G) based on the Financial Market Law enacted by Royal Decree No. M/30, dated 2/6/1424 H as amended by the Capital Market Authority Board Resolution No. 3-104-2016, dated 05/11/1437H (corresponding to 8/8/2016G).

Corporate Governance Regulations

The Corporate Governance Regulations in KSA issued by Capital Market Authority under resolution No 1-212-2006 dated 12/10/1427H corresponding to 12/11/2006G and amended by CMA’s Board number 1-10-2010, dated 30/3/1431H (corresponding to 16/3/2010G).

Underwriter Riyadh Capital Company appointed by the Company as a sole Underwriter to the Offering

Applicant Institutional Investors and Individual Investors

Board or Board of Direc-tors Board of Directors of the Company

Auditor PricewaterhouseCoopers and Ernest and Young.

Lead Manager Riyadh Capital Company

Shareholders Shareholders at any time

Substantial Shareholder A person who owns 5% of more of the Company Shares

Selling Shareholders The current shareholders of the Company on the date of this Prospectus whose names are listed on page (32)

Legal Advisor Mohammed Aldhabaan & Partners in association with Eversheds Sutherland

Financial Advisor Riyadh Capital Company

Advisors The Company Advisors with regard to the Offering whose names appeared in page (vi) of the this Prospectus

Subscriber A person who subscribes to the Offer Shares

Individual Investors Saudi natural persons including any divorced Saudi woman or widow from a marriage to a non-Saudi who has minor children, who may subscribe in the names of such children to her own benefit.

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Beneficial Ownership A person shall be treated as a beneficial owner of shares if he has the ultimate beneficial ownership or control of the shares, whether through a chain of companies or otherwise.

KSA or the Kingdom Kingdom of Saudi Arabia

Institutional Investors

The Institutional Investors include the following institutions:

• publicly offered investment funds established in Saudi Arabia and investing in securities listed on the Exchange provided that the terms of the respective funds permit such investment, and provided that the terms and conditions of the CMA’s Investment Funds Regulations are complied with;

• persons authorized by the CMA to deal in securities as principal provided that the minimum capital adequacy requirements are complied with; and

• publicly listed companies (through their portfolios which are managed by authorized persons), publicly listed banks and insurance companies, in compliance with the regulations issued by CMA, and provided that their subscription does not result in any conflict of interest;

Prospectus This document prepared by the Company related to the Offering

By-Laws The by-laws of the Company, which are approved by the Company’s General Meeting

Capital Market Law Capital Market Law promulgated by Royal Decree No. M/30, dated 02/06/1424H (corresponding to 31/07/2003G) as amended.

Companies Regulations The Companies’ Regulations, issued under Royal Decree No. M/3, dated 28/7/1437H (corresponding to 10/11/2015G), enforced as of 25/07/1437H (corresponding to 02/05/2016G).

Subscription Application Form The subscription application form to be used by Subscribers to subscribe to the Offer Shares

CMA or the Authority The Capital Market Authority in Saudi Arabia

MOC Ministry of Commerce and Investment in Saudi Arabia, previously Ministry of Commerce and Industry

Qualified Foreign Financial Investor

A foreign investor registered with the Capital Market Authority in accordance with the rules governing the investment of qualified foreign financial institutions in the listed shares issued by the Capital Market Authority pursuant to Resolution No. 1-42-2015, dated 15/7/1436H (corresponding to 4/5/2015G) and revised under CMA’s resolution No. 3-104-2016 dated 5/11/1437H (corresponding to 8/8/2016G) to invest in listed shares.

Beneficial Ownership A person shall be treated as a beneficial owner of shares if he has the ultimate beneficial ownership or control of the shares, whether through a chain of companies or otherwise.

WaterproofingIt serves to protect the building from the impact of water that affects construction materials and reduces its life and has different systems and various materials including a bituminous or plastic or chemical basis may be in liquids or membranes.

Thermal insulation Is the use of materials with thermal properties that help to reduce the leakage of heat and move from outside the building during summer season and vice versa in winter.

Bituminous membranes

Are materials in the form of rolls manufactured with polyester fabric or similar materials and are coated from both sides with a special mixture of bitumen and other chemicals. Their surface is then treated as a non-permeable membrane and is often heated at the edges so that the membrane is welded together that covers the surface to be insulated.

Liquid membranesThey are liquid materials made from various chemicals used to paint the building at cold without the need for heating. They may be a homogeneous mixture of bitumen, chemical additives or non-bituminous ma-terials such as acrylic, polyurethane or epoxy.

Polymeric membranesThey are membranes of non-bituminous materials such as PVC or rubber (IBDM). They are reclaimed on the surface or wall and welded together with hot air or suitable adhesives. They are lighter and less thick than bituminous membranes.

Other systems They are materials designed to make concrete or building material non-permeable for water. They are chemical additives.

Polyurethane (PU) Systems It is one of the liquid membrane systems and is applied by paint or spraying and is widely used on metal surfaces in factories.

Metal WoolIt is one of the types of thermal insulation and is produced in the form of rolls or boards. The production is done by melting a certain type of rock and convert the molten into fine bristles and assembled like wool and is used extensively in the field of cooling and heating.

Extruded Polystyrene (XPS)

It is one of the most common thermal insulation types in residential and service buildings. The polysty-rene granules are melted in special machines, mixed with chemicals and injected with gases. They are produced in the form of thickness plates and can be controlled by their thickness and weight and thus in the insulation properties.

Polystyrene (EPS) Is one of the types of thermal insulation produced in the form of panels of fluffy blown adjacent walls with each other, but their granules are less compatible with each other compared to the extruded type

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2. Risk FactorsAnyone wishing to invest in the offered shares should carefully study all information contained in this Prospectus, including the risks set out below, in view of their investment conditions and objectives, prior to making a decision whether to invest or not in the offered shares. However, risks set out below may not include all risks that the Company may encounter, as additional factors, currently unknown to the Company, may exist and will affect its operations. The Company’s Board of Directors affirm that there is no significant risk that may adversely affect the Company’s business and financial performance, other than risks disclosed below, as of the date of this Prospectus. The Board of Directors affirm that, to the best of their knowledge and belief, there are no other risks, other than those mentioned in this section, which may affect the investors’ decision as of the date of this Prospectus.

The Company’s business, future prospects, results of operations and cash flows could be adversely affected if any of the risks included in this section, and currently considered by the Boards of Directors to be material, occurs.

In the event of occurrence of any other risk, currently considered by the Board of Directors, to be material, or occurrence of any other risks that the Board of Directors have not identified or currently considered to be immaterial, the share price may decrease and potential investors may lose all or part of their investment.

The risks and uncertainties described below are presented in an order that does not reflect their importance. Additional unknown risks and uncertainties including those deemed immaterial now, may have the effects set forth above. The subscription is suitable for investors who are able to assess risks, or investors who use authorized persons to assess these risks.

2-1 Risks Related to Company’s Business, Subsidiaries and Operations

2-1-1 Reliance on Key StaffThe Company currently relies on the capabilities and expertise of its executive managers and key management personnel. The success of the Company also depends on attracting highly qualified and experienced employees to meet the risk of losing key employees and minimize the impact of leaving any of them the work with the Company. In the future, the Company may not be able to attract these employees or retain key employees, which will affect the Company’s business, expectations, financial condition and results of operations.

2-1-2 Transactions with Related PartiesThe Company deals with several transactions and deals whether to sell its products or to buy finished products from related parties. The approval is obtained from the Ordinary General Assembly to enter into such transactions and deals with related parties and the General Assembly has not denied any transactions with the related parties in recent years. Total transactions with related parties amounted to SAR 5,351,425 representing 1.6% of total sales as at 31 March 2017. However, in case the General Assembly does not approve any deals or transactions with related parties, he Company’s operations, projections, financial condition and results of operations will be affected. For further information, see Table 116 related party transactions as at March 31, 2014, 2015, 2016 and 2017 of this Prospectus.

2-1-3 Low Government Spending and its ImpactGovernment infrastructure projects, such as public roads, schools, etc., form a major part of the Company’s operations through contracting with contractors appointed by the relevant government agencies to complete these projects. The procedures currently followed by government agencies to restructure expenses and re-prioritize the projects, which led to the reduction and postponement of some of projects and cancellation of others, will directly affect the Company’s business and that will adversely affect the Company’s operations and consequently its financial condition.

2-1-4 Risks related to Increase of Power ChargesIn its operations and production, the Company relies on electrical power transformers in its plants which are directly connected to Saudi Electricity Company network. (For further information, see Section 4-13, Plant’s Requirements of Electricity and Water). Therefore, the Company’s power consumption is calculated based on the tariff specified by the Saudi Electricity Company which recently increased the consumption tariff by just over thirty five percent (35.7%) last year. Therefore, the increase of power prices and the current trend of the government, the concerned bodies and Saudi Electricity Company to restructure the tariff of power use and consumption and the increase of tariff, will have a direct impact on the high cost of production, which will have a significant impact on the Company’s operations and method of pricing the products and that will lead to increase of the prices of the products. Consequently it will affect the Company’s ability to compete in the local and regional markets and will also reduce its profit margins which will adversely affect the Company’s financial condition.

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2-1-5 Risks related to Availability of Raw Materials and Price FluctuationThe Company acquires a portion of its raw materials from Saudi Aramco, representing 14.1% of total raw materials used for production as in the fiscal year ended 31 March 2017. The Company also obtains other raw materials from several international and local vendors. The Company has not entered into any long-term contracts with all these vendors. The prices of the main raw materials used by the Company are subject to domestic and international supply and demand. If the material prices increase or the Company becomes unable to offset such increase by increasing the prices of its products, the Company’s production and prices of products will be affected by fluctuations of prices of raw materials and the Company’s ability to obtain them, which will have adverse effect on the Company’s results of operations and financial condition.

2-1-6 Change of Laws and Regulations Governing the Export of the Company’s products

Until the end of the year ended March 31, 2017, approximately 28.6% of the Company’s products were exported abroad outside the Kingdom of Saudi Arabia to the States of Qatar, Kuwait and United Arab Emirates. Any change in the laws of these countries or any other country to which the Company exports or any change in the local bylaws and regulations of the Kingdom of Saudi Arabia regarding the export of the Company’s products will affect the ability of the Company to serve its customers in these countries, which will have adverse effects on the Company’s results of operations and financial condition.

2-1-7 Risks related to Increase of the Customs Duties The Company obtains raw materials (asphalt 60/70 and B-300) supplied by Saudi Aramco based on the price subsidized by the Kingdom, and the Company pays customs duties for exports of goods to outside the Kingdom. Customs duties are calculated by the Customs Authority based on the pre-estimated tariff, which are periodically adjusted in line with international oil prices. The Customs Authority may adopt a change and modify the customs tariff on exports, resulting in higher prices of the Company’s products, which will affect the Company’s competitiveness, results of operations and financial condition.

2-1-8 Risk related to non-compliance with Quality Control SystemThe quality of the products depends on the effectiveness of the Company’s internal quality control system, which in turn depends on a number of factors, including the Company’s self-training programs on quality control and assurance the staff’s adherence to the quality control policies and standards. The failure of the Company to maintain the standards and quality of products provided, will adversely affect the quality of its products, reputation in the market and among its customers who may be reluctant to deal with it. This will weaken the Company’s ability to retain competitive advantages in the insulating materials production sector, and consequently which will have adverse effects on the Company’s results of operations and financial condition.

2-1-9 Risks related to change of regulations organizing Industrial Zones within which the Company’s factories are located

The factories of the Company are located in the second industrial zone of Riyadh and the industrial city of Jeddah. The factories of its subsidiaries for production of stone and membrane are located in the Manakh Industrial zone in Riyadh and on Al-Kharj road respectively. The Company obtained the necessary regulatory permits for the establishment of factories and until the date of this prospectus, it has not received any notification to change its location. However, any change in the regulations of the industrial zones, especially near the populated areas as in the city of Jeddah, may lead in future to force all factories to move to other industrial zones. This will lead to closure of the plant and thus interruption of the Company’s business, until it is relocated to the new site. Also, it will affect the Company by having costs of significant capital expenditures in case construction of new plant. This will have negative impact on the Company’s results of operations and financial condition.

2-1-10 Risks related to Reliance on Key CustomersThe Company relies on a group of major domestic and international customers to market its products on the market. The Company sells 24.7% of its products to the ten most active customers. In 2014, sales to the Company’s top ten customers accounted for 27.1%. In 2015, the ratio was 24.8%. In 2016, the top ten customers accounted for 25.3%. In the fiscal year ended 31 March 2017, the top 10 customers accounted for 25.6%. Any decline in demand on the Company’s products from the key customers of the Company and its subsidiaries will result in lower sales and profits of the Company and fluctuation and decrease of the Company’s net profit, which will adversely affect the Company’s results of operations and financial condition. (For further information, please refer to Section 4.15 Key Customers).

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2-1-11 Risk related to Implementation of Expansion Strategy by producing New Products

The Company’s future performance depends on the effective implementation of its business plans and growth strategies, which include manufacturing of new products and expansion of its product base by building, equipping and developing production lines and establishing or acquiring subsidiaries that support the Company’s business.

The Company’s ability to manage its future business expansion depends on its ability to continue implementing and improving its operational, financial and administrative information systems efficiently and in a timely manner, its ability to increase, train, motivate and manage its workforce, and its ability to obtain the regulatory approvals to increase its licensed production capacity.

There is no guarantee that the employees appointed by the Company, or the systems, procedures and controls adopted by the Company will be sufficient to support future growth and expansion. Also, there are no guarantee that the Company will be able to obtain regulatory approvals to increase the licensed production capacity. Any business expansion plans that the Company intends to implement in the future will be subject to estimated costs and schedule of implementation, and the Company may need financing to accomplish any expansion plans.

The inability of the Company to manage and/or implement its expansion plans according to the schedule will lead to increased costs through the reassignment of new efficient and knowledgeable staff, reappointment of new consultants and re-preparation of studies to reach alternative expansion plans and management mechanism, which will reduce the Company’s profitability. In addition, if the Company cannot implement the expansion plans, it will not achieve the desired economic benefits throughout the delay period, which will adversely affect the Company’s competitive condition, results of the operations and financial condition.

2-1-12 Risks related to Investment in SubsidiariesDuring the fiscal years 2014, 2015 and 2016, the Company invested in several subsidiaries by cash contributions, whether through legal ownership or beneficial ownership. The Company beneficially owns 95% of Awazel International Co. Qatar with a capital of two hundred thousand Qatari Riyals. The legal ownership is 50% for Qatar International Trading and Investment Company, and 50% for Firas Al Suqair;

99% of Awazel International Company with a capital of three hundred thousand Dirhams is 99% for Ibrahim Al-Suqair, 1% for Firas Al-Suqair; and 99% of Kuwait Awazel for Building Materials with a legal ownership 51% for Firas Al-Suqair and 49% for Ibrahim Al-Suqair. It also directly owns 90% of the Advanced Membrane Manufacturing Company with a capital of SAR 10 million and 80% of Al-Sultan Company for Contracting, Trading and Industry with a capital of SAR 1.2 million and Takamul Stone Factory for Stone and Marble Co. with a capital of SAR 2.0 million.

Investment in subsidiaries, especially through cash investments, is risky in the event of revenues shrinking and no profits realized from these subsidiaries, or in case of insolvency or bankruptcy. Also, investment in companies located in countries that are not politically stable or do not have healthy diplomatic relations with Saudi Arabia, will cause capital losses to the Company, due to difficulty in transferring assets and profits after cutting the relations, and thus will affect the Company’s financial condition.

2-1-13 Risks related to Operations and Unexpected Business InterruptionThe Company’s factories consist of several lines and machines for production of insulating materials. Any sudden defect, malfunction or interruption in the work of these lines or machines, will have a negative impact on the production of the Company during the period of defect, failure or interruption. The Company’s operations are currently concentrated in the two factories owned by the Company in Riyadh and one factory in Jeddah. The production of these three factories is approximately 95% of the total production capacity of the Company. Therefore, the work and results of the Company depends entirely on the operations of the factories and their continuity. Therefore, occurrence of anything that adversely affects the operations of the factories due technical reasons (such as interruption of electricity, power or water), or their exposure to any accident or emergency that affects, temporarily or permanently, the continuity of their work, or natural disasters such as floods, will have a material impact on the Company’s operational and financial results, which will adversely affect the Company’s results of operations and financial condition.

2-1-14 Risks related to the Company’s InventoryThe Company stores large quantities of raw materials for manufacturing of the Company’s products, finished products and spare parts, totaling SAR 60.4 million for the fiscal year ended 31 March 2017. They are purchased by the Company either in cash or through bank credits. The value of raw materials stocks amounted to SAR 27.8 million, while finished products amounted to SAR 25.8 million. Inventory value of spare parts amounted to SAR 6.8 million. The raw materials may be exposed to recurring risks such as fire or damage. However, in the event of any unexpected accidents, failure to take care of the stock, or occurrence of any damage or risks to the Company’s stock, will adversely and significantly affect the ability of the Company to continue production of its products at competitive prices, and thus reduce profitability and net profit margins, which will have negative impacts on the Company’s results of operations and financial condition.

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2-1-15 Risks related to Dependence on one SupplierThe Company purchases basic raw materials, namely asphalt derivatives and petroleum products from one supplier, Saudi Aramco, as the sole domestic supplier. The risks associated with relying on a single supplier, especially in basic raw materials, represents a danger in case that Saudi Aramco cuts supply of raw materials or raises the prices, which would raise the prices of the Company’s products, affect the demand on such products or lead to interruption and delay in production. This will adversely affect the Company’s obligations, and accordingly its results of operations and financial condition.

2-1-16 Risks related to the Length of Cash Transfer CycleThe Company has a repayment period of 60 to 180 days for domestic and international customers. In exceptional cases, some customers with good historical relations with the Company (in terms of volume of dealings and commitment to pay) may have a repayment period of one year depending on the policy adopted by the Company. The increase of the Company’s inventory and long-term repayment lead to the length of cash collection cycle which significantly affects the working capital. Some of the Company’s short-term financing needs are covered by letters of guarantee. However, if the Company is required to obtain funding to support working capital due to the length of cash collection cycle, this will have a major and significant impact on the Company’s ability to continue its business. Therefore, any disruption in cash collection cycle or provision of funds to provide the working capital will have a negative and significant impact on net profit margins, which will adversely affect the Company’s results of operations and financial condition.

2-1-17 Risks related to the Working Capital CycleThe working capital cycle is 199 days as in the fiscal year ending in 2014, 182 days as in the fiscal year ending in 2015, 193 days in the fiscal year ending in 2016 and 207 days in the fiscal year ending in 2017 based on the consolidated budget. Taking into consideration that the working capital cycle is high, there are high receivables compared to payables, and in general, increased funding is required to supply creditors and inventory. The Company has maintained cash and bank balances of SAR 101,254,974 (one hundred and one million two hundred and fifty four thousand nine hundred and seventy four) Saudi Riyals as at 31 March 2014 and SAR 119,100,000 (one hundred and nineteen million and one hundred thousand) Saudi Riyals as at 31 March 2015, and SAR 129,700,000 as at 31 March 2016 and SAR 137,040,864 (one hundred and thirty-seven million forty thousand eight hundred and sixty-four) Saudi Riyals as at 31 March 2017. However, a lack of cash in the Company’s assets or the impact of the length of the working capital cycle will have a negative impact on the availability of cash to meet the Company’s needs and expenses, which will have a negative impact on the Company’s results of operations and financial condition.

2-1-18 Risks related to Validity of Certificates and PermitsThe Company carries several certificates and permits from several regulatory bodies such as the commercial register from the Ministry of Commerce, investment and industrial license from the Ministry of Energy, Industry and Mineral Resources, environmental license from the Department of Meteorology and Environmental Protection, and the contributions certificate from the General Organization for Social Insurance. The Company’s works and some contracts with the government, such as the Commission of Industrial Cities, which are renewed periodically (monthly or annually), requires the existence, effectiveness and validity of such certificates. Some of these certificates and permits may cease or terminate during the period of applying for subscription. The suspension or non-renewal of the quarry license for the subsidiary company, Al-Takamul Stone Company for Stone and Marble, or the environmental permit or any civil defense permits for any reason including regulatory reasons will adversely affect the Company’s results of operations and financial condition.

In addition, the license of the quarry for the subsidiary company, Sultan Company for Contracting, Trading and Industry, has expired on 25/3/1437H, and this license is under renewal and has not been renewed until the date of this prospectus. The renewal is also subject to issuance of special regulations and instructions by the competent authorities. The non-renewal of this license will adversely affect the Company’s results of operations and financial condition.

2-1-19 Risks related to Changes in the Sector Environment and Consumption Environment

The Company’s activities are concentrated in the production of insulation materials and all types of water impurities, production of all kinds of emulsifiers, paints, compounds and pastes that petroleum and its derivatives enter in their manufacturing, manufacturing and trading of building materials including cladding materials, stone, marble, glass and insulating metal panels. Growth in industrial and agricultural production, increase in population and per capita expenditure are key factors in this industry, either negatively or positively. Any change in these factors will affect the Company’s operations, future prospects and overall financial condition. The development of styles and techniques of the insulation industry by competing manufacturers is also an important factor in the industry. Any negative change on these factors will also have negative impact on the Company’s results of operations and financial condition.

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2-1-20 Risks related to TransportationThe Company does not have a private transport fleet sufficient to transport its products to the customers. The Company relies on external transport providers to transport its products to its customers. Any disruption or material change in the availability of these transport services, whether due to a change in the transport regulations or regulatory requirements for the transport of the Company’s products, will affect the Company’s ability to supply its products to the customers, and consequently will have adverse impacts on the Company’s results of operations and financial condition.

The final pricing of the Company’s products includes shipping costs except that the Company pays the shipping costs directly to the carriers; however, if there is any disruption in the transport process after the sale of the products has led to an increase in the transport costs of the Company’s products by substitutes, the Company will not be able to modify the price of the products by adding the cost to the price of sold products, and therefore will lead to a lower profitability margin of the products, which will adversely affect the Company’s results of operations and financial condition.

2-1-21 Risk related to Fluctuation in the Selling Prices and Net ProfitThe future performance of the Company depends on its ability to maintain its market share and increase that share through expansion in production and marketing. The decline in demand for the Company’s products for any reason may adversely affect the results of the Company’s operations. The future performance of the Company depends on its ability to maintain its profitability by maintaining appropriate prices for its products and the ability to transfer any increase in production costs to its customers by raising the prices of products. This depends on supply and demand in the local and international markets, which may have negative impact on the Company’s results of operations and financial condition.

2-1-22 Risks related to Compliance with Saudization requirements and Labor costsThe commitment to Saudization requirements is a government directive that requires companies operating in the Kingdom to employ a certain percentage of Saudi nationals and their like in their workforce. According to the circular of the Ministry of Labor and Social Affairs issued on 01/05/1423H (corresponding to 10/08/2002), the Company must obtain a certificate in this regard from the Ministry of Labor and Social Affairs. Although the Company is currently committed to Saudization rates required in its sector, the Ministry of Labor and Social Affairs may decide to impose more severe Saudization policies in future. The Ministry of Labor and Social Affairs and the Ministry of Interior have recently begun to raise the cost of employing foreign workers and continuing the sponsorship of them and their families residing in the Kingdom, as well as their entry, exit and recruitment fees, which directly affect the Company’s financial condition.

Therefore, the Company does not guarantee that the Ministry of Labor and Social Affairs will continue in its current policies for issuance of visas and thus does not guarantee its ability to provide the necessary labor for production of insulation materials, which will adversely affect the results of operations and its financial condition.

2-1-23 Risks related to Judicial ProceedingsClaims and lawsuits filed by the Company or against it adversely affect its financial results and operations if the verdict outcome is in favor of the other party. The Company cannot predict the outcome of such claims or lawsuits, and may have negative impact on the Company’s results of operations and financial condition. There is a lawsuit filed by the Company with the Saudi Customs Authority, regarding a financial claim amounting to eighty nine million five hundred and six five thousand and eighty six Saudi Riyals (SAR 89,565,086) which constitute export duties on the products of the Company exported abroad. The Company requests to recover this value on the basis of incorrect estimate and fees imposed on the Company. The decision of the Appeal Customs Commission was issued at the end of July 2017, rejecting the appeal.

The Company also affirms that this claim has not been mentioned in the Company’s records, because in the event of winning this claim and refunding the said amount, it will be distributed to the current partners, each according to the percentage of his shareholding. (For further information, see Section 6) Financial Information, Management Discussion and Analysis, and Section 11, Legal Section)

2-1-24 Risks related to Incidents not covered by InsuranceThe Company cannot give assurance that the insurance coverage will be sufficient in all cases or will cover all the risks or cases of work disruptions that may be experienced by the Company. There may be future incidents in which the Company is not insured in a manner that covers potential losses or may not be insured against it at all. In addition, current insurance policies may include exceptions or limits of coverage, and current insurance policies and schemes may not be available in future (for further information, see Section 11.7). As a result, insurance coverage may not cover in future the volume of claims filed against the Company and therefore losses and liabilities arising from not adequately insured risks can significantly increase the costs of the Company, which will adversely affect its results of operations and financial condition.

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2-1-25 Risks related to Zakat AssessmentThe last Zakat assessment for the Company was for its fiscal year ended 31 March 2016 and DZIT certificate will stay valid until 31 July 2017. In any event, the Department of Zakat and Income Tax may request the Company to pay additional amounts for the Company’s disclosures, which will adversely affect its results of operations and financial condition.

2-1-26 Risks related to violation of Management Rules of Public Shareholding Companies

Since its inception the Company has been managed as a limited liability company and then as a closed joint stock company since its transformation in 2005. Therefore, the senior management of the Company has limited experience in managing public shareholding companies and how to comply with the bylaws and regulations of shareholding companies listed on the stock market, or does have experience in this respect. The Company shall comply with the disclosure regulations and rules imposed on Companies listed on the Saudi Stock Exchange. In the event of non-compliance with these rules and violation of transparency and disclosure requirements, the Company may be subject to fines and penalties, which will adversely affect the Company’s results of operations and financial condition.

2-1-27 Risks related to Internal Audit and Automation of Inventory SystemThe internal audit policy of the Company depends mainly on the Internal Audit Department, which consists of only one general manager, and depends also on the general supervisor of the Company’s assets, including the Company’s inventory. The Director General of Internal Audit delegates staff working in Finance Department to perform internal audit functions of the subsidiaries outside the Kingdom of Saudi Arabia and delegates the General Supervisor of Credit Facilities to audit the subsidiaries within the Kingdom of Saudi Arabia. Upon completion of the internal audit function, they submit reports to the Company’s Internal Audit Manager. Also, the internal auditor does not visit the subsidiaries continuously, but selectively, and thus he verifies and audits their works and accounts, and relies on the internal reports received from the delegated and appointed auditors. Although the Company has introduced automated inventory control applications and some other mechanisms for payment control and resource management through SAP system, all these systems are the responsibility of only one full-time employee. Depending on only one full-time internal auditor who alone audits the Company’s and subsidiaries’ accounts without the use of an independent external auditor would result in many errors with respect to accounts control, and delays in auditing and verifying the accounts and inventory in warehouses of the Company and subsidiaries. This will have a negative impact on the accuracy of the financial results of the Company and the validity of data received and input, and accordingly will have a negative impact on the Company’s results of operations and financial condition.

2-1-28 Risks related to the Company’s Information SystemThe Arabian Waterproofing Industries Company was using (PBCS) information system and replaced it by SAP system for all Company activities such as warehouses, production operations, sales, accounting and all other operations in the Kingdom of Saudi Arabia. The Company has started, effective June 2017 for a period of nine months, applying this system in the Advanced Membrane Manufacturing Company inside the Kingdom and in all subsidiaries outside the Kingdom. Sultan Company for Contracting, Trading and Industry and Al-Takamul Stone Company for Stone and Marble will continue to use the existing system of SMACC. However, the Advanced Membrane Manufacturing Company and subsidiaries outside Saudi Arabia will work on both SAP and PBCS systems simultaneously during transition to use only the SAP system, in order to ensure the quality of SAP system and that it works perfectly and correctly. However, the plan to complete full conversion by the end of the fiscal year ended 31 March 2018G. The conversion from PBCS to SAP may result in interruption of work in the Company’s stores and warehouses during the conversion period between the two systems not exceeding five working days. It will also delay the audit and review of financial entries and inventory records of stores and warehouses, which will have a negative impact on relations with customers and on the Company’s results of operations and financial condition.

2-1-29 Risks related to Assets, Plant and Equipment The Company follows a strict depreciation policy for the assets, production lines and equipment, where the annual depreciation rate for machinery and equipment is 12.5% and for fixed mechanical installations is 7.5%. As a result, these assets have been depreciated by 82%. The Company has several factories that contain many production lines and equipment that need periodical maintenance at a cost of SAR 3.5 million annually due to that number of factories, lines and equipment owned by the Company. The lack of periodical maintenance or high annual cost will adversely affect the production capacity of the factories during frequent and closer periods of maintenance, which will also affect the Company’s results of the operations and financial condition.

2-1-30 Risks related to Financing and Credit FacilitiesThe Company’s financing needs depend on its capital, profits, financial condition, operating results and cash flows. The Company, with the exception of letters of guarantee issued by banks to third parties, does not currently rely on financing from banks and financiers. Therefore, the Company cannot give any confirmation or guarantee that it will be able to obtain

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the necessary financing in a timely manner or on acceptable terms, if there is a need for that. This may adversely affect the implementation of the Company’s business. The Company may also need financing in the future, and therefore will have a negative impact on its results of operations and financial condition. (For further information, see Section 6) Financial Information and Discussion of Analysis of Management Report and Section 11 (Legal Section)

2-1-31 Risks related to Fluctuation of Interest Rates, Currency Exchange Rates and Financing Costs

Foreign currency risk exists when the Company has trade relationship with an international entities that require it to deal with them in their currency when purchasing machinery, equipment and materials from them or when selling its products in foreign markets. Since the Company’s transactions are made in Saudi Riyal, any fluctuation in currency rate will adversely affect its results of operations and financial condition. The increase in net income was offset by occasional and non-recurrent losses resulting from conversion of foreign currencies amounting to SAR 13.3 million during the year ended 31 March 2015, due to transfer of a balance of EUR 11.0 million to Saudi Riyals during the year ended 31 March 2015, as incidental and exceptional losses. The decrease in the Kuwaiti Dinar against the Saudi Riyal during the fiscal year ended March 31, 2016 led to a decrease in the value of sales of Kuwait Awazel Company for Building Materials amounting to nearly half million Saudi Riyals. Although these losses are incidental, they may be repeated due to currency fluctuation, which will adversely affect the Company’s results of operations and financial condition.

Although the Company did not receive large credit facilities, it may need funds from banks in exchange for an interest rate or Murabaha as the case may be. This will raise the operating cost on the Company and adversely affect its financial condition.

2-1-32 Risks related to the Environmental ResponsibilityThe Company’s operations include some risks that may expose it to legal liability under the environmental regulation. The requirements of the General Authority of Meteorology and Environmental Protection require the Company to maintain the environmental safety of air and water and not to disturb the surrounding area. Any violation of these requirements will expose the Company to penalties and costs of removing such violations. These damages are not within the scope of insurance, and as such will have a negative impact on the Company’s results of operations and financial condition.

2-1-33 Risks related to CreditCredit risk is the risk of financial loss because the Company’s customers are unable to meet their obligations. The Company’s credit risks relate mainly to trade receivables. The ratio of debts exceeded maturity period of one year as of 31 March 2017 was 14.9% of the total trade receivables of the Company and the ratio of bad debts was 0.2% of the total trade receivables of the Company during the last five years. The Company does not guarantee that it will be able to assess the current financial condition of its customers and determine their ability to meet their financial obligations accurately. A large number of the Company customers can face low financial performance and the Company may not be able to analyze the credit risks of these parties. Any decline in the overall credit quality of customers can adversely affect the Company’s results of operation and financial condition.

2-1-34 Risks related to Non-protection of the Intellectual PropertyThe name and trademarks registered in the name of the Company and subsidiaries support their business and help to differentiate them clearly in the market for both customers and vendors. The Company has registered its trademark “Awazel” as a trademark under two certificates of different technical design with the Ministry of Commerce and Investment on 28/11/1429H under No. 1027/85 and No. 1027/86. Both registrations are valid until 9/10/1438H (corresponding to 30/7/2017G). The Company has not registered these marks outside the Kingdom of Saudi Arabia, which may allow others to use the trademark and name of the Company in manufacturing competing products and compete with the Company in its market share, which will require the Company to defend its name, brand and right of precedence of registration for each case separately. The competitive condition of the Company and its subsidiaries depends on several factors, including the ability to continue to use the brand to provide services in the sector in which they operate, and to protect the rights associated with any illegal use. If the Company is unable to protect this trademark for any reason, the Company’s operating results and financial condition will be adversely affected.

2-1-35 Risks related to non-renewal of Technical Know-how AgreementsThe Company relies on technical knowledge and industrial information on recycling of industrial wastes and their use as raw materials not registered as intellectual property rights and not owned by the Company. These unregistered rights are used under a license agreement with one of the related companies referred to in Section 11.9 of this Prospectus. Non-renewal, cancelation or amendment of the Agreement will adversely affect the Company’s operating results and financial condition.

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2-1-36 Risks related to Regulations, Bylaws, Permits and LicensesThe Company and its operations in production of insulation materials are subject to supervision and control by several governmental bodies such as the Ministry of Commerce and Investment, the General Authority of Meteorology and Environmental Protection, the Municipalities concerned, the Saudi Industrial Property Authority (MODON) and the Ministry of Energy, Industry and Mineral Resources. They always seek to apply the regulations and bylaws and review them continuously. In case of modifications to current regulations or bylaws or issuance of new regulations or bylaws relating to the Company’s area of business, the Company, in order to comply with them, may have to make adjustments to its operations, methods of marketing and selling its products or to modify its products or production lines to be in line with the requirements imposed by these regulations. Accordingly, the Company will bear unexpected additional financial expenses or its operations will be materially affected. The license of one subsidiary (Al Sultan Plant) has already expired for exploitation of limestone quarry and the license is currently under renewal. Due to changes and modification made to related regulations and bylaws the Company may not be able to renew the license, which will have a negative impact on its result of operations and financial condition. In the event of non-renewal, the operating cost of Sultan Company for Contracting, Trading and Industry will increase by one million to two million Saudi Riyals per year, and the Company’ net profits may decrease by the same amount.

The regulations and instructions in force in the Kingdom require the Company to obtain several permits and licenses related to the practice of its business, to ensure that such permits and licenses remain valid and to comply with their terms. If the Company is unable to obtain or renew such licenses or increase the quantities of production of the licenses materials for any reason. This will expose it to violations, fines or penalties imposed by the regulatory authorities that will adversely affect its operations, thus limiting the growth of their revenues, suspending their work or license. This will affect the Company’s ability to conduct its business and thus adversely affect it financial results and profitability.

2-1-37 Risks related to Lease Contract The Company’s head office in Riyadh, the Company’s factories in Riyadh and Jeddah, its offices and exhibitions in Riyadh, Jeddah and Dammam, as well as the offices and exhibitions of subsidiaries are leased premises. Many lease contracts are under renewal during the subscription period. The non-renewal of any of these contracts will affect the ability of the Company or subsidiaries to continue business and increase the operating cost of the Company as a result of moving to new sites and consequent disruption of the Company’s business. In addition, all the factory leases are concluded with the Saudi Industrial Property Authority (MODON) under 25 years contracts at competitive rental values. Failure to renew these contracts under the same conditions will result in higher production costs and consequently lower profits due to higher rental costs.

In addition, Awazel International has a rental property in Dubai, and if any of the tenants fails to pay rental fees or has not renewed the lease contract, or if Awazel International Company is unable to rent the property continuously, its financial results and profits will be adversely affected.

2-1-38 Risks related to White Land PlotsThe approval of the White Land Fees Law dated 12/02/1437H (corresponding to 24/11/2015G) by the Council of Ministers, will lead to a change in land prices. This will adversely affect the prices of the real estate as well as the rental prices. Therefore, the real estate will be affected by this decision, which may negatively affect the rental prices to the Company and increase them, which will in turn negatively affect the Company’s business, forecasts, results of operations, financial condition and future prospects.

2-1-39 Geopolitical riskThe Company has beneficial ownership of 95% of Awazel International Qatar Co. with a capital of two hundred thousand Qatari Riyals (205,890 Saudi Riyals). Currently the legal ownership is 50% for Qatar International Trading and Investment Company (the local Qatari partner) and 50% for Firas Al Suqair on behalf of the Company until the completion of the internal procedures in Qatar for transfer of shares. This investment is in a company located in a country that does not currently have healthy diplomatic relations with Saudi Arabia. There is also a political and economic boycott between Saudi Arabia and Qatar, which does not guarantee the transfer of profits and/ or investment income in Qatar. The profits of Awazel International Qatar amounted to SAR 1,6 million representing 2.2% of the Company’s net profit for the fiscal year ended March 31, 2015 and SAR one million representing 1.07% of the Company’s net profit for the fiscal year ended 31 March 2016, and a loss of SAR 60,000 representing less than 1% of the Company’s net profit for the fiscal year ended 31 March 2017.

The political situation, currently or in the near future, does not guarantee the recovery of the value or the return of the capital investment of SAR 3.4 million as per the last budget. The assets of Awazel International Qatar, based on the latest audited financial statements, are estimated at SAR 26 million. The Company will suffer capital losses in terms of difficulty in recovering value or sale of assets, distribution and receipt of profits or make any partners resolutions or administrative decisions locally in Qatar after cutting relations. This will have negative impact on the Company’s market share in Qatar, and accordingly on its profitability and financial condition.

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The current conditions are beyond the Company’s control. Therefore, the Company currently has no plan to deal with the current circumstances. The Company closely monitors the matter, knowing that the loss of Awazel Qatar is SAR 60 thousand representing less than 1% of the net profit of the Company in the fiscal year Ended 31 March 2017.

2-1-40 Risks related to the Beneficial Ownership of SubsidiariesThe beneficial subsidiaries of the Company are:

� Awazel International Company (UAE). The legal ownership as shown in the records of Awazel International Company (UAE) is 99% of the shares registered in the name of Ibrahim Ali Al-Suqair and 1% of the shares registered in the name of Firas Ali Al-Suqair. However, as beneficial ownership, the Company owns 99% of Awazel International Company (UAE) and Firas Ali Al-Suqair owns 1% of the shares.

� Awazel International Co. Qatar. The legal ownership as per records of Awazel International Co. Qatar is that 50% of the shares of Awazel International Co. Qatar is registered in the name of Qatar International Company for Trading and Investment and 50% of the shares is registered in the name of Firas Ali Al-Suqair. However, as beneficial ownership, the Company owns 95% of the shares of Awazel International Co. Qatar, and Firas Ali Al-Suqair owns 5% of the shares.

� Awazel Kuwait for Building Materials Co.. The legal ownership as registered in the records of Awazel Kuwait for Building Materials, is 51% of the shares registered in the name of Firas Ali Al-Suqair and 49% of the shares registered in the name of Ibrahim Ali Al-Suqair. However, as beneficial ownership, the Company owns 99% of the shares of Awazel Kuwait for Building Materials, and 1% of the shares owned by Firas Ali Al-Suqair.

The Company’s beneficial ownership of these shares in these subsidiaries is evidenced by beneficial ownership agreements, for a total 99% of the shares of Awazel International (UAE) shares, 99% of the shares of Awazel Kuwait for Building Materials and 95% the shares of Awazel International-Qatar.

The Company owns as beneficial ownership 99% of the shares and 1% of the remaining shares are owned by Firas Al-Suqair. The legal ownership is 51% for Firas Al-Suqair and 49% for Ibrahim Al-Suqair. The beneficial ownership of these shares in these companies is under beneficial ownership agreements for a total of 99% of Awazel International Co. and Awazel Kuwait for Building Materials and 95% of Awazel International Co. Qatar.

All beneficial agreements are subject to the laws of the Kingdom of Saudi Arabia. However, it is not clear that the laws and regulations of the beneficial companies permit the transfer of ownership of these companies legally and lawfully in the name of the Company. Therefore, in the event of any judicial dispute over these beneficial ownerships, the Company’s right in the ownership of assets of the subsidiaries with beneficial ownership and the right to receive profits from these companies are not guaranteed. This will have a negative and significant impact on the Company’s business, future prospects, results of operations, financial conditions and profitability realized from these companies owned as beneficial ownership by the Company.

2-2 Risks related to the Market and Sector

2-2-1 Introduction of New Regulations and Bylaws that have Impacts on How the Company Exercises its Operations

The Company’s business is subject to the regulations in force in the Kingdom of Saudi Arabia. The regular environment in which the Company operates is subject to change, and the regulation changes resulting from political, economic, technical and environmental factors can affect the Company’s operations and limit the development of the Company or its business. If the new regulations and bylaws imposed new requirements that are difficult to comply with, and if the Company is forced to adjust its products or operations to comply with these regulations, it is likely that this will result in an increase in the cost of the products and will negatively affect the Company’s profits, cash flow, activities, expectations, results of operations, financial condition and share prices.

2-2-2 Risks related to the Market Share During the two fiscal years ended March 31, 2016 and March 31, 2017, world oil prices dropped significantly, leading to a decline in the prices of raw materials for the Company’s products, which led to increased competition of similar products in Kuwait and UAE through the export of neighboring countries to these countries at low prices, which negatively affected the Company’s sales in these countries. The future performance of the Company depends on acquiring market share, maintaining its market share and increasing that share through expansion in production and marketing. Low demand for the Company’s products for any reason could negatively impact the results of the Company’s operations. Also, the future performance of the Company depends on its ability to maintain its profitability by maintaining appropriate prices for its products and the ability to transfer any increase in production costs to its customers by raising the prices of products. This is beyond the control of the Company because the final price that the Company can get for its products depends on supply and demand in local market.

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2-2-3 Risks related to the CompetitivenessThere is no guarantee that the Company will be able to compete effectively against existing or new companies in the market. Changes in the competitive environment of the Company may result in decrease of prices for the Company’s products, profit margins and loss of part of the market share. The intensive competition may make the competitors increase spending on marketing and promotional activities or reduce the prices of their products.

The Company’s ability to compete with local, regional and international companies depends to a large extent on its acquisition of an integrated production cycle and provision of quality products to suit the requirements of its customers at reasonable prices.

2-3 Risks Associated with IPO Shares

2-3-1 Absence of Previous Market for the Company shares and Possible Fluctuation of Share Prices

There has never been a market for the Company’s shares and they have not been traded in the Saudi stock market “Tadawul”. The share price has been determined according to several factors including the history and expectations of the Company, the industry in which it competes, and evaluation of the Company’s administrative, operational and financial results. There is no confirmation that the subscription price will be equal to the market price of the stock after the IPO. The share price in the market may be subject to significant fluctuations depending on many factors including differences in actual or expected business results, changes or failure to achieve estimated or expected revenues, and the Company’s conditions compared to the industry, in addition to the formal procedures and general economic conditions.

Inability to Distribute Dividends. The distribution of profits depends on several factors, including the Company’s ability to make profits, its financial condition, statutory reserve requirements, available credit limits, general economic conditions and other factors subject to the recommendations of the Board of Directors for dividend declaration as it deems appropriate. The Company does not confirm the availability of those factors that will help it to distribute profits continuously, and therefore the Company does not guarantee to its shareholders that any future profits will be distributed.

2-3-2 Risks related to Effective and Actual Control by Existing ShareholdersSelling shareholders will continue to control all matters requiring the approval of the Company’s shareholders, including the selection of Board members and the Company’s significant activities. Upon completion of the Offering, the Selling Shareholders will own 70% of the Company’s shares as listed on page (xvi) of this Prospectus and will therefore be able to jointly influence all matters requiring the approval of the Company’s shareholders and they may do so in a manner that may affect the Group’s activity, financial condition and business results.

2-3-3 Risks related to Sale of Shares and Offering Shares for Future SubscriptionAlthough the selling shareholders will be subject to lock-up period for six months from the date on which trading in the Company’s Shares commences, during which they will be prohibited from disposing any of their shares. After such period and any proposed sale of shares by the Selling Shareholders requires prior approval of the CMA. However, sale of a large amount of the Company’s shares in the market or expectation of such sale may adversely affect the price of shares.

The Company does not intend to issue additional shares at the present time. However, the issuance of additional shares by the Company or the sale of a large number of shares after the lock-up period may have negative impact on the share price.

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3. Market and Industry OverviewArabian Waterproofing Industries Company (Awazel) has appointed Frost & Sullivan to conduct a study on the insulation market in the Kingdom of Saudi Arabia for the period (2009-2014G). All information was obtained from the market report prepared by Frost and Sullivan. Frost & Sullivan was founded in 1961 in New York City, USA.

Unless otherwise stated, information on the insulation market was obtained from a report prepared by Frost and Sullivan. Frost and Sullivan gave, and has not withdrawn, their written consent to the use of the report in the format and context set forth in this Prospectus. Neither Frost & Sullivan, nor its employees, or any of their relatives or subsidiaries, has no interest whatsoever in the Company.

3-1 Overview of the GCC economy

3-1-1 The main economic indicators in the GCC regionThe table below indicates the major economic indicators in the GCC during 2014G.

Table (4): Major Economic Indicators in the GCC States, 2014

BahrainKuwaitOmanQatarUAEKSAKey Indicators

33.9172.477.8210.1399.5746Nominal GDP (USD billion)

26,71043,16820,92793,99042,94324,252GDP per capita USD)

2.70%2.90%1.00%3.00%2.30%2.70%Inflation (%)

3.30%31.00%2.00%26.10%13.70%10.30%Current Account (% of GDP)

-5.30%-10.60%-2.40%-1.5%-5.1%-9.40% (%)GDP growth - Oil sector (%)

5.90%6.20%10.10%11.5%8.10%-8.60%GDP growth - Non-oil sector (%)

-8.90%7.00%4.80%4.40%14.20%1.10%Revenue Growth (%)Source: Frost & Sullivan

The Kingdom’s GDP grew at a CAGR of 4.2% for the period from 2010 to 2015G. The table below shows the economic indicators of the Saudi economy for the period from 2010 to 2015G.

Table (5): Key Financial Indicators in the Kingdom of Saudi Arabia 2010-2015G

201520142013201220112010Key Indicators

31.630.829.929.228.427.5Population Estimates (million)

(200.5)276.6507.9617.9594.5250.3Current Account (SAR billion)

2.22.73.52.93.73.8Inflation (%)

2422.52826.92,791.302,752.302,510.701,975.50Nominal GDP (SAR billion)

615.91,044.301,156.401,247.401,117.80741.6Actual public revenues (SAR billion)

978.141,109.90976873.3826.7653.9Actual Public Expenditures (SAR billion)

5.71.62.153.055.48.5Ratio of public debt to GDP (%)Source: SAMA

3-1-2 Construction and Building Sector in the GCC RegionThe great efforts exerted by GCC Countries to diversify their oil and gas-based economies to be more diversified and sustainable economies lead to more investment in the construction sector. The construction sector contribution to the GDP is the highest in the United Arab Emirates, followed by Qatar and Saudi Arabia at 9%, 5.5% and 5.47%, respectively.

Table (6): The contribution of the building and construction sector to the GDP at current prices, 2014G

BahrainKuwaitOmanQatarUAEKSA

5.10%2.10%3.90%5.50%9.00%5.50%Contribution of the construction sector to GDP at current prices (%)Source: Frost & Sullivan

During the period from 2010 to 2014, UAE investments amounted to $ 215 billion, followed by Saudi Arabia with about $ 204 billion.

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Table (7): GCC Investments in Construction Projects, 2010-2014 (US $ Billion)

2014G2013G2012G2011G2010GCountry

56.74536.73530.7KSA

52.74743.235.836.3UAE

19.815.113.819.523.4Qatar

6.36.34.54.24Amman

9.66.64.33.64.3Kuwait

2.32.12.12.93.2BahrainSource: Frost & Sullivan

3-2 Drivers of demand for insulation materials � The continued growth in construction sector in the GCC Countries is contributed to:

� Growing population

� The major events in the region - Expo 2020 in Dubai-UAE and the 2022 World Cup in Qatar, continue to attract investment for the construction sector, especially in the hospitality and retail sectors.

� The increased allocations by GCC governments in their budgets for infrastructure developments, leading to increased construction activities in the airports and high-speed trains, and roads

� Increased awareness of water insulation systems and modern products among consultants.

� The technical regulation of the Saudi Organization for Standardization, Metrology and Quality No. 2856 imposes on all private buildings the installation of insulation in accordance with the values of the heat transfer factor specified effective 2014 as the first phase. As part of the second phase, from 2017 onwards, these values will become more stringent, as government buildings must adhere to the values of the heat transfer factor for the second phase.

3-3 Waterproofing

3-3-1 Overview of waterproofingWaterproofing is a prerequisite for any building to protect it from negative environmental conditions. It is a set of materials and/or systems designed to prevent water entering the different sections of the building’s roof or structure. A wide range of waterproofing materials and solutions are currently available in the GCC market to meet the requirements of waterproofing in different construction sectors.

Reasons to use it:

Concrete substrates based on concrete are subject to movement, shrinkage and cracking. Therefore, penetration of water through voids, cracks and joints can be caused by hydrostatic pressure, which may lead to damage of the structure and deterioration of the elements of beauty therein.

Installation time:

During the construction, repair, restoration and/or renovation of a new building or structure.

Place of Installation:

� From outside the construction to protect the foundations: the same side of the structure of the building which is a potential source of water entry.

� From inside the construction to protect the foundations: the side opposite to the side where the water pressure exists.

� Interior: Bathrooms, kitchen, lift, etc.

� Outdoor places: terrace, roof, water tank, exterior wall, podium, basement, tunnel, swimming pool, and so on.

Considerations for selecting a waterproofing system:

� Type of structure/ construction

� Depth of foundation

� Groundwater rise

� Environmental conditions (temperature, pH, humidity, salinity, etc.)

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� The nature of the substrate

� Easy installation

� Historical efficiency of the system

� Construction cost

� Cost of maintenance

Waterproofing systems and materials

Polymer membranes Bituminous membranes

• Polyvinyl chloride (PVC) membranes

• Ethylene propylene diner monomer (EPDM) membranes

• Thermoplastic polyolefin (TPO) membranes

• Membrane modified with polypropylene (plastic) (APP)

• Membrane Modified with stearine, butadiene and stearine (SBS)

• Oxidized membranes and others

Other systems Liquid membranes

• Crystalline

• Cement

• Mixing systems and others

• Polyurethane systems

• Bituminous emulsions

• Acrylic systems, and others


3-3-2 Overview of Waterproofing Products

A- Bituminous membranes

Bituminous membranes are one of the most widely used waterproofing systems in the GCC Countries because of their outstanding performance and low prices compared with other available alternatives such as polymers with different types.

It is a reinforced layer of fiberglass or polyester, coated with either modified or oxidized bitumen. A protective layer is placed on the surface of the product on both sides to prevent adhesion of the coils to each other, as well as to obtain a surface that is resistant to UV rays and to reflect sunlight- if the protection layer is aluminum- and so on.

Products of insulation from bituminous membranes

� Modified with polypropylene (plastic) (APP)

� Modified with Styrene, butadiene and Styrene (SBS)

� Oxidized membranes and others

Method of installation:

They are often installed through proper heating by the heater. The waterproofing is installed in several ways, either installed completely or partially on the surface (by heater) or the product is self-adhesive or otherwise installed as required.

B- Liquid membranes

Liquid membranes are liquid systems with one component or multiple components, modified or unmodified. Usage of liquid membranes in the GCC Countries is limited, to a large extent, to wet areas such as toilets, kitchens and small balconies.


It is installed by using the brush, roller, or spray. Liquid membranes are sometimes reinforced with fiberglass membranes or woven (mesh) membranes during installation to obtain greater tensile strength.

Insulation Products made of Liquid Membranes

� Bituminous emulsions

� Polyurethane systems (the Company does not manufacture the product at present, but it is the exclusive agent of Maris Polymer, a limited liability company)

C- Polymer membranes

It is a single-layer membrane made of polymers such as polyvinyl chloride (PVC), thermoplastic polyolifens (TPO), and ethylene propylene diner monomer (EPDM), either reinforced by polyester or fiberglass or non-reinforced, and include properties such as high mechanical and thermal resistance, weather resistance, perforation, and hot-cold temperature resistance.

17


They are spread on the surface, connect and bond membranes with each other through hot air welding or by special adhesives.

Insulation products from polymeric membranes

� Specially shaped plastic films (Dimple Board) *

It is a plastic membrane with special specifications produced using high density polyethylene and used to protect various insulation systems. It is used for water discharge and as part of the green surfaces insulation system.* The Advanced Membrane Manufacturing Company manufactures this product

3-3-3 Analysis of the size of waterproofing materials market in the Gulf region by country and type of product, 2014

The market size of the waterproofing materials in the GCC Countries in 2014 is estimated at 230.9 million square meters. The table below shows the market size of waterproofing materials in the Gulf region by country and type of product in 2014.

Table (8): Analysis of the Market Size of Waterproofing Materials in the Gulf Region by Country and Type of Product

The rest of the GCC StatesKuwaitQatarUAEKSAProduct

22.125.534.564.184.7M2 million

80%75%58%69%78%Bituminous membranes

6%7%12%9%6%Polymer membranes

11%14%23%17%12%Liquid membranes

3%4%7%5%3%Other systemsSource: Frost & Sullivan

3-3-4 Analysis of the Market Size of Waterproofing Materials in the Gulf Region by Type of Product and End Use, 2014

The consumption of residential and commercial buildings and other buildings (education, health, etc.) collectively accounts for more than 75% of the GCC market consumption of waterproofing materials. Bituminous membranes are the most widely used waterproofing system in all end-use sectors, except for the industrial sector, which is dominated by the use of liquid membranes. The other construction sector (airports, metro stations, etc.) also consumes the largest proportion of polymeric membranes.

Table (9): Analysis of Market Size of Water Insulation Materials in the Gulf Region by Type of Product and Final Use, 2014G

End useProduct

Other constructionM2 millionOther buildingscommercialHousing

34.6Product57.746.269.3M2 million

49%36%77%83%87%Bituminous membranes

30%50%9%7%7%Liquid membranes

21%14%14%10%6%OtherSource: Frost & Sullivan

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3-3-5 Demand on Waterproofing Materials in the GCC Countries, 2010 -2014The Kingdom and the UAE are the largest construction markets in the Gulf, with 65% of the total demand in the GCC.

Table (10): Demand for Waterproofing Materials in the GCC Countries, 2010-2014

CAGR%2014G2013G2012G2011G2010GM2 million

19%25.521.41815.112.7Kuwait

13%34.530.5272421.4Qatar

10%64.158.253.148.544.5UAE

12%84.775.667.760.754.5KSA

17%22.118.315.513.311.6The rest of the GCC StatesSource: Frost & Sullivan

3-3-6 Demand on Waterproofing Materials in the GCC Countries by Product, 2010 -2014

Bituminous membranes are the most widely used waterproofing solutions in the GCC Countries because of the availability of major raw materials at competitive prices, general climatic conditions, traditional construction practices and others. Demand for polymer membranes increased by 20% during the period 2010-2014, as some international consultant offices prefer polymeric membranes more than bituminous membranes in various existing and planned construction and infrastructure projects. The Qatar-based subway project is one of the main drivers of demand for polymeric membranes. The project requires the use of nearly one million square meters of water proofing in its tunnels and underground stations.

Table (11): Demand on Waterproofing Materials in the GCC Countries by Product, 2010 - 2014


22%35.228.623.419.115.7Liquid membranes

22%1814.6129.98.1Polymer membranes

10%167.7152.3138.6126.3115.4Bituminous membranes

16%108.57.36.35.5Other systemsSource: Frost & Sullivan

3-3-7 Trends in pricing waterproofing materials in the GCC Countries, 2014Prices of bituminous membranes are the lowest among similar waterproofing materials, and the prices of waterproofing materials in the Kingdom are generally lower than in the rest of the GCC Countries.

Table (12): Trends in pricing water insulation materials in the GCC Countries, 2014

Liquid membranesPolymer membranesBituminous membranesM2 / US D

5-64-52-3KSA

6-76-73-4UAE

6-75-63-4Qatar

6-75-63-4Amman

5-65-63-4Kuwait

5-64-53-4BahrainSource: Frost & Sullivan

19

3-4 Thermal Insulation

3-4-1 Overview of Thermal InsulationThe main purpose of thermal insulation is to maintain a comfortable and healthy indoor environment regardless of external conditions, while protecting building elements and achieving energy efficiency. It is a material or a group of materials that reduce the flow of heat through the surfaces, which increases the operational efficiency of heating, ventilation or cooling. A wide range of insulation materials and solutions are currently available in the GCC countries to meet the requirements of thermal insulation which is divided into two systems namely hot thermal insulation system and cold thermal insulation system.

Place of Installation:

� Thermal insulation systems (hot): Installed mainly on the facades and roofs of residential and commercial buildings, and walls. They help in maintaining appropriate climatic conditions inside the buildings.

� Thermal insulation systems (cold): Used for industrial purposes such as cold/frozen store systems, including insulation of natural gas transmission pipes and heating, ventilation and air conditioning pipes.

Reasons to use it:

� Reduce loss or gain from heat

� Energy conservation

� Prevent or reduce condensation on the walls

� Increase the operational efficiency of heating, ventilation and cooling

� Protect the environment indirectly by reducing carbon dioxide emissions and nitrogen oxides

Installation time:

The installation time is mainly during construction of a new building, and also during renovation works.

Thermal insulation systems and materials

Other systems Polyurethane (PU) Systems

• Different fibers based on cellulose wood

• Composite systems

• Perlite/ Cellular Glass

• Polyurethane foam

• Polyurethane Iso Cyanurate foam

• Polyurethane spraying systems

Extruded Polystyrene (XPS) Mineral wool

Expanded polystyrene (EPS)• Rock wool (stone wool)

• Glass wool


3-4-2 Overview of Thermal Insulation Products

Type/shape of product Description

Solid (tile or slab)This insulation consists of glass wool, polystyrene (plumed/extruded) or polyurethane, which is of high quality, and comes in different thickness slabs. It can be used in walls of buildings and on concrete surfaces.

Flexible (Covers, rolls or mem-branes)

They are made of metal fibers, either from glass wool or treated rock wool, and come in rolls of covers with different width. They are is installed between special ducts for installation under floors, over ceilings, and between walls. They are one of the cheapest types of insulation, but care must be taken during installation.

Loose materials

This type of insulation is composed of soft fibers and balls that are inflated between spaces. They are available in types made of cellulose fibers, perlite, or a mixture of glass wool and rock wool. Cellulose can be from recycled materials. The installation of this type is high in price and limited in use.

SprayThis insulation consists of two parts, and includes a polymer and foam. It is sprayed into spaces to isolate them from the air. It is sprayed with liquid, but quickly expands to a solid plastic material. It is the most expensive and best types of insulation.

20

Based plastic product Basis of metal production Wooden product basis Other

Product Forms Polystyrene Polyurethane Glass Wool Rock Wool Cellulose Fibers Fibreboard Berlite / Cellular Glass

Solid / coherent √ √ √ √ X √ √

flexible x x √ √ X x √

Loose x x √ √ √ x √

spray x √ x X X x X

Currently, Awazel does not produce any thermal insulation products.

3-4-3 Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Country and Type of Product, 2014G

Extruded polystyrene (XPS) is the most widely used insulation material in the Kingdom, especially in surfaces and walls, followed by expanded polystyrene (EPS) and rock wool. Polyurethane systems have also begun to spread, especially following the implementation of SASO 2856. A similar trend was observed in Kuwait and Bahrain regarding the choice of insulation materials. Demand for new and innovative insulation systems, such as hybrid systems (systems that combine more than one insulation material into a single insulation system), with less energy consumption, witnesses slow increase in UAE, although demand is still relatively small.

Table (13): Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Country and Type of Product, 2014G

The rest of the GCC StatesKuwaitQatarUAEKSAProduct

0.440.510.691.281.69M3 million

60%62%57%62%62%Extruded polystyrene (XPS)

15%15%15%14%15%Polystyrene (EPS)

10%10%10%9%10%Rock Wool

10%8%13%11%8%Polyurethane systems (PU)

5%5%5%4%5%Other systemsSource: Frost & Sullivan

3-4-4 Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Country and Type of Product, 2014G

The combined consumption of residential and commercial buildings accounts for more than 77% of the Gulf market’s consumption of thermal insulation materials. Polystyrene is the most widely used thermal insulation system in the residential and commercial sectors, accounting for 80% and 62%, respectively. The volume of thermal insulation market in 2014 in the Gulf region as a whole reached 4.6 million cubic meters.

Table (14): Analysis of the Market Size of Thermal Insulation Materials in the Gulf Region by Type of Product and Final Use, 2014

End useProduct

IndustrialcommercialHousing

1.061.811.75M3 million

26%62%80%PU Systems

20%17%10%Rock Wool

28%8%1%EPS

20%6%6%XPS

5%7%3%Other SystemsSource: Frost & Sullivan

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3-4-5 Demand for Thermal Insulation Materials in the GCC Countries, 2010 -2014The table below shows the demand for thermal insulation materials in the GCC Countries during the period 2010-2014

Table (15): Demand for Thermal Insulation Materials in the Gulf Countries by Product, 2009 - 2014


13%0.690.610.540.480.43Qatar

10%1.281.161.060.970.89UAE

12%1.691.511.351.211.09KSA

18%0.950.790.670.570.49The rest of the GCC StatesSource Frost & Sullivan

3-4-6 Demand for Thermal Insulation Materials in the Gulf Countries by Product, 2009 - 2014

Extruded polystyrene (XPS) is one of the most widely used forms of insulation in the Gulf, where it is used in the residential and commercial sectors for its efficiency, ease of installation and relatively low cost. Polystyrene is often used on the surfaces, walls and for underground uses.

Table (16): Demand for Heat Insulation Materials in the Gulf Countries by Product, 2010 -2014


28%0.460.380.290.240.17PU Systems

6%0.450.410.40.360.35Rock Wool

13%0.670.590.530.470.41EPS

11%2.812.512.262.031.87XPS

25%0.220.190.140.130.09Other SystemsSource: Frost & Sullivan

3-4-7 Trends in pricing thermal insulation materials in the GCC Countries, 2014 The price of thermal insulation materials increases according to their density. Typically, insulation materials with density ranging from 40 to 50 kg/m3 are used, and the prices of the extruded polystyrene systems and polyurethane systems are often in the same range.

Table (17): Trends in pricing thermal insulation materials in the GCC Countries, 2014

Rck Wool** PU Systems* XPS*M2 / US D

40-7060-9060-90KSA

50-7065-9560-90UAE

50-7065-9560-90Qatar

40-7060-9060-90Amman

40-7060-9060-90Kuwait

40-7060-9060-90BahrainSource: Frost & Sullivan

* Density ranges between 20-50 kg / m3

** Density ranges between 20-150 kg / m3

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3-5 Analysis of competition

3-5-1 Production capacity of Awazel compared to its competitors, 2014The total production capacity of membranes in 2014 in the GCC countries was 261 million square meters (bituminous membranes: 249, polymeric membranes: 12). Awazel is the largest membrane producer in the Gulf, with 18% of the market’s production capacity.

Table (18): Production capacity of Awazel compared to its competitors, 2014G

% Of total energyCountryCompany

16%KSA - UAEHenkel Poly Company

11%KSAWaterproof Insulation Industries Co. (Dermabit)

8%QatarBitomod Qatar Company

6%UAEImpright Membrane Industries

18%KSAAwazel

33%-OtherSource: Frost & Sullivan

3-5-2 Production capacity of membrane producers, 2010 -2014GThe capacity of producers of bituminous membranes in the GCC Countries increased by 34 million square meters during the period 2010-2014 with a compound annual growth rate of 2.7%. Betomude-Qatar (20 million square meters), Q-Cell-Qatar (10 million square meters) and Polaris-Bahrain (4 million square meters) are the most prominent new producers in the Gulf market.

Table (19): Production/Absorbing Capacity of Membrane Producers, 2010-2014

2014G2013G2012G2011G2010GCountryM2 million

1515151515KSA - UAEDobrov Company

200000QatarBitomod Qatar Company

2121212121KSAWaterproof Insulation Industries Dermabit Co., Ltd

2828282828KSAPetomat Company

4242424242UAEHenkel Poly Pet Company

6060606060KSAAwazel

8787877373-OtherSource: Frost & Sullivan

3-5-3 Market share of membrane producers in the Gulf, 2014The table below shows the market share of membrane producers in the Gulf (bituminous and polymeric membranes) in 2014.

Table (20): Market share of membrane producers in the Gulf, 2014

market share (%)Country

18%KSA - UAEHenkel Poly Pet Company

12%KSAPetomat Company

9%KSAWaterproof Insulation Industries Dermabit Co., Ltd

9%QatarBitomod Qatar Company

6%UAEDobrov Company

20%KSAAwazel

26%-OtherSource: Frost & Sullivan

23

3-5-4 Market share of Awazel Co. by country - for all types of waterproofing, 2014GThe table below shows the market share of Awazel Company in waterproofing material sector by country..

Table (21): Market share of Awazel Co. by country- for all types of waterproofing, 2014

KuwaitQatarUAEKSA

25.534.564.184.7Market Size (M2 million)

5.11.93.627.5Sales os Awazel (M2 million)

20%6%6%32%The market share of Awazel (%)Source: Frost & Sullivan

24

4. Company Overview and Business

4-1 IntroductionArabian Waterproofing Industries Company (“Awazel”) (“the Company”) is a Saudi joint stock company headquartered in Riyadh (Al Kharj Road) under Commercial Registration No. 1010039827 dated 14/08/1401H (corresponding to 17/06/1981) and Ministerial Resolution No. 1247, dated 26/01/1426H (Corresponding to 07/03/2005G). The main activity of the Company is the manufacture and sale of insulation materials including waterproofing and thermal insulation. The Company produces two types of waterproofing systems, namely, bituminous membranes and liquid membranes. The Company has not yet begun producing thermal insulation. What has been provided in Section 4.4 (Subsidiaries), Section 4.5 (Real Estate) and Section 11-8 (Real Estate Assets) of this Prospectus, represent all of the assets, businesses, profits and cash flows owned by the Company inside and outside Saudi Arabia.

4-2 Company’s Share Capital’s Main Developments The Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000). The capital was formed from in-kind cash equivalents and cash shares of equal value and registered in Commercial Register No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) with a capital of twelve million Saudi Riyals (SAR 12,000,000). On 21/01/1402H (corresponding to 18/11/1981G) the Company increased its capital to fourteen million Saudi Riyals (SAR 14,000,000) by two million Saudi Riyal (SAR 2 million) in cash divided into fourteen thousand (14,000) cash shares each of cash value of SAR 1,000, paid by the partners based on their ownership ratios.








25


Table (22): Most significant changes in the Company’s Capital and legal form

Date Company’s Form

Capital prior to Change

(SAR)

Capital Post Change (SAR) Nature of Change Reason of Change

14/06/1401H (corresponding to 18/04/1981G)

Limited liability company

None 12,000,000 In-kind and cash shares

The Company was established as a limited liability company with a capital of SAR 12,000,000 divided into 12,000 shares, 9,600 in-kind shares and 1,000 cash shares each of SAR 1000.



12,000,000 14,000,000 Cash shares

the Company increased its capital by SAR 2,000,000 provided as cash shares paid by partners at SAR 1,000 per share.



14,000,000 30,000,000Capital increase was financed by retained earnings

Capital increase was financed by capitalizing (SAR 16,000,000) from retained earnings



30,000,000 65,000,000

The capital of the Company was increased by capitalization of (SAR 35,000,000) from the retained earnings account, While new investors were also entered as shareholders in the Company through a private placement of shares.

The Company was transformed into a Saudi closed joint stock company with a capital of (SAR 65,000,000).


Closed joint stock company

65,000,000 81,250,000

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of four previous shares registered in the Company’s records at the end of the day of the meeting

The increase was covered by capitalization of sixteen million and two hundred and fifty thousand Saudi Riyals (SAR 16,250,000) from the retained earnings account



81,250,000 108,333,280

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of three previous shares registered in the Company’s records at the end of the day of the meeting

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of three previous shares

27/06/1429H (corresponding 01/07/2008H)


108,333,280 151,666,590

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of two and half previous shares registered in the Company’s records at the end of the day of the meeting

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of two and half previous shares

26

Date Company’s Form

Capital prior to Change

(SAR)

Capital Post Change (SAR) Nature of Change Reason of Change



151,666,590 181,999,810

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of five previous shares registered in the Company’s records at the end of the day of the meeting

The Capital Increase was financed from the retained earnings by issuing one new share for each holder of five previous shares



181,999,810 272,999,780

One free share was granted for every two shares held by the registered shareholders on the date of the Extraordinary General Meeting.

The proposed capital increase shall be covered by transferring (SAR 23,999,970) from the retained earnings and transfer an amount of (SR 67,000,000) from the statutory reserve item as at the date of the audited financial statements ended on 31 March 2016G. The fractures of shares are aggregated and sold to shareholders.

4-3 Legal Structure of the Company and Its SubsidiariesThe following chart shows the legal structure of the Company and Its Subsidiaries

Figure 2: The Company’s Structure

Of Advanced Membrane Industry

Company

Kalkal National for Trading of Building

Materials Ltd. *Ali Saeed Al-MubrakAli Saeed Al-MubrakFiras Ali Al-SuqairFiras Ali Al-SuqairFiras Ali Al-Suqair

Of Takamul Stone and Marble Factory

Company

Of Awazel UAEOf Awazel Kuwait for

Building MaterialsOf Awazel

International Qatar

Of Al-Sultan Contracting, Trading

and Industry Company

90%80%80%

10%20%20%1% 1%5%

99%99%95%

Arabian Waterproo�ng Industries Co. (Awazel)

Direct Legal OwnershipBene�cial Ownership **

* Kalkal Company is owned by Ibrahim Ali Al-Suqair, Firas Ali Al-Suqair and Mansour Ali Al-Suqair

** For further information please refer to Section 4.4 (Subsidiaries) Table 23 (Profiles of Subsidiaries outside the Kingdom)

Source: The Company

4-4 SubsidiariesThe Company’s beneficial ownership is 95% of Awazel International Qatar, where the legal ownership is 50% for Qatar International for Trade and Investments, 50% for Firas Al-Suqair; 99% of Awazel International Company, where the legal ownership is 99% for Ibrahim Al-Suqair and 1% for Firas Al-Suqair; 99% of Awazel Kuwait for Building Materials, where the legal ownership is 50% for Firas Al-Suqair and 49% for Ibrahim Al-Suqair. It also directly owns 90% of the Advanced Membrane Industry Company and 80% of Al-Sultan Contracting, Trading and Industry Co. and Al-Takamul Stone and Marble Factory.

27

Table (23): Information about subsidiaries outside the Kingdom

Company Name

Place of incor-poration

Date of incor-poration

Legal entity

Ownership structureMain activity

Legal Beneficial

Awazel International Company

UAE 2002GLimited Liability Company

• 99% Ibrahim Al-Suqair

• 1% Firas Al-Suqair

• 99% Awazel Co.


Trading of build-ing materials and insulation mate-rials for surfaces and floors

Awazel International Company

Qatar 2008GLimited Liability Company

• 50% Qatar Inter-national Trading and Investment Company


• 95% Awazel Co.



Awazel Kuwait for Building Materials

Kuwait 2003GLimited Liability Company

• 49% Ibrahim Al-Suqair


• 99% Awazel Co.



Table (24): Information about subsidiaries inside the Kingdom

Company Name Place of incorpo-ration

Date of incorpo-ration

Legal entity Ownership structure Main activity

Advanced Mem-brane Manufac-turing

Company

Kingdom 2013GLimited Liability Company

• 90% Awazel Co.

• 10% Kalkal National Company for Building Materials Trading Co. Ltd

Production of plastic membranes

Al-Sultan Con-tracting, Trading and Industry Company


• 80% Awazel Co.

• 20% Ali Saeed Al-Mubarak

Cutting of stones in different sizes of stone quarries used for facade cladding

Al-Takamul Stone and Marble Factory


• 80% Awazel Co.

• 20% Ali Saeed Al-Mubarak

Extraction of stones from quarries and chisel them to pro-duce carved stone pieces.

4-4-1 Awazel International CompanyA limited liability company established on 13/5/2002G by and between Salem Al-Jabri and Firas Al-Suqair. The Company’s capital is 300 thousand Dirhams divided into 300 shares. Salem Al Jabri owns 51% of the shares and Firas Al-Suqair owns 49%. It was agreed to appoint Firas Al-Suqair as the Chairman of the Board of Directors. On 28/02/2013G, all the shares of Salem Al-Jabri were sold to Ibrahim Al-Suqair as a third party. Firas also sold 48% of the shares to Ibrahim Al-Suqair and retained 1% of the shares. At the same time, the capital was raised to three million Dirham (AED 3,000,000) by capitalizing the retained earnings. The legal ownership is 99% for Ibrahim Al-Suqair and 1% for Faris Al-Suqair. The Company is engaged in trading of building materials and surface and floor insulation materials.

Unlike the remaining subsidiaries outside the Kingdom of Saudi Arabia, Awazel International Company owns two plots of land in Ras Al-Khor Industrial Area in Dubai- UAE with total area of 5,641.42 square meters and book value of SAR 15,442,429. There are warehouses, offices and exhibitions built on that land and the book value of the constructions is SAR 25,000,000.

The Company owns 99% of the shares in Awazel International Company as per the agreement dated 3/1/2016, while the 1% of the remaining shares are owned by Firas Al-Suqair.

4-4-2 Awazel International QatarAwazel International Qatar was established on 16/03/2008 as a limited liability company with a capital of QR 200,000 and registered in Qatar under Commercial Registration No. 38673. It is mainly engaged in the trading of building materials and surface and floor insulation materials. The share capital of the Company is divided into 200 shares, the value per share is QR 1,000. Qatar International for Trade and Investment owns 50% and Firas Al-Suqair holds the remaining 50%. The Company owns a share of 95% of Awazel International Qatar, which is beneficially owned by the Company as per agreement between Firas Al-Suqair and Qatar International Trading and Investment Company in 2008G, whereby the entire beneficial ownership of Firas Ali Ibrahim Al-Suqair was waived. Also, the declaration was issued by Firas Ali Al-Suqair on 1/1/2009, under which it was confirmed that the Company owns 95% of the capital and assets of Awazel International Qatar. The remaining shares of 5% were registered in the name of Firas Al-Suqair.

28

The current conditions are beyond the Company’s control. Therefore, the Company currently has no plan to deal with the current circumstances. The Company closely monitors the matter, knowing that the loss of Awazel Qatar is SAR 60 thousand representing less than 1% of the net profit of the Company in the fiscal year Ended 31 March 2017.

4-4-3 Awazel Kuwait for Building MaterialsAwazel Kuwait for Building Materials Co. was established on 22/09/2003 as per agreement between Firas Al-Suqair and Ibrahim Al-Suqair with a capital of fifty thousand Kuwaiti Dinars (KWD 50,000) divided into one hundred (100) shares, each share five hundred Kuwaiti Dinars (KWD 500), where Firas owns 51% of the shares and Ibrahim owns 49%. The Company beneficially owns 99% in Awazel Kuwait Company for Building Materials under the agreement between Ibrahim and Firas Al-Suqair and the Company on 3/1/2016, while 1% of the remaining shares are owned by Firas Al-Suqair. The Company is engaged in the trade of building materials and surface and floor insulation materials. In 2016, the capital of the Company was increased to Two Hundred Thousand Kuwaiti Dinars (KWD 200,000) divided into four hundred (400) shares, each share five hundred (500) Kuwaiti Dinar, through retained earnings item.

4-4-4 Advanced Membrane Manufacturing CompanyAdvanced Membrane Manufacturing Co. is a limited liability company registered in the Kingdom of Saudi Arabia and operates under Commercial Registration No. 1010386193 and is engaged in the production of plastic membranes. The Advanced Membrane Manufacturing Co. was established on 6/4/1434H corresponding to 16/2/2013G. The production lines have been installed and practical tests have been performed successfully. The Company started its actual production in October 2016G.

The Company’s capital is ten million Saudi Riyals (SAR 10), divided into One (1) million shares of ten (10) Saudi Riyals each. The Company owns 90% of the shares. Kalkal National Building Materials Trading Co. Ltd. (owned by Firas Al Suqair, Ibrahim Al-Suqair and Mansour Al-Suqair) the remaining share of 10%.

4-4-5 Al-Sultan Contracting, Trading & Industry Co.Al-Sultan Company for Contracting, Trading and Industry is a limited liability company registered in the Kingdom of Saudi Arabia and operates under the Commercial Register No. 1010192171 dated 16/10/2003H. The Company’s capital is One Million Two Hundred Thousand Saudi Riyals (SR 1,200,000) divided into One hundred twenty thousand (120,000) cash share worth ten (10) Riyals per share, where Awazel Company owns 80% equivalent to 96,000 shares, and Ali Said Mubarak own 20% equivalent to 24,000 shares. The Company is engaged in stone cutting activities of various sizes of stone quarries used for facade cladding.

4-4-6 Al-Takamul Stone & Marble Factory Co.In the past, the Company was a subsidiary of Al-Sultan Contracting, Trading and Industry Company until it was converted into a limited liability company during the fiscal year ended 31 March 2015. It operates under the Commercial Register No. 1010272852 dated 28/8/1430H (corresponding to 16/8/2009G) with a capital of two million six hundred thousand (2,600,000) Saudi Riyals divided into two hundred and sixty thousand (260,000) cash share worth ten (10) Riyals per share. Awazel owns 80% of the shares, equivalent to 208,000 shares, and Ali Saeed Al Mubarak owns 20% equivalent to 52,000 shares. The Company works in extraction of stones from quarries and carving them to produce carved stone pieces such as cutting carved columns and decoration of stone facades.

Table (25): Net profit of subsidiaries for the last four years (SAR in thousands)Al-Takamul

Stone & Marble

Factory Co

Al-Sultan Contracting and Trading

Co.

Advanced Membrane

Manufacturing Company


Awazel International Indonesia *

Awazel International

Qatar

Awazel International

Co.

As of the fiscal year ended 31

March

Net Profit

--(152)3,375 (622)1,235 2,023 2014

-5,782 (185)2,200 (664)1,580 2,857 2015

549 2,733 (252)2,405 (551)1,019 5,478 2016

(379)(510)(984)2,508(119)(60)4,2832017* The decision was made to liquidate this company on 12/4/2015. For further information, see Waived Investments Section

Source: The Company

29

4-5 The Company’s assets inside and outside the Kingdom

Table (26): Net Value of Fixed Assets in the Arabian Waterproofing Co. Inc. inside and outside the Kingdom and the ratio of assets outside the Kingdom to the total fixed assets of the Company as at 31 March 2015, 2016 and 2017.

201720162015SR ‘000

78,17983,68188,222Kingdom of Saudi Arabia

41,15539,65127,346Gulf States (excluding the Kingdom) and Indonesia

119,334123,332115,568Total assets

34,49%32,15%23,66%Ratio of assets outside the Kingdom in proportion to total fixed assetsSource: The Company

Table (27): Net Value of Current Assets in the Arabian Waterproofing Co. Inc. inside and outside the Kingdom and the ratio of assets outside the Kingdom to the total current assets of the Company as at 31 March 2015, 2016 and 2017

201720162015SR Thousands

282,400260,000251,200Kingdom of Saudi Arabia


362,700341,600336,000Total assets

22,14%23,89%25,24%Ratio of assets outside the Kingdom in proportion to total current assetsSource: The Company

Table (28): Net Asset Value of the Arabian Waterproofing Co. Inc. in and outside the Kingdom and the ratio of assets outside the Kingdom to Total Assets of the Company as at 31 March 2015, 2016 and 2017

201720162015(SR Thousands)

360,579343,681339.422Kingdom of Saudi Arabia


482,034464,932451,568Total assets excluding Indonesia

25,2%26,1%24,8%Ratio of assets outside the Kingdom in proportion to total assetsSource: The Company

4-6 Changes in the Company’s ownership1- The Arabian Waterproofing Industries Co. was established as a limited liability company, and registered under

Commercial Register No. 1010039827 dated 14/08/1401H (corresponding to 17/06/1981G) with a nominal and cash capital of SAR 12,000,000.

Table (29): Ownership structure of the Company when it was established as a limited liability company with a value of SAR 1,000 per share

Name of Partner Nationality Number of Shares Value of Share (SR) Ownership Percentage

Hamad Al-Mubarak Al-Hamid Saudi 2,400 2,400,000 20%

Nasser Abdulaziz Al-Salama Saudi 3,000 3,000,000 25%

Ali Ibrahim Al-Suqair Saudi 2,400 2,400,000 20%

Hamad Al-Saleh Al-Suqair Saudi 1,800 1,800,000 15%

Marcel Steger Swiss 2,400 2,400,000 20%

Total 12,000 12,000,000 100%Source: The Company

2- On 21/1/1402H (corresponding to 18/11/1981G), the Company raised its capital to SAR 14,000,000 divided into 14,000 equal cash share with a value of (SR 1,000) One Thousand Saudi Riyals per share.

30

Table (30): Ownership Structure of the Company dated 21/1/1402H (corresponding to 18/11/1981) with a value of SAR 1,000 per share





Hamad Al-Saleh Al-Suqair Saudi 2,100 2,100,000 15%



3- Under the second amendment to the Company’s Articles of Association, Hamad Saleh Al-Suqair waived his share to Ali Ibrahim Al-Suqair and there was no change in the Company’s capital.

Table (31): Ownership structure of the Company under the second amendment to the Company’s Articles of Association with a value of SAR 1,000 per share





Marcel Steger Saudi 2,800 2,800,000 20%

Total Swiss 14,000 14,000,000 100%Source: The Company

4- Under the third amendment to the Company’s Articles of Association, Hamad Al-Mubarak Al-Humaid assigned his share to Khalid Ali Al-Turki & Sons Company and there was no change in the capital.

Table (32): Ownership Structure of the Company on 08/02/1412H (corresponding to 18/08/1991) under the third amendment to the Company’s Articles of Association with a value of SAR 1,000 per share







5- On 08/12/1412H (corresponding to 18/08/1991), Nasser Abdul Aziz Al Salama and Marcel Steger assigned their share to Ali Ibrahim Al-Suqair and there was no change in the capital.

Table (33): Ownership structure of the Company on 08/02/1412H (corresponding to 18/8/1991) with a value of SAR 1,000 per share.

Name of Partner Number of Shares Value of Share (SR) Ownership

Percentage

Ali Ibrahim Al-Suqair 11,200 11,200,000 95%

Khalid Ali Al-Turki & Sons Company 2,800 2,800,000 5%


6- On 23/10/1413H (corresponding to 20/10/1992), Khalid Ali Al Turki & Sons Company assigned its share to Ali Ibrahim Al-Suqair. Also, Ali Ibrahim Al-Suqair waived 700 shares to Ibrahim Ali Al-Suqair. The capital was raised to SAR 30,000,000 divided into 30,000 equal cash shares, with a value of SAR 1,000 per share.

31

Table (34): Ownership structure of the Company on 23/4/1413H with a value of SAR 1,000 per share.

Name of Partner Number of Shares Value of Share (SR) Ownership Percentage

Ali Ibrahim Al-Suqair 28,500 28,500,000 95%

Ibrahim Ali Ibrahim Al-Suqair 1,500 15,000,000 5%


7- On 15/07/1420H corresponding to 24/10/1999G, the share of the deceased Ali Ibrahim Al-Sugair was distributed to his heirs. The capital was divided into 60,000 equal value shares, each of SAR 500.

Table (35): Ownership Structure of the Company under the Decree of Distribution of estate No. 8/16 issued on 8/1/1420H with a nominal value of SAR 500 per share

Ownership (%)Share Value (SAR)No. of SharesShareholder

14.23%4,270,0008,540Ibrahim Ali Ibrahim Al-Suqair

9.23%2,770,0005,540Firas Ali Ibrahim Al-Suqair

9.23%2,770,0005,540Mansour Ali Ibrahim Al-Suqair

9.23%2,770,0005,540Nasser Ali Ibrahim Al-Suqair

9.23%2,770,0005,540Suqair Ali Ibrahim Al-Suqair

9.23%2,770,0005,540 Rumaih Ali Ibrahim Al-Suqair

11.90%3,570,0007,140Haila Abdul Rahman Issa Al - Rumaih

4.62%1,385,0002,770Huda Ali Ibrahim Al-Suqair

4.62%1,385,0002,770Lolwa Ali Ibrahim Al-Suqair

4.62%1,385,0002,770Noura Ali Ibrahim Al-Suqair

4.62%1,385,0002,770Munira Ali Ibrahim Al-Suqair

4.62%1,385,0002,770Fatima Ali Ibrahim Al-Suqair

4.62%1,385,0002,770Sarah Ali Ibrahim Al-Suqair

100.00% 30,000,00060,000Total Source: The Company

8- The Minister of Commerce and Investment issued the Ministerial Decision No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G) announcing the transformation of the Company into a closed joint stock company with a capital of sixty five million Saudi Riyals (SAR 65,000,000) divided into one million and three hundred thousand (1,300,000) shares at a nominal value of fifty Saudi Riyals (SAR 50) per share. The capital of the Company was increased by capitalization of thirty five million Saudi Riyals (SAR 35,000,000) from the retained earnings account. New investors were also entered as shareholders in the Company through a private placement of shares

Table (36): Ownership Structure of the Company on 11/09/1425H (corresponding to 25/10/2004) when converted into a Closed Joint Stock Company with a nominal value of SAR 50 per share

OwnershipShare nominal value (SAR)No. of SharesShareholders

20.00%13,000,000260,000Boubyan Petrochemical Company

7.83%5,089,400101,788Ibrahim Ali Ibrahim Al-Suqair

7.69%5,000,000100,000Suleiman bin Abdul Mohsen Aba-Nami

6.53%4,245,30084,906Haila Abdul Rahman Issa Al - Rumaih

5.77%3,750,00075,000Nasser bin Mohammed Al Mutawa Al-Otaibi

5.08%3,301,95066,039Firas Ali Ibrahim Al-Suqair

5.08%3,301,95066,039Mansour Ali Ibrahim Al-Suqair

5.08%3,301,90066,038Nasser Ali Ibrahim Al-Suqair

5.08%3,301,90066,038Suqair Ali Ibrahim Al-Suqair

5.08%3,301,90066,038 Rumaih Ali Ibrahim Al-Suqair

32

OwnershipShare nominal value (SAR)No. of SharesShareholders

2.54%1,650,95033,019Huda Ali Ibrahim Al-Suqair

2.54%1,650,95033,019Lolwa Ali Ibrahim Al-Suqair

2.54%1,650,95033,019Noura Ali Ibrahim Al-Suqair

2.54%1,650,95033,019Munira Ali Ibrahim Al-Suqair

2.54%1,650,95033,019Fatima Ali Ibrahim Al-Suqair

2.54%1,650,95033,019Sarah Ali Ibrahim Al-Suqair

2.31%1,500,00030,000Abdul Rahman Saad Al-Sadhan

1.54%1,000,00020,000Al Mutlaq Group Company

1.54%1,000,00020,000Abdullah Bin Saeedan Real Estate Company

0.77%500,00010,000Hisham & Jamal Abdul Rahman Al Zamil Company

0.77%500,00010,000Abdul Mohsin Al Abdul Mohsen Al Suwailem

0.77%500,00010,000Sulaiman bin Abdulrahman Al-Qwaiz

0.77%500,00010,000Omar bin Abdul Aziz Al Zabin

0.77%500,00010,000Issam Qabbani and Partners Co Ltd

0.77%500,00010,000Saeed bin Mohammed Al-Maddah

0.77%500,00010,000Abdullah Saad Al Rashed

0.38%250,0005,000Waleed Sulaiman Aba-Nami

0.38%250,0005,000Turki Nasser Mohammed Al-Mutawa Al-Otaibi

100.00%65,000,000 1,300,000TotalSource: The Company

9- On 17/09/1427H corresponding to 10/09/2006G, the partners decided to increase the Company’s share capital by SAR 16,250,000 to SAR 81,250,000 paid in full and divided into 8,125,000 ordinary shares with a nominal value of SAR 10 per share.

10- On 23/08/1428H corresponding to 05/09/2007G, the partners decided to increase the share capital by SAR 27,83,280 to SAR 108,333,280 which is fully paid and divided into 10,833,378 ordinary shares with a nominal value of SAR 10 per share.

11- On 27/06/1429H corresponding to 01/07/2008G, the partners decided to increase the share capital by SAR 43,333,310 to SAR 151,666,590 divided into 15,166,659 ordinary shares with a nominal value of SAR 10 per share.

12- On 04/08/1430H (26/07/2009G), the partners decided to increase the share capital by SAR 30,333,220 to SAR 181,999,810 divided into 18,199,981 ordinary shares with a nominal value of SAR 10 per share.

13- On 16/12/1436H corresponding to 29/9/2015G, the partners decided to increase the Company’s share capital by SAR 90,900,970 to SAR 272,999,780 Divided into 27,299,978 ordinary shares with a nominal value of SAR 10 per share.

Table (37): Company’s current ownership structure with nominal value per share of SAR 10

Shareholders No. of Shares Nominal Value (SAR) Percentage Indirect Ownership

Boubyan Petrochemical Company 5,672,036.00 56,720,360.00 20.78% 0.00%

Ibrahim Ali Ibrahim Al-Suqair 1,837,547.00 18,375,470.00 6.73% 0.36%

Haila Abdul Rahman Issa Al - Rumaih 1,783,023.00 17,830,230.00 6.53% 0.00%

Samama Investment Company 1,736,949.00 17,369,490.00 6.36% 0.00%

Nasser Ali Ibrahim Al-Suqair 1,663,740.00 16,637,400.00 6.09% 0.00%

Firas Ali Ibrahim Al-Suqair 1,493,919.00 14,939,190.00 5.47% 0.00%

Mansour Ali Ibrahim Al-Suqair 1,493,919.00 14,939,190.00 5.47% 0.00%

Suqair Ali Ibrahim Al-Suqair 1,386,798.00 13,867,980.00 5.08% 0.00%

Rumaih Ali Ibrahim Al-Suqair 1,386,795.00 13,867,950.00 5.08% 0.00%

33

Shareholders No. of Shares Nominal Value (SAR) Percentage Indirect Ownership

Lolwa Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Noura Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Munira Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Fatima Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Huda Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Sarah Ali Ibrahim Al-Suqair 693,401.00 6,934,010.00 2.54% 0.00%

Waleed Sulaiman Abdul Mohsen Aba-Nami 506,292.00 5,062,920,00 1.85% 0.00%

Al Mutlaq Group Company 436,295.00 4,362,950.00 1.60% 0.00%

Yazid Sulaiman Abdulhamsin Aba-Nami 397,176.00 3,971,760.00 1.45% 0.00%

Mohammed Sulaiman Abdulhamsen Aba-Nami 397,176.00 3,971,760.00 1.45% 0.00%

Moudi Saleh Abdullah Al Mesfer 312,071.00 3,120,710.00 1.14% 0.00%

Turki Nasser Mohammed Al Mutawa Al Otaibi 260,316.00 2,603,160.00 0.95% 0.00%

Sulaiman Al Qweiz 218,145.00 2,181,450.00 0.80% 0.00%

Abdullah bin Saad Al Rashed 218,145.00 2,181,450.00 0.80% 0.00%

Essam Mohammed Khairi Qabbani Holding Company 209,999.00 2,099,990.00 0.77% 0.00%

Reham Sulaiman Aba-Nami 198,588.00 1,985.880.00 0.73% 0.00%

Reem Sulaiman Aba-Nami 198,588.00 1,985,880.00 0.73% 0.00%

Amal Sulaiman Aba-Nami 198,588.00 1,985,880.00 0.73% 0.00%

Sultana Sulaiman Aba-Nami 198,588.00 1,985,880.00 0.73% 0.00%

Mai Sulaiman Aba-Nami 198,588.00 1,985,880.00 0.73% 0.00%

Hana Abdulrahman Al Suqair 150,000.00 1,1500,000.00 0.55% 0.00%

Jamal Abdulrahman Al Zamil 109,073.00 1,090,730.00 0.44% 0.00%

Hisham Abdulrahman Al Zamil 109,073.00 1,090,730.00 0.44% 0.00%

Saad Abdelmohsen Swailem 65,444.00 654,440.00 0.24% 0.00%

Hatoun Ibrahim Al-Suqair 50,000.00 500,000.00 0.18% 0.00%

Hadeel Ibrahim Al-Suqair 50,000.00 500,000.00 0.18% 0.00%

Ali Ibrahim Al-Suqair 50,000.00 500,000.00 0.18% 0.00%

Ibrahim Abdulmohsen Al - Swailem 43,629.00 436,290.00 0.16% 0.00%

Salwa Abdul - Mohsen Al - Swailem 21,815.00 218,150.00 0.08% 0.00%

Muna Abdul - Mohsen Al - Swailem 21,815.00 218,150.00 0.08% 0.00%

Iptihaj Abdul Mohsen Al - Swailem 21,814.00 218,140.00 0.08% 0.00%

Amal Abdul Mohsen Al - Swailem 21,814.00 218,140.00 0.08% 0.00%

Ibtisam Abdulmohsen Swailem 21,814.00 218,140.00 0.08% 0.00%

Total 27,299,978.00 272,999,780.00 100% 0.36%Source: The Company

34

4-7 Ownership Structure of the Company Shares Pre-Offering and Post-Of-fering

The current capital of the Company stands at two hundred and seventy-two million nine hundred and ninety nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) divided into twenty-seven million two hundred and ninety-nine, nine hundred and seventy eight (27,299,978) shares of ten Saudi Riyals (SAR 10) each.

Table (38): Ownership Structure of the Company Shares Pre-Offering and Post-Offering

No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares Percentage


Value (SAR)


5,672,036 20.78% 0.00% 56,720,360 3,970,424 14.54% 0.00% 39,704,240


1,837,547 6.73% 0.36% 18,375,470 1,286,282 4.71% 0.25% 12,862,820


1,783,023 6.53% 0.00% 17,830,230 1,248,115 4.57% 0.00% 12,481,150


1,736,949 6.36% 0.00% 17,369,490 1,215,863 4.45% 0.00% 12,158,630


6 Firas Ali Ibra-him Al-Suqair 1,493,919 5.47% 0.00% 14,939,190 1,045,742 3.83% 0.00% 10,457,420


1,493,919 5.47% 0.00% 14,939,190 1,045,743 3.83% 0.00% 10,457,430



1,386,795 5.08% 0.00% 13,867,950 970,757 3.56% 0.00% 9,707,570



12Munira Ali Ibrahim Al-Suqair

693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810


14 Huda Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

15 Sarah Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

16


506,292 1.85% 0.00% 5,062,920 354,404 1.30% 0.00% 3,544,040

17Al Mutlaq Group Com-pany

436,295 1.60% 0.00% 4,362,950 305,407 1.12% 0.00% 3,054,070


397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230

35

No Shareholders


No. of Shares

Percent-age


Value (SAR)



Value (SAR)

19


397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230


312,071 1.14% 0.00% 3,120,710 218,450 0.80% 0.00% 2,184,500

21


260,316 0.95% 0.00% 2,603,160 182,221 0.67% 0.00% 1,822,210


23Abdullah bin Saad Al Rashed

218,145 0.80% 0.00% 2,181,450 152,702 0.56% 0.00% 1,527,020

24

Essam Mohammed Khairi Qabbani Holding Com-pany

209,999 0.77% 0.00% 2,099,990 146,999 0.54% 0.00% 1,469,990

25Reham Sulaiman Aba-Nami

198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

26Reem Sulaiman Aba-Nami

198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120



198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120


30Hana Abdul-rahman Al Suqair

150,000 0.55% 0.00% 1,500,000 105,000 0.38% 0.00% 1,050,000


109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

32Hisham Ab-dulrahman Al Zamil

109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

33Saad Ab-delmohsen Swailem

65,444 0.24% 0.00% 654,440 45,811 0.17% 0.00% 458,110

34 Hatoun Ibra-him Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000

35 Hadeel Ibra-him Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000


37Ibrahim Abdul-mohsen Al - Swailem

43,629 0.16% 0.00% 436,290 30,540 0.11% 0.00% 305,400

36

No Shareholders


No. of Shares

Percent-age


Value (SAR)



Value (SAR)


21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710


21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710


21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700


21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

42Ibtisam Abdulmohsen Swailem

21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

43 public - - - 8,189,994 30.00% 81,899,943

Total 27,299,978 27,299,978 100% 272,999,780 27,299,978 100%Source: The Company

4-8 Shareholders holding 5% or more of the Company’s shares

Table (39): Details of Shareholders with direct ownership of 5% or more of the Company’s shares

Shareholders


No. of Shares Nominal Value

% of Direct

Owner-ship

% of Indirect Owner-

ship

No. of Shares Nominal Value

% of Direct

Owner-ship

% of Indirect Owner-

ship

Boubyan Petro-chemical Company 5,672,036.00 56,720,360.00 20.78% - 3,970,424 39,704,240 14.55% -

Ibrahim Ali Ibrahim Al-Suqair 1,837,547.00 18,375,470.00 6.73% 0.36% 1,286,282 12,862,820 4.71% 0.25%

Haila Abdul Rahman Issa Al - Rumaih

1,783,023.00 17,830,230.00 6.53% - 1,248,115 12,481,150 4.57% -

Samama Invest-ment Company 1,736,949.00 17,369,490.00 6.36% - 1,215,863 12,158,630 4.45% -

Nasser Ali Ibrahim Al-Suqair 1,663,740.00 16,637,400.00 6.09% - 1,164,617 11,646,170 4.26% -

Firas Ali Ibrahim Al-Suqair 1,493,919.00 14,939,190.00 5.47% - 1,045,742 10,457,420 3.83% -

Mansour Ali Ibra-him Al-Suqair 1,493,919.00 14,939,190.00 5.47% - 1,045,743 10,457,430 3.83% -

Suqair Ali Ibrahim Al-Suqair 1,386,798.00 13,867,980.00 5.08% - 970,759 9,707,590 3.56% -

Rumaih Ali Ibrahim Al-Suqair 1,386,795.00 13,867,950.00 5.08% - 970,757 9,707,570 3.56% -

Source: The Company

37

4-9 Information about the companies owning shares in the Company

4-9-1 Boubyan Petrochemical CompanyBoubyan Petrochemical Company is a Kuwaiti joint stock company listed on the Kuwait Stock Market. It was established on 12/09/1415H (corresponding to 12/02/1995G) with a capital of fifty million nine hundred and thirty five thousand five hundred Kuwaiti Dinars (KWD 53,482,000), equivalent to six hundred sixty five million eight hundred fifty thousand and nine hundred Saudi Riyals (SAR 665,850,900). The Company’s objectives are to manufacture all kinds of petroleum chemicals and derivatives, sell, buy, supply, distribute, export and store these materials and participate in all related activities, including the establishment and leasing of necessary services. The Company may conduct the above activities in Kuwait and abroad as an original or proxy. It can own, develop, set up industrial projects, industrial zones, industrial support services, and contribute to all this, provide technical support, industrial maintenance, financing and development of projects after obtaining approvals from the competent official bodies, contribute to establishment or acquisition of companies with similar activities or which assist the Company to achieve its purposes in Kuwait or abroad. Boubyan is still operating.

Boubyan Petrochemical Company is managed by a Board of Directors composed of the following members:

Dabbous Mubarak Al-Dabbous: Chairman of the Board

Khalid Ali Alghanim: Vice Chairman of the Board

Saud Abdul Aziz Al Babtain: Member

Khaled Al Muraikhi: Member

Khalid Mohammed Al-Sayed Al-Amir: Member

The Board of Directors shall have the widest powers to manage the Company and carry out all acts requiring the management of the Company in accordance with its purposes and nothing limits such authority except as provided by the law or this regulation or the resolutions of the General Assembly. The Board of Directors may sell or mortgage the Company’s assets or grant guarantees or arrange loans according to the interests of the Company.

Table (40): A list of the owners of 5% or more in Boubyan Petrochemical Company

Ownership (%)Number of SharesShareholder Name

5.45%29,147,840Ali Al Ghanim Sons Trading & Contracting Co.

6.56%35,084,372General Organization for Social Insurance

5.51%29,506,171Mubarak Al-Dabbous Sons General Trading & Contracting Co.Source: Kuwait Stock Market on 24/8/2016G

4-9-2 Samama Investment CompanySamama Investment Company is a Saudi limited liability company registered in Riyadh under the Commercial Registration No. (1010279036), established on 17/01/1431H (corresponding to 03/01/2010G) with a capital of one million Saudi Riyals. The purposes of the Company focus on agriculture, fishing, mines, petroleum and their branches; manufacturing industries and their branches as per the industrial permits; electricity, gas, water and its branches; construction, building, trade, transportation, storage, cooling, money and business services, and other services; Social, collective, personal services; information technology, security and safety services. Samama Investment Company is still operating.

The sole partner and owner of the capital in Samama Investment Company is Eng. Nasser bin Mohammed bin Hamoud Al Mutawa Al Otaibi, who is the sole manager of the Company

Table (41): Ownership structure of Samama Investment CompanyOwnership percentage

(%)Nominal value of share

(SR)Number of SharesShareholder’s name

100%1,0001,000Nasser Mohammed Al Mutawa Al Otaibi

100%TotalSource: The Company

38

4-9-3 Al-Mutlaq Group CompanyAl-Mutlaq Group Company is a closed joint stock company registered in Riyadh with Commercial Registration No. 1010073881 dated 22/02/1409H (corresponding to 05/10/1988) with a capital of SAR 300 million (SR 300,000,000).

The Company’s activities include industrial, commercial and real estate investment, wholesale and retail trade in furniture, carpets, home, office and school furniture, agricultural equipment and machinery, water pumps, irrigation equipment, building contracting, road construction, electrical, mechanical, industrial and decoration contracting works.

Table (42): Ownership Structure of Al-Mutlaq Group CompanyOwnership percentage

(%)Nominal value of Shares

(SR)Number of SharesName of Shareholder

20%60,000,0006,000,000Abdulmohsen Abdullah Al-Mutlaq

20%60,000,0006,000,000Mutlaq Abdullah Al Mutlaq

3.75%11,250,0001,250,000Badriyah Jassem Al-Qusair

10.50%31,500,0003,150,000Bader Abdulmohsen Al-Mutlaq

7.50%22,500,0002,250,000Tareq Mutlaq Al-Mutlaq

7.50%22,500,0002,250,000Abdullah Mutlaq Al-Mutlaq

5.25%15,750,0001,575,000Kholoud Abdulmohsen Al-Mutlaq

5.25%15,750,0001,575,000Faten Abdulmohsen Al-Mutlaq

5.25%15,750,0001,575,000Basma Abdulmohsen Al-Mutlaq

3.75%11,250,0001,125,000Ulfat Mutlaq Al-Mutlaq

3.75%11,250,0001,125,000Hanan Mutlaq Al-Mutlaq

3.75%11,250,0001,125,000Razan Mutlaq Al-Mutlaq

100% 300,000,00030,000,000TotalSource: The Company

4-9-4 Essam Mohammed Khairi Qabbani Holding Company-IEssam Qabbani Holding Company I, is a limited liability company registered in Jeddah under Commercial Registration No. 4030218309 dated 04/12/1432H (corresponding to 31/10/2011G) with a capital of SAR 500,000.

The activities of the Company includes establishment of companies by a percentage enabling it to control these companies, purchase and ownership of land for construction of buildings and investment by selling or rental in favor of the Company. The Company is managed, jointly or separately, by two directors Essam Mohammed Khairi Qabbani and Mr. Hassan Essam Mohammed Qabbani. All partners have equal rights to vote.

Table (43): Ownership Structure of Essam Qabbani Holding Company

Ownership percentage (%)Nominal value of Shares (SR)Number of SharesName of Shareholder

90%450,000450Essam Mohammed Qabbani

10%50,00050Hassan Essam Qabbani

100%500,000500TotalSource: The Company

39

4-10 General nature of the Company’s business and description of the main products

The main current activity of the Company is the production and sale of insulation materials and waterproofing items from asphalt and petrochemical base in the form of rolls, plates or adhesives of various types, oxidized and modified asphalt and all types of emulsifiers, paints, compounds, and pastes in which petroleum and its derivatives are used, and all types of thermal and acoustic insulators. The activities of the subsidiaries in the Kingdom also include the production and sale of all construction materials, including materials if stone and marble fir facades cladding. The activity of the subsidiaries outside the Kingdom includes distribution and sale of insulation products and stone and marble industries outside the Kingdom.

The diagram below illustrates the products of the Company and its products:

Figure 3: The Company’s Products

Advanced Membrane Manufacturing Co

Membrane modi�ed with polypropylene

(plastic) (APP)

Oxidized membranes and others

Self-Adhesive Membranes

Company’s ProductsSubsidiariesProducts

Al-Takamul Stone Factory Co. for Stone

and Marble

Al - Sultan Contracting, Trading

& Industry Co

Non-bituminous Membranes (polymeric)

Special-form plastic �lms(Dimple Board)

Natural StoneNatural Stone

Membrabes

Bituminous Membranes

Bituminous Liquids

Primer

Damp Coat

Liquid Asphalt

Amended Road Asphalt

Non-Bituminous Liquids

Polypropylene

Liquids/FluidsOther Products


and stearine (SBS)

Protection Boards


Source: The Company

40

4-10-1 Products of the Company and its subsidiaries

a- The Products of the Company

1- Membranes

Bituminous membranesThey are rolls of materials manufactured by using polyester or similar fabrics and coated on both sides with a special mixture of bitumen mixed with special chemicals. Then their surface is treated to be an impermeable membrane and installed by heating at the edges to form a welded membrane covering the surface to be insulated.

� Membranes modified with polypropylene (Plastic) (APP)This product is reinforced membrane coated with a bituminous mixture with plastic properties used in the foundations and surfaces

� Membranes modified with styrene butadiene styrene (Plastic) (SBS)This product is reinforced membrane coated with a bituminous mixture with rubber properties and used in insulation of all kinds, especially in cold areas

� Oxidized membranesThis product is composed of reinforced membranes coated with a bituminous mixture modified by oxidization with no other additives. It is used in insulation, especially in hot places. This product is an economic product

� Protection panelsThis product is composed of reinforced membranes and coated with a specially modified oxidized bituminous mixture. It is used in insulation protection

� Membranes modified with styrene butadiene styrene (unreinforced)This product is composed of bituminous mixture with rubber properties. It is often used in high quality engineering constructions.

� Self-adhesive membranesAluminum or plastic coated membrane with high rubber properties. It is installed without heating and used for insulation of kitchens, toilets, vaults and metal surfaces.

� StrapsThe adhesive tape product is used in fixing and installation of membranes. It is also used to insulate the buried metal pipes. The Company produces the tapes with special specifications and special measurements according to the nature of the use, using the rolls of the previously produced bituminous membranes (self-adhesive) to be loaded automatically on special machine that cuts rolls to the required sizes. They are wrapped and packaged automatically.

2- Fluids

� Bituminous liquids:They are liquid substances made of bituminous material after treatment with special chemicals, and are used in cold paint, without heating, by using the brush.

� Primer paintBituminous liquid used in surface paint prior to insulation to help seal adhesion and stability.

� Damp CoatingBituminous liquid used in the lubrication of buried or invisible foundations to protect it from moisture.

� Liquid Asphalt CountingBituminous liquid used in painting external surfaces of the building to protect against moisture.

� Performance Grade AsphaltIi is one of the special products manufactured by the Company and is used in making road asphalt mixtures with high specifications.

41

Non-bituminous liquids:They are liquid materials made from special chemical polymers and are used in cold paint without heating, by using a brush.

� Polyurethane � Is used in insulation of surfaces, especially metal surfaces to protect them from the impact of weather factors or

wear from intensive use by painting them by brush or spraying (the Company does not manufacture the product, sells it as an exclusive agent for a European manufacturer)

b. Other Products:

Miscellaneous prefabricated products for insulation of building pillars or for insulation of bridge breaks or penetrating pipes and other special sectors. Another product is (Geo Tex Style) which is a polyester fabric used as a special layer between waterproof and thermal insulation or to fix the sides of the grades.

Products of subsidiaries

Non-Bituminous membranes (polymeric)

These are membranes of non-bituminous material, either plastic or rubber.

� Membranes of a special plastic type (Dimple Board)Plastic membrane with special specifications produced by using high density polyethylene. It is used for protection of various insulation systems, for water discharge and as part of green surfaces insulation system.

� Natural stone productsThe Company processes the natural stone by cutting and flushing it with different sizes (stone quarries) or engrave it, such as cutting carved columns and stone facades decorations.

4-10-2 Description of Production LinesThe following table describes the production lines/units of the Company’s factories:

Table (44): Description of production lines/units of the Company’s factories

ProductsDescription Production Line/UnitFactory

Modified membranes with styrene, butadiene and stearin (rubber)

Automatic line capable of producing many materials

Multi production line (RUM 1)

Riyadh Factory-1

Modified membranes with Polypropylene (plastic)

Oxidized membranes


Automatic line capable of producing many materials

Multi production line (RUM 2) Modified membranes with polypropylene (plastic)

Oxidized membranes

PrimerIt is special unit for the production of various types of liquid products

Liquid production unit Damp Coat

Liquid Asphalt

Performance Grade AsphaltProduction and Adjustment Unit as per standard specification Asphalt production unit

Paste for pipe insulation (PIPE MASTIC)Specialized Production LineProduction line of paste for pipe insulation


Automatic line capable of producing many materials.

Multi production line (NARD)

Riyadh Factory-2 Polypropylene modified membranes (plastic)

Oxidized membranes

42


Protection panelsSpecialized automatic lineSpecialized production line (1)

Riyadh Factory-2

Self-adhesive membranesSpecialized automatic lineSpecialized production

line (2) Tapes

Modified membranes with styrene, butadiene and Styrene (unreinforced)Specialized automatic lineSpecialized production

line (3)

Modified membranes with styrene, butadiene and Styrene (rubber)

Automatic line capable of producing many materialsMulti production line (1)

Jeddah Factory

Polypropylene modified membranes (plastic)

Oxidized membranes

Modified membranes with styrene, butadiene and Styrene (rubber)Automatic line capable of

producing many materialsMulti production line (2)

Polypropylene modified membranes (plastic)

Performance Grade AsphaltAsphalt production & adjustment unit as per standard specifications

Asphalt Production Unit

Source: The Company

The following table describes the production lines/units of the subsidiaries

Table (45): Description of production lines/units of subsidiaries’ factories


Stone quarries of various sizesTwo Semi-automatic production lines

Production line (1) and Production line (2)Al-Sultan Factory-1

Production of the Spanish mixtureSpecialized production lineProduction Line (1)Al-Sultan Factory-2

Carved columns and stone facades decorationThe carving process in the factory is manualAl-Takamul Factory

Membranes of special plastic typeSpecialized production lineProduction line (1)

Advanced membrane manufacturing Factory

Source: The Company

4-10-3 Information about the factories of the Company and its subsidiaries

a- Awazel Factory-1, Riyadh

In 1981, Riyadh Awazel Factory-1 was inaugurated in the second industrial zone on Al-Kharj road south of Riyadh city on land leased by the Saudi Industrial Property Authority with an area of 32,500 square meters.

The following table shows the most important developments witnessed by the factory since its establishment until the date of this prospectus

Table (46): Summary of the most important developments witnessed by the Riyadh Factory-1Total production

capacity of the Factory

Added production capacityDevelopmentYear

5,000 ton5,000 tonEstablishment of the factory with a liquid production unit1981G

5,000 ton5,000 tonStarted trial production of the factory1982G

5,000 ton5,000 tonStarted commercial production1983G

5,000 ton

9,000,000 sq. m9,000,000 sq. mCompleted installation of two production lines of rolls1984G

5,000 ton

20,000,000 sq. m

5,000 ton

20,000,000 sq. m

Completed total renovation of the factory by the addition of production lines (Rom 1) and (Rom 2), addition of a new liquid production unit and the addition of oxidation towers with all accessories (old production lines were completely terminated)

1997G

43

Total production capacity of the

Factory

Added production capacityDevelopmentYear

33,000 ton

20,000,000 sq. m28,000 tonAdded production line of performance grade asphalt unit2010G

34,000 ton

20,000,000 sq. m1,000 tonAdded production line of paste for pipes insulations2013G

Source: The Company

The following table shows the production capacity and absorbing capacity of Riyadh factory-1 and production quantities for the period from 2014 to 2017G.

Table (47): Production capacity and absorbing capacity of Riyadh factory-1 and production quantities for the period from 2014 to 2017G

Actual Production

Pro-duction capacity

Absorbing capacityUnitProduction line/unit

Util

ized

cap

acit

y %

2017

Util

ized

cap

acit

y %

2016

Util

ized

cap

acit

y %

2015

Util

ized

cap

acit

y %

2014

70.45%7,750,12488.81%9,769,36688.03%9,682,96481.67%8,983,30010,000,00011,000,000Sq. meter

Multi production line (Rom 1)

76.15%8,376,87090.25%9,927,81887.97%9,676,16279.70%8,766,86010,000,00011,000,000Sq. meter

Multi production line (Rom 2)

38.60%1,93047.33%2,60343.29%2,38141.44%2,279

5,0005,500Ton

Primer

Liquid production unit

2.28%1559.42%5189.45%5206.40%352Damp Coat

0.78%433.51%1935.25%2896.13%337Liquid Asphalt

0.14%440.48%1451.13%3393.61%1,08228,00030,000TonAsphalt production unit

0.00%00.00%01.55%1713.09%1441,0001,100Ton Past production line for pipe insulation

Source: The Company

b- Awazel Factory-2, Riyadh

In 2007G, Riyadh Awazel Factory-2 was inaugurated in the second industrial zone on Al-Kharj road south of Riyadh city on land leased by the Saudi Industrial Property Authority with an area of 12,500 square meters.

The following table shows the most important developments witnessed by the factory since its establishment until the date of this prospectus.

Table (48): Summary of the most important developments witnessed by the Riyadh Factory-2Total production capacity

of the FactoryAdded production

capacityDevelopmentYear

4,500,000 sq. meter4,500,000 sq. meterRiyadh Factory-2 opened with specialized production line (1)2007G

7,500,000 sq. meter3,000,000 sq. meterAdded specialized production line (2)2008G

8,000,000 sq. meter500,000 sq. meterAdded specialized production line (3)2009G

20,000,000 sq. meter12,000,000 sq. meterAdded multi production line (NARD)2010GSource: The Company

44

The following table shows the production capacity and absorbing capacity of Riyadh factory-2 and production quantities for the period from 2014 to 2017G.

Table (49): Production capacity and absorbing capacity of Riyadh factory-2 and production quantities for the period from 2014 to 2017G

Actual Production

Prod

uctio

n ca

paci

ty

Abs

orbi

ng c

apac

ity

UnitProduction line/unit

Util

ized

cap

acit

y %

2017

Util

ized

cap

acit

y %

2016

Util

ized

cap

acit

y %

2015

Util

ized

cap

acit

y %

2014

52.26%8,361,62458.70%9,391,75858.58%9,372,13257.29%9,166,60012,000,00016,000,000

Sq. meter

Multi pro-duction line (NARD)

50.82%2,541,00059.59%2,979,40049.38%2,469,00051.82%2,591,0004,500,0005,000,000Specialized Production Line (1)

12.86%450,30021.69%759,15028.38%993,27028.68%1,003,7003,000,0003,500,000Specialized Production Line (2)

7.27%36,36812.93%64,65018.41%92,0420.00%0500,000500,000Specialized Production Line (3)

Source: The Company

c- Awazel Factory, Jeddah

In 1981, Jeddah Awazel Factory-2 was inaugurated in Jeddah on a land leased by the Saudi Industrial Property Authority with an area of 20,000 square meters.

The following table shows the most important developments witnessed by the factory since its establishment until the date of this prospectus.

Table (50): Summary of the most important developments witnessed by Jeddah FactoryTotal production capacity

of the FactoryAdded production

capacityDevelopmentYear

5,000 ton5,000 tonEstablishment of a factory with production unit of liquids and oxidation 1981

20,000,000 sq. m20,000,000 sq. mCompletion of the total factory renovation, addition of two multi production lines (1) and (2) (old production unit was terminated)

2010

28,000 ton

20,000,000 sq. m28,000 tonEstablishment of asphalt production unit2013

Source: The Company

The following table shows the production capacity and absorbing capacity of Jeddah Factory and production quantities for the period from 2014 to 2017G.

Table (51): Production capacity and absorbing capacity of Jeddah Factory and production quantities for the period from 2014 to 2017G

Actual Production

Prod

uctio

n ca

paci

ty

Abs

orbi

ng

capa

city


Util

ized

ca

paci

ty %

2017

Util

ized

ca

paci

ty %

2016

Util

ized

ca

paci

ty %

2015

Util

ized

ca

paci

ty %

2014

61.00%6,768,12060.71%6,677,98055.53%6,108,38047.39%5,213,10010,000,00011,000,000

Sq. m

Multi produc-tion line (1)

0.00%00.00%00.00%00.00%010,000,00011,000,000Multi produc-tion line (2)

10.65%3,19617.62%5,2884.86%1,40617.94%5,382 28,00030,000TonAsphalt produc-tion unit

Source: The Company

45

Subsidiaries Factories

a- Al-Sultan Factory-1

In 2003, Al-Sultan Factory-1, located in Al-Manakh industrial zone in Riyadh, was opened on a land owned by Al-Sultan Contracting, Trading and Industry Co. with an area of 2,660 square meters. The factory contains a number of electric saws that cut the rocks into large pieces and then they are transferred to 2 semi-automatic production lines that cut the pieces to different sizes of stone quarry and then clean and soften.

The following table shows the production capacity and absorbing capacity of Al-Sultan Factory-1 and the quantities of production for the period from 2014 to 2017

Table (52): The production capacity and capacity of Al-Sultan Factory-1 and production quantities for the period from 2014 to 2017G

Actual Production

Prod

uctio

n ca

paci

ty

Abs

orbi

ng

capa

city


Util

ized

ca

paci

ty

%2017

Util

ized

ca

paci

ty

%2016

Util

ized

ca

paci

ty

%2015

Util

ized

ca

paci

ty

%2014 *

70.83%170,00083.33%200,00083.33%200,0000.00%0200,000240,000Sq. m

Production line (1) and Production line (2)

Source: The Company

* Awazel Co. acquired Al-Sultan Contracting, Trading and Industry Co. in May 2014

b- Al-Sultan Factory-2

In 2014, Al-Sultan Factory-2, located in Al-Manakh industrial zone in Riyadh, was opened on a leased land with an area of 600 square meters. The factory consists of one production line to produce the Spanish mixture.

The following table shows the production capacity and absorbing capacity of Al-Sultan Factory-2 and the production quantities for the period from 2014 to 2017

Table (53): The production capacity and capacity of Al-Sultan Factory-2 and production quantities for the period from 2014 to 2017G

Actual Production

Prod

uctio

n ca

paci

ty

Abs

orbi

ng

capa

city


Utilized capacity

%2017

Utilized capacity

%2016

Utilized capacity

%2015

Utilized capacity

%2014

91.00%1,00199.00%1,08998.00%1,0780.00%-1,0001,100TonProduction line (Spanish mixture)

Source: The Company

c- Al-Takamul Factory

In 2015, Al-Takamul Factory was opened on a leased land of with an area of 1,500 square meters located in Al-Manakh industrial zone- Riyadh city. The factory produces engraved stone pieces such as carved stone columns and stone facades decoration, in addition to the operation of the quarries. The process of scu l pture in the factory is conducted in semi-automatic manual way. The amount of the carved pieces produced in 2015G, was 500 cubic meters.

d- Advanced Membrane Manufacturing Plant

In 2015, Advanced Membrane Manufacturing Plant was established in Hit-Kharj Road in Riyadh on a land owned by Arabian Waterproofing Inc. Co. with an area of 30,000 square meters. The commercial production of the plant began in October 2016. The plant consists of one production line for production of specially shaped plastic films. It has absorbing capacity of 3,500,000 square meters and a production capacity of 3,000,000 square meters.

46

4-10-4 Method of manufacturing the products of the Company and its subsidiaries

a- Bituminous membranes:

� The raw materials, whether liquid or solid, are received and stored in appropriate manner in the allocated space. The liquid bituminous materials are stored in special isolated tanks containing heating devices so that the materials are always in their liquid condition and at the necessary temperature for manufacturing.

� Bituminous materials are pumped into the oxidation unit, which is a special tower in which the temperature of the bituminous materials is increased and the air is introduced for the process of oxidation. This process aims to improve the properties of the bituminous ore involved in the manufacturing process.

� The oxidizing materials are pumped to the mixing unit where they are mixed according to the material which is intended to be finally produced. Either it is mixed with plastic softeners so the final product will have plastic properties, or the mixed by adding a rubber material so the final product will have rubber properties, or no softeners are added to the mixture, so that the final product will be oxidizing materials. In any case, the fillers and some fine chemicals shall be added. Materials shall be thoroughly mixed until they are fully homogenized. Samples shall be taken by the laboratory of the Quality Management Department in the Company to confirm the validity of the final product.

� The complete mixture is pumped after passing the quality tests to the production lines. The conveyor membrane is passed in the tubs filled with the pre-tested mixture. The film is impregnated and coated on both sides and then passed between special stainless steel cylinders to obtain the desired thickness. Plastic film is added on both sides and then the product enters in a special cooling and optimization special section and then automatically transferred to the rolling section where it is rolled and cut according to the length of each product which is often ranging between 8 to 10 meters.

� Rolls produced automatically are transferred to the packaging section where they are automatically stacked on pallets and covered with plastic. Labels of product name, batch number and final material quality are marked (1 or 2). This is done under the supervision of the quality management which takes samples of production lines continuously, checks them and determines the quality of the produced rolls

� These produced and packed materials are transferred on pallets to the Material Management Department where they are stored in the finished material stores. All this is done automatically under the supervision of SAP program.

b- Bituminous liquids:

Bituminous materials are pumped from the storage tanks to the liquid production unit where they are mixed with solvents or special chemicals and packaged in appropriate containers.

c- Performance Grade Asphalt

It is produced in special production units under the supervision of the computer where the liquid bituminous materials are pumped and mixed with special rubber softeners in the agreed proportions with the Ministry of Communications of Saudi Arabia.

d- Stone Quarries:

The blocks are taken and received in stores according to their color and size. When executing a specific order, the appropriate stones are selected from the warehouse by the General Supervisor of production and distributed to the appropriate cutting saws. They are cut into slices at the full length of the stone block. These slices are cut to the required sizes and their edges are processed as required, then they are transferred to the clearing and softening Section, where the surface is cleaned and polished and then they are stacked on the special wooden boards and be ready for sale.

e- Carved Stone Pieces:

The Production Department receives the required stone from the production supervisor and receives the drawing of the final form to be produced. Then the specialists in the Department sign this drawing on the stones and then perform the engraving process until the desired form is reached. Most of this is done manually. There is a semiautomatic section to produce the stereotypes which are processed by using special lathes.

f- The method of producing the Spanish mixture:

The marble mixture is processed with the desired color. The mixture is then added by adding white cement, colors and special chemicals that help to be bonded in special mixers. They are then automatically filled in bags and automatically sealed and be ready for sale.

47

g- Membranes of a special plastic type:

The Advanced Membrane Plant contains a production line which is one of the most modern production lines in the world. Production is done in a complete mechanical manner. The granules of the raw material (High Density Polyethylene HDPE) are extracted automatically and mixed with their colors. They are then automatically switched to spitting machines which convert these granules into liquid plastic material and pump it on metal cylinders with special shapes where the plastic product is formed. Then it is cooled and rolled to the appropriate lengths and sizes. The excess parts of the production process is automatically collected and cut into appropriate sizes and reused.

4-11 Sales volume of the Company and its subsidiaries by type of productThe following table shows the sales volume of Awazel Company according to the type of product for the financial years ended 31 March 2014, 2015, 2016 and 2017G.

Table (54): Sales volume of Awazel Company (Insulation Materials) by type of product for the financial years ended 31 March 2014, 2015, 2016 and 2017.

2017201620152014Unit Product

%of total

sales

Sales (SR

‘000)Qty

%of total

sales

Sales(SR ‘000)Qty

%of total

sales

Sales(SR ‘000)Qty

%of total

sales

Sales(SR ‘000)Qty

96.85%273,96733.796.06%344,00039.696.95%360,48038.595.40%334,98036.2Million Sq. Meter

mem-branes

2.89%9,6595.43.65%15,10792.41%10,03853.34%13,04710Thou-sand/ton

Liquids

0.00%000.00%500.31%1,29650.86%3,35914Thou-sand roll

Tapes

0.00%341500.01%261300.00%8490.02%70397Per box

Acces-sories of wa-ter-proof-ing products

0.30%800N/A0.28%1,178N/A0.33%1,356N/A0.38%1,482N/AN/AOther prod-ucts *

100.00%284,460100.00%360,316100.00%373,178100.00%352,983Awazel total sales **Source: The Company

* Other products are different materials in different units, mostly polyurethane and geotextics

** Represents net sales of Awazel.

The following table shows the sales volume of the subsidiaries in the Kingdom according to the type of product for the financial years ended 31 March 2014, 2015, 2016 and 2017G

Table (55): Sales volume of the subsidiaries (stones) in the Kingdom by Type of product for the financial years Ended 31 March 2014, 2015, 2016 and 2017.

2017201620152014Unit Product Sales

(SR ‘000)Quantity Sales (SR ‘000)Quantity Sales

(SR ‘000)Quantity*Sales (SR ‘000)Quantity

Al-Sultan Contracting, Trading and Industry Co.

16,976170,00021,112200,00018,851200,000--Sq. meterStone quarries

1,00110001.0081,0898991,078--Ton Spanish Mix Stone

Al-Takamul Stone & Marble Factory Co.

14070015005,000----Sq. meterCutting of stones

7632001678500----Sq. meterCarved columns and stone facades decoration

Source: The Company

48

4-12 Raw materials needed to manufacture the Company’s products 1- Asphalt: is one of the basic materials, on which manufacturing of bituminous insulation materials is based. Asphalt

is purchased from Aramco and comes in different degrees such as 60/70 degree and B300 grade

2- Polythene oils (softening the product): To improve the properties of bituminous mixture and they are obtained from the local market

3- Solvents such as kerosene or its equivalent and they are locally obtained.

4- Substances modification and improvement of bituminous properties: substances used to improve and modify the properties of bituminous mixtures. They are divided into two main parts:

5- Styrene Butadiene SBS (rubber): substances that give rubber properties of the bituminous mixture and are imported from abroad

6- Polypropylene: plastic granules used to modify and improve the properties of bituminous mixtures and are obtained from the local market, whether pure or reused.

7- Filling materials (powder): These materials come as powder and are used to modify the texture of the mixture and are locally obtained.

8- Carrying membranes: membranes of polyester, fiberglass or similar materials obtained from the local market or imported.

9- (Servicing Materials): They are very thin membranes of plastic material and are they are obtained from the local market

10- Special membranes of different materials such as PVC, HDPE and aluminum foils

11- Special materials to cover the surface of the product: materials that are rocks in special colors grind spray on the surface of the product

12- Packing and packaging materials: These are packing materials such as wooden pallets and large plastic bags in which the product is packaged and they are obtained from the local market

4-13 Raw materials needed to manufacture the subsidiaries’ products

4-13-1 Advanced company for membrane industry1- High density polyethylene (plastic material): It is obtained locally from SABIC and Tasnea

2- Master Patch (plastic color): It is obtained locally

3- Packaging materials of PP material (polypropylene) and wooden boxes

4-13-2 Al-Takamul Stone and Marble Factory and Al-Sultan Contracting, Trading and Industry Co.

1- Stones and marble are in the form of blocks and are obtained locally.

2- Crushed marble with different colors, chemicals and cement needed for the Spanish mixture

4-14 The Factory needs of electricity and water

4-14-1 ElectricityThe Company’s two factories are located in the second industrial city in Riyadh which belongs to the Industrial Properties Authority, and therefore they consume electricity from the Saudi Electricity Company network. The electrical power provided by the Saudi Electricity Company is 4000 kW for the two factories. The two factories in Riyadh consume an average of 1,400 kilowatt-hours equivalent to SAR 250 per hour.

Jeddah factory is located in the industrial city in Jeddah and currently consumes an average of 260 kWh equivalent to SAR 50 per hour which is provided by the Saudi Electricity Company network.

As for the subsidiaries, Al-Sultan Factory and Al-Takamul Factory are supplied with 400kWh of electricity by the Saudi Electricity Company.

Jeddah factory is located in the industrial city in Jeddah and currently consumes an average of 260 kWh equivalent to SAR 50 per hour which is provided by the Saudi Electricity Company network.

As for the subsidiaries, Al-Sultan Factory and Al-Takamul Factory are supplied with 400kWh of electricity by the Saudi Electricity Company.

The electric power provided by the Saudi Electricity Company to the site where the Advanced Company’s Factory is located on part of it, is 2000 kW. The Advanced Company’s Factory consumes 600 kilowatt /watt.

49

4-14-2 WaterWater is not part of the production system and it is used only for cooling and filtration purposes. Thus, the Company’s factories in Riyadh and Jeddah consume an average of 30 cubic meters per day.

As for the subsidiaries, the water is recycled by special filters. The quality of the filters affects the consumed amount, but the average is 100 cubic meters per day for both Al-Sultan Factory and Al-Takamul Factory.

As for the Advanced Company, it does not use water as an essential part of its production processes.

4-15 Companies and investments waived during the previous three fiscal years

4-15-1 Awazel International Company- IndonesiaAwazel International Indonesia was established under authenticated certificate No. (3) dated January 13, 2009G before the notary public in Jakarta Iskander S. H. The Minister of Justice endorsed the Articles of Association under the letter of resolution AHU-29936, AH, O1, O1, Tahun, 2009 of 2 July 2009, as well as the Presidential Approval Notice issued by the Capital Investment Board (BKPM) No 1812/|/2008 issued on 10 November 2008G. The Company is mainly engaged in the trade of waterproofing materials. The Company and its warehouses are located in Begaten Parata Raya, South Jakarta/Indonesia.

During the six month period ended September 30, 2015, the main Company ceased exporting the membranes to Awazel International Indonesia and the stock of that company was sold during the six month period ended 30 September 2015.

On April 12, 2015, the Company decided to suspend and liquidate the Company. The decision to dissolve and liquidate the Company was issued by the Indonesian authorities on April 4, 2016.

4-16 Major ClientsThe following table shows the Company’s revenue from the Company’s top ten customers

Table (56): The Company’s sales to the top ten customers in the years 2014, 2015, 2016 and 2017 (thousand Saudi Riyals)

(%) f

rom

tota

l Sal

es

As

at th

e fis

cal y

ear

ende

d 31

Mar

ch

2017

Com

pany

(%) f

rom

tota

l Sal

es

As

at th

e fis

cal y

ear

ende

d 31

Mar

ch

2016

Com

pany

(%) f

rom

tota

l Sal

es

As

at th

e fis

cal y

ear

ende

d 31

Mar

ch

2015

Com

pany

(%) f

rom

tota

l Sal

es

As

at th

e fis

cal y

ear

ende

d 31

Mar

ch

2014Company

5.57%19,633Al Rajhi for Trading and Industry




4.11%14,033BMC Saudi Qabbani for Construction

3.08%12,717Saleh Al-Shathri3.26%13,593

Al Bahr Bardaweel Company - Kuwait

3.55%13,300


3.09%10,542


2.75%11,360Absar Com-pany2.98%12,415

Jawad Abdul-lah Al-Safar Est. - Kuwait

3.23%12,103

Jawad Abdullah Al-Safar Est. - Kuwait

2.35%8,022Saleh Al Shathri2.74%11,327


2.88%11,995Absar Com-pany2.96%11,087

BMC Saudi Qabbani for Construction

2.23%7,590Absar Com-pany2.50%10,345

Jawad Abdul-lah Al-Safar Est. - Kuwait

2.26%9,424Mohammed Al Nashmi Trading Est

2.60%9,723Ebsar




2.51%9,392Protec-Mid-dle East Company

1.93%6,592Jawad Abdul-lah Al-Safar Est. - Kuwait

2.05%8,482Saeed Oth-man Bajneed Est

2.19%9,129Al-Hamra Company-Ku-wait

2.40%8,970Al-Hamra Compa-ny-Kuwait

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2014Company

1.48%5,049Al-Hamra Company-Ku-wait

1.86%7,672Al-Hamra Compa-ny-Kuwait

2.01%8,393Protek Middle East Co2.30%8,627Al-Jazeera

Awzel

1.32%4,495

Al Mahta Trading & Contracting Est


1.81%7,551Saleh Al Shathri2.13%7,957Saeed Bajnid

1.28%4,357Protek Middle East Company1.51%6,229

Protek Middle East Company

1.57%6,532Al-Jazeera Awazel1.90%7,109

Mohammed Al Nashmi Trading Est

25.59%87,273Sales for top 10 customers25.33%104,673Sales for top

10 customers24.80%103,355Sales for top 10 customers27.16%101,682

Sales for top 10 customers

Source: The Company

4-17 Research and Development ActivitiesThe Company has a R & D department of four employees and is headed by the General Manager of Operations. The main functions of the department are as follows:

� Examine new mixtures to improve the specifications of the final product or reach alternative materials of the same quality and at a lower cost.

� Examine specific solutions for waterproofing/insulation problems and then convert these solutions into products.

The department records all trials with their results in special records. Experiments that have initially succeeded are passed through another phase of tests where a Prototype is produced. The product is tested from the experimental production in a complete laboratory test in the Company’s quality laboratory. If proven to be successful, the product is incorporated into the Company’s suite products and produced and marketed.

Following are examples of the works done by the R & D department:

� The Company cooperated with the Ministry of Transportation to test and introduce a new type of road asphalt which have dynamic characteristics suitable for the local environment. The cooperation started in 1419H. After years of experiments, the product was adopted and deployed by the Ministry of Transportation. Awazel is one of the approved producers of this product

� The Company conducted many researches and succeeded in replacing materials in its mixtures instead of materials that were imported from abroad.

� Through research, the Company has managed to use recycled plastic in mixtures.

� The Company has managed to develop prefabricated sectors for the purpose of insulating sensitive areas of buildings such as pillars and pipes penetrating surfaces/roofs, such as bridge joints.

4-18 Quality Department The Company’s management determines the quality of the products to be sold to customers through the Company’s branches and factories, and ensures that they comply with the international quality standards according to the International Standardization Organization (ISO) and global standards for waterproofing/insulation industry such as the American ASTM and customer specifications. Reports are being prepared to measure quality of the product and examine the samples to ensure their quality. Procedures of random inspection in the delivery and receipt are applied, which leads to careful attention to the order of the exhibits and cleanliness of the environment and dealing with customers with full professionalism.

4-19 Future PlansThe Company has adopted the following expansion projects:

� The establishment of a new factory belonging to the Al-Sultan Contracting, Trading and Manufacturing Company in Riyadh. The construction will take place on a land plot located in the Industrial City in Dharma with an area of 15,000 square meters.

� Addition of a production line for Riyadh Waterproofing Factory for Extruded Polystyrene (XPS).

� Addition of a production line for Extruded Polystyrene (XPS) in Jeddah.

51

The following table shows the most important current projects of the Company.

Table (57): Company Projects

Project NameAwazel

Ownership Percentage

Production Capacity of the Project

Project Start Date

Project End Estimated

Date

Total Esti-mated Cost

Method of Finance

Percentage of Performance

Founding a Factory to Sultan Company 80% 300,000 m2 March 2016G March

2018GSAR 5.3 million

Self-Fi-nance 10%

Addition of a pro-duction line, thermal Awazel Factory, Riyadh

100% 150,000 m3 April 2016G March 2018G

SAR 15.5 million

Self-Fi-nance 15%

Addition of a pro-duction line, thermal insulation factory, Jeddah

100% 72,00 m3 November 2017G June 2018G SAR 8.7

millionSelf-Fi-nance 0

Source: The Company

2- Company’s Vision, Mission and Stratefy

2-a Company’s Vision

Constant pursuit to achieve leadership in the waterproofing industry in the Middle East.

2-b Company’s Mission

� Endeavour to develop products to meet customer expectations and find innovative solutions to waterproofing problems.

� Maintain a distinguished relationship with customers, society and the environment.

� Achieve profitable financial returns for the shareholders of the Company.

Company StrategyArabian Waterproofing Industries Co. seeks to be the main manufacturer of all forms of insulation waterproofing products in in the Kingdom and other GCC states by working on the following areas;

Bituminous water insulation activity � Continue to lead in this sector and maintain market share.

� Support strategic customer and facilitate their needs.

� Increase interest in products relating to road activity.

Building chemicals � Ddeepening the industrial system to introduce local manufacturing in the field of building chemicals and work to

partner with international companies in this field.

� Introducing a department in the Company to market these materials and provide support to their customers.

Thermal insulation � The Company intends to enter the field of manufacturing thermal insulation by implementing the projectors

mentioned in the future projects section. The Company intends also to search for companies and acquisitions in this field.

Stone and marble finishes/cladding � Carrying out expansions and developing planned production.

Deepening the spread of sales through: � Entering into partnerships or acquisitions with other producers

� Work to spread outside the Gulf States.

� Implementing the governance regulations and maximizing the use of professional development of employees and their loyalty to the Company

52

4-20 Competitive advantages and strengths

4-20-1 Competitive advantages and strengthsThe Company believes that its strength lies in the following competitive advantages:

� Using the latest manufacturing and production equipment at strategic locations owned by the Company.

� The financial strength and distinguished performance of the Company and subsidiaries.

� Ability to maintain and develop administrative, technical and financial competencies.

� strong Experiences and competencies of the senior management team in the field of manufacturing and trading of insulation materials and their deep understanding of the market data.

� Robust relationships with a diverse number of clients that have been built over a long period of time.

� The strength of negotiation power in the provision of raw materials due to the volume of monthly orders and excellent relationship with suppliers.

� Attention to the annual planning of the Sales, Production and Warehouses Departments. Plan is followed weekly and monthly and compared with the budget and market requirements and is modified using the latest planning program (SAP), which the Company started to use at the beginning of 2015G.

� Benefiting from the accumulated experience of the Company thanks to the good management of stores and control raw materials costs.

� Provide free transportation and delivery to all customers throughout the Kingdom.

� Provide after sales services such as consultancy services in the installation process.

� The Company conducts (training courses and seminars) to introduce new products.

� The Company remains one of the largest producers of waterproofing materials in the region.

The Company is one of the largest producers of leakage barriers in the GCC region with a capacity of 60 million meters of membranes in 2014G. The following table shows the distribution of the production capacity of insulation materials producers in the region:

Table (58): The Company’s competitors in the GCC region, as at 31 March 2017

Production Capacity (M2 million per year)CountryPlant/Factory

35KSABituminous Products Co., Ltd. (BETOMAT)

21KSAWaterproof Insulation Industries Co. (Dermabit)

42KSA & UAEHenkel Poly Pet Industries Co., Ltd.

7KSASaudi Bitumen Manufacturing Co. (SAPT)

7KSAAwazel Gulf Industrial Co. (Gulf Seal)

7KSAInsulation & Packaging Products Co

15UAEEMI EMPERT Company

15UAEDobroaov Company LLC

7UAEOasis Waterpowaving Company

10QatarQ-Seal Company

20QatarBitomod Qatar Company

7KuwaitAwazel International Co. (Petogulf )

7KuwaitAl Ahlia Chemicals Company

10BahrainGMC Company (Badr)

4BahrainPolaris International Company Source: Frost & Sullivan

53

4-20-2 Products PortfolioWhile the Company began its operations in the production of oxidizing liquids in 1981G, it currently has about 150 products of various waterproofing, which fall under four systems; i.e. bituminous membranes, polymeric membranes, liquid membranes, and other systems.

Table (59): Company’s Major Export Markets

2017G2016G2015G2014GCountry

%SAR’000%SAR’000%SAR’000%SAR’000

37.30%49,10640.20%59,99443.9%73,57247.2%71,490Kuwait

40.80%53,75735.80%53,50335.0%58,65833.9%51,303UAE

21.90%28,89323.60%35,22319.6%32,81217.3%26,140Qatar

0.00%-0.40%5961.6%2,7391.7%2,569Indonesia

100%131,756100%149,316%100167,781%100151,502Total export salesSource: The Company

4-21 Safety and SecurityThe Company provides the necessary means for the protection and safety of its employees and property in accordance with the conditions of insurance against fire, theft and work injuries. In addition to securing and guarding the Company’s sites and insurance, all Company’s sites are provided in accordance with the safety and prevention requirements of firefighting equipment, fire alarm systems and any other means of protection for the safety of personnel required by the nature of work in certain locations. The safety and security supervisor prepares the safety and security manual in the Company and distributes brochures and instructions that guide employees to use safety equipment, as well as theoretical and practical training on security and safety procedures.

4-22 EmployeesAs of 20/09/1438H (corresponding to 15/06/2017G), the total number of employees of the Company was 379 employees, of which 79 are Saudi employees and 300 are non-Saudi employees. The senior management and executive managers of the Company account for 3.95% of the total workforce.

The Company is classified within the green range of the Saudization Scope Program according to the Saudization certificate issued by Nitaqat Application in the website of the Ministry of Labor and Social Affairs on 20/09/1438 H (corresponding to 15/06/2017G). The Company’s recruitment is in line with the Labor Law. The Company does not expect any negative impact resulting from residency and labor regulations as the Company is already committed to the relevant regulations.

The following table shows the number of employees of the Company during the years 2014, 2015, 2016 and 2017G.

Table (60): Number of Employees in the Company for the Years 2014, 2015, 2016 and 2017G

Employees2017G 2016G 2015G 2014G

Number Percentage Number Percentage Number Percentage Number Percentage

Saudis 51 14.50% 74 20% 72 19.40% 79 20.84%

Non-Saudis 300 85.50% 301 80% 299 80.60% 300 79.16%

Total 351 100.00% 375 100% 371 100% 379 100%Source: The Company

54

Table (61): Staff details per department

Section2017G 2016G 2015G 2014G

Saudis Non-Saudis Total Saudis Non-

Saudis Total Saudis Non-Saudis Total Saudis Non-

Saudis Total

Housing and transportation 1 67 68 2 61 63 2 60 62 2 61 63

sales 4 37 41 3 41 44 3 41 44 3 41 44

Human Resourc-es 8 2 10 22 2 24 20 2 22 19 2 21

Finance 0 8 8 12 8 20 10 8 18 10 8 18

Shops 1 33 34 1 35 36 1 31 32 1 34 35

Production 2 140 142 1 144 145 3 145 148 5 142 147

Procurement 3 2 5 3 2 5 3 2 5 3 2 5

Security 31 0 31 21 0 21 22 0 22 28 0 28

Safety 0 2 2 0 2 2 0 4 4 0 4 4

Information technology 0 6 6 0 6 6 1 6 7 1 6 7

Marketing 1 3 4 9 0 9 7 0 7 7 0 7

Total 51 300 351 74 301 375 72 299 371 79 300 379Source: The Company

The number of employees in Al-Sultan Contracting, Trading and Manufacturing Company is 159 employees, including 14 Saudi and 145 non-Saudi as reflected in the certificate issued by the General Organization for Social Insurance issued on 20/09/1438H (corresponding to 15/06/2017H) and ending on 20/10/1438H (14/07/2017G).

Al-Sultan Contracting, Trading and Manufacturing Company has achieved the required Saudization percentage, as reflected in the Saudization Certificate issued by the Ministry of Labor on 20/09/1438H.

The total number of employees of Al-Takamul plant is 3 employees, including 3 Saudis and 0 non-Saudi employees, as reflected in the certificate of the General Organization for Social Insurance issued on 20/09/1438H (corresponding to 15/06/2017G) and ending on 20/10/1438H (corresponding to 14/07/2017G).

There are no employees under sponsorship of the Advance Membranes Company as it is still waiting for the final license. Two individuals from the parent Company (Arabian Waterproofing Industries Company) are conducting experimental production.

Table (62): *Details of Employees in Subsidiaries Outside the Kingdom as at 31 March 2017

The Company Sales Department Finance Department Warehouse Section Total

Awazel International Co 7 8 7 22

Awazel Kuwait for Building Materials 4 5 8 17

Awazel International Qatar 5 2 4 11Source: The Company

* Employment numbers have not changed during the period from 2014 to 2017

4-22-1 Staff training and qualification programOn 01/09/2015G, the Company entered into an agreement with Retal International Training Center. This agreement aims to provide training for 35 Saudi employees of both genders working in the Company to improve their work skills to ensure that they perform their work in the most professional manner during the period of this agreement being twenty months from the date of its conclusion.

Once they are employed, the Company’s staff receive on-site safety training in addition to specific job training.

The Company’s Human Resources Department has focused on several aspects related to the development and training of its employees by implementing several programs in order to achieve the desired benefits for individuals, organizations and society in general. The Saudization strategy of the Company aims to provide technical jobs for citizens and to reduce dependence of the Company where possible, in particular (and the Kingdom in general) on expatriate workers from outside the Kingdom.

55

5. Organization Structure

5-1 Organization StrucureThe following figure shows the organizational structure of the Company

Figure. 4: Organizational Structure of the Company

Board of Directors

General Assembly

Finance Manager

Research and PlanningManager

Human ResourceManager

Management SupportUnit/ SAP

Program Manager

Information Systems andTechnology Manager

CEO

Internal Auditor

Audit Committee

Investment Committee

Nominations andRemunerations

CommitteeBoard Secretary

Operations GeneralManager

Production andMaintenance Manager

Housing and Transportation Manager

Procurements Manager

Materials ManagementManager

Assets and MaterialsController

Environment andSafety Department

Quality ManagementLabs.

Marketing Manager

Local BranchesSales Manager

Export Coordinator

International BranchesSales Manager

Sales and MarketingGeneral Manager

Source: The Company

5-2 Board of DirectorsThe Company is currently managed by a Board comprised of nine (9) members, five (5) of which are non-executive and three (3) of which are independent. All members were appointed by the Ordinary General Assembly for three (3) years term as of (22/9/2914G) except member Tarek Bin Mutlaq Al Mutlaq (representative of Al Mutlaq Group Company) who was appointed on (20/7/2016G) when the number of Board members was amended to become (9) members instead of eight (8) members. As the current period of the Board is nearing completion, invitations have been sent for membership in the coming term. All current members have expressed their willingness to renew the candidature except for Tareq Al Mutlaq, who has not nominated himself for a another term. The candidature is still open until the next scheduled date of the EGM on 24-9-2017 (pending approval by the Ministry of the proposed date) and the members of the Board will be elected.

The Company’s Board of Directors formed a number of committees: The Nominations and Remunerations Committee and the Investment and Business Development Committee. These committees have approved laws and regulations that constitute part of the Company’s internal governance system and determines the tasks and responsibilities of each committee. The committees submit reports and suggestions to the Board, which annually reviews the rules of the committees based on their recommendations.

56

Following is a summary of the responsibilities of the Board Chairman and members.

Chairman of the Board1- Regulates Board work and manage the Board members’ discussion of agenda topics.

2- Organizes Board attendance meetings dates, calls for Board meetings, prepares agendas, chairs meetings and regulates voting on decisions.

3- Oversees organizing of minutes of meetings and signs them.

4- Ensures the validity of the candidate for the CEO post and request Board approval on his appointment.

5- Chairs the shareholders’ general assembly or authorizes a proxy from Board members to chair the assembly in the absence of the Deputy Chairman or in the event he is unable to chair the assembly.

6- Supervises preparation of the Board report, which is part of the contents of the Company annual report that includes the Board activities during the year.

7- Exercises the authorities vested in him under the Company’s By-Laws or delegated to him by the Board from time to time.

8- Consults with other Board members and CEO upon preparing the agenda topics that will be submitted to the Board.

Board Members1- Approve the comprehensive strategies of the Company and key business plans and determine their key objectives,

which include the operational and financial annual plans of the Company via the recommendations submitted by the executive body of the Company.

2- Appoint the Company CEO and follow up his performance.

3- Set, review and guide a regulation for the risks policy in the Company.

4- Determine the Company most appropriate capital structure, its strategy and financial objectives and approve annual budgets.

5- Oversee the key capital expenditures of the Company in addition to acquisition and disposal of assets.

6- Set the performance goals and monitor overall representation and performance of the Company.

7- Review and approve the organizational and human resources structures of the Company on a periodic basis.

8- Set a governance system for the Company – that would not contradict with the provisions of the Companies Governance Regulations issued by the Capital Market Authority – Supervise the system, monitor its efficiency and amend it when needed.

9- Develop a written policy that regulates conflict of interests and remedies the potential conflicts for each of the Board members, the Executive Management and the shareholders. This includes misuse of Company’s assets and facilities and mismanagement resulting from transactions with related parties.

10- Ensure the integrity of the financial and accounting systems, including systems related to the preparation of financial reports.

11- Ensure the implementation of adequate control systems for risks management via generally forecasting the risks that the Company may encounter and disclosing such risks transparently.

12- Review of the Company’s internal control procedures and their effectiveness on an annual basis.

13- Develop explicit and specific policies, standards and procedures for Board membership and implement them after approval by the general assembly.

57

The following table shows the current Board members:

Table (63): Board Members.

Ser. Name Post Repre-senting

Nation-ality Age Capacity

Direct Owner-ship%*

Indirect Owner-ship %*

Date of Member-

ship**

Before IPO

After IPO

Before Offer-

ing

After Offer-

ing22/09/2014G

1Dr. Walid Bin Sulaiman Aba-nami

ChairmanIn his personal capacity

Saudi 50

Non-Exec-utive and Independ-ent

1.85% 1.30% - - 22/09/2014G

2 Firas Ali Ibrahim Al Suqair

Deputy Chairman


Saudi 49 Executive 5.47% 3.83% - - 22/09/2014G

3Mansour Ali Ibrahim Al Suqair



4 Naser Ali Ibra-him Al Suqair Member



5Mohammed Abdulaziz Al Bahar

Member

Boubyan Petro-chemical Co.

Kuwaiti 55

Non-Exec-utive and Non-Inde-pendent

20.78% 14.55% - - 22/09/2014G

6Turki Naser Mohammed Al Motawwaa


Saudi 38


0.95% 0.67% - - 22/09/2014G

7 Ibrahim Ali Ibra-him Al Suqair

Managing Director


Saudi 54 Executive 6.73% 4.71% 0.36% 0.25% 22/09/2014G



Saudi 55


0.40% 0.28% - - 22/09/2014G

9 Tarek Bin Mut-laq Al Mutlaq Member


Saudi 54


0.40% 0.28% - - 20/07/2016G

Source: The Company

* Under the Company’s By-Laws and the provisions of the current Companies Law, the Board members have shares as a Membership Guarantee in the Company in a nominal value of forty thousand Saudi Riyals (SAR 40,000) per member.

** The dates mentioned in this table are the dates of appointment in the current posts stated in the same table. The CVs of Board members shows the date of start of appointment of each of them in the Company whether in the Board or any other post that precedes such posts. (For more information, please refer to sub-section 5-2 “Board of Directors” of this Prospectus.

*** The indirect ownership for Ibrahim Ali Al Suqair is related to his minors Hatoun Ibrahim Al Suqair who owns 50,000 shares and Ali Ibrahim Al Suqair who owns 50,000 shares. The Indirect ownership for Tarek Mutalq Al Mutlaq is related to his ownership in Al Mutlaq Group.

58

5-2-1 Summary of the CVs of Board Members and SecretaryFollowing is a summary of the CVs of the Board members and secretary:

Name Walid Sulaiman Abdulmohsen Abanami

Age 50

Nationality Saudi

Post Board Chairman

Qualifications

• Ph.D. in Financial Management, Southern Illinois University, Illinois, United Stated of America (USA), 1997G.

• Masters in Information Systems Management, Illinois University, Illinois, USA, 1990G.

• Bachelor of Computer Sciences, Southern Illinois University, Illinois, USA, 1988G.

Current Posts

• Board Chairman of Arabian Waterproofing Industries Company, a joint stock company operating in manu-facturing of waterproofing materials and road asphalt, since 2016G.

• Member of the Board of Inmaia Investment and Real Estate and Tourism Development Company, a joint stock closed company operating in real estate development, since 2006G.

• Manager and Managing Director in Saudi Knowledge Company, a limited liability company operating in retail trade and educational instruments, since 1997G.

Other Posts • Member of the Board of Arabian Waterproofing Industries Company, a joint stock company operating in manufacturing waterproofing materials and road asphalt from 2005G to 2016G.

Name Firas Ali Ibrahim Al Suqair

Age 50

Nationality Saudi

Post Deputy Chairman and General Manager of Sales and Marketing

Qualifications• Masters of Business Administration, Al Faisal University, Riyadh, Kingdom of Saudi Arabia, 2012G.

• Bachelor of Biochemistry, King Saud University, Riyadh, Kingdom of Saudi Arabia, 1989G.

Current Posts

• Manager in Lemar Arabian Company for Investment and Real Estate Development, a limited liability com-pany operating in investment and real estate development, since 2015G.

• Manager in Retal International Center Company for Training, a limited liability company operating in uni-versity management and founding institutes and academies, since 2014G.

• Manager in Al Sultan Contracting, Commercial and Industrial Company Ltd., a limited liability company operating in manufacturing and installing Riyadh stone, since 2014G.

• Manager in Al Agmar Educational Company, a limited liability company, operating in the design and inno-vation of educational research and instruments, since 2014G.

• Manager in Fast Employment Company, a limited liability company operating in administrative consulting and recruitment of Saudi Nationals, since 2014G

• Manager in Al Takamul Factory Company for Stones and Marble, a limited liability company operating in the manufacture of Riyadh decorated stone and breaking façades marble, since 2014G.

• Manager in Advanced Membranes Company for Industry, a limited liability company operating in the production of plastic membranes and thermal insulation since, 2013G.

• Manager in Kalkal National Company for building materials, a limited liability company operating in the construction of factories and wholesale of building materials since, 2009G.

• Manager in Awazel International Company, Qatar, a limited liability company operating in the trade of building materials, since 2008G.

• Manager in Kuwait Awazel Company for Building Materials, a limited liability company operating in the trade of building materials since, 2003G.

• Manager in Awazel International Company a limited liability Company operating in the trade of building materials, since 2002G.

• Deputy Chairman of the Board of Arabian Waterproofing Industries Company, a joint stock company oper-ating in the manufacturing of waterproofing materials and road asphalt, since 1999G.

• Manager of Marketing and Sales in Arabian Waterproofing Industries, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 1996G.

Other Posts NA

59

Name Ibrahim Ali Ibrahim Al Suqair

Age 55

Nationality Saudi

Post Managing Director

Qualifications • Bachelor of Computer Information Systems, Ferris State University, USA, 1992G.

Current Posts

• Manager in Lemar Arabian Company for Investment and Real Estate Development, a limited liability com-pany operating in investment and real estate development, since 2015G.

• Member of the Board of Inmaia Investment and Real Estate and Tourism Development, a joint stock closed company operating in real estate development, since 2008G.

• Member of the Board of Ozrix International Company, a limited liability company operating in oil process-ing, manufacturing and packing of all asphalt derivatives, since 2005G.

• Member of the Board of Arabian Waterproofing Industries Company, a joint stock company operating in manufacturing waterproofing materials and road asphalt, since 1992G.

• Manager of Retem Hydraulic Equipment Maintenance Company, a limited liability company operating in the maintenance of hydraulic equipment since, 1999G.

Other Posts NA

Name Mohammed Abdulaziz Ali Bahar

Age 55

Nationality Kuwaiti

Post Board Member

Qualifications• Master of Operational Research, University of Southern California, California, USA, 1985G.

• Bachelor of Industrial Engineering and Systems, University of Southern California, California, USA, 1982G.

Current Posts

• Board Chairman of Boubyan Plastic Industries Company, a Kuwaiti joint stock closed company operating in the manufacturing of plastic products, since 2001G.

• Member of the Board of Kuwaiti Olefins Company, a Kuwaiti closed joint stock company, manufacturing of olefins, since 2009G.

• Board Chairman of Al Jubail Integrated Packing Company, a limited liability company operating in the manufacturing of plastic products since, 2008G.

• Member of the Board of Nama Chemicals Company, a joint stock company operating in the manufacturing of intermediate chemicals, since 2007G.

• Member of the Board of the Arabian Waterproofing Industries Company, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 2007G.

• General Manager of Boubyan Petrochemicals, a Kuwaiti joint stock company operating in industrial invest-ment, since 2001G.

Other Posts NA

Name Turki Naser Mohammed Al Motawwaa Al Otaibi

Age 38

Nationality Saudi

Post Board Member

Qualifications • Bachelors of Business Administration, King Saud University, Kingdom of Saudi Arabia, 2001G.

Current Posts

• Vice President for Investment, Samama Holding Company, a joint stock closed company operating in con-tracting and investments, since 2010G.

• Member of the Board of Samama Holding Company, a joint stock closed company, operating in contract-ing and investments, since 2009G.


Other Posts NA

60

Name Tarek Mutlaq Abdullah Al Mutlaq

Age 54

Nationality Saudi

Post Board Member

Qualifications • Bachelor of Commerce, American University in Washington, D.C., USA, 1986G.

Current Posts


• Board Chairman of the Saudi Arabian Daikin Company, a limited liability company operating in importing and exporting household, electrical and electronic appliances, since 2014G.

• Member of the Board of Riyadh Cables Company, a joint stock closed company operating in cables produc-tion, since 2014G.

• Chief Executive Officer in Al Mutlaq Real Estate Investment Company, a limited liability company operating in real estate investment, since 2009G.

• Member of the Board of the Arabian Water and Energy Projects Company, Acwa Power, a joint stock closed company operating in water desalination, since 2007G.

Other Posts

• Member of the Board of Saudi Orix Leasing Company, a closed joint stock company operating in financing, from 2008G to 2014G.

• Member of the Board of the National Installment Company, a joint stock closed company operating in financing, from 2007G to 2014G.

• Member of the Board of the Sahara Petrochemicals Company, a joint stock closed company, operating in production of petrochemicals, from 2007G to 2014G.

• Member of the Board of the National Financing House, a joint stock closed company, operating in financ-ing, from 2006G to 2012G.

• Member of the Board of Arabian Insurance Company, a joint stock company operating in insurance, from 2006G to 2012G.

• Member of the Board of Al Waha Petrochemicals Company, a limited liability company operating in the production of petrochemicals, from 2006G to 2012G.

• Board Chairman of Shuaa Capital Saudi Arabia Company, a joint stock closed company operating in finan-cial services, from 2007G to 2012G.

Name Naser Ali Ibrahim Al Suqair

Age 40

Nationality Saudi

Post Board Member and General Manager of Marketing

Qualifications • Bachelor of Business Administration, Al Faisail University, Kingdom of Saudi Arabia, 2015G

Current Posts

• Assistant Manager of Marketing and Sales in the Arabian Waterproofing Industries Company, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 2002G.


Other Posts NA

Name Jamal Abdulrahman Al Zamil

Age 55

Nationality Saudi

Post Board Member

Qualifications • Bachelor of Business Administration, Cairo University, Cairo, Arab Republic of Egypt, 1996G.

Current Posts

• Member of the Board of Directors and Chairman of the Executive Committee in Al Zamil Company for Industry, Trade and Transport, a limited liability company operating in wholesale and retail trade and third party import and export services, since 2013G.

• Member of the Board of Directors of the Arabian Waterproofing Industries Company, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 1999G.

61

Name Jamal Abdulrahman Al Zamil

Other Posts

• General Manager of Al Zamil for Manhole Covers Production, a limited liability company operating in the manufacturing, importing and trading of manhole covers, from 2012G to 2013G.

• General Manager of Al Zamil Automatic Doors Company, a limited liability company operating in the wholesale and retail sale trading of all garages and automatic and steel doors, from 2006G to 2013G.

• General Manager of Jamal Abdulrahman Al Zamil Company and Partners for Contracting, a limited liability company operating in general contracting, thermal insulation and waterproofing of buildings, from 2002G to 2013G.

• General Manager of Al Zamil Water Tanks Company, a limited liability company operating in the production of plastic tanks, from 1998G to 2013G.

• General Manager of Al Zamil Company for Industry, Trade and Transport, a limited liability company operating in the wholesale and retail sale trade and third party import and export services, from 1991G to 2013G.

Name Mansour Ali Ibrahim Al Suqair

Age 49

Nationality Saudi

Post Board Member and Operations General Manager

Qualifications• Diploma of Law, Nayef University of Security Sciences, Riyadh, Kingdom of Saudi Arabia, 2012G.

• Bachelor of Mechanical Engineering, King Saud University, Riyadh, Kingdom of Saudi Arabia.

Current Posts

• General Manager of Operations in the Arabian Waterproofing Industries Company, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 1996G.

• General Manager of Afael International Trading Company, a limited liability company operating in commerce and industry, since 2014G.

• Manager in Ozrix International Company, a limited liability company operating in oils, manufacturing and packing of all asphalt derivatives, since 2005G.

• Member of the Board of the Arabian Waterproofing Company, a joint stock company operating in the manufacturing of waterproofing materials and road asphalt, since 2005G.

Other Posts NA

Name Aladin Mohammed Mohammed Bargouth

Age 65

Nationality Egyptian

Post Board Secretary and Company Advisor

Qualifications

• Master of Engineering Sciences, Imperial University of Science and Technology, London, United Kingdom, 1979G.

• Fellowship Diploma, Imperial College of Science and Technology, 1976G.

• Bachelor of Telecommunications Engineering, Alexandria University, Alexandria, Arab Republic of Egypt, 1974G.

• Study of Administrative Sciences in the (ETH) Federal Institute of Science Management, Zurich, Switzer-land,1986G and successfully completed the study and research in 1988G.

Experiences

• Secretary of the Board of the Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, from 20007G to date.

• Resident advisor in the Arabian Waterproofing Industries Company, a joint stock closed company operat-ing in the manufacturing of waterproofing materials and road asphalt, from 20005G to date.

• Partner and Manager in Consolid Company of Egypt, a limited liability company operating in road con-struction chemicals, from 1996G to 1998G.

• Founded and Managed Aladin Office for Consulting in Zurich, individual establishment operating in feasi-bility studies, from 1990G to 1995G.

• Marketing Manager in Top Export Limited, Switzerland, a limited liability company operating in export, from 1983G to 1985G.

• Projects Management in in Al Suqair Company Limited, a limited liability company operating in contract-ing, from 1982G to 1983G

• Development Engineer in World Lords Consulting Company Ltd., England, a limited liability company operating in consulting services, from 1979G to 1981G.

Other Posts NA

62

5-3 Executive ManagementThe Executive Management is composed of a skillful team that has the required experiences and skills to manage the Company efficiently and effectively in line with the directions of the Board of Directors.

Table (64): Executive Management of the Company

Name Post Nationality Age Date of JoinShares Owned before the Of-

fering

Shares Owned after the Of-

fering

Ibrahim Ali Al Suqair Managing Director Saudi 55 1993G 1,837,547 1,286,283

Firas Ali Al Suqair General Manager of Marketing and Sales Saudi 50 1996G 1,493,919 1,045,743

Mansour Ali Al Suqair General Manager of Operations Saudi 49 1996G 1,493,919 1,045,743

Naser Ali Al Suqair Marketing Manager Saudi 40 2002G 1,663,740 1,164,618

Zahed Hasan Finance Manager Pakistani 73 1992G 0 0

Khaled Yousef Saifan Production Manager Palestinian 55 1991G 0 0

Jaafar Al Amin Procurements Man-ager Sudanese 65 1988G 0 0

Mohammed Rajab Darwish Internal Auditor Egyptian 55 1990G 0 0

Jely Ali Ibrahim Mohammed

Domestic Sales Manager Sudanese 57 1990G 0 0

Fuad Ibrahim Al Moqayyad

Materials Manage-ment Manager Palestinian 62 1995G 0 0

Mohammed Abdul-lah Al Saawi

Transportation Man-ager Saudi 42 1999G 0 0

Bilal Mustafa Al Osta Information Technolo-gy Manager Lebanese 54 2002G 0 0

Aladin Mohmmed Bargouth

Board Secretary and Company Advisor Egyptian 65 2004G 0 0

Sulaiman Ibrahim Al Suqair

Management Support Unit/ SAP Program Manager

Saudi 27 2013G 0 0

Nayef Shaker Al Dalbahi

Human Resources Manager Saudi 31 2014G 0 0

Source: The Company

5-3-1 Responsibilities of Managing Director (CEO)The Managing Director shall have the right, solely or jointly with the Board Chairman and Deputy Chairmen, to represent the Company in its relationship with third parties as well as the administrative, financial and technical powers and authorities required for management operations; represent the Company before the different types of governmental and judicial bodies, general, district and administrative courts, Board of Grievances; defending; advocacy; litigation; acceptance and denial of reconciliation; acceptance and denial of arbitration; admission; denial; hearing and responding to lawsuits; recourse to the notary public and Civil Affairs Department, Recruitment Offices, Labor Offices, Social Insurances and Passport Department; conclude agreements and transactions in the name of the Company; sign companies’ By-Laws in which the Company is a party and sign its annexes; open branches inside and outside the Kingdom and sign for the same before the notary public; purchase shares and stocks; sell, buy, rent and vacate real estates and sign the same before the notary public; open accounts in local and international banks of different types and manage such accounts including deposit and withdrawal for the Company’s benefit; conclude bank loan agreements and facilities and Islamic financing agreements of all types and treasury agreements with governmental financing funds and organizations, bank and financial houses, warrantees and guarantees, mortgages and its redemption; open credits and sign on all required documentations; prepare internal Human Resource By-Law, appointment of personnel locally or recruit them from abroad, determine their salaries and remunerations and dismiss them; appoint accountants, advisors and lawyers and determine the fees, remunerations and salaries; take all measures necessary for the Company business within its scope of purposes and fulfillment of its different obligations and authorize third parties to undertake a specific work or works.

63

5-3-2 Responsibilities, Operations’ General ManagerThe responsibilities of the Operations’ General Manager include managing operational plans of the Company factories, all operation and supports operations departments and its supporting units. This includes overseeing and approving production, maintenance, expansions and procurements plans and approving their sources as well as supervising transportation departments, research and development units and developing quality control fundamentals and ensuring implementation of safety systems and standards.

5-3-3 Responsibilities, Finance ManagerThe responsibilities of the Finance Manager include managing and preparing financial reports and taking part in preparing the estimated budget for the next year, developing the accounting cycle and bases, determining authorities within the department, approving payments and transfers of all types, determining and discussing banking facilities, managing the funds, monitoring the financial performance of the Company and its branches, developing the consolidated budgets (monthly, quarterly and annually) and cooperating and coordinating with the internal and external auditors.

5-3-4 Responsibilities, Marketing and Sales General ManagerThe responsibilities of the Marketing and Sales General Manager include determining ideal marketing plans for the Company, supervising and developing policies for local sales and export, following up financial and administrative businesses of the management such as the collection policy, credit granting policy, participating in developing the sales estimated annual plan and effective communicating with VIP clients and decision-makers to approve and qualify Company products.

5-3-5 Responsibilities, Human Resource ManagerResponsibilities of the Human Resource Manager include appointment of qualified personnel, developing and retaining relevant resources in order to help the Company to achieve its goals. The responsibilities also include providing the job description and determining the job ranking system, providing guidance, following up regarding periodic appraisals, ensuring compliance with Saudization and social insurance systems and other applicable regulations.

5-3-6 Responsibilities, Production Department ManagerThe responsibilities of the Production Department Manager include Company production planned quantities, ensuring provision of a high quality required manufactured products in line with the established plans, analyzing and controlling production inputs vs. actual production, developing production demand plans and utilizing available manpower and equipment, comparing the actual and planned production quantities and the goals set by the managements, ensuring safety of facilities and personnel in addition to preparing periodic maintenance plans and supervising repair.

5-3-7 CVs of the Executive Management

Name Ibrahim Ali Ibrahim Al Suqair

Age 55

Nationality Saudi

Post Managing Director

Qualification

Please refer to section 5-2-1, “Summary of the CVs of Board members and Secretary”Experiences

Other Posts

Name Firas Ali Ibrahim Al Suqair

Age 50

Nationality Saudi

Post Deputy Chairman and General Manager of Sales and Marketing

Qualifications


Other Posts

64

Name Mansour Ali Ibrahim Al Suqair

Age 49

Nationality Saudi

Post Board Member and Operations General Manager

Qualification


Other Posts

Name Naser Ali Ibrahim Al Suqair

Age 40

Nationality Saudi

Post Board Member and General Manager of Marketing

Qualification


Other Posts

Name Zahed Hasan Goulam Hasan

Age 73

Nationality Pakistani

Post Finance Manager

Qualification• Master of Business Administration, Detroit University, USA, 1975G.

• Master of Commerce, Punjab University – Pakistan, 1970G.

Experiences

• Finance Manager, Arabian Waterproofing Industries Company, a joint stock closed company, operating in the manufacturing of waterproofing materials and road asphalt, since 1994G to date.

• Finance Manager, Al Mawarid Constructions Company, a limited liability company operating in contract-ing, from 1990G to 1994G.

• Finance Manager, Arabian Waterproofing Industries Company, a joint stock closed company, operating in the manufacturing of waterproofing materials and road asphalt, from 1988G to 1990G.

• Accountant , Arabian Contracting Company, a limited liability company operating in contracting, from 1981G to 1988G

• Accountant, Ittifaq Group – Pakistan, a limited liability company operating in contracting, from 1979G to 1981G.

• Costs Accountant, Powertech America, USA, a limited liability company operating in contracting, from 1974G to 1979G.

• Accountant in the Sacred Heart Healthcare Center, USA, a philanthropic society operating in healthcare, from 1973G to 1974G.

• Accountant, Peshky Packaging Company, USA, a limited liability company operating in packaging, from 1970G to 1973G.

• Accountant, Water and Electricity Company – Pakistan, a governmental company operating in the field of water and electricity, from 1965G to 1970G.

Other Posts NA

65

Name Khaled Yousef Saifan

Age 55

Nationality Palestinian

Post Manager of Production and Maintenance

Qualification • Bachelor of Electrical Engineering, University of California, USA, 1986G.

Experiences

• Manager of Production and Maintenance and Manager of Procurements, Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, since 1990G to date.

• Maintenance Engineer, Mohammed Ibrahim Abo Nayan Company, a limited liability company operating in well drilling, from 1987G to 1989G.

• Maintenance Engineer in Saudi Sime Company, a Saudi Italian company operating in electro-mechanics, from 1985G to 1987G.

Other Posts NA

Name Jafar Alamin Mohammed

Age 65

Nationality Sudanese

Post Procurements Manager

Qualification • Bachelor of Economics and Political Sciences, University of Khartoum, Sudan, 1974G.

Experiences

• Manager of Procurements, Arabian Waterproofing Industries Company, a joint stock closed company oper-ating in the manufacturing of waterproofing materials and road asphalt, since 1986G to date.

• Manager of Procurements, Dallah Albaraka Company, a joint stock closed company operating in several industries, from 1983G to 1986G.

• Commercial Manager, Al Dafra Trading Company – Sudan, a limited liability company, operating in import and export, from 1980G to 1983G.

• Economic Researcher, Ministry of Finance and National Economy – Sudan, government ministry, from 1977G to 1980G.

• Researcher in the Ministry of Commerce – Sudan, government ministry, from 1974G to 1977G.

Other Posts NA

Name Mohammed Rajab Darwish Mohammed

Age 55


Post Internal Auditor

Qualification• Computer Diploma, University of Alexandria, Alexandria, Arab Republic of Egypt, 1987G.

• Bachelor of Commerce, University of Alexandria, Alexandria, Arab Republic of Egypt, 1982G.

Experiences

• Internal Auditor, Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, from 1989G to date.

• Computer Programmer, Information Operation Systems Company – Arab Republic of Egypt, a limited liability company operating in information technology, from 1982G to 1988G.

Other Posts NA

66

Name Jely Ali Ibrahim Mohammed

Age 57

Nationality Sudanese

Post Domestic Sales Manager

Qualification • Bachelor of Psychology, University of Sudan, Khartoum, Sudan, 1982G.

Experiences

• Domestic Sales Manager, Arabian Waterproofing Industries Company, a joint stock closed company oper-ating in the manufacturing of waterproofing materials and road asphalt, from 1989G to date.

• Marketing Manager, Albilad Cement Company, a limited liability company operating in reinforced concrete pipes, from 1987G to 1989G.

• Sales Officer, Absal Steel Fabrication Company, a joint stock closed company operating in fabricating steel for buildings and constructions, from 1983G to 1986G.

Other Posts NA

Name Fuad Ibrahim Hussain Al Moqayed

Age 62

Nationality Palestinian

Post Materials Management Manager

Qualification• Master of Technical Sciences, King Saud University, Riyadh, Kingdom of Saudi Arabia, 1983G.

• Bachelor of Chemistry, King Saud University, Riyadh, Kingdom of Saudi Arabia, 1975G

Experiences

• Materials Management Manager, Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, from 1996G to date.

• Executive Manager in Alkhairat Medical Center, a medical institution operating in healthcare, from 1990G to 1995G.

• Lab. Technician in the General Authority of Girls Education, a government entity operating in the field of education, from 1975G to 1990G.

Other Posts NA

Name Mohammed Abdullah Sulaiman Al Saawi

Age 42

Nationality Saudi

Post Manager of Transportation, Housing and Nutrition

Qualification • High School

Experiences

• Manager of Transportation, Housing and Nutrition, Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, from 1998G to date.

• Manager, Retem Company, a limited liability company operating in the maintenance of hydraulic equip-ment, from 1996G to 1998G.

• Public Relation Officer, Saud Post, a government entity, operating in logistic and postal services, from 1993G to 1996G.

Other Posts NA

Name Bilal Mustafa Al Osta

Age 54

Nationality Lebanese

Post Manager of Computer Department

Qualification • Master of Computer Sciences, Southern Illinois University, USA, 1985.

67

Name Bilal Mustafa Al Osta

Experiences

• Manager of Computer Department, Arabian Waterproofing Company, a joint stock closed company oper-ating in the manufacturing of waterproofing materials and road asphalt, from 2002G to date.

• Computer Engineer, Alamthal Establishment, individual establishment operating in import and export, from 1992G to 2002G.

• Computer Engineer, Alayel Company – Kuwait, a limited liability company operating in information tech-nology, from 1988G to 1990G.

• Computer Engineer in Solectron Company – Lebanon, operating in the information technology, from 1987G to 1998G.

• Computer Engineer, Merit Company, USA operating in information technology, 1986G to 1987G.

Other Posts NA

Name Aladin Mohammed Mohammed Bargouth

Age 65


Post Company Advisor

Qualification

Please refer to section 5-2-1, “Summary of the CVs of Board Members and Secretary”Experiences

Other Posts

Name Sulaiman Ibrahim Ali Al Suqair

Age 27

Nationality Saudi

Post Manager of Management Support Unit/ SAP Program

Qualification • Bachelor of Industrial Engineering, Al Faisal University, Riyadh, Kingdom of Saudi Arabia, 2012G.

Experiences

• Management Support Unit/ SAP Program Manager, Arabian Waterproofing Industries Company, a joint stock closed company operating in the manufacturing of waterproofing materials and road asphalt, from 2013G to date.

• Study of projects in Saudi Sab Company, a limited liability company operating in information technology, from 2012G to 2013G.

Other Posts NA

Name Nayef Shaker Shirar Al Dalbahi

Age 31

Nationality Saudi

Post Human Resource Manager

Qualification • Advanced Diploma in Human Resource, Oxford Training College, Riyadh, Kingdom of Saudi Arabia, 2005G.

Experiences

• Human Resource Manager, Arabian Waterproofing Industries Company, a joint stock closed company oper-ating in the manufacturing of waterproofing materials and road asphalt, from 2014G to date.

• Administrative Affairs Officer, Almasar Telecommunications and Information Technology Company, a limit-ed liability company, from 2011G to 2013G.

• Administrative Affairs Officer, National Commercial Bank, a joint stock company operating in banking services, from 2006G to 2011G

Other Posts NASource: The Company

68

5-4 Contracts and Remunerations of Board Members and Executive Managers

There are no contracts with the Board members. The remunerations policy is stipulated in the By-Laws and voted upon in the general assembly meeting. The Board remuneration shall be a percentage not to exceed ten (10%) percent of the remaining amount after distribution of company annual net profits and after deduction of the following:

1- 10% mandatory reserve

2- 10% consensual reserve

3- Any general reserves approved by the general assembly in line with the Company’s By-Laws.

4- 5% of paid up capital as dividends distributed to shareholders

The Board’s report submitted to the general assembly shall contain a comprehensive statement of all amounts received by Board members during the fiscal year, including salaries, share of profits, Board meeting attendance allowance, expenses during the fiscal year and any other benefits as well. The said report shall also include a statement of the amounts received by Board members as employees or administrators or amounts received by them versus technical, administrative or advisory activities previously approved by the Company general assembly.

The following table shows the remunerations, salaries and benefits received by the Board members and senior management personnel, including the five senior executives who received the highest remunerations during the fiscal years ended 31 March 2014G, 2015G, 2016G and 2017G.

Table (65): Remunerations, Salaries and Benefits Received by the Board and Senior Management Personnel during the Fiscal Years Ended 31 March 2014G, 2015G, 2016G, 2017G.

2017G2016G2015G2014GSAR million

0*1.51.51.5Board Members

11.212.211.2210.25Senior Management PersonnelSource: The Company

� Remunerations of the Board are approved by the annual general assembly meetings and those which are not yet held.

Company Contracts with Senior Management PersonnelThe contracts of the executive managers in the Company are unified contracts and have the same terms with the post and wage constituting the only difference.

Table (66): Summary of the Company Contracts with Senior Management Personnel

End of ContractStart of ContractPostNameNumber

One year contract renewable automatically for similar periods1/4/2015GFinance ManagerZahed Hasan1

One year contract renewable automatically for similar periods1/4/2015GManager of Production and

MaintenanceKhalid Saifan2

One year contract renewable by agreement of both parties1/1/2015GAuditorMohammed Rajab Darwish

Mohamed3

One year contract renewable by agreement of both parties1/1/2015GHuman Resource ManagerNayef Shaker Sherar Al

Dalbahi4

Source: the Company

5-5 Corporate GovernanceThe Company complies with the governance regulations issued by the Ministry of Commerce and Investment, Capital Market Authority and Tadawul. On 12/7/2016G, the Company Board approved its governance guide, which regulates the Company’s governance rules and includes but not limited to the mechanisms of formation of the Board and its committees and the method of its selection as well as the scenarios of terminating membership of the Board or its committees, in line with the governance instructions laws issued by the Ministry of Commerce and Investment and the Capital Market Authority.

The Company’s governance guide also includes as a standard, dealing with the conflict of interests scenarios and mechanisms of solving them.

69

5-6 Undertakings of Board Members after the Offering and ListingThe Board members shall undertake to carry out the following after the offering and listing:

� Disclose to the Board and general assemblies on annual basis, transactions and contracts with the Company Board members in line with the new Companies’ Law and the Companies Governance Regulations in order to obtain shareholders’ approval after excluding related parties.

� Disclose to the general assemblies on annual basis, any conflict of interests between the Company’s business and the business of its substantial shareholders and Board members or the companies in which they have shares in order to obtain Board and shareholders’ approval after excluding related parties.

� Inform the Capital Market Authority of the date of general assemblies’ meetings that will be held by the Company after listing in order for the CMA representative to attend such meetings.

� Adhere to all mandatory articles of the Companies’ Governance Regulations directly after listing.

� Undertake, within one year of entry of force of the Companies’ Law, to have the Audit Committee reporting to the general assembly instead of the Board.

� Transfer ownership of all shares and stocks owned for the benefit of the Company in the subsidiaries to be a direct ownership in the name of the Company.

� Adhere to the contents of the Listing and Registration Rules and the Companies Governance Regulations upon preparing the Board’s report.

� Complete expansions, founding a new factory and disclosure of developments as mentioned in table 51 of this prospectus unless there is a legal impediment or the shareholders have otherwise voted as follows:

Project NameAwazel

Ownership Percentage

Production Capacity of the Project

Project Start Date

Project End Estimated

Date

Total Estimated

Cost

Method of Finance

Percentage of Performance

Founding a Factory to Sultan Company

80% 300,000 sqm March 2016G March 2018G SAR 5.3 million

Self-Finance 10%

Addition of a production line, thermal insulation factory, Riyadh

100% 150,000 cbm April 2016G March 2018G SAR 15.5 million

Self-Finance 15%

Addition of a production line, thermal insulation factory, Jeddah

100% 72,00 cbm November 2017G June 2018G SAR 8.7

millionSelf-

Finance 0

5-7 Conflict of InterestsThe Company’s By-Laws or any of the internal policies and regulations do not provide for any authorities that enable a Board member to vote on a contract or offer in which he has a direct or indirect substantial interest. This is in implementation of the text of article (71) of the Companies’ Law, which states that no Board member shall not have any interest whether directly or indirectly in the transactions and contracts made for the account of the Company except with an authorization from the Ordinary General Assembly and shall be renewed annually.

Pursuant to the text of the said article, the Board member shall inform the Board of any personal interests he may have in the transactions and contracts made for the account of the Company. The Board Chairman shall inform the general assembly once convened, of the transactions and contracts in which a Board member has a personal interest. Such communication shall be accompanied by a special report from the Auditor. Such notification shall be registered in the Board’s minutes of meeting. The member who has interest shall not have the right to vote on the resolution submitted for voting in this respect. Based on the aforementioned, the Board members shall acknowledge as follows:

a- Adhere to act in line with articles (71) and (72) of the Companies’ Law and article (18) of the Companies Governance Regulations.

b- Not to vote on the contracts concluded with related parties in the general assembly meetings, if they have direct or indirect interest in such contracts.

c- Adhere not to enter into competition against the Company’s business, and that all transactions with related parties in the future shall be on a competitive basis in application of text of article (72) of the Companies’ Law.

70

5-8 Internal Committees and Their Responsibilities

5-8-1 Audit CommitteeThe provisions of the Company’s By-Laws concur with the requirements of the Company’s Law. The Company’s By-Laws states explicitly that the Audit Committee shall be formed and report to the Ordinary General Assembly of shareholders.

The key current function of the Audit Committee is monitoring the Company’s business. To that effect, the committee shall have the right to review the Company’s records and documents and may request any clarification or statement from any Board member or the Executive Management. The committee may request the Board to call the Company’s general assembly to convene if its business has been impeded by the Board or the in the event the Company has suffered significant damages and losses. The Audit Committee shall also have the right to review the financial statements of the Company, reports and comments submitted by the auditor and submit its views accordingly, if any. The Committee shall also prepare a report on its opinion with respect to the extent of adequacy of the Company’s internal control system, and other business it has undertaken within the scope of its jurisdiction. The detailed functions of the committee includes what is determined in the resolution of appointing committee members in each term, its business controls and remunerations of its members.

The committee is formed of three (3) members other than executive members whether shareholders or otherwise who are appointed by the shareholders’ Ordinary General Assembly. The committee meeting shall be valid if attended by the majority of its members. Resolutions of the committee shall issue by majority voting of attendees. The vote of the Chairman shall be casting in the event of a tie. The following table shows current members of the Audit Committee:

Table (67): Audit Committee Members

PostName

MemberTurki Al Mutawwaa Al Otaibi

MemberMohammed Al Bahar

MemberJamal Al ZamilSource: The Company

* The Company has not held its first meeting to select its chairman.

Following are the CVs of the Audit Committee members:

Turki Al Mutawwa Al Otaibi (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

Mohammed Al Bahar (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

Jamal Al Zamil (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

5-8-2 Remunerations and Nominations CommitteeThe Remunerations and Nominations Committee assumes the following tasks:

� Provides recommendation to the Board for the nomination of its membership, in line with the approved policies and standards stated in the Board Regulations, taking into consideration that nomination shall not include any no person previously convicted with a crime infringing on honesty and integrity.

� Annually reviews of the required needs of adequate skills for Board membership and provision of a description of the potentials and qualifications required for the Board membership, including determining the time that need to be allocated for the Board business by the member.

� Reviews the Board structure and provides recommendation in regards changes that may be made.

� Determines weaknesses and strengths of the Board and recommend remedies in line with the Company’s interest.

� Develops standards to determine independence of the Board member and an adequate mechanism to inform shareholders of any changes that cause the member to lose his independence; ensures the independence of independent members and the absence of no of any conflict of interest if the member acts as a board member in another company. This shall be made on an annual basis.

� Prepares guidelines and introductory programs for the new independent and non-executive Board members’ on the nature of Company’s business and a detailed description of their responsibilities and tasks as Board members.

� Provides recommendations to the Board to determine specific standards for the selection of persons to occupy the CEO and the key departments’ managerial posts in the Company.

� Sets a clear policy of compensations, remunerations and rewards for the Board members and executive managers of the Company; organize the efforts of each Board member and the CEO to apply the Company’s strategic goals and utilize performance related standards and evaluate their personal performance against the goals stipulated by the Board.

� Sets standards for the remunerations of the Board Chairman and members that enable the Company to achieve distinct performance without affecting independence of members.

71

� Sets standards for the remunerations of the CEO and managers of departments and units of the Company. The committee shall conduct a periodic review of these standards related to the fixed annual salaries and the changing bonuses, which are based on the financial and non-financial evaluation of performance. This shall be in addition to establishing standards of long-term incentives to connect the managers’ interests with those of the Company’s shareholders.

� Reviews on ongoing basis the extent of adequacy of the Company’s remunerations standards vs. the Company’s performance and balance sheet as well as key trends of the business market.

� The committee is formed of at least three (3) members appointed by the Board. The term of the committee member shall not exceed the term of the Board membership, provided the membership of the committee member shall expire with the expiry of his Board membership.

The following table shows the members of the Nominations and Remunerations Committee:

Table (68): Nominations and Remunerations Committee Members

PostName

ChairmanDr. Walid Sulaiman Abanami

MemberFiras Ali Al Suqair

MemberTurki Naser Mohammed Al Mutawwaa Al OtaibiSource: The Company

Following are the CVs of the Nominations and Remunerations Committee Members

Dr. Walid Sulaiman Abanami (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

Firas Ali Al Suqair (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

Turki Naser Mohammed Al Mutawwaa Al Otaibi (please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

5-8-3 Investment and Business Development CommitteeThe Investment and Business Development Committee studies investment opportunities and acquisitions and provides recommendations accordingly; studies projects recommended by the Board and the Executive Management regarding products, manufacturing and production lines and strategic planning with respect to investment opportunities and any liquidation of the Company’s outstanding investment in its business field, supporting it or close to it. The committee also assists the Board in carrying out its supervisory tasks efficiently and effectively, specifically in terms of determining strategic goals of the Company, its financial and operational priorities in addition to evaluating long-term productivity of the Company’s business operations.

The committee is formed of at least two (2) members selected and appointed by the Board. The committee membership shall be from Board members or non-board members, who shall have the required experience, knowledge and administrative and technical skills to assume the committee membership. The term of committee member shall not exceed the Board term and the membership of the committee shall expire with the expiry of his Board’s membership.

The following table shows the members of the Investment and Business Development Committee:

Table (69): Investment and Business Development Committee Members

PostName

ChairmanFiras Ali Al Suqair

MemberAladin BargouthSource: The Company

Following are the CVs of the Investment and Business Development Committee members:

Firas Ali Al Suqair please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

Aladin Bargouth please refer to section 2-2-1 “Summary of CVs of the Board Chairman and Secretary”)

72

6. Financial information and management discussion and analysisThe Management Discussion and Analysis Section for Awazel contains an analytical review for the results of the Company’s operations and financial position during the years ending on 31 March 2014G, 2016G, 2016 and 2017G. This section should be read in conjunction with the Company’s financial statements prepared for a special purpose that are audited and consolidated for the fiscal year ended on 31 March 2014G, and the attached thereto (“the financial statements prepared for a special purpose”), as well as the consolidated and audited financial statements for the fiscal years ending on 31 March 2015G, 2016G And 2017G and the notes thereto (the “Consolidated and Audited Financial Statements for the Company”).

Noteworthy, “PricewaterhouseCoopers” has audited the financial statements for the fiscal year ended on 31 March 2014 and the consolidated financial statements for the fiscal year ended on 31 March 2015G and 2016G, For further information, please refer to Section (6.5.3) (Restatement and Amendment). Ernst & Young reviewed the consolidated and audited financial statements of the Company for the fiscal year ended on 31 March 2017. All financial statements mentioned in this Prospectus have been included. PricewaterhouseCoopers, Ernst & Young, or any of their subsidiaries or affiliates do not own any shares or interest of any kind in the Company, as they have submitted their written consent - and has not been withdrawn - to the reference mentioned in the Prospectus as to their role as auditors of the Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

This section may contain forward-looking statements relating to the Company’s future prospects based on the current management plans and expectations regarding the Company’s growth, the results of its operations and its financial positions that may involve risks and uncertain expectations. Therefore, the actual results of the Company may differ significantly from those expectations as a result of several future factors and events including the factors discussed in this section of the Prospectus or elsewhere, particularly those contained in the risk factors section of this Prospectus. Please note that the figures listed in this discussion and analysis section are rounded to the nearest Saudi Riyal, and therefore may be different from those listed in the tables which were rounded to the nearest Saudi Riyal. It should also be noted that all annual percentages, margins, expenditures and compound annual growth rates are based on those rounded figures. The compound annual growth rate for the items of the income statement was calculated on a four financial year basis starting from the fiscal year ended on 31 March 2014G until the fiscal year ended on 31 March 2017G.

Noteworthy, the consolidated financial statements for the fiscal year ended on 31 March 2014G have been amended by reclassifying customs duties on exports during the fiscal year ended on 31 March 2014G from current liabilities in the statement of financial position to the cost of sales in the statement of income, due to the fact that the Company was in the period of filing a claim against the fees of the Saudi Customs Authority imposed on exports during the fiscal year ended on 31 March 2014G. The obligation to pay fees was not confirmed during the period mentioned. Subsequent to the commitment, the restatement has been made and the items of the financial position for the fiscal year ended on 31 March 2014G have been adjusted to reflect the effect of those imposed fees. In addition, the financial statements for the fiscal year ended on 31 March 2014G have been amended to reflect the effect of the provision for end of service benefits to all Company employees as it has been discovered that the method of calculating and repaying the provision is not in line with the labor law regulations and provisions of the Labor Law in the Kingdom of Saudi Arabia. Accordingly, the balance of provision and related balances have been adjusted to conform with the regulations and provisions of the Labor Law. The details of the amendment and restatement were described in paragraph 6.5.3 (Restatement and Amendment) of the Financial Information Section and Management Discussion and Analysis.

6-1 Board of Directors’ Declaration of the financial informationThe members of the Board of Directors - to the best of their knowledge and belief upon the preparation of this Prospectus - acknowledge that the financial information presented in this Prospectus has been extracted from the financial statements that are prepared for a special purpose for the fiscal year ended on 31 March 2014G and the consolidated and audited financial statements for the fiscal years ended on 31 March 2015G, 2016G and 2017G for the Company and the subsidiaries and the explanatory notes included therein without making any significant modification thereto. The financial statements referred to have been prepared by the Company’s management in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (“SOCPA”).

The members of the Board of Directors also recognize that there has been no signicifcant adverse change in the financial or commercial position of the Company and its subsidiaries during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G up to the date of this Prospectus.

In addition, members of the Board of Directors acknowledge that the Company and its subsidiaries have sufficient funding to meet the requirements of the working capital for a period of 12 months as of the date of this Prospectus.

Members of the Board of Directors recognize that there is no intention to make any material change in the nature of the Company’s future activity.

Members of the Board of Directors, CEO, Board Secretary and senior executives acknowledge that they have not been exposed to bankruptcy at any time or are subject to bankruptcy proceedings as of the date of this Prospectus.

Members of the Board of Directors confirm that all major facts relating to the Company and its subsidiaries and their financial performance have been disclosed in this Prospectus. The Memebrs of the Board of Directors further affirm that

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there are no other key facts that have not been mentioned or ignored, whose omission may mislead the reader with any of the financial statements.

Members of the Board of Directors also acknowledge that the Company and its subsidiaries have not granted commissions, brokerage fees or other non-monetary compensation during the four years immediately preceding the date of applying for registration for the issuance or sale of any shares other than those disclosed in Section 10, declarations of this preospectus.

Members of the Board of Directors acknowledge that the Company has not issued any sukuk or any debt instruments until the date of this Prospectus.

The Board of Directors further affirms that the Company and its subsidiaries have no assets, including contractual securities or other assets whose value is subject to fluctuations or whose value is difficult to ascertain, which will significantly affect the assessment of the financial position.

The members of the Board of Directors also acknowledge that the capital of the Company or any of its subsidiaries is not subject to the right of option, as of the date of this Prospectus.

The Board of Directors also acknowledges that the Company is not aware of any information relating to any of the Government’s monetary, economic, financial, political or other factors that have affected or may have a material impact, directly or indirectly, on the Company’s operations other than those disclosed in Section (10), the declarations of this Prospectus.

The Board of Directors also recognize that the Company and its subsidiaries have not used financing instruments during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G, and up to the date of this Prospectus.

As at 31 March 2017G, the letters granted to others amounted to SAR 14.0 million . As of March 27, 2017G, the Board of Directors approved, in its meeting, the distribution of dividends of SAR 10.9 million for the quarter ended on 31 December 2016G, at a value of SAR 0.4 per share based on the shareholders’ equity as of March 27, 2017G. Payment was made on 31 March 2017G. Except for what was stated in respect of letters of guarantee to third parties and dividends, the Board of Directors acknowledges that there are no mortgages, rights or expenses due to the Company as at the date of this Prospectus. For more information as to the letters granted to third parties, please see the section on contingency obligations and expenses, page (140). For more information on dividends, please see the subsequent events section, page (147).

6-2 Capital IncreaseThe General Assembly of the Company - held on 29 September 2015G - approved an increase in capital from SAR 182 million to SAR 273.0 million by transferring SAR 67.0 million from the statutory reserve and SAR 24.0 million from the retained earnings.

The following table shows the significant changes in the capital of the subsidiaries

Table (70): Substantial changes in the capital of subsidiaries

SAR’000As of 31 March 2016G

2014G 2015G 2016G 2017G

Kuwait Waterproofing (Awazel) Company for Building Materials ** 665 624 2,480 2,460

International Waterproofing (Awazel) Company Qatar 206 206 206 206

*International Waterproofing (Awazel) Co 3,062 3,062 3,060 3,063

* International Waterproofing (Awazel) Company Indonesia 1,098 962 923 937

Al Sultan Contracting, Trading & Industry Company - 1,200 1,200 1,200

Advanced Company for Membrane Industry 10,000 10,000 10,000 10,000

Al-Takamul Stone Factory Company for Stone and Marble - - 2,600 2,600Source: The Company

Note: Due to the conversion of foreign currencies from the local currency in the country concerned to the Saudi Riyal, the capital of the subsidiaries is stated in Saudi Riyals according to the exchange rate as of 31 March of each year. In other words, exchange rates of the subsidiary capitals assessed in foreign currencies were used as of 31 March each year in order to convert the currency from the local currencies in the respective countries to the Saudi Riyal.

** During the fiscal year ended on 31 March 2016G, the capital of Kuwait Waterproofing Company for Building Materials was increased from KD 50,000 which is equivalent to SAR 62,142 to KD 200,000 which is equivalent to (SAR 2,485,680). During the fiscal year ended on 31 March 2014G, 2015G and 2017G, the capital of Kuwait Waterproofing Company for Building Materials has not changed. The differences between the fiscal years ended on 31 March 2014G, 2015G and 2017G are due to currency exchange differences from Kuwaiti Dinar to Saudi Riyal.

* It is worth mentioning that the capital of Indonesia Awazel International and Awazel International Company has not changed during the fiscal years as at 31 March 2014G, 2016G, 2016G and 2017G. The change in the table above resulted from the differences in local currency exchange of the said companies to the Saudi Riyal

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6-3 Key factors affecting the results of operationsSection 6 of this Prospectus presents a detailed discussion of the most important affecting factors – or that are expected to affect - the financial position of the Company and the results of its operations.

The demand for the Company’s products depends on the level of activity of the construction sector in the region, which in turn is affected by economic conditions such as government spending on developmental projects and infrastructure in the sector itself.

� Factors related to population growth and needs for construction:Growing population:Population growth is one of the most important drivers for the construction activity. The compound annual growth rate in the population of the Kingdom, as the largest and fastest growing among the Gulf countries amounted to 2.9% during the period from 2009G to 2014G. The compound annual growth rate of the population in the UAE was 2.6% for the same period.

� Economic factorsContinued major projects in the regionExpenditures on upcoming projects such as Expo 2020 in the United Arab Emirates and the and the 2022 World Cup in Qatar will attract investment in the construction sector, especially in the hospitality and retail sectors.

Increasing infrastructure allocationsThe governments of the Arab Gulf countries intend to increase the allocations for infrastructure development in their budgets, which in turn will lead to increased construction activities in airports, high-speed trains, roads and other projects to keep pace with these works.

� Legislative factorsThe Saudi Standards, Metrology and Quality Organization (SASO2856) requires all premises to have insulation installed in accordance with the specific thermal emission values of 2014G, as the first stage. As part of the second phase, from 2017G onwards, these values will become more stringent, as government premises must comply with the values of the second phase from 2014G onwards.

� Factors related to the Company’s businessThe results of the operations are of a seasonal nature. In general, business activity decreases in the summer and decreases in Ramadan and during the holidays. The effect is compounded by meeting more than one of the factors mentioned above at the same time.

6-4 Company OverviewArabian Waterproofing Industries Company (“the Company” or “Awazel”) was established under Commercial Registration No. 1010039827 dated 14 Shaaban 1401H corresponding to (17 June 1981). The Company is headquartered in Riyadh City and has a branch in Jeddah under Commercial Registration No.: 4030045288) and a branch in Dammam (Commercial Registration No: 2050020686). The Company’s factories are located in the cities of Riyadh and Jeddah.

The Company was transformed from a limited liability company to a closed joint stock company on 15 Safar 1426H (corresponding to 25 March 2005). The main activity of the Company is in the manufacture of insulation materials and water leakage barriers from the asphalt and petrochemical base in the form of rolls, plates or adhesives of their different types as well as the oxidized roads, all kinds of emulsions, paints, compounds, pastes, all types of thermal and acoustic Awazel, manufacture and trade of cladding materials, stone and marble construction facades, insulating metal panels and others. For more information about the Company’s products, please see the Company’s products listed in page (40).

The following table shows the Company’s subsidiaries:

Table (71): Affiliates /Subsidiaries

Company Type of Company

Country of Incorporation

Company Status

Percentage of actual ownership

As of March 31

2014G 2015G 2016G 2017G

Awazel Kuwait Company for Building Materials

Limited Liability Kuwait Affiliated 99.0% 99.0% 99.0% 99.0%

Awazel International Limited Liability

United Arab Emirates Affiliated 99.0% 99.0% 99.0% 99.0%

Awazel International Company Qatar

Limited Liability Qatar Affiliated 95.0% 95.0% 95.0% 95.0%

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Company Status


As of March 31

2014G 2015G 2016G 2017G

* Awazel International Indonesia

Limited Liability Indonesia Affiliated 95.0% 95.0% 95.0% 0.0%

Advanced Company for Membrane Industry

Limited Liability Saudi Arabia Affiliated 90.0% 90.0% 90.0% 90.0%

Sultan Contracting Co Limited Liability Saudi Arabia Affiliated - 80.0% 80.0% 80.0%

Al-Takamul Stone Factory Com-pany for Stone and Marble

Limited Liability Saudi Arabia Affiliated - - 80.00% 80.0%

Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements of the Company.

* Activity was suspended during the fiscal year ended in March 2016G on the basis of the official decision to liquidate the Company issued on 4 April 2016G.

For more information about affiliates, please refer to page (26).

6-5 Summary of Significant Accounting PoliciesThe accounting policies have been included in the “(17)” section of the “ Consolidated Financial Statements and Audor’s Report “ in this Prospectus. These policies have been applied consistently for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

The following are the most significant accounting policies used in the preparation of the consolidated and audited financial statements for the fiscal years ended on 31 March 2014G, 2016G, 2016G and 2017G.

6-5-1 Bases of preparationThe consolidated and audited financial statements have been prepared on the historical cost basis modified by the revaluation of available for sale investments at fair value and on the accrual basis of accounting and in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (“SOCPA”).

6-5-2 Significant Accounting Estimates and AssumptionsThe preparation of consolidated and audited financial statements, in accordance with generally accepted accounting principles, requires the use of certain significant estimates and assumptions that would affect the reported amounts of assets and liabilities, disclosure of potential assets and liabilities as at the date of the consolidated and audited financial statements and the amounts recorded in the event of income and expenses. Estimates and assumptions are continually evaluated and are based on past experience and other factors, including future projections of events that are appropriate to the circumstances. The Company makes future estimates and assumptions and the resulting accounting estimates are rarely compliant in terms of their definition with their actual related results.

6-5-3 Restatements and AmendmentsThe Company buys raw materials (300-B and 60/70) from Saudi Aramco at a subsidized price. Subsequently, the Company pays customs duties when exporting finished goods outside the Kingdom of Saudi Arabia. Customs duties are calculated on exports based on predefined prices by the Saudi Customs Authority. The Company filed a protest against the customs duties imposed on its exports. Therefore, the Company did not include customs duties on exports as part of the cost of sales during the fiscal year ended on 31 March 2014G, while the customs duties on exports during the fiscal year ended on 31 March 2015G were included in the cost of sales. The customs duties on exports during the fiscal year ended on 31 March 2014G were also included in the cost of sales to ensure that the financial statements are consistent and that there will be no effect of restatement on the annual net income for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Amendment: During the fiscal year ended on 31 March 2015G, the Saudi Customs Authority requested the Company to pay customs duties on its imports during the fiscal year ended on 31 March 2015G and the four preceding years. During the fiscal year ended on March 31, 2015G, the Company recorded customs duties on imports amounting to SAR 31.1 million , which is the maximum amount the Customs Authority can claim. This balance represents a balance relating to the previous five years. The annual import duties of SAR 4.3 million were charged to the income statement for the fiscal year ended on 31 March 2015G. The income statement for the fiscal year ended on 31 March 2014G was adjusted by SAR 7.0 million to reflect the effect of import duties on the income statement. The income statements for the fiscal year ended on 31 March 2013 has been adjusted by SAR 6.7 million . The balance of SAR 13.5 million has been charged to the retained earnings as at 01 April 2012G. The following table shows the items affected by the import tariff adjustment in the statement of income and the Company’s financial position:

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Table (72): Effect of Accounting Adjustment

SAR’000As of 31 March

2014G 2015G 2016G 2017G

Statement of financial position:

Customs duties on imports due (before adjustment) 7,249 30,633 21,682 14,927

Customs duties on imports due (after adjustment) 26,733 31,081 21,682 14,927

Statutory reserve (before adjustment) 62,251 66,485 8,774 16,094

Statutory reserve (after adjustment) 59,791 66,485 8,774 16,094

Contractual reserve(before adjustment) 68,741 75,092 67,873 75,192

Contractual reserve(after adjustment) 65,051 75,092 67,873 75,192

Retained earnings (before adjustment) 51.33 52,468 41,348 54,635

Retained earnings (after adjustment) 32.88 52,468 41,348 54,635

income list:

Cost of sales (before adjustment) 275,038 288,309 265,569 214,971

Cost of sales (after adjustment) 275,180 288,542 265,569 214,971Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements for the Company.

Amendment: During the fiscal year ended on 31 March 2014G and 2015G, the provision for end of service benefits is calculated for all employees and the benefit from the end of service provision has been paid on an annual basis based on the employees’ contracts. During the fiscal year ended on 31 March 2016G, it was discovered that the method of calculating and repaying the provision is not in line with the regulations, bi-laws and provisions of the Labor Law in the Kingdom of Saudi Arabia. To amend this in accounting, the provision has been recalculated for all employees of the Company. The balance of retained earnings and all other related balances have also been adjusted as at 01 April 2014G and certain other accounts have been adjusted in the statement of income and statement of financial position for the fiscal year ended on 31 March 2015G. Adjustment was made on all balances and accounts mentioned above on an acumulative basis.

The provision for end of service indemnity after adjustment is in line with the regulations, by-laws and provisions of the Labor Law in the Kingdom of Saudi Arabia. Payments made against the end of service indemnity represent those amounts paid annually to employees who have completed their services for fiscal years preceding the fiscal year ended on 31 March 2016G. This represents the net balance due to employees after deducting end of service benefits based on the regulations, by-laws and of the Labor Law. The effect of the amendment on related items is disclosed in the comparative figures for the fiscal years included in this Prospectus. The following table shows the effect of the accounting adjustment:

Table (73): Effect of the Accounting adjustment

SAR’000As of 31 March

2014G 2015G 2016G * 2017G *

As of 1 April before adjustment 784 1,018 20.16 22,167

Adjustments 15,196 16,972 - -

As of April 1 total, (adjusted) 15,980 17,990 20,160 22,167

Advance payments to employees (adjusted) (10,890) (12,051) (13,351) (13,030)

As of April 1, net (adjusted) 5,090 5,939 6,808 9,137

Provisions 1,632 1,456 2,036 2,562

Payments (1,398) (1,315) (29) (540)

Custom, (Modified) 615 719 - -

As of March 31, net (adjusted) 5,939 6,808 8,815 11,159

Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements of the Company

* Figures listed in the fiscal year ended on 31 March, 2016G and 2017G were not affected by the adjustment of employees’ end of service benefits.

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6-5-4 InvestmentsAffiliates/Subsidiaries: Subsidiaries are entities in which the Company controls the direction of its financial and operating policies to obtain economic benefits generally coupled with a contribution of more than half of the voting rights. The importance of the existence and effect of the potential voting rights that the Company may exercise and transfer at the present time is to determine whether the Company has Control over an entity. Subsidiaries are consolidated from the date on which control over it is transferred to the Company and are derecognized from the date on which the Company control ceases. The acquisition method of accounting is used when a statement of acquisition of subsidiaries is presented. The cost of the acquisition is determined as the fair value of the granted assets and incurred or potential liabilities on the date of acquisition, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Company’s share of net assets acquired is recognized as goodwill. Goodwill arising from the acquisition of subsidiaries is recorded in the statement of financial position under “Intangible assets”. Goodwill balamce is tested annually for impairment of goodwill and carried at cost less any goodwill impairment loss, if any. Transactions between companies, unrealized profits and related balances are also ruled out, as well as unrealized losses. The accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies established in the Company. Minority interests represent a proportion of the profits or losses and net assets not held by the Company and are recognized separately in the consolidated statement of income and consolidated statement of financial position.

Available for sale investments: Available for sale investments consist mainly of investments of less than 20.0% of the capital of other companies and investments in commissioning instruments. These investments are recorded under non-current assets unless the management has the intention to sell those investments within twelve months from the date of the Statement of financial position. These investments are initially recorded at cost and subsequently revalued at fair value at each reporting date as follows:

� The fair value of securities listed on the market is determined based on market prices available at the reporting date, which is adjusted for any transfer or sale of such investments.

� The fair value of non-current securities is determined based on an appropriate estimate determined by reference to the current market value of similar investment securities or based on expected discounted cash flows.

� Accumulated adjustments arising from the revaluation of these investments are recognized as a separate line item under equity under fair value reserve until such investments are disposed of.

Investments in real estate: Property held for the purpose of generating rental income or for the purpose of capital gains or both, which are not used by the Company, is classified as investment in property. Investments in property are carried at historical cost, net after deducting the accumulated depreciation and impairment losses, if any. Historical cost includes expenses directly attributable to the acquisition of the asset. Subsequent costs are recognized in the carrying amount of the asset or as an independent asset, as appropriate, only if it is likely that future economic benefits associated with the carrying amount of the asset will flow to the Company and the cost of the asset can be measured reliably. The carrying amount of the replaced part is eliminated. All other repairs and maintenance expenses are recognized in the consolidated income statement during the fiscal year in which they are incurred. Land is not subject to consumption. Real estate investments are depreciated on a straight-line basis over their estimated useful lives.

6-5-5 Sector Report

a- Business sector

The business sector represents a group of assets, processes or entities that:

1- Operates in income generating activities.

2- The results of their operations are continuously analyzed by the Department so that they can make decisions on resource allocation and performance evaluation.

3- Their financial information is available separately.

b- Geographical sector

6-5-6 Foreign currency conversionsPrincipal currency: These consolidated financial statements are presented in Saudi Riyals, which is the Company’s functional currency.

Transactions and balances: Transactions in foreign currencies are recorded in Saudi Riyals at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. All differences are recognized in the consolidated statement of income.

Subsidiaries: All financial results and positions of all subsidiaries that use currencies different from the presentation currency are translated into the presentation currency as follows:

� Assets and liabilities are transferred to each balance sheet at the closing price on the balance sheet date.

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� Transfer of equity items other than retained earnings on the basis of the prevailing price at the date of acquiring the Company.

� Income and expenses are transferred to each income statement on the basis of average exchange rates.

� All resulting differences are recognized as a separate component within the equity.

6-5-7 Cash and cash equivalentsCash and cash equivalents include cash in hand, bank balances and other short term highly liquid investments that are readily convertible into known amounts of cash and have maturities of three months or less from the date of acquisition.

6-5-8 Short-term depositsShort-term deposits include placements with banks and other short-term highly liquid investments with original maturities of three months or more but not more than one year from the purchase date.

6-5-9 Accounts ReceivableAccounts receivable are carried at original invoice amount less provision for doubtful debts. A provision against doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Such provisions are charged to consolidated income statement and reported under “selling and marketing expenses”. When an account receivable is uncollectible, it is written-off against the provision for doubtful accounts. Any subsequent recoveries of amounts previously written-off are credited in other income in the consolidated income statement.

6-5-10 InventoryInventories are carried at the lower of cost or net realizable value. Cost is determined as follows:

� Raw materials at average cost.

� Finished goods at standard cost.

� Spare parts at purchase price.

The cost of finished goods includes the cost of raw materials, labor and indirect production costs.

Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

6-5-11 Property, plant and equipmentProperty, plant and equipment are valued at cost less accumulated depreciation except for projects in progress that are estimated at cost. There will be no depreciation for the land. Depreciation is charged to the consolidated statement of income on a straight-line basis so that the cost of the related assets is distributed over their residual values over their useful lives as follows.

Number of years

Land development 20

Premises 33

Improvements to premises 33

Furniture and fixtures 10

Computer hardware and IT equipment 4

Cars 4

Factory & Equipment 4-13Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements of the Company.

Gains and losses on disposal are determined by comparing the proceeds against the carrying value and are recognized in the consolidated statement of income.

Regular maintenance and repairs, which are not materially greater than the useful life of the asset, are recognized in the consolidated statement of income, if incurred. Major renovations and improvements, if any, are capitalized when the future economic benefits associated with these items may flow to the Company and the cost of the item can be measured reliably and the carrying amount of the replacement parts is eliminated.

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6-5-12 Impairment of non-current assetsNon-current assets other than goodwill, if any, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill, if any, is tested for impairment annually. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets are grouped at lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-current assets other than goodwill, if any, that suffered impairment are reviewed for possible reversal of impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined, had no impairment loss been recognized for the assets or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately in the consolidated income statement. Impairment losses recognized on goodwill are not reversible.

6-5-13 Accounts payable and accrualsAmounts to be paid for goods and services received are recognized whether the Company is invoiced or not.

6-5-14 ProvisionsProvisions are recognized when the Company has a present legal or constructive obligation as a result of a past event and it is probable that a flow of resources will arise to settle this obligation with a reliable estimate of this obligation.

6-5-15 ZakatThe Zakat is payable in accordance with the regulations of the Zakat and Income Tax Department in the Kingdom of Saudi Arabia. Provision for Zakat is, if any, will be accrued. Zakat payable on the Company is charged to the consolidated statement of income. The additional amounts of the final Zakat due, if any, shall be recorded when determined. The Company shall deduct taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia in accordance with the provisions of the Saudi Income Tax Law. In addition, subsidiaries located in the State of Kuwait, the United Arab Emirates, Qatar and Indonesia are subject to income taxes in their countries of origin and are charged, if any, to the consolidated statement of income.

6-5-16 Employees’ End of Service BenefitsThe provision for employees’ end of service benefits is registered and charged to the income statement under the terms and regulations of labor in the Kingdom of Saudi Arabia by the Company for all employees working in Saudi Arabia. The amount of the liability is calculated on the basis of the present value of the employee’s accrued remuneration if the employee dropped his work on the date of the statement of financial position. End of service paid amounts are calculated on the basis of the employees ‘salaries and allowances and their accumulated years of service as described in the Saudi Arabian regulations. Provision for employees’ end of service benefits for employees who work in subsidiaries outside Saudi Arabia is made and charged to the income statement under the terms and regulations of labor that are prevailing in the home country of the subsidiary. For more information on end of service benefits, please see the non-current liabilities section shown in page (133).

6-5-17 Revenue recognitionRevenues are recognized when the products are delivered and are recorded in net and after discounts are made and after excluding sales between company branches.

6-5-18 Sale, marketing and general and administrative expensesSale, marketing, general and administrative expenses include direct and indirect costs that are not necessarily considered part of the production costs in accordance with generally accepted accounting principles. Sale, marketing, general and administrative expenses and production costs, when necessary, are distributed in a systematic manner.

6-5-19 Dividend distributionDividend income is recognized in the financial statements in the period in which it is approved by the Board of Directors in accordance with the powers conferred to it by the shareholders in Awazel during the general assembly meeting.

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Results of operations

6-6 Income StatementThe following table presents the Company’s consolidated income statement for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (74): Consolidated statement of income for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Amount of Increase / (decrease)

Com-pound annual growth rate %

2014G 2015G 2016G 2017G 2014 – 2015G

2015 – 2016G

2016 – 2017G

2014 – 2015G

2015 – 2016G

2016 – 2017GAudited Audited Audited Audited

Sales 374,335 416.81 413.28 341,026 11.30% (0.8%) (17.5%) 42,475 (3,530) (72,254) (3.15)

Cost of sales (275.18) (288,542) (265,569) (214,971) 4.90% (8.05) (19.1%) (13,362) 22,973 50,598 (7.9%)

Gross profit 99,154 128,268 147,711 126,056 29.40% 15.20% (14.7%) 29,114 19,443 (21,655) 8.30%

Gross profit margin (%) 26.5% 30.8% 35.70% 37.00% 16.20% 15.9% 3.60% 4.30% 4.90% 1.30% 11.80%

Sale, mar-keting and general and admin-istrative expenses

(19,565) (22,108) (26,612) (27,001) 13.00% 20.40% 1.50% (2,543) (4,504) (389) 11.30%

Ge. & Admin. Expenses (18,096) (19,633) (23,616) (21,574) 8.50% 20.30% (8.6%) (1,537) (3,983) 2,042 6.00%

Income gen-erated from operations

61,494 86,527 97,483 77,481 40.70% 12.70% (20.5%) 25,033 10,956 (20.002) 8.00%

(Expenses) / other in-come, net

2,817 (10,939 5,512 4,871 (488.3%) (15.4%) (11.6%) (13,756) 16,451 (641) 20.00%

Income before Zakat and minority interest

64,311 75,588 102,995 82,352 17.5% 36.3% (20.0%) 11,277 27,407 (20,643) 8.6%

Zakat (7.2) (7.41) (9,372) (9,377) 2.9% 26.5% 0.10% (210) (1,962) (5) 9.2%

Income be-fore Minority Interest

57,111 68,178 93,623 72,975 19.4% 37.3% (22.1%) 11,067 25,445 (20,648) 8.50%

Minority Interest (69) (1,234) (733) 217 1688.4% (4.6%) (129.6%) (1.165) 501 950 (246.5%)

Net income 57,041 66,944 92.89 73,192 17.4% 38.8% (21.2%) 9,903 25,946 (19,698) 8.7%Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements of the Company.

Note: The Company’s consolidated statement of income for the fiscal year ended on 31 March 2014 has been adjusted to reflect the effect of the restatement and adjustment during the fiscal year. For more details, please see page (75).

The Company works in the manufacturing and sale of water insulation products mainly, and in 2014, the stone production activity was added. Water insulation products are divided into two main types: membrane and liquid products. These products are used in waterproofing, moisture insulation, road construction, maintenance, corrosion protection and sealing.

The products of membranes and liquid products are divided into bituminous products (Bitumen) and non-bituminous products, representing the bitumen products sold in the form of rolls of most of the Company’s products. The Company also produces and sells many liquid insulating materials and improved road asphalt. The Company also sells liquid products for insulation made of polyurethane. For more information about the Company’s products, please see the Company’s products section shown in page (40).

The Company’s products are used in many areas including insulation of roofs, Warehouses, protection insulation of concrete layers against seawater and salts, insulation protection against corrosion of concrete foundations and bases, and construction of roads.

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Local sales include Awazel’ sales, Al-Takamul Stone Factory Company for Stone and Marble, Sultan Company for Contracting, Trade and Industry and Advanced Company for Membrane Industry, which was established on 06 Rabea Thani 1434H (corresponding to 16 February 2013).

Sales of international companies include sales of subsidiaries outside the Kingdom (Kuwait Waterproofing Company for Building Materials in Kuwait, Awazel International Company in the United Arab Emirates, International Waterproofing Company Qatar and Indonesia which the management ceased its operations on 12 April 2015G and the activity was officially suspended on 04 April 2016G.

Sales decreased by a CAGR of 3.1% for the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G. The decrease was mainly due to lower sales during the fiscal year ended March 31, 2016 and 2017 due to lower demand for membrane products mainly due to lower construction and contracting activity in Saudi Arabia, Kuwait, Qatar and the UAE. The prices of the Company’s products have not increased during the fiscal years ended on 31 March 2014G and 2015G.

he prices of the Company’s products have fallen in 2016 and 2017 to match the prices of competitors due to the low world oil prices and the low customs duties on exports.The decrease was mainly due to a decrease in sales during the fiscal year ended on 31 March 2016G and 2017G due to lower demand for Mainly due to low construction and contracting activity in Saudi Arabia, Kuwait, Qatar and the UAE. The prices of the Company’s products have not increased during the fiscal years ended 31 March 2014 and 2015. The prices of the Company’s products have decreased in 2016G and 2017G to match the prices of competitors due to the low world oil prices and the low customs duties on exports.

The Company’s sales increased by SAR 42.5 million or 11.3% from SAR 374.3 million during the fiscal year ended on 31 March 2014G to SAR 416.8 million during the fiscal year ended on 31 March 2015G. The rise was due to an increase of 6.4% due to increased construction and contracting activity in Saudi Arabia, and due to increased sales of Awazel International and International Waterproofing Company Qatar, which increased by SAR 7.4 million and SAR 6.7 million respectively during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G. The increase in sales in the UAE and Qatar is attributed to the higher sales of membrane products due to the increase in contracting activity witnessed in the mentioned countries. In addition, the Company acquired Sultan Contracting, Trading and Industry Co. during the fiscal year ended on 31 March 2014G, which added SAR 19.8 million to the sales balance during the fiscal year ended on 31 March 2015G, while sales decreased by SAR 3.5 million , or 0.8%, from SAR 416.8 million during the fiscal year ended on 31 March 2015G to SAR 413.3 million during the fiscal year ended on 31 March 2016G. The decrease was due to the decrease in sales of Kuwait Waterproofing Company for Building Materials by SAR 13.6 million , International Waterproofing Company by SAR 5.2 million and Indonesia by SAR 2.1 million . The decrease in sales of Kuwait Waterproofing Company for Building Materials mainly resulted in a reduction in the prices of its products in Kuwait due to lower prices of raw materials and lower taxes imposed on exports, and to reduce the disparity between the prices of its products and those of competitors. In addition to the low prices of the products, the completion of some of the supply contracts with some senior customers of Kuwait Waterproofing Company for Building Materials resulted in a decrease in their sales. In addition, the Kuwaiti Dinar exchange rate was devalued compared to the Saudi Riyal during 2016G. The decline in sales of Emirates Waterproofing Company is due to the decrease in the average price of its products in the UAE. This is due to the increase in competition and the slowdown in contracting activity in the UAE during the fiscal year ended on 31 March 2016G. The reason for the decline in sales of Indonesia is due to the suspension of the Company’s export to the State of Indonesia as a step to liquidate the International Waterproofing Company Indonesia.

The Company’s sales decreased by SAR 72.3 million ; by 17.5% from SAR 413.3 million during the fiscal year ended on 31 March 2016G to SAR 341.0 million during the fiscal year ended on 31 March 2017G. This is mainly due to a decrease in the quantity of membrane sales which decreased by A 66.9 million Saudi Riyal; by 19.6%. This decrease was reflected in both Awazel domestic and International Waterproofing Company Qatar and Kuwait. The decrease in the volume of membrane sales is due to the slowdown in urban activity in the Kingdom, Kuwait and Qatar. In addition, the reduction in export tariffs has reduced the sale price of membrane products. The decrease in export duties is due to the decrease in the amount of exports of bituminous membranes. The decrease in export duties is due to the decrease in the tax on the sales unit (m2) of exported membranes due to the direct proportion correlation between oil prices and tax levied

The cost of sales mainly includes the cost of raw materials, direct labor costs, indirect manufacturing expenses and export duties. The cost of sales decreased at a CAGR of 7.9% for the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G,. The decrease in the cost of sales in general is attributed to the increase in the efficiency of the manufacturing process by re-planning the production according to weekly schedules allowing for production in economical quantities, as well as determining upper limits for the stock of each item, and the change in the prices of raw materials on exports, especially during the years 2016G and 2017G. The reason for the change in export tariffs is the decrease in the volume of exports of Bitumen membrane products of the Company and the decrease in the tax on the sales unit (m2) of the exported membranes as a direct result of the direct proportion correlation between oil prices and tax levied.

The cost of sales increased by SAR 13.4 million or 4.9% from SAR 275.2 million during the fiscal year ended on 31 March 2014G to SAR 288.5 million during the fiscal year ended on 31 March 2015G. The increase in the cost of sales was due to the growth in sales volume and the high export duties during the same period. At the same time, the efficiency of materials use and processing increased during manufacturing during the fiscal year ended on3 1 March 2015G which led to a decrease in the cost of sales - as a percentage of sales - to 69.2% compared to 73.5% during the fiscal year ended on 31 March 2014G.

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During the fiscal year ended on 31 March31, 2016G, the cost of sales decreased by SAR 23.0 million , or 8.0%, to SAR 265.6 million , mainly due to lower export duties and lower raw material prices during the said fiscal year compared to the fiscal year ended on 31 March 2015G. The decrease in the total customs duties on exports was due to the decrease in exports of Bitumen membrane products of the Company and to the reduction of the tax levied on the sales unit (m2) of the exported membranes as a direct result of the direct proportion correlation between oil prices and tax levied. For more information on the cost of sales, please see the sales cost section as shown on page (92).

The cost of sales decreased by SAR 50.6 million ; 19.1% from SAR 265.6 million during the fiscal year ended on 31 March 2016G to SAR 215.0 million during the fiscal year ended on 31 March 2017G. The decrease was primarily due to a decrease in the sales volume of the membrane product in Awazel locally by 5.0 million meters, and in Kuwait Waterproofing Company for Building Materials by 1.0 million Saudi Riyals meters and from the stone and marble product in Al Sultan company. The decrease in the amount of sales in Awazel is due to the decrease in the sales of its products, especially the membrane product due to the slowdown in construction activity in the Kingdom of Saudi Arabia. The decrease in the sales of Awazel in the State of Kuwait is mainly due to the reduction of export duties in the State of Kuwait which led Awazel to to reduce the Sale price of its products sold in the State of Kuwait. Due to the lack of renewal of the license of most of the quarries, including the quarry of the Sultan Company, pending the regulatory procedures in this sector, the sales volume of the Sultan Company was decreased. The decrease in export duties is also due to the reduction in the amount of exports of bituminous membrane products and to the lower value of the tax levied on the export membrane unit.

Gross profit increased at a CAGR of 8.5% for the fiscal year ended on 31 March 2014G and ended on 31 March 2017G. The increase in gross profit was due to the lower cost of sales due to lower sales of the membrane product as mentioned above.

Gross profit increased by SAR 29.1 million or 29.4% from SAR 99.2 million during the fiscal year ended on 31 March 2014G, to SAR 128.3 million in the fiscal year ended on 31 March 2015G. The increase was due to an increase of sales by SAR 42.5 million or 11.3% while the cost of sales increased by only SAR 13.4 million and by 4.9%. Growth was good in the contracting sector, which enabled the Company to benefit from its production capacity well.

Gross profit increased by SAR 19.4 million or 15.2% from SAR 128.3 million during the fiscal year ended on 31 March 2015G to SAR 147.7 million during the fiscal year ended on 31 March 2016G, due to the lower cost of sales. The cost of sales decreased by SAR 23.0 million or 8.1% during the fiscal year ended on 31 March 2016G compared to a decrease in slaes by SAR 3.5 million or 0.8% during the mentioned period. The decrease in the cost of sales resulted primarily from lower raw material prices during the fiscal year ended on 31 March 2016G and the decline in Customs duties on exports during the same period.

The Company’s total profit decreased by SAR 21.7 million or 14.7% from SAR 147.7 million during the fiscal year ended on 31 March 2016G to SAR 126.1 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to lower sales of the Company to SAR 72.3 million inside and outside the Kingdom due to the decrease in the urban activity during the fiscal year ended on 31 March 2017G.

Gross profit margin increased from 26.5% during the fiscal year ended on 31 March 2014G to 30.8% during the fiscal year ended on 31 March 2015G by 16.2%. The increase in gross profit margin was due to the increase in sales by SAR 42.4 million during the fiscal year ended on 31 March 2015G Compared to the fiscal year ended on 31March 2014G. The increase in sales was mainly due to higher sales of Awazel. The total profit for Awazel - as a percentage of the Company’s total profit - represented 81.6% during the fiscal year ended on 31 March 2015G.

The gross profit margin increased from 30.8% during the fiscal year ended on 31 March 2015G to 35.7% during the fiscal year ended on 31 March 2016G. This was due to a decrease in the cost of sales by SAR 23.2 million during the fiscal year ended on 31 March 2016G despite the increase in the quantity of production by about 1 million Saudi Riyals square meters of insulating membranes due to the decrease in the prices of raw materials, especially polyester. The decrease in raw materials amounted to about 11 million Saudi Riyals and also because of the low customs duties on exports during the fiscal year ended on 31 March 2016G. Noteworthy, the direct proportion correlation between the price of oil and the tax imposed on exports, where the decline in oil prices during the fiscal year was followed by a decrease of the average value of customs of 34% per square meter compared to that in 2015G. There is also a direct proportion correlation between the price of oil and the price of raw materials but the change in the price of raw materials is significantly less than the change in the price of oil in general. The decrease in export duties is due to the decrease in the Company’s exports of Bitumen membrane products and to the decrease in the value of the tax levied on the exported membrane as a direct result of the direct proportion correlation between oil prices and tax levied.

The Company’s gross profit margin increased by 1.3% from 35.7% during the fiscal year ended on 31 March 2016G to 37.0% during the fiscal year ended on 31 March 2017G. The increase was mainly due to the lower cost of sales this is higher that the decrease in sales due to the pressure imposed by some expenses such as overtime and user incentives during the fiscal year ended on 31 March 2017G.

Sale and marketing expenses include primarily all the expenses of the subsidiaries and the sale and marketing expenses of the Company’s products from the expenses of salaries, wages and benefits, sales commissions, rent and amortization expenses related to the sale and marketing function, provisions for doubtful debts and advertising and promotion expenses. Sales and marketing expenses increased at a CAGR of 11.3% for the fiscal year ended on 31 March 2014G until the end of the fiscal year ended on 31 March 2017G, mainly due to the increase in salary, pay and benefits expenses from SAR 8.6 million during the fiscal year ended on 31 March 2014G to SAR 11.8 million during the fiscal year ended on 31

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March 2017G due to higher average salaries and the increase in provisions for doubtful debts from SAR 0.3 million to SAR 2.5 million during the fiscal years which ended on 31 March 2014G, 2015G, 2016G and 2017G.

Sales and marketing expenses increased by SAR 2.5 million or 13.0% from SAR 19.6 million during the fiscal year ended on 31 March 2014G to SAR 22.1 million during the fiscal year ended on 31 March 2015G, mainly due to higher expenses of salaries, wages and benefits that amounted to SAR 1.0 million (11.7%) mainly due to sales and marketing expenses of Al Sultan Contracting, Trading and Industry Company which commenced its activity during the fiscal year ended on 31 March 2015G. In addition to the increase in salaries, wages and benefits, the increase in the provisions for doubtful debts by SAR 1.4 million (420.0%) was a major reason for the increase in sales and marketing expenses during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G, sales and marketing expenses increased by SAR 4.5 million or 20.4%. The increase mainly resulted from an increase in salary and benefit expenses of SAR 2.4 million during the same period due to an increase in the average employee salaries and end of Service adjustments and to the addition of salary, pay and benefits expenses to Al-Takamul Stone Factory Company for Stone and Marble. The rise is also due to the increase in provisions for doubtful debts by SAR 0.7 million although the general and administrative expenses of the subsidiaries are recognized as part of the sales and marketing expenses.

Sales and marketing expenses did not witness any significant rise or fall during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G. Expenses rose by SAR 0.2 million or 1.5%. This is mainly due to the depreciation expense of new premises prepared for leasing to others in the International Waterproofing Company in the United Arab Emirates by 0.5 Saudi Riyals.

General and administrative expenses increased from SAR 18.1 million for the fiscal year ended on 31 March 2014G to SAR 21.6 million for the fiscal year ended on 31 March 2017G, i.e a CAGR of 6.0% for the fiscal year ended on 31 March 2014G and until the end of the fiscal year ended on 31 March 2017G. This is mainly due to changes in salary, pay and benefits expenses from SAR 15.5 million during the fiscal year ended on 31 March 2014G to SAR 15.6 million during the fiscal year ended on 31 March 2017. Sales and marketing expenses increased by SAR 4.5 million or 20.4%. The increase mainly resulted from an increase in salary and benefit expenses of SAR 2.4 million during the same period due to an increase in average employee salaries and end Service and to add salary, pay and benefits expenses to Al-Takamul Stone Factory Company for Stone and Marble and the increase is also due to increase in provisions for doubtful debts by SAR 0.7 million . The general and administrative expenses of the subsidiaries are recognized as part of the sales and marketing expenses. This is attributed to the high average salaries and benefits and an increase in the number of staff members by 5-persons in the Information Technology section and to the end-of-service adjustments to comply with the Saudi labor regulations. In addition to the change in expenses of salaries, wages and benefits, the depreciation expense increase at a CAGR of 146.2%. The growth in depreciation is due to the start of the calculation of the depreciation expense of the building improvements for the main headquarters building for Awazel in Riyadh during the fiscal year ended on 31 March 2017G, and calculation of depreciation expense of the information systems and hardware (SAP) introduced by the Company in 2016G and 2017G, as well as the increase in the professional services expenses from SAR 0.5 million to SAR 1.8 million during the fiscal years ended on 31 March 2014G to 31 March 2017G, ie 1.3 million Saudi Riyals during that period because there were Consultancy and professional services related to administrative systems and customs exemption systems have been obtained.

General and administrative expenses increased by SAR 1.5 million (8.5%) from SAR 18.1 million during the fiscal year ended on 31 March 2014G to SAR 19.6 million during the fiscal year ended on 31 March 2015G. This is mainly due to higher salaries, wages and benefits by SAR 0.7 million (4.7%), and the increase in professional services by SAR 0.5 million.

General and administrative expenses increased by SAR 4.0 million during the fiscal year ended on 31 March, 2016G, or 20.3%, compared to the fiscal year ended on 31 March 2015G. The increase was due to the increase in salaries, wages and benefits by SAR 2.8 million due to an increase in the number of employees by 5-persons in the Information Technology section and to the end-of-service adjustments, and the increase in bonuses during the fiscal year ended on 31 March 2016G. In addition, the depreciation expense increased by SAR 1.5 million, due to the increase in the depreciation expenditure on the information systems and hardware (SAP) introduced by the Company in 2016G.

General and administrative expenses decreased by SAR 2.0 million or 8.6% from SAR 23.6 million during the fiscal year ended on 31 March 2016G to SAR 21.6 million during the fiscal year ended on 31 March 2017G, mainly due to lower salaries, bonuses and benefits of senior management In Awazel during the fiscal year ended on 31 March 2017G, due to failure to achieve the sale targets set by the Company where the plan was aimed at maintaining the same value of sales achieved in 2016G.

Operating income increased from SAR 61.5 million for the fiscal year ended on 31 March 2014G to SAR 77.5 million for the fiscal year ended on 31 March 2017G at a CAGR of 8.0% during the fiscal year ending 31 March 2014G until the end of the fiscal year ended on 31 March 2017G.

Operating income increased by SAR 25.0 million or 40.7% from SAR 61.5 million during the fiscal year ended on 31 March 2014G to SAR 86.5 million during the fiscal year ended on 31 March 2015G, mainly due to increased sales during the fiscal year ended on 31 March 2015G, due to higher sales of membrane products due to increased demand for the Company’s products by customers. In addition, Al-Sultan Contracting, Trade and Industry Company has contributed to an increase in operating income by SAR 4.4 million during the fiscal year ended on 31 March 2015G which was acquired by the Company during the mentioned fiscal year.

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Operating income increased by SAR 11.0 million (12.7%) during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015. The increase was due to the lower sales cost greater than decrease in sales whereby recording a decrease of SAR 23.0 million , and a decrease of SAR 3.5 million respectively during the fiscal year ended on 31 March 2016G. The decrease in the cost of sales is due to the decrease in the prices of raw materials in general and to the reduction of customs duties on exports during the fiscal year ended 31 March 2016. The decrease in the cost of sales during the fiscal year ended on 31 March 2016 is mainly due to the decrease in the sale price of exports, and the decrease in sales in Kuwait Waterproofing Company for Building Materials - which decreased by SAR 13.6 million during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G. This decrease is due to the decrease in the amount of sales of Kuwait Waterproofing Company for Building Materials because of the termination of supply contracts with some of the largest customers in the State of Kuwait in addition to the decline in the exchange rate of the Kuwaiti dinar compared to the Saudi Riyal. The decrease in the amount of customs duties on exports is due to the decrease in the volume of the Company’s exports of bituminous membranes and to the decrease in the value of the tax imposed on the unit (m2) of the exported membranes as a direct result of the direct proportion correlation between oil prices and the tax imposed..

Operating income decreased by SAR 20.0 million or 20.5% from SAR 97.5 million during the fiscal year ended on 31 March 2016G to SAR 77.5 million during the fiscal year ended on 31 March 2017. The decrease is mainly due to a decrease in sales of Awazel sales of Membrane products, lower sales of Al Sultan of stone / marble products and membrane sales of Awazel in Kuwait and Qatar due to the slowness of activity in the construction sector.

Other (expenses)/income include sub-operations that do not represent the main activity of the Company such as income from warehouse rental, income from oil waste disposal, income from deposits and profit / (loss) from foreign currency conversion to and from Saudi Riyal. Occasional and non-recurring operations such as profit / (loss) on sale of property, plant and equipment, other income and bad debts that have been recovered. Income from (expenses)/ other income increased from SAR 2.8 million for the fiscal year ended on 31 March 2014G to SAR 4.9 million for the fiscal year ended on 31 March 2017G at a CAGR of 20.0% during the fiscal year ended on 31 March 2014G until the end of the fiscal year ended 31 March 2017G.

(Expenses)/other income during the fiscal year ended on 31 March 2015G decreased by SAR 13.7 million or 488.3% from a positive value of SAR 2.8 million during the fiscal year ended on 31 March 2014G to a negative value of SAR 10.9 million during the fiscal year ended on 31 March 2015G. This decrease is mainly attributable to foreign currency conversion losses of SAR 13.8 million during the fiscal year ended on 31 March 2015G. This is mainly due to the fact that the balance of the British bank account in Euro for Awazel constituted most balance accounts of banks- as it represented a total balance of bank accounts for Awazel of 46.4% as at 31 March 2015G. The account balance of € 11.0 million has been held for a year and has been adversely affected by fluctuations in the exchange rate of the euro against the Saudi Riyal during the said period without any realized losses. The full amount of € 11.0 million was transferred to Saudi Riyals during the fiscal year ended on 31 March 2016G, resulting in realized loss of SAR 13.3 million acknowledged during the fiscal year as accidental or Extraordinary losses.

During the fiscal year ended on 31 March 2016G, (expenses) /other income increased from the negative value of SAR 10.9 million during the fiscal year ended on 31 March 2015G to a positive value of SAR 5.5 million during the financial period ended on 31 March 2016G by 150.4 %. This is due to gaining profit of SAR 0.6 million on foreign currency conversion and the recovery of SAR 1.8 million in bad debts. Income from rental of warehouses and offices in the UAE increased by SAR 0.8 million, and disposal of oil residues by 0.5 million during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G compared to the accidental losses incurred during the fiscal year ended on 31 March 2015G represented by the foreign exchange conversion losses of SAR 13.8 million that are mentioned above. For more information on the Company’s expenses/ other income, please see the Expenses/ Other Income section as shown on page (109).

During the fiscal year ended on 31 March 2017G, there was no significant increase or decrease in (expenses) /other income as it decreased by SAR 0.6 million or 11.6% from SAR 5.5 million during the fiscal year ended on 31 March 2016G to SAR 4.9 million during the fiscal year ended on 31 March 2017G. The decrease was due mainly to not achieving income from foreign currency conversion and the absence of income from the removal of oil waste or bad debts recovered during the fiscal year ended on 31 March 2017G. In return for these decreases in other revenues, the revenue gained from the investment building in Dubai was increased by SAR 0.9 million. Deposits with banks also earned SAR 1.6 million. For more information on company’s expenses / other income, please see the (Expenses) / Other Income section on page (109).

Income before Zakat and minority interest increased at a CAGR of 8.6% for the fiscal year ended on 31 March 2014G and until the fiscal year ended on 31 March 2017G. This increase is mainly due to higher operating income which amounted to a compound annual growth rate of 8.0% during the same period. In addition, expenses / other income increased during the said fiscal years which resulted in higher income before Zakat and minority interest during the fiscal year ended on 31 March 2017G.

Income before Zakat and minority interest increased by SAR 11.3 million or 17.5% from SAR 64.3 million during the fiscal year ended on 31 March 2014G to SAR 75.6 million during the fiscal year ended on 31 March 2015G. This increase was mainly as a result of an increase in income from operations by SAR 25.0 million (40.7%) despite the increase in other expenses by SAR 13.7 million during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March, 2016G, income before Zakat and minority interest increased by SAR 27.4 million or 36.3%. The increase was due to an increase in operating income by SAR 11.6 million and the increase in expenses / other income to SAR 5.5 million- positive value - during the fiscal year ended on 31 March 2016G compared to the negative value

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recorded during the fiscal year ended on 31 March 2015G that amounted to SAR 10.9 million.

Income before Zakat and minority interest decreased by SAR 20.6 million or 20.0% from SAR 103.0 million during the fiscal year ended on 31 March 2016G to SAR 82.4 million during the fiscal year ended on 31 March 2017G. This decrease is mainly due to lower income from operations by SAR 19.4 million caused by a decrease in sales of SAR 72.2 million and the decrease in other income by SAR 0.6 million. The decrease in the Company’s sales is due to lower sales of Awazel of membrane products, lower sales stone / marble products by Al Sultan and lowe sales of membranes by Awazel in Kuwait and Qatar due to the slowdown in construction activity during the fiscal year ended on 31 March 2017G. For more details, please see the (Expenses) / Other Income section (109) and the Income from Operations section (106).

Pursunat to the regulations of the Zakat and Income Tax Authority in the Kingdom of Saudi Arabia, the Company pays zakat fees for Awazel, Al Sultan Contracting Company for Trade and Industry, Advanced Company for Membrane Industry and Al-Takamul Stone Factory Company for Stone and Marble. The Company received from the Authority final certificates of Zakat for the fiscal years ended on 31 March 2014G and 2015G , 2016G. It is expected to receive the final certificate for the fiscal year ended on 31 March 2017G after the date of issuance of the prospectus. Zakat expense increased at a CAGR of 9.1% from the fiscal year ended on 31 March 2014G and until the end on 31 March 2017G due to the increase in Zakat base as a result of the increase in Zakat income during the mentioned financial period.

Zakat expenses did not rise or decrease significantly during the fiscal year ended on 31 March 2015G. Zakat expense increased by SAR 0.2 million or 2.9%. It increased from SAR 7.2 million during the fiscal year ended on 31 March 2014G to SAR 7.4 million during the fiscal year ended on 31 March 2015G. Zakat expense increased by SAR 2.0 million, or 26.5%, to SAR 9.4 million during the fiscal year ended on 31 March, 2016G. This is due to the increase in Zakat income due to the increase in the net profit of the Company based on the Company’s Zakat base. Zakat expense decreased by 0.005% or 0.1% from SAR 9.4 million during the fiscal year ended on 31 March 2016G to SAR 9.3 million during the fiscal year ended on 31 March 2017G. For more information on Zakat method of calculation, please see page (110).

Income before minority interest increased from SAR 57.1 million for the fiscal year ended on 31 March 2014G to SAR 73.0 million for the fiscal year ended on 31 March 2017G, i.e a compound annual growth rate of 8.5% for the period from the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G. This was mainly a result of higher income before Zakat and minority interest at a CAGR of 8.6% during the same period. In addition, Zakat expense did not significantly affect income before Zakat and minority interest. Zakat expense represented as a percentage of income before Zakat and minority interest - 11.2% during the fiscal year ended on 31 March 2014G and 9.8% during the fiscal year ended on 31 March 2015G and 11.2% for the fiscal year ended on 31 March 2016G and 11.4% for the fiscal year ended on 31 March 2017G.

Income before minority interest increased by SAR 11.1 million or 19.4% from SAR 57.1 million during the fiscal year ended on 31 March 2014G to SAR 68.2 million during the fiscal year ended on 31 March 2015G. This increase is due to the continued growth of total profit. The above mentioned increase was substantially identical to the total profit, operating income, income before Zakat and minority interest.

During the fiscal year ended on 31 March 2016G, income before minority interest increased by SAR 25.4 million or 37.3%. The increase was due to higher income before Zakat and minority interest of SAR 28.1 million during the fiscal year ended on 31 March 2016G. The impact of the increase in Zakat is SAR 2.0 million, which is the difference between income before minority interest and income before Zakat and minority interest.

Income before minority interest decreased by SAR 20.6 million or 22.1% from SAR 93.6 million during the fiscal year ended on 31 March 2016G to SAR 73.0 million during the fiscal year ended on 31 March 2017G. The amount of the decrease is equivalent to the lower income before Zakat and minority interest (SAR 20.6 million). For more details, please see the Income Before Zakat and Minority interests Page No. (79).

“Minority interests” refer to the income due to the shareholders of the subsidiaries from the net gross income achieved by the subsidiaries. Minority interests increased from the profit distributed to shareholders by SAR 0.069 million during the fiscal year ended on 31 March 2014G to a loss of SAR 0.2 million charged to them during the fiscal year ended on 31 March 2015G. This is mainly due to the increase in the net income of the subsidiaries. Income increased by SAR 5.7 million or 97.5% from SAR 5.9 million during the fiscal year ended on 31 March 2014G to SAR 11.6 million during the fiscal year ended on 31 March 2015G. This was due to the increase in sales of Kuwait Waterproofing Company for Building Materials, international Awazel, International Waterproofing Company Qatar and International Waterproofing Company Indonesia, as well as investment in Al Sultan Contracting Company for Trade and Industry during the fiscal year ended on 31 March 2015G. Minority interests accounted for 20.0% of the net income for Al Sultan Contracting & Trading and Industry Company which amounted to SAR 5.8 million during the fiscal year ended on 31 March 2015G.

Income attributable to minority interests decreased by SAR 0.5 million (40.6%) from SAR 1.2 million during the fiscal year ended on 31 March 2015G to SAR 0.7 million during the fiscal year ended on 31 March 2016G. This decrease can be attributed to the decrease of SAR 3.0 million in net income for Al Sultan Contracting & Trading and Industry during the year ended 31 March 2016 compared to the fiscal year ended on 31 March 2015G, which was mainly offset by the increase in net income of Awazel International by SAR 2.6 million during the same period. The decrease in the net income of Sultan Contracting, Contracting, Trading and Industry Company is due to the increase in the cost of sales and sales and marketing expenses due to the increase in the quantity of production and the decrease in product prices. The Company reduced the average prices of the products of Al Sultan Contracting, Trading and Industry Company due to the Company’s suspension of exports

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outside the Kingdom of Saudi Arabia, and due to tha fact that the product prices within Saudi Arabia are relatively lower than the international product prices. Income attributable to minority interests decreased by SAR 1.0 million or 129.6% from SAR 0.7 million during the fiscal year ended on 31 March 2016 to a loss of SAR 0.2 million during the fiscal year ended on 31 March 2017. This is due to the losses incurred by the subsidiaries of Awazel during the fiscal year ended on 31 March 2017 and in particular the Al Sultan Company, Takamul and Waterproofing Co. in Indonesia.

Net income increased by a CAGR of 8.7% during the fiscal year ended on 31 March 2014G until the end of the fiscal year ended on 31 March 2017G. Net income increased from SAR 57.0 million during the fiscal year ended on 31 March 2014G to SAR 73.2 million during the fiscal year ended on 31 March 2017G. The growth in net income was mainly due to a decrease in the cost of sales at a CAGR of 7.9% compared to the decrease in sales by a CAGR of 3.1%. This resulted in an increase in the gross profit of SAR 26.9 million fom the fiscal year ended on 31 March 2014G until the end of the fiscal year ended on 31 March 2017G. In return for the positive increase in gross profit and the increase in other income by SAR 2.0 million. Negative effects such as increased sale and marketing expenses increased by SAR 7.4 million, general and administrative expenses increased by SAR 3.5 million and Zakat expense increased by SAR 2.2 million. The outcome of the above items explains the increase in net income by SAR 17.4 million for the period from the fiscal year ended on 31 March 2014G to the end of the fiscal year ending 31 March 2017G. The decrease in the cost of sales is mainly due to the increase in the manufacturing efficiency, lower raw material prices and lower customs duties on exports during the fiscal year ending on 31 March 2016G, in addition to a decrease in the volume of sales mainly during the fiscal year ended on 31 March 2017G. The reason for the low customs duties on exports is due to the reduction in the amount of exports of bituminous membrane products and the decrease in the value of the tax levied on the unit (m2) of exported membranes. It should be noted that there is a direct (positive) correlation between oil prices and export tariffs. The increase in sales, marketing, and administrative and general expenses is mainly due to depreciation of hardware and software in the Information Technology Section (SAP) and in the facilities for leasing in the United Arab Emirates and in the increase in provisions for doubtful debts and the increase in the provision for Zakat.

Net income increased by SAR 9.9 million or 17.4% from SAR 57.0 million during the fiscal year ended on 31 March 2014G to SAR 66.9 million during the fiscal year ended on 31 March 2015G due to the growth of sales by SAR 42.5 million. This increase in mainly due to the increase in sales. Sales increased by SAR 42.5 million and by 11.3% from SAR 374.3 million during the fiscal year ended on 31 March 2014G to SAR 416.8 million during the fiscal year ended on 31 March 2015G. The increase in sales was offset by a loss of SAR 13.3 million in foreign currency conversion during the fiscal year ended on 31 March 2015G, that resulted from the conversion of the Euro to Saudi Riyal during the mentioned period, which is considered to be occasional and non-recurring.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, net income increased by SAR 25.9 million (38.8%) mainly due to a decrease in cost of sales by SAR 23.0 million (while sales decreased by SAR 3.5 million) Saudi). The lower cost of sales was due to lower raw material prices and lower export duties during the mentioned fiscal year compared to the fiscal year ended on 31 March 2015G. This resulted in lower quantities of exports of bituminous membrane products and a decrease in the value of the tax imposed on the unit (m2) of exported membranes due to the direct (positive) correlation between oil prices and tax imposed. The increase in net income is the result of an increase in the operating income of SAR 11.0 million and expenses / other income to SAR 5.5 million (positive value) during the fiscal year ended on 31 March 2016G compared to the negative value recorded during the fiscal year ended on At March 2015G which amounted to SAR 10.9 million.

Net income decreased by SAR 19.7 million or 21.2% from SAR 92.9 million during the fiscal year ended on 31 March, 2016G to SAR 74.2 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to a decrease in sales by SAR 72.3 which resulted in a decrease in gross profit by SAR 21.4 millionThe increase in sales and marketing expenses increased by SAR 0.1 million and the decrease of other income by SAR 0.6 million also contributed to a decrease in net income by a small percentage. You may refer to the sales and other revenue analysis and sales and marketing expenses on pages (88), (99) and (107) to find out the causes for the above mentioned increases and decreases.

Table (75): Key profitability ratios

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase / (decrease) Amount Compound

annual growth rate %

2014G 2015G 2016G 2017G 2014 – 2015G

2015 – 2016G

2016 – 2017G

2014 – 2015G

2015 – 2016G

2016 – 2017GAudited Audited Audited Audited

Gross profit margin (%) 26.5% 30.8% 35.70% 37.00% 16.2% 15.9% 3.6% 4.3% 4.9% 1.3% 11.8%

Operating profit margin 16.40% 20.80% 23.60% 22.70% 26.4% 13.6% (3.7%) 4.3% 2.8% (0.9%) 11.4%

Net profit margin 15.20% 16.10% 22.50% 21.50% 5.4% 39.9% (4.5%) 0.8% 6.4% (1.0%) 12.1%

Source: The Company

Net profit margin increased from 15.2% during the fiscal year ended on 31 March 2014G to 21.5% during the fiscal year ended on 31 March 2017G at a CAGR of 12.1%. Net profit margin increased from 15.2% during the fiscal year ended on 31 March 2014G to 16.1% during the fiscal year ended on 31 March 2015G, and then to 22.5% during the fiscal year ended

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on 31 March 2016G, and then decreased to 21.5% during the fiscal year ended on 31 March 2017G. The net profit margin growth during these periods is due to the growth in total margin and operating profit margin. This growth has been reflected in the preceding paragraph.

Gross profit margin increased from 26.5% during the fiscal year ended on 31 March 2014G to 37.0% during the fiscal year ended on 31 March 2017G at a compound annual growth rate of 11.8%. The gross profit margin increased from 26.5% during the fiscal year ended on 31 March 2014G to 30.8% during the fiscal year ended on 31 March 2015G .This increase in gross profit margin is due to the increase in the rate of use efficiency and processing of materials during the stages of manufacturing.

The overall profit margin also witnessed a rise of 30.8% during the fiscal year ended on 31 March 2015G to 35.7% during the fiscal year ended on 31 March 2016G, and this is due to rise to the low cost of sales - higher than the lower sales - (cost of sales decreased by 8.0% while sales dropped by 0.8% for the same period of time) mainly due to lower prices of raw materials as well as lower tariffs on exports. This is due to the low volume of exports of bituminous membrane products and to the lower value of the tax levied on the unit from exported membranes as a direct result of the direct and positive correlation between oil prices and tax levied.

The Company’s gross profit margin increased by 3.6% from 35.7% during the fiscal year ended on 31 March 2016G to 37.0% during the fiscal year ended on 31 March 2017G. The increase maily was due to the lower cost of sales – (Sales cost decreased by 19.1% while sales declined by 17.5% for the same period of time), due to the reduced demand for membranes in the Kingdom mainly due to the decrease in urban activity during the fiscal year ended on 31 March 2017G. The Company has further planned production to reduce expenses such as reducing overtime hours.

The operating profit margin increased from 16.4% during the fiscal year ended on 31 March 2014G to 22.7% during the fiscal year ended on 31 March 2017G at a compound annual growth rate of 11.4%, largely due to the increase in gross profit margin during the same period 2014G to 2017G (CAGR of 11.8%). The operating profit margin increased from 16.4% during the fiscal year ended on 31 March 2014G to 20.8% during the fiscal year ended on 31 March 2015G. The operating profit margin increased to 23.6% during the fiscal year ended on 31 March 2016G and then decreased to 22.7% during the fiscal year ended on 31 March 2017G. The decrease in the operating profit margin, despite the decrease in the sale and administrative expenses together by SAR 1,7 million in the fiscal year ended on 31 March 2017G compared to those expenses occurred in the fiscal year ended on 31 March 2016G, be explained by the fact that both sales and administrative expenses as a percentage of sales accounted for 14.2% for the fiscal year ended on 31 March 2016G (representing 12.2% in the fiscal year ended on 31 March 2016G).

Fiscal Year ended on 31 March Increase / (Decrease) % Amount of Increase / (decrease) Compound


2014G 2015G 2016G 2017G2014 – 2015G

2015 – 2016G

2016 – 2017G

2014 – 2015G

2015 – 2016G

2016 – 2017G

Audited Audited Audited Audited

Net profit (in SAR ‘000) 57,041 66,944 92.89 73,192 17.40% 38.80% (21.25) 9,903 25,946 (19,698) 8,705

Weighted average for the number of shares (share)

18,199,981 18,199,981 22,776,430 27,299,978 0.00% 25.10% 19.80% - 4,576,449 4,523,548 15%

Earnings per share (SAR) 3.13 3.67 4.08 2.68 17.40% 10.90% (34.35) 0.54 0.4 (0.14) (5.1%)

Earnings per share (in Saudi Riyals) at the weighted aver-age in 2017G *

2.09 2.45 3.4 2.68 17.40% 38.80% (21.2%) 0.36 0.95 -0.72 8.7%

Source: The Company

Earnings per share (in SAR) by the weighted average for 2017G are calculated based on the net income for the year divided by a fixed number of shares as at 31 March 2017G. This is made for the purpose of comparing earnings per share for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G. Accordingly, earnings per share were analyzed on the said basis.

Earnings per share increased by SAR 0.36 per share or 17.4% from SAR 2,09 per share during the fiscal year ended on 31 March 2014G to SAR 2.45 during the fiscal year ended on 31 March 2015G. This increase was similar to the net income.

During the fiscal year ended on 31 March 2016G, earnings per share increased by SAR 0.95 per share or 38.8% to SAR 3.40 per share. This increase is similar to with net income.

Earnings per share decreased by SAR 0.72 from SAR 3.40 per share during the fiscal year ended on 31 March 2016G to SAR 2.68 per share during the fiscal year ended on 31 March 2017G. The increase was similar to the Company’s net income.

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Sales

1- Sales by company

The table below shows net consolidated sales by company for the years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (76): Consolidated net sales by company for the years ended on 31 March 2014G, 2015G, 2016G and 2017G:

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amount Compound annual growth rate %

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017GAudited Audited Audited Audited

Awazel Net sales * 222,833 229,272 235,422 190,270 2.90% 2.70% (19.25) 6,439 9,350 (45,152) (5.1%)

Al-Takamul Stone Factory Company for Stone and Marble

- - 3,200 903 0.00% N/A (71.8%) - 3,200 (2,297) N/A

Al-Sultan Contract-ing, Trading and Indus-try Co.

- 19,757 25,338 17,977 N/A 28.30% (29.1%) 19,757 5,582 (7,361) N/A

Advanced Compa-ny for Membrane Industry

- - - 119 N/A N/A N/A - - 119 N/A

Net domes-tic sales 222,833 249,028 263,963 209,269 11.8% 6.0% (20.7%) 26,195 14,935 (54,694) (2.1%)

International companies

Kuwait Wa-terproofing Company for Building Materials

71,490 73,572 59,994 49,106 2.9% (18.5%) (18.1%) 2,083 913,578) (10,888) (11.85)

Awazel Internation-al Co.

51,303 58,658 53,503 53,757 14.30% (8.8%) 0.5% 7,356 (5,155) 254 1.6%

Interna-tional Wa-terproofing Company Qatar

26,140 32,812 35,223 28,893 25.50% 7.30% (18.0%) 6,672 2,410 (6,330) 3.4%

Interna-tional Wa-terproofing Company Indonesia

2,569 2,739 596 - 6.6% (78.2%) (100.0%) 170 (2,143) (596) (100.0%)

Net compa-ny sales 374,335 416,810 413,280 341,026 11.30% (0.8%) (17.5%) 42,476 (3,531) (72,254) (3.1%)

Source: The Company

* Awazel sales in the local market for insulation products.

Note: The term “does not apply” refers to percentages that don’t show meaning which is used for percentages of growth / decline of more than 1,000% - because of dividing a negative balance by a positive balance and vice versa or if divided by zero.

Local SalesLocal sales consist of sales of waterproofing products and heat insulation materials, sales of Al-Sultan Contracting, Trading and Industry Co., Ltd. (stone / marble products), and sales of Al-Takamul Stone Factory Company for Stone and Marble (stone / marble products) to customers within Saudi Arabia.

Local sales increased by SAR 26.2 million, representing an increase of 11.8% from SAR 222.8 million during the fiscal year

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ended on 31 March 2014G to SAR 249.0 million during the fiscal year ended on 31 March 2015G. The increase was due to an increase in membrane sales in Awazel by SAR 6.4 million and the increase in the sales of Al Sultan Contracting, Trading and Industry by SAR 19.8 million.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, local sales increased by SAR 14.9 million (6.0%) due to increased demand for the Company’s products within Saudi Arabia, in particular the sales of membrane products which increased by 9.5 million Saudi Riyals and the increase in the demand for stones within the Kingdom which rose by SAR 5.4 million during the fiscal year ended 31 March 2016. The increase in demand for producers is due to the increase in the contracting and construction activity in the Kingdom of Saudi Arabia during the fiscal year ended on 31 March 2016.

During the fiscal year ended on 31 March 2015G, the Company acquired 80% of Sultan Contracting, Trading and Industry Company, which manufactures and sells facades and marble facades for the use of houses and other construction projects in the Kingdom of Saudi Arabia. The Company’s sales amounted to SAR 19.8 million during the fiscal year ended on 31 March 2015G and SAR 25.3 million during the fiscal year ended on 31 March 2016G. The increase in sales, which amounted to SAR 5.6 million (28.3%), is due to higher sales volume.

In the past, Al-Takamul Stone Factory Company for Stone and Marble was established was a branch of Sultan Contracting, Trading and Industry Company until incorporated as an independent legal entity with a capital of SAR 2.6 million during the fiscal year ended March on 31 March 2015G. In addition, Al-Takamul Stone Factory Company for Stone and Marble works in the extraction of natural stone from quarries and quarrying and selling it to Al Sultan Company for Contracting, Trading and Industry Co.. The Company owns ownership percentage in Al-Takamul Stone Factory Company for Stone and Marble estimated at 80.0% and a total investment in Al-Takamul Stone Factory Company for Stone and Marble that amounted to 2.1 million Saudi Riyals until 31 March 2016G.

During the fiscal year ended 31 March 2017G compared to the fiscal year ended on 31 March 2016, domestic sales decreased by SAR 54.7 million (20.7%) mainly due to a decrease in sales of Awazel by SAR 45.2 million and the sales of Sultan Contracting, Trading and Industry Co by SAR 7.4 million, and Takamul sales by SAR 2.3 million. The decrease in Awazel sales is due to the decrease in the demand for insulation products (especially membranes) in the Kingdom of Saudi Arabia mainly due to the decrease in urban activity inside the Kingdom. The volume of membrane sales in the domestic market decreased from 29.0 million square meters during the fiscal year ended on 31 March 2016G to 23.5 million square meters during the fiscal year ended on 31 March 2017, which resulted in a decrease in the sales value by SAR 41.9 million. In addition, Awazel reduced the average price of membranes from SAR 7.6 per square meter to SAR 7.46 per meter Square, causing a drop in sales value by SAR 3.3 million during the fiscal year ended on 31 March 2017G. The decrease in the sales of Al-Sultan Contracting, Trading and Industry Company and the sales of Takamul Company is mainly due to the to the extraction of the stone and marble and the decrease in the volume of its sales of the stone product (especially the white stone) due to the lack of supply of raw stone as a result of the non-renewal of the license of most quarries, including the quarry of Al Sultan Company for Contracting, Trade and Industry Co. pending regulatory actions in this sector. It should be noted that during the fiscal year ended on 31 March 2017G, the average sale of the products of Al Sultan for Contracting, Trade and Industry Co. decreased due to the suspension of the export of this company outside the Kingdom of Saudi Arabia (due to lack of supply). It should be noted that the prices of products within the Kingdom of Saudi Arabia are lower than the international prices of products.

lack of supply of raw stone due to the non-renewal of the license of most of the quarries, including the quarry of the Sultan Company for Contracting, Trade and Industry in anticipation of the procedures In the fiscal year ended March 31, 2017, the average selling price of the products of Al-Sultan Contracting, Trading and Industry Company decreased due to the suspension of the export of this company outside the Kingdom of Saudi Arabia Saudi Arabia (due to lack of supply) It should be noted that the prices of products within the Kingdom of Saudi Arabia is less than the international price of products.

The Advanced Company for Membrane Industry started to manufacture the membranes in the Kingdom in October 2016, and has achieved an adoption of its product in the Riyadh metro in the tunnel projects inside the Kingdom. The Company has also supplied 21.700 square meters of membranes to the customer. The Company achieved sales of SAR 0.1 million, and work is underway to adopt materials manufactured by the consulting offices and the concerned government agencies. It should be noted that the said company is in the process of promotion stages and adoption of its products.

International Companies SalesInternational companies sales represent sales of waterproofing and thermal insulation products to international customers through the Company’s subsidiaries located in the State of Kuwait, UAE, Qatar, Indonesia and all of the aforementioned subsidiaries representing sales and marketing centers for the Company’s products. In addition to the sales of Al Sultan Company for Contracting, Trading and Industry and the sales of Al-Takamul Stone Factory Company for Stone and Marble to international customers through export.

During the fiscal year ended on 31 March 2016G and 2017G, international oil prices dropped significantly, leading to a decline in the prices of some raw materials in the Company’s products, which led to an increased competition of similar products produced in the State of Kuwait, Qatar and the UAE and products exported from neighboring countries to those countries at low prices, which adversely affected the Company’s sales in the mentioned countries. In contrast, through increased production efficiency, lower prices of some raw materials and lower export taxes, the Company has been able to

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reduce the prices of its products, particularly membranes.

Sales of Kuwait Waterproofing Company for Building Materials increased by SAR 2.1 million or 2.9% from SAR 71.5 million during the fiscal year ended on 31 March 2014G to SAR 73.6 million during the fiscal year ended on 31 March 2015G. The volume of sales of membrane products is mainly due to the increase in construction work and the contracting activity witnessed within the State of Kuwait during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, sales of Kuwait Waterproofing Company for Building Materials decreased by SAR 13.6 million or (18.5%). This is mainly due to the decrease in the prices of its products in Kuwait due to the decrease in the prices of raw materials and to maintain competitive prices to increase the volume of sales. In addition to the low prices of the products, the completion of some sales contracts with some senior customers of Kuwait Waterproofing Company for building materials resulted in the decline of sales of Kuwait Waterproofing Company for building materials. In addition, the Kuwaiti Dinar depreciated against the Saudi Riyal during 2016G, which led to a decline in the value of sales after converting its currency - the Kuwaiti Dinar - into Saudi Riyal.

Sales of Kuwait Waterproofing Company for Building Materials decreased by SAR 18.1% from SAR 60.0 million during the fiscal year ended on 31 March 2016G to SAR 49.1 million during the fiscal year ended on 31 March 2017G, as a result of a decrease in the sale price of the product as a direct result of the decrease in the export duties which led to making Kuwait Waterproofing Company reduce the sale price of its products in the State of Kuwait. In addition, the sold quantity of membranes, particularly in Kuwait, decreased due to the slowdown in the urban activity. The quantity sold decreased by 1.0 million square meters during the fiscal year ended on 31 March 2017G.

Sales of the International Waterproofing Company increased by SAR 7.4 million (14.3%) to rise from SAR 51.3 million during the fiscal year ended on 31 March 2014G to SAR 58.7 million during the fiscal year ended on 31 March 2015G due to the increase in sales of membrane products mainly due to increased demand as a result of the growth of construction and contracting in the UAE during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the sales of the International Waterproofing Company decreased by SAR 5.2 million or 8.8% due to the decrease in the average price of the Company’s products in the UAE in order to increase the quantity of sales and to maintain competitive prices. This was due to increased competition in the UAE and a slowdown in contracting activity in the UAE during the fiscal year ended on 31 March 2016G.

Sales of the International Waterproofing Company did not witness a significant increase or decrease in sales. Sales increased by SAR 0.3 million or 0.5% from SAR 53.5 million during the fiscal year ended on 31 March 2016G to SAR 53.8 million during the fiscal year ended on 31 March 2017G. Noteworthy, despite the competition and the overall decline in prices, the Company has achieved the positive result due to of the Company’s focus on marketing high-quality products that are difficult for competitors to compete.

Sales of the International Waterproofing Company Qatar increased by SAR 6.7 million or 25.5% from SAR 26.1 million during the fiscal year ended on 31 March 2014G to SAR 32.8 million during the fiscal year ended on 31 March 2015G. The increase was mainly due to the increase in the volume of membrane product sales due to the increase in customer demand. This resulted from the increased activity in the construction and contracting business witnessed in the State of Qatar during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the sales of the International Waterproofing Company Qatar increased by SAR 2.4 million (7.3%). This is mainly due to the increased demand for membrane products during the fiscal year ended on 31 March 2016G due to the increase in the contracting activity and construction work in the State of Qatar during the said period.

Sales of International Waterproofing Company Qatar decreased by SAR 6.3 million (18.0%) from SAR 35.2 million during the fiscal year ended on 31 March 2016G to SAR 28.9 million during the fiscal year ended on 31 March 2017G due to the slowdown in the contracting activity in Qatar and the sale price of the product has been reduced due to the lower value of the tax imposed on the exported membranes as a direct result of the of the positive correlation between the oil prices and the tax imposed.

The sales of the International Waterproofing Company Indonesia did not witness a significant increase or decrease in sales during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the sales of International Waterproofing Company Indonesia decreased by SAR 2.1 million or 78.2% to SAR 0.6 million due to the discontinuation of exports based on the Company’s decision. The export of membranes to International Waterproofing Company Indonesia was halted due to its financial performance which came lower than expected. The sales balance of SAR 0.6 million during the fiscal year ended on 31 March 2016G represents the inventory balance to be liquidated.

International Waterproofing Company Indonesia did not achieve any sales during the fiscal year ended on 31 March 2017G due to the suspension of the sale activity in full from the beginning of the mentioned financial year.

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2- Sales by product

The following table shows the net sales of insulation materials for Awazel by product for the years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (77): Net Sales of Awazel * by Product for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amount Com-pound annual growth rate %

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Mem-branes 334,984 360,418 340,852 273,967 7.60% (5.4%) (19.6%) 25,434 (19,566) (66,885) (6.5%)

Liquid products 13,047 10,038 15,107 9,659 (23.1%) 50.50% (36.1%) (3,009) 5,069 (5,448) (9.5%)

Tapes 3,359 1,296 5 - (61.4%) (99.6%) (100%) (2,063) (1,291) (5) (100.0%)

Other products 1,552 1,364 1.204 834 (12.15) (11.7%) (30,7%) (188) (160) (370) (18.70%)

Net Sales 352,942 373,116 357,168 284.46 5.75 (4.3%) (20.4%) 20,174 (15,948) (72,708) (6.9%)Source: The Company

* This table shows the Company’s sales from the point of view of Saudi Waterproofing Company (including its sales in the local market and the quantities exported to foreign markets of waterproofing products).

Membrane salesMembrane sales accounted for 94.9% of total net sales for Awazel for the fiscal year ended on 31 March 2014G, 96.6% for the fiscal year ended on 31 March 2015G, 95.4% for the fiscal year ended on 31 March 2016G, 96.3% During the fiscal year ended on 31 March 2017G. Membrane sales increased by SAR 25.4 million or 7.6% to SAR 360.4 million during the fiscal year ended on 31 March 2015G compared to SAR 335.0 million during the fiscal year ended on 31 March 2014G. The increase was due to higher volume of sales for Awazel which was supported by an increased customer demand for membranes in Saudi Arabia and abroad during the fiscal year ended on 31 March 2015G due to the increased contracting and construction activity in Saudi Arabia.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, membrane sales decreased by SAR 19.6 million or 5.4%, due to the reduction of the competitors prices of their products, which led to the reduction of membrane prices, which led to Awazel to reduce the prices of membranes resulting in the decrease in the value of sales of membrane products in general, and also due to the clear decline in sales in the State of Kuwait as the the completion of the supply of some projects with senior customers of the Kuwait Waterproofing Company for Building Materials and the delay in the start of new projects has resulted in a clear drop in sales.

Membrane sales decreased by SAR 66.9 million or 19.6% from SAR 340.9 million during the fiscal year ended on 31 March 2016G to SAR 274.0 million for the fiscal year ended on 31 March 2017G due mainly to a decrease in domestic sales of membranes. The decrease in the local market was SAR 40.0 million, in addition to the decrease in membrane exports due to the slowdown in the construction activity in Kuwait and Qatar. In addition, the decrease in export tariffs caused a reduction in the sale price of membrane products as mentioned earlier. The decrease in customs duties on exports is due to the decrease in the value of the tax levied on the unit (m2) of exported membranes due to the direct correlation between oil prices and the tax imposed.

Sales of liquid productsThe sales of liquid products a limited to Awazel domestic sales within the Kingdom of Saudi Arabia. Liquid products are products that can not be exported outside the Kingdom according to the Kingdom’s regulations. The Company manufactures liquid bituminous products in its factories in Riyadh and is used in waterproofing in all types of buildings . There is no specific segment of the society that the sale of liquid products iss limited to it. Liquid customer base includes governmental agencies, individuals and companies alike. Sales of liquid products decreased by SAR 3.0 million (23.1%) from SAR 13.0 million during the fiscal year ended on 31 March 2014G to SAR 10.0 million during the fiscal year ended on 31 March 2015G, mainly due to lower volumes sold of the modified road asphalt product.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, sales of liquid products increased by SAR 5.1 million or 50.5%. This increase was due to the increase in sales of asphalt road products during the fiscal year ended on 31 March 2016G. The Company produces the modified asphalt in each of the Company’s factories in Riyadh and Jeddah.

The Company has recently introduced a liquid insulation product from Polyurethane in its domestic and international markets.

Sales of liquid products decreased by SAR 5.4 million or36.1% from SAR 15.1 million during the fiscal year ended on 31 March 2016G to SAR 9.7 million for the fiscal year ended on 31 March 2017G. The decrease was mainly due to the decline in

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the urban activity in the Kingdom of Saudi Arabia Saudi Arabia (these liquids are not allowed to be exported).

Sales of tapesThe adhesive tape product is used in the fixation and installation of membranes. It is also used to repair membranes used in waterproofing and is used to isolate pipes. It may also be used for membrane installation. There is no specific type of customer for this product. Tape sales decreased by SAR 2.1 million or 61.4%, from SAR 3.4 million in the fiscal year ended on 31 March 2014G to SAR 1.3 million in the fiscal year ended on 31 March 2015G, due to lower sale volumes as a result of the lower demand for tapes during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, tape sales decreased by SAR1.3 million (99.6%) due to a slowdown in the growth tempo of construction related to infrastructure projects.

Tapes were not sold during the fiscal year ended on 31 March 2017G due to the fact that no infrastructure projects were launched within the Kingdom, which is the main factor for the sales of the tapes

Other productsOther products refer to a variety of prefabricated products for the insulation of building elements or to insulate bridge and tunnel spacers or the building penetrating pipes and others that are produced in Awazel. Under this item, the construction chemicals that have been introduced by the Company in its product list are listed as well as special fabrics designed for the field of construction (Geo textile). The Company noticed that there is a growth in this product and it was introduced to the external branches. All mentioned products were included in one item according to their relative importance. Other product sales decreased by SAR 0.2 million or 12.1% from SAR 1.6 million the building during the fiscal year ended on 31 March 2014G to SAR 1.4 million the building during the fiscal year ended on 31 March 2015G, due to lower demand on other products during the fiscal year year ended on 31 March 2015G.

Sales of other products decreased by SAR 0.2 million , or 11.7%, from 1.4 during the fiscal year ended on 31 March 2015G to SAR1.2 million during the fiscal year ended on 31 March 2016G due to the slowdown in the contracting activity inside and outside the Kingdom of Saudi Arabia during the fiscal year ended on 31 March 2016G.

Sales of other products decreased by SAR 0.4 million or 31.7%, from SAR 1.2 million during the fiscal year ended on 31 March 2016G to SAR 0.8 million during the fiscal year ended on 31 March 2017G due to the slowdown of the contracting activity.

6-6-1 Cost of Sales

1- Cost of sales by items

The table below shows the Company’s consolidated sale costs by item for the years ended on 31 March 2014G, 2016G, 2016G and 2017G.

Table (78): The Company’s Consolidated Sale Costs by Item for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amountCompound


2014G 2015G 2016G 2017G2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Raw mate-rials 176,730 175,822 165,915 126,651 (0.5%) (5.6%) (23.7%) (9.8) (9,907) (39,264) (10.5%)

Customs duties on exports

54,192 55,137 30,214 19,225 1.7% (45.2%) (36.4%) 945 (24,923) (10,989) (29.2%)

Indirect manufactur-ing expenses

20,346 19,559 19,630 15,536 (3.9%) 0.4% (20.9%) (787) 71 (4,094) (8.6%)

Other costs 12,065 11,169 12,205 9,678 (7.4%) 9.3% (20.7%) (896) 1,036 (2,527) (7.1%)

Direct Labor 4,488 4,631 4,892 4,657 3.2% 5.6% (4.8%) 143 261 (235) 1.20%

Labor ac-commoda-tion costs

2,297 2,496 2,673 2,782 8.7% 7.1% 4.1% 199 177 109 6.6%

Amendment of customs duties on imports

(580) - - - (100.0%) N/A N/A 580 - - (100.0%)

Modification in Inventory 155 (91) 72 - (158.7%) (179.1%) (100.0%) (246) 163 (72) (100.0%)

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SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amountCompound


2014G 2015G 2016G 2017G2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Cost of sales incurred by subsidiaries

135,595 163,713 151,952 130,868 20.70% (7.2%) (13.9%) 28,118 (11,761) (21,084) (1.2%)

Exclusions (130,108) (143,8940 (121,984) (94,426) 10.60% (15.2%) (22.6%) (13,786) 21,910 27,558 (10.1%)

Total 275,180 288,542 265,569 214,971 4.90% (8.0%) (19.1%) 13,362 (22,973) (50,598) (7.9%)Source: The Company

The cost of sales includes the cost of raw materials, direct labor costs, indirect manufacturing expenses and export duties. The cost of sales decreased at a CAGR of 8.0% from the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G. This decrease came mainly as a result of the decline in prices of raw materials and the reduction of customs duties on exports during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

The cost of sales increased by SAR 13.4 million or 4.9% from SAR 275.2 million during the fiscal year ended on 31 March 2014G to SAR 288.5 million during the fiscal year ended on 31 March 2015G due to the growth in sales during the same period of approximately 2 million meters of membranes.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the cost of sales decreased by SAR 23.0 million or 8.0%, to SAR 265.6 million due mainly to lower raw material prices and lower customs duties on exports during the mentioned fiscal year compared to the fiscal year ended on 31 March 2015G. The decrease in export duties is due to the reduction in the amount of exports of bituminous membranes and the reduction in the value of the tax levied on exported membranes due to the direct (positive) correlation between oil prices and the tax imposed.

The cost of sales decreased by SAR 50.6 million or 19.1% from SAR 265.6 million during the fiscal year ended on 31 March 2016G to SAR 215.0 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to lower sales volumes from the membrane product in Awazel locally, in Awazel Kuwait and from the stone and marble product at Al Sultan Company. The decrease in the amount of sales in Awazel is due to the decrease in the sales of its products, especially the membrane product due to the slowdown in urban activity in the Kingdom of Saudi Arabia. The decrease in the sales of Awazel in the State of Kuwait is mainly due to the decrease in customs duties on exports, which led to making Awazel reduce the sale price of its products sold in the State of Kuwait, in addition to the decrease in the quantity of sales due to the slowdown in the urban activity and the increased competition from manufacturers in the State of Kuwait. The reason for the decrease in the Company’s sales volume is the lack of supply of raw stone due to the lack of renewal of the license of most of the quarries, including the quarry of Al Takamul company for the extraction of stone and marble, in anticipation of regulatory procedures in this sector. The decrease in export duties is also due to the reduction in the amount of exports of bituminous membrane products and to the reduced tax on exported membranes.

On the other hand, the cost of sales has declined due to lower cost of raw materials, export duties and other costs. Details of these decreases are as follows:

Raw materials“Raw materials” refer to the products associated with the Company’s products. Approximately, 35.0% of the raw materials are associated with the subsidized membrane (polyester) and approximately 20.0% of raw materials are associated with polymers. Both materials are imported in most cases from Europe and East Asia (approximately 10.0% of the subsidized membrane is purchased from the local market). Imports from outside the Kingdom are supported with guarantee letters, while approximately 25.0% of raw materials are associated with asphalt purchased from Saudi Aramco. Approximately 10.0% of the plastic materials are used to process the product surface (purchased from the local market), and approximately 10.0% of raw materials for packaging and packaging of products, mostly purchased locally.

In general, all raw material costs are directly related to international oil prices. There are no long-term contracts with the Company’s suppliers, but there are sustainable relationships spanning decades, and the supply is according to the annual production plan and its amendments. The Company maintains a strategic stock for about two months for the imported materials. Raw materials did not increase or decrease significantly during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G. The cost of raw materials decreased by SAR 1.0 million by 0.5% from SAR 176.7 million during the fiscal year ended on 31 March To SAR 175.8 million during the fiscal year ended on 31 March 2015G. In addition, the cost of raw materials - as a percentage of total sales cost of the Company - decreased from 64.2% during the fiscal year ended on 31 March 2014G to 60.9% during the fiscal year ended on 31 March 2015G, During manufacturing, during the same period.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the cost of raw materials decreased by SAR 9.9 million (5.6%) mainly due to lower raw material prices during the fiscal year ended on 31 March 2016G. In addition, the cost of raw materials - as a percentage of the Company’s total cost of sales - increased from 60.7% during the fiscal year ended on 31 March 2015G to 62.3% during the fiscal year ended on 31 March 2016G. This is due to the Company’s low cost of sales due to the impact of the low customs duties on exports, which is considered part of the Company’s cost of sales. The decrease in export duties is due to the reduction in the amount of exports of bituminous

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membranes. The decrease in customs duties on exports is due to the decrease in the value of the tax levied on the unit (m2) of exporting membranes due to the direct (positive) correlation between oil prices and the tax imposed.

Raw materials decreased by SAR 39.3 million or 23.7% from SAR 165.9 million during the fiscal year ended on 31 March 2016G to SAR 126.7 million during the fiscal year ended on 31 March 2017G. The decline in raw materials is mainly due to lower production. Awazel follows the production planning according to the latest planning programs policy, and due to lower sales volume. The cost of raw materials - as a percentage of the the Company’s total cost of sales - decreased from 62.4% during the fiscal year ended on 31 March 2016G to 59.0% during the fiscal year ended on 31 March 2017G. The decrease is due to lower prices of certain materials due to the diversification of sources of procurement and the Company’s financial ability which allows it to obtain preferential prices.

Customs duties due on exportsCustoms duties due on exports “refers to the customs duties paid by the Company on its exports of finished goods. The customs duties due on exports increased by SAR 0.9 million or 1.7% from SAR 54.2 million during the fiscal year ended on 31 March 2014G to SAR 55.1 million during the fiscal year ended on 31 March 2015G as a result of the increase in the quantity of export sales which was partially offset by the decrease in export duties during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, customs duties on exports decreased by SAR 24.9 million or 45.2% to SAR 30.2 million due to the low volume of exports of bituminous membrane products (“ Bitumen “) of the Company and because of the low value of tax levied on the membranes exported as a direct result of the direct (positive) correlation between the price of oil prices and tax imposed. Noteworthy, oil prices have decreased in 2016G compared to the year 2015G.

For information, export duties are based on the fact that Aramco in Saudi Arabia sells bituminous products at a price subsidized by the Kingdom of Saudi Arabia. Thus, companies exporting bituminous membranes pay customs duties on their exports equivalent to the difference between the international price and the subsidized price within the Kingdom.

Customs duties on exports decreased by SAR 11.0 million or 36.4%, from SAR 30.2 million in the fiscal year ended on 31 March 2016G to SAR 19.2 million during the fiscal year ended on 31 March 2017G due to the decrease in the amount of exports of bituminous membrane products and the decrease in the value of the tax imposed on the exported membranes. This was due to the reduction of customs duties on exports by the Customs Department in proportion for the international oil prices, which correlate directly to the duties imposed on the Company. Therefore, the cost of exporting of Awazel to its international subsidiaries decreased by the same amount during the fiscal year ended on 31 March 2017G

Indirect Manufacturing ExpensesIndirect manufacturing expenses decreased at a CAGR of 8.6% from SAR 20.3 million from the fiscal year ended on 31 March 2014G to SAR 15.5 million at the end of the fiscal year ended on 31 March 2017G. Indirect manufacturing expenses decreased by SAR 0.8 million or 3.9% which decreased SAR 20.3 million during the year ended 31 March 2014G to SAR 19.6 million during the fiscal year ended 31 March 2015G due to the lack of major maintenance operations required during the fiscal year ended31 March 2015G.

During the fiscal year ended on 31 March 2016G, indirect manufacturing expenses decreased by SAR 4.1 million or 20.9%, from SAR 19.6 million in the fiscal year ended on 31 March 2016G to SAR 15.5 million during the fiscal year ended on 31 March 2017G due to reduced maintenance and auxiliary materials such as oil and electricity and others in the factory due to the low production process during the period as mentioned earlier.

Other costs“Other costs” refer to transport-related costs. Other costs – as a percentage of sales - represented 4.4% during the fiscal year ended on 31 March 2014G, 3.9% during the fiscal year ended on 31 March 2015G and 4.6% during the fiscal year Ended on 31 March 2016G. In general, the percentage of other costs decreases with increased sales.

Other costs decreased by SAR 0.9 million or 7.4%, from SAR 12.1 million during the fiscal year ended on 31 March 2014G to SAR 11.2 million during the fiscal year ended on 31 March 2015G due to the agreement on a more economical transport rates from carriers during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G, other costs increased by SAR 1.0 million or 9.3% from SAR 11.2 million to SAR 12.2 million. This is mainlu due to the change in the prices of the transport of the Company’s products during the fiscal year ended on 31 March 2016G.

Other costs decreased by SAR 2.5 million or 20.7% from SAR 12.2 million during the fiscal year ended on 31 March 2016G to SAR 9.7 million during the fiscal year ended on 31 March 2017G. The decrease in other costs is due to the decrease in the amount of sales transported to subsidiaries mainly because of the slowdown in urban activity locally and in Kuwait and Qatar in particular.

Direct LaborThe cost of “direct labor” refers to salaries and wages of employees in the production process. The direct labor cost as a percentage of the cost of production represented 1.63% during the fiscal year ended on 31 March 2014G, 1.6% during the fiscal year ended on 31 March 2015G, 1.85% during the year ended 31 March 2016 and 2.16% during the year ended 31 March 2017. In general, the cost ratio decreases with the increase in production.

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During the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G, direct labor costs increased by SAR 0.1 million (3.2%). This increase is due to the increase in the average direct labor salaries and benefits during the fiscal year ended on 31 March 2015G compared to thefiscal year ended on 31 March 2014G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the direct labor cost increased by SAR 3.3 million (5.6%), due to the annual increase in the average direct labor benefits, particularly end of service benefits during the fiscal year ended on 31 March 2016G.

Direct labor costs decreased by SAR 0.2 million or 4.8%, from SAR 4.9 million during the fiscal year ended on 31 March 2016G to SAR 4.7 million during the fiscal year ending 31 March 2017G due to lower production which resulted in lower incentive payments vis-à-vis the overtime granted to labor in the production department.

Labor Accomodation Costs“Labor Accommodation Costs” refers to the costs incurred for food and the use of facilities and services at the accommodation facilities in Riyadh. Labor Accommodation Costs did not witness any significant increase or decrease during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Adjustment of Customs Duties Due on Imports“Adjustment of customs duties due on imports “ refers to an amount of SAR (0.6) million recorded during the fiscal year ended on 31 March 2014G as an addition to the balance of expenses due on imports to the Saudi Customs Authority. This has been done to amend the customs duties payable on imports to commensurate with the balance of due obligation.

It should be noted that during the fiscal year ended on 31 March 2015G, the Saudi Customs Authority requested the Company to pay customs duties on its imports during the fiscal year ended on 31 March 2015G and the preceding four years. During the fiscal year ended on 31 March 2015G, the Company recorded customs duties on imports amounting to SAR 31.1 million, a balance relating to the previous five years. The annual import duties of SAR 4.3 million were charged to the income statement for the fiscal year ended on 31 March 2015G. The income statement for the fiscal year ended on 31 March 2014G was adjusted by SAR 7.0 million to reflect the effect of import duties on the income statement. The income statement for the fiscal year ended on 31 March 2013G has been adjusted by SAR 6.7 million. The balance of SAR 13.5 million has been charged to the retained earnings line item as at 1 April 2012G.

Sales costs incurred by subsidiaries“Sales cost incurred by subsidiaries” refers to the cost of sales related to subsidiaries within the Kingdom such as Sultan Contracting, Trading and Industry Company, and Al-Takamul Stone Factory for Stone and Marble and the subsidiaries located in the State of Kuwait, the United Arab Emirates, Qatar and Indonesia. For the purpose of analyzing the cost of sales incurred by the subsidiaries, the cost of sales incurred by the subsidiaries is recognized as a net amount after excluding the cost of sales between subsidiaries and Awazel and among the subsidiaries.

The cost of sales incurred by the subsidiaries increased by SAR 28.1 million from SAR 135.6 million during the fiscal year ended on 31 March 2014G to SAR 163.7 million during the fiscal year ended on 31 March 2015G, mainly due to the addition of the cost of sales of the Sultan Contracting Company Trade and industry which amounted to SAR 14.3 million during the fiscalyear ended 31 March 2015G and which were acquired during the mentioned fiscal year.

Sales costs incurred by the subsidiaries increased by SAR 11.8 million or 7.2%, from SAR 163.7 million during the fiscal year ended on 31 March 2015G to SAR 151.9 million during the fiscal year ended on 31 March 2016G. The increase is due to the increased cost of sales of Al Sultan Contracting, Trading and Industry Company by SAR 6.3 million and the cost of sales of Al-Takamul Stone Factory Company for Stone and Marble by SAR 2.4 million due to listing the financial statements of Al-Takamul Stone Factory Company for Stone and Marble to the consolidated financial statements during the mentioned fiscal year.

The cost incurred by the subsidiaries increased by SAR 21.5 million or 13.9% from SAR 151.9 million during the fiscal year ended on 31 March 2016G to SAR 130.9 million during the fiscal year ended on 31 March 2017G. The increase in cost was due to the fact that the subsidiaries located outside the Kingdom purchased chemical waterproofing products from foreign sources (European) for the the purpose of selling them during the fiscal year ended on 31 March 2017G

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Gross profit

6-6-2 Total profit by companyThe table below shows the consolidated gross profit for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G

Table (79): Consolidated gross profit for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amount Com-pound annual growth rate %

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 83,248 104,441 121,823 106,168 25.5% 16.6% (12.9%) 21,194 17,382 (15,655) 8.4%

Al Sultan Contracting, Trading & Industry Co

- 5,464 4,704 2,107 N/A (13.9%) (55.2%) 5,464 (760) (2,597) N/A

Al-Takamul Stone Facto-ry Company for Stone and Marble

- - 740 (135) N/A N/A (118.2%) - 740 (875) N/A

Advanced company for membrane industry

- - 0 (899) N/A N/A N/A - - (899) N/A

Total 83,248 109,905 127,522 107,667 32.00% 16.00% (15.6%) 26,658 17,617 (19,855) 9.0%



6,510 7,049 6,335 6,377 8.30% (10.1%) 0.7% 539 (714) 42 (0.7%)

International Waterproof-ing Compay

5,922 6,861 9,144 9,283 15.9% 33.3% 1.5% 939 2283 139 16.20%

International Waterproof-ing Compa-ny Qatar

3,197 3,945 4,876 3,155 23.4% 23.6% (35.3%) 748 931 (1,721) (0.4%)

International Water-proofing Company Indonesia

279 508 89 0 82.10% (82.5%) (100.0%) 229 (419) (89) (100.0%)

Total 99,154 128,268 147,711 126,056 29.4% 15.2% (14.7%) 29,114 19,443 (21,655) 8.3%Source: The Company

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Table (80): Ratio of the gross profit of each subsidiary to the total profit of the Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

%

Fiscal Year ended on 31 March

2014G 2015G 2016G 2017G



Waterproofing Company 84.00% 81.4% 82.5% 84.20%

Al Sultan Contracting, Trading & Industry Co 0.00% 4.30% 3.30% 1.70%

Al-Takamul Stone Factory Company for Stone and Marble 0.00% 0.00% 0.50% (0.1%)

Advanced company for Membrane Industry 0.00% 0.00% 0.00% (0.7%)

Kuwait Waterproofing Company for Building Materials 6.60% 5.50^ 4.30 5.10%

International Waterproofing Compay 6.00% 5.30% 6.20% 7.40%

International Waterproofing Company Qatar 3.20% 3.10% 3.30% 2.50%

International Waterproofing Company Indonesia 3.00% 4.00% 1.00% 0.00%

Total profit of the Company 100.00% 100.00% 100.00% 100.00%Source: The Company

Total profit of the CompanyThe Company’s total profit increased by SAR 29.1 million (29.4%) from SAR 99.2 million during the fiscal year ended on 31 March 2014G to SAR 128.3 million during the fiscal year ended on 31 March 2015G due to higher sales than the cost of sales, especially Awazel mainly due to the increase in sales of membrane products which led to a sales increase of SAR 42.5 million compared with a higher sales cost of SAR 13.4 million (due to the increase of the average raw materials processing and processing efficiency during manufacturing by the management) during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the Company’s gross profit increased by SAR 19.4 million (15.2%). This is mainly due to the lower cost of sales during the fiscal year ended on 31 March 2016G due to lower prices of raw materials and export custom duties.

The Company’s total profit decreased by SAR 21.7 million (14.7%) from SAR 147.7 million during the fiscal year ended on 31 March 2016G to SAR 126.1 million during the fiscal year ended on 31 March 2017G. The decrease was due to a decrease in the Company sales by SAR 72.3 million inside and outside the Kingdom and mainly the decline in urban activity during the fiscal year ended on 31 March 2017G.

AwazelAwazel total gross profit increased during the fiscal year ended on 31 March 2014G by SAR 21.2 million ( 25.5%) from SAR 83.2 million to SAR 104.4 million during the fiscal year ended on 31 March 2015G. The increase was due to higher domestic sales and lower manufacturing cost due to higher operating efficiency.

Awazel total profit increased by SAR 17.4 million (16.6%) from SAR 104.4 million during the fiscal year ended on 31 March 2015G to SAR 121.8 million during the fiscal year ended on 31 March 2016G. This was a result of higher local sales and lower manufacturing cost due to lower raw materials.

During the fiscal year ended on 31 March 2017G compared to 2016G, the gross profit of Awazel decreased by SAR 15.7 million (12.9%). This was mainly due to the low demand for Awazel products in the Kingdom due to the slowdown in urban activity

Al Sultan Contracting, Trading & Industry CompanyAl Sultan Contracting, Trading and Industry Company achieved a gross profit of SAR 5.5 million during the fiscal year ended on 31 March 2015G and SAR 4.7 million during the fiscal year ended on 31 March 2016G. The decline in the Company’s gross profit during the fiscal year ended on 31 March 2016G was SAR 0.8 million compared to the fiscal year ended on 31 March 2015G. The decline in the Company’s gross profit is due to the shortage of quantities exported outside the Kingdom whose profit exceeds the price of products sold locally. The cost of sales increased by SAR 6.3 million compared to increase in sales by SAR 5.6 million during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G.

The gross profit of Al Sultan Contracting, Trading and Industry Co. decreased by SAR 2.6 million (55.2%) from SAR 4.7 million during the fiscal year ended on 31 March 2016G to SAR 83.2 million during the fiscal year ended on 31 March 2017G. The mentioned decrease was due to a decrease in the amount of production due the lack of availability of stones and their high price, as already explained. This led to a decrease in the sales of the Company mentioned by SAR 7.4 million during the fiscal year ended on 31 March 2017G.

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Al-Takamul Stone Factory Company for Stone and MarbleAl-Takamul Stone Factory Company for Stone and Marble was previously a branch of Al Sultan Contracting, Trading and Industry Company until it was transitioned to a limited liability company during the fiscal year ended on 31 March 2016G with a capital of SAR 2.6 million. Al-Takamul Stone Factory Company for Stone and Marble achieved a gross profit of SAR 0.7 million from the date of commencement of activity in July 2015G until 31 March 2016G.

During the fiscal year ended on 31 March 2017G, the gross profit of Al-Takamul Stone Factory Company for Stone and Marble decreased by SAR 0.9 million (118.2%) of the total profit of SAR 0.7 million during the fiscal year ended on 31 March 2016G to a total loss of SAR 0.1 million during the fiscal year ended on 31 March 2017G. The total loss was due to the non-renewal of the licenses of most of the quarries in the Kingdom, including the quarry administered by the aforementioned company as mentioned earlier.

Advanced Company for Membrane IndustryThe Advanced Company for Membrane Industry achieved a total loss of SAR 0.9 million during the fiscal year ending 31 March 2017G because it is in the promotional period for its products. Work is under way to adopt its products by the consulting offices and the relevant governmental agencies.

Kuwait Waterproofing Company for Building MaterialsThe total profit of Kuwait Waterproofing Company for Building Materials increased during the fiscal year ended on 31 March 2015G by SAR 0.5 million (8.3%) from SAR 6.5 million during the fiscal year ended on 31 March 2014G to SAR 7.0 million during the fiscal year ended on 31 March 2015G mainly due to increased sales of Kuwait Waterproofing Company for Building Materials during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, gross profit decreased by SAR 0.7 million (10.1%). This was mainly due to the decrease in the value of sales of Kuwait Waterproofing Company for Building Materials due to the reduction in sale prices to maintain competitive prices as a result of the slowdown in the construction activity during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G. In addition, some large projects were completed with senior customers of Kuwait Waterproofing Company for Building Materials and due to the decrease in the Kuwaiti Dinar exchange rate compared to the Saudi Riyal.

The total profit of Kuwait Waterproofing Company for Building Materials did not witness any significant rise or decrease during the fiscal year ended on 31 March 2017G compared to 2016G wherein the cost of sales decreased by SAR10.9 million and sales decreased equally during the fiscal year ended on 31 March 2017G, which caused to maintain the total profit of the said company.

International Waterproofing CompanyDuring the fiscal year ended on 31 March 2015G, gross profit increased by SAR 0.9 million (15.9%) from SAR 5.9 million during the fiscal year ended on 31 March 2014 G to SAR 6.9 million during the fiscal year ended on 31 March 2015G. The increase was due mainly to increased sales of membrane products.

During the fiscal year ended on 31 March 2016G, the total profit of International Waterproofing Company increased by SAR 2.3 million (33.3%) to SAR 9.1 million mainly due to the lower cost of procurement of waterproofing during the mentioned fiscal year (lower procurement cost was due to lower tariffs during the fiscal year ended on 31 March 2016G).

During the fiscal year ended on 31 March 2017G, the Company was able to maintain the same level of gross profit achieved during the fiscal year ended on 31 March 2016G.

International Waterproofing Company QatarThe total gross profit of the International Waterproofing Company Qatar increased by SAR 0.7 million (23.4%) from SAR 3.2 million during the fiscal year ended on 31 March 2014G to SAR 3.9 million during the fiscal year ended on 31 March 2015G mainly due to the increased sales of membrane products.

During the fiscal year ended on 31 March 2016G, the Company’s gross profit increased by SAR 9.9 million (23.6%) due to increased demand on the Company’s products - particularly the membrane product - in the State of Qatar which led to higher sales in Qatar. In addition to the low price of the Company’s purchases from Awazel. Due to the decline in international oil prices, as mentioned earlier, the price of Bituminous products sold by the International Waterproofing Company Qatar has decreased from Awazel (such as membrane products) leading to a decrease in the cost of purchasing for the said company, which reflected positively on the total profit.

The total profit of International Waterproofing Company Qatar decreased by SAR 1.7 million (35.3%) from SAR 4.9 million during the fiscal year ended on 31 March 2016G to SAR 2.1 million during the fiscal year ended on 31 March 2017G. The decrease was due to lower sales of membranes in the State of Qatar due to the slowdown in urban activity in the mentioned country.

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International Waterproofing IndonesiaDuring the fiscal year ended on 31 March 2015G, the Waterproofing Company ceased its exports International Waterproofing Company Indonesia . International Waterproofing Company Indonesia has operated through its inventory. The total profit of International Waterproofing Company Indonesia during the fiscal year ended on 31 March 2014G amounted to SAR 0.5 million On 31 March 2015G.

The Company’s total profit decreased by SAR 0.4 million (82.5%) during the fiscal year ended on 31 March 2016G to SAR 0.1 million. This is due to the fact that the International Waterproofing Company Indonesia has been in liquidation for the fiscal year ended on 31 March 2016G. Gross profit represents sales and liquidation costs of International Waterproofing Company Indonesia up to the end of April 2016G, where it was officially closed.

International Waterproofing Company Indonesia did not record total profit due to the closure of operating activities during the fiscal year ended on 31 March 2017G.

6-6-3 Sale and Marketing Expenses

2- Sale and Marketing Expenses by item

The table below presents the Company’s consolidated sales and marketing expenses for the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G:

Table (81): Consolidated expenses for the Company’s sale and marketing during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000

Fiscal Year ended on 31 March Increase / (Decrease) % Increase (Decrease) amount

Com-pound annual growth rate %

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Salaries, wages and benefits

8,563 9,565 11,987 11.81 11.7% 25.3% (1.5%) 1,002 2,422 (177) 11.3%

Sales commissions 2,580 2,721 3,062 2.433 5.5% 12.5% (20.5%) 141 341 (629) (1.9%)

Rent 2,307 2,531 2,646 2,762 9.75 4.5% 4.4% 224 115 116 6.2%

Provisions for doubtful debts

343 1,783 2,493 2,456 419.8% 39. 8% (1.5%) 1,440 710 (37) 92.7%

Advertising and promotion

1,137 1.102 1,420 1,353 (3.1%) 28.9% (4.7%) (35) 318 (67) 6.0%

Depreciation of equipment and machinery

798 868 1,026 1,005 8.8% 18.2% (2.0%) 70 158 (21) 8.0%

Communica-tions expenses 414 414 303 327 0.00% (26.8%) 7.9% - (111) 24 7.6%

Insurance 270 328 366 287 21.5% 11.6% (21.6%) 58 38 (79) 2.1%

Depreciation of investment properties

- - - 548 N/A N/A N/A - - 548 N/A

Repair and maintenance - - - 600 N/A N/A N/A - - 600 N/A

Travel 172 276 256 346 60.50% (7.2%) 35.2% 104 (20) 90 26.20%

Bank fees 227 167 340 319 (26.4%) 103.6% (6.2%) (60) 173 (21) 12.00%

Commission expenses - - 303 - N/A N/A (100.0%) - 303 (303) N/A

Office facilities - - - 236 N/A N/A N/A - - 236 N/A

Other expenses 2,753 2,353 2,712 2,521 (14.5%) 15.3% (7.0%) (400) 359 (191) (2.9%)

Total 19,565 22,108 26,612 27,001 13.00% 20.40% 1.5% 2,543 4,504 389 11.3%Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

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Sale and marketing expenses mainly include all subsidiary expenses and sales and marketing expenses the Company’s products from salary, pay and benefit expenses, sales commissions, rent and amortization expenses related to the sale and marketing function, doubtful debts and advertising and promotion expenses. Sales and marketing expenses increased at a CAGR of 11.3% from the fiscal year ended on 31 March 2014G until the end of the fiscal year ended on 31 March 2017G mainly due to the increase in salary, pay and benefits expenses from SAR 8.6 million during the fiscal year ended on 31 March 2014G to SAR 11.8 million during the fiscal year ended on 31 March 2017G. This is due to the increase in average salaries and benefits and the adjustment of end of service benefits during the said periods and the increase in provisions for doubtful debts from SAR 0.3 million during the fiscal year ended on 31 March 2014G to SAR 2.5 million during the fiscal year ended on 31 March 2017G.

Sales and marketing expenses increased by SAR 2.5 million (13.0%) from SAR 19.6 million during the fiscal year ended on 31 March 2014G to SAR 22.1 million during the fiscal year ended on 31 March 2015G. The increase is mainly due to higher salary expenses, fees and benefits which increased by 1.0 million Saudi Riyals (11.7%) mainly due to the sales and marketing expenses of Al Sultan Company for Contracting, Trading and Industry which started its activity during the fiscal year ended on 31 March 2015G. In addition to the increase in provisions for doubtful debts from SAR 0.3 million during the fiscal year ended on 31 March 2014G to SAR 1.8 million during the fiscal year ended on 31 March 2015G (SAR 1.4 million) or 419.8% which was a major reason for higher sales and marketing expenses during the fiscal year ended on 31 March 2015G.

Sale and marketing expenses increased by SAR 4.5 million (20.4%) from SAR 22.1 million during the fiscal year ended on 31 March 2015G to SAR 26.6 million during the fiscal year ended on 31 March 2016G. The increase was mainly due to increased salary expenses, salary and benefits by SAR 2.4 million during the same period. This was mainly due to the adjustment of end of service expenses, the increase in salaries of subsidiaries and the addition of salaries, wages and benefits to Stone Takamul Factory Company for Stone and Marble . This is in addition to the increase in the provisions for doubtful debts from SAR 1.8 million during the fiscal year ended on 31 March 2015G to SAR 2.5 million during the fiscal year ended on 31 March 2016G by SAR 0.7 million.

Sales and marketing expenses did not witness any significant rise or fall during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G, which increased by 0.4 million Saudi Riyals (1.5%) mainly due to the depreciation expense of new premises set for lease to others in the International Waterproofing Company in the United Arab Emirates by SAR 0.5 million.

The Company’s consolidated sales and marketing expenses consist of the following:

Salaries, wages and benefitsSalaries, wages and benefits refer to compensations provided to human resources engaged in sales activities. Salaries, wages and benefits - as a percentage of total sales and marketing expenses - represented 43.8% during the fiscal year ended on 31 March 2014G and 43.3% during the fiscal year ended on 31 March 2015G and 45.0% during the fiscal year ended on 31 March 2016G.

Salaries, wages and benefits increased by SAR 1.0 million representing an increase of 11.7% from SAR 8.6 million during the fiscal year ended on 31 March 2014G to SAR 9.6 million during the fiscal year ended on 31 March 2015G. The increase is mainly due to the salary, wages and benefits expenses of Sultan Contracting, Trading and Industry Company which commenced its operations during the fiscal year ended 31 March 2015.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the Company’s salary, wage and benefit expenses increased by SAR 2.4 million (25.3%). This is due to the addition of the salaries of Al-Takamul Stone Factory Company for Stone and Marble, in addition to the adjustment of the end of service expenses and increasing the salaries of the subsidiaries during the fiscal year ended on 31 March 2016G.

Salaries, wages and benefits have not any material increase or decrease as they decreased by SAR 0.1 million or 1.5% during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G.

Sale commissionsSale commissions are calculated on the basis of the sale targets achieved by the employees. Sale commissions have not witnessed any significant fluctuations during the fiscal years ended on 31 March 2014G, 2016G and 2016G. Sale commissions amounted to SAR 2.6 million during the fiscal year ended on 31 March 2014G and 2.7 million during the fiscal year ended on 31 March 2015G and SAR 3.1 million during the fiscal year ended on 31 March 2016G. The increase in sale commissions during the fiscal year ended on 31 March 2015G is attributable to the higher sales volume due to the increase in sales commissions during the fiscal year ended on 31 March 2016G mainly to achieve the sale target by the sales department employees, and to increase motivation by the Company to achieve more sales.

Sales commissions decreased by SAR 0.6 million (20.5%) from SAR 3.1 million during the fiscal year ended on 31 March 2016G to SAR 2.4 million during the fiscal year ended on 31 March 2017G due to lower sales value as sales commission has a direct correlation with sales value.

RentThe cost of “rent” refers to the cost of rent for the sales offices in Riyadh, Jeddah and Dammam, as well as the cost of renting the warehouses and the accommodation facility in Dammam, while the expenses of the accommodation facilities in Riyadh are restricted as part of the cost of sales as these facilities primarily serve the production personnel. The lease has

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not witnessed a significant increase or decrease during the fiscal years ended 31 March 2014G, 2015G and 2016G. Rental expenses amounted to SAR 2.3 million during the fiscal year ended 31 March 2014G and SAR 2.5 million during the fiscal year ended 31 March 2015G and SAR 2.6 million during the fiscal year ended on 31 March 2016G. The increase in rental expenses during the above fiscal years is mainly due to the increase in rental value of subsidiaries.

There was no increase or decrease in rental expenses as they increased by SAR 0.1 million or 4.4% during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G.

Provisions for doubtful debtsThe provisions for doubtful debts increased by SAR 1.4 million or 419.8% from SAR 0.3 million during the fiscal year ended on 31 March 2014G to SAR 1.8 million during the fiscal year ended on 31 March 2015G. This increase was due to the provisions that were recorded against the receivables at International Waterproofing Company Indonesia due to the decision of the Board of Directors to liquidate the Company.

The provisions for doubtful debts increased by SAR 0.7 million or 39.8% to SAR 2.5 million during the fiscal year ended on 31 March 2016G due to the aging of certain debts as at 31 March 2016G.

The provisions for doubtful debts did not witness any significant rise or fall as it decreased by SAR 0.03 million or 1.5% during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G.

Advertising and Promotion“Advertising and Promotion Expenses” refer to the expenses incurred by the Company for marketing its products inside and outside the Kingdom of Saudi Arabia. Advertising and Promotion expenses did not witness any significant increase or decrease during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G and during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G.

Advertising and Promotion expense did not witness any significant increase or decrease as it decreased by 0.07 million Saudi Riyals Saudi Riyals or 4.7% during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G.

Other expenses“Other expenses” refer to the expenses related to office equipment, expenses related to vehicle and other expenses. Other expenses did not witness any significant increase or decrease during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G, and during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G.

Other expenses increased by SAR 0.3 million (15.1%) from SAR 2.2 million during the fiscal year ended on 31 March 2016G to SAR 3.5 million during the fiscal year ended on 31 March 2017G.

3- Sale And Marketing Expenses By Company

The table below shows the Company’s consolidated sales and marketing expenses during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (82): Consolidated Sale and Marketing Expenses by Company during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


CAGR%2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Water-proofing Company

8,830 10,351 9,935 9,455 17.20% (4.0%) (4.8%) 1,521 (416) (480) 2.3%


- 1,058 2,816 3,000 N/A 166.2% 6.5% 1,058 1,758 184 N/A


- - 191 194 N/A N/A 1.6% - 191 3 N/A

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SAR’000


CAGR%2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



151 185 180 43 22.5% (2.7%) (76.1%) 34 (5) (137) (34.2%)

Sub Total 8,981 11,594 13,122 12,692 29.10% 13.2% (3.3%) 2,613 1,528 (430) 12.2%



3,291 3,409 4,198 3,843 3.60% 23.10% (8.5%) 118 789 (355) 5.3%

International Waterproof-ing Compay

3,988 4,004 4,759 7,044 0.40% 18.90% 48.00% 16 755 2,285 20.90%


1,958 2,364 3,834 3,265 20.70% 62.20% (14.80%) 406 1,470 (569) 18.60%

International Waterproof-ing Compa-ny Indonesia

1,347 737 699 157 (45.30% (5.20%) (77.50%) (610) (38) (542) (51.20%)

Total 19,565 22,108 26,612 27,001 13.00% 20.40% 1.50% 2,543 4,504 389 11.30%Source: Company

Sale and marketing expenses for the Waterproofing company accounted for 45.1% of total sales and marketing expenses for the fiscal year ended on 31 March 2014G, 46.8% for the fiscal year ended on 31 March 2015G and 37.3% for the fiscal year ended on 31 March 2016G, and 35.0% during the fiscal year ended on 31 March 2017G. These ratios for the Waterproofing Company represented the highest percentage of sales and marketing expenses for the Company during the mentioned fiscal years compared to the rest of the Waterproofing companies, because the sales and marketing expenses for Awazel in Saudi Arabia represent the largest part of Sale and marketing expenses.

The sales and marketing expenses for the International Waterproofing Company represented 20.4% of the Company’s total sales and marketing expenses during the fiscal year ended on 31 March 2014G, 18.1% during the fiscal year ended on 31 March 2015G and 17.9% during the fiscal year ended on 31 March 2016G, and 26.1% during the fiscal year ended on 31 March 2017G. This is mainly due to the high cost of performing business in the International Waterproofing Company in the UAE. Noteworthy, the sale expenses of the International Waterproofing Company increased by 48% as in the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G due to the calculation of depreciationl of investment premises and more provisions for doubtful debts. The Company’s sales and marketing expenses in the State of Qatar represented 10.0% of the Company’s total sale and marketing expenses during the fiscal year ended on 31 March 2014G, 10.7% during the fiscal year ended on 31 March 2015G and 14.4% during the fiscal year ended on 31 March 2016G and 12.1% during the fiscal year ended on 31 March 2017G. The Company’s sales and marketing expenses in Kuwait accounted for 16.8% of total sales and marketing expenses for the fiscal year ended on 31 March 2014G, 15.4% for the fiscal year ended on 31 March 2015G and 15.8% the fiscal year ended on 31 March 2016G and 14.2% during the fiscal year ended on 31 March 2017G. Subsidiaries constitute the remaining percentage.

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6-6-4 General and Administrative ExpensesThe following table presents the Company’s consolidated general and administrative expenses for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (83): The Company’s General and administrative expenses for the fiscal years ended on March 2014G, 2015G, 2016G and 2017G.

SAR’000


CAGR%2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Salaries, wages and benefits 15,547 16,281 19,070 15,621 4.70% 17.10% (18.10%) 734 2,789 (3,449) 0.20%

Professional Services 492 954 495 1,800 93.90% (48.10%) 263.60% 462 (459) 1,305 54.10%

Travel expenses 709 693 325 151 (2.30%) (53.10%) (53.50%) (16) (368) (174) (40.30%)

Insurance 350 344 360 450 (1.70%) 4.70% 25.00% (6) 16 90 8.70%

Bank fees 94 172 37 83 83.00% (78.50%) 124.30% 78 (135) 46 (4.10%)

Depreciation of property and equipment

115 113 1,610 1,717 (1.70%) 1324.80% 6.60% (2) 1,497 107 146.20%

Other expenses 790 1,075 1,719 1.752 36.1& 59.90% 1.90% 285 644 33 30.40%

Total 18,096 19,633 23.616 21.574 8.50% 20.30% (8.60%) 1,537 3,983 (2,042) 6.00%Source: Financial statements prepared for a special purpose and the consolidated and audited financial statements of the Company.

General and administrative expenses” are limited to the Waterproofing Company expenses only, while the general and administrative expenses of the subsidiaries have been recorded as part of the sales and marketing expenses. General and administrative expenses include the Waterproofing Company expenses from salaries, wages, benefits and depreciation expenses of non-current non-marketable assets and all other expenses that are not classified in the main items related to the Waterproofing Company. General and administrative expenses increased from SAR 18.1 million for the fiscal year ended on 31 March 2014G to SAR 21.6 million for the fiscal year ended on 31 March 2017G by SAR 3.5 million at a CAGR of 5.2% for the fiscal year ended 31 March 2014G until the fiscal year ended on 31 March 2017G. This is mainly due to changes in salary, pay and benefits expenses from SAR 15.5 million to SAR 16.3 million to SAR 19.1 million to SAR 15.6 million during the fiscal year ended on 31 2014G, 2015G, 2016G and 2017G respectively which is due to the appointment of additional employees in the Information Technology Department, the amendment of employee benefits and bonuses and the adjustment of end of service benefits to commensurate with the Saudi Labor Law. In addition, professional services increased from SAR 0.5 million to SAR 1.8 million from the fiscal year ended on 31 March 2014G to the fiscal year ended on 31 March 2017G by SAR 1.3 million during that period. This is due to the fact that consulting and professional services have been obtained for administrative and customs exemption systems. The depreciation expense increased from SAR 0.2 million for the fiscal year ended on 31 March 2014G to SAR 1.7 million as at 31 March 2017 by SAR 1.6 million during the fiscal year ended on 31 March 2017 due to the calculation of depreciation on additions and improvements made to the Company’s headquarters premises in Riyadh during the fiscal year ended on 31 March 2017G, and also to calculate expenses of the depreciation expense increased from SAR 0.2 million for the fiscal year ended on 31 March 2014G to SAR 1.7 million as at 31 March 2017G by SAR 1.6 million during the fiscal year ended on 31 March 2017G due to the calculation of depreciation on additions and improvements made to The Company’s headquarters in Riyadh during the fiscal year ended on 31 March 2017G, and also to calculate the depreciation of computers and information systems (SAP system) introduced by the Company in 2016G and 2017G. The increase is also due to the increase in other expenses. Other expenses increased from SAR 0.8 million during the fiscal year ended on 31 March 2014G to SAR 1.8 million during the fiscal year ended on 31 March 2017G by SAR 1.0 million during the fiscal year ended on 31 March 2017G due to the need to renew some licenses or certificates of environment.

General and administrative expenses increased by SAR 1.5 million (8.5%) from SAR 18.1 million during the fiscal year ended on 31 March 2014G to SAR 19.6 million during the fiscal year ended on 31 March 2015G mainly due to higher salaries, wages and benefits by SAR 0.7 million (4.7%) due to the increase in the average salary of employees - especially the bonuses of executives and managers - due to the Awazel’s realization of increased income during the fiscal years ended on 31 March 2014G, 2016G and 2016G. In addition, professional services increased by SAR 0.5 million during the fiscal year ended on 31 March 2015G as a result of financial and legal consultation expenses to correct end of service benefits to conform with labor laws in the Kingdom and to prepare the governmental regulations.

General and administrative expenses increased by SAR 4.0 million during the fiscal year ended on 31 March 2016G or 20.3%, compared to the fiscal year ended on 31 March 2015G. The increase was due to an increase of SAR 2.4 million in salaries, wages and benefits due to the recruitment of additional staff In the Information Technology Department (five employees), adjusting employee benefits (end of service benefits), increasing allowances for senior executives and

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managers, and increasing the average salary of employees. This is in addition to the increase in depreciation expenses by SAR 1.5 million during the fiscal year ended on 31 March 2016G due to the calculation of the depreciation expense on automated information systems and computers (SAP) system introduced by the Company in the 2016G.

General and administrative expenses decreased by SAR 2.0 million or 8.6% from SAR 23.6 million during the fiscal year ended on 31 March 2016G to SAR 21.6 million during the fiscal year ended on 31 March 2017G mainly due to the reduction of the higher management remuneration at the Awazel, and the decrease in employee bonuses during the fiscal year ended on 31 March 2017G, due to failure to achieve the targets set by the Company and it should be noted that the bonuses and incentives are subject to the approved company’s reward committee policy which is related to performance standards.

Salaries, wages and benefitsThe table below shows the Company’s salaries, wages and benefits during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (84): Company’s Salaries, wages and benefits during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


CAGR%2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Rewards, salaries and benefits of senior man-agement

6,733 6,781 8,603 6,053 0.70% 26.90% (29.6) 48 1,822 (2,550) (3.50%)

Salaries 4,239 4,590 4,542 4,340 8.30% (1.00%) (4.40%) 351 (48) (202) 0.80%

Rewards 1,236 1,227 2,045 1,477 (0.70%) 66.70% (27.80%) (9) 818 (568) 6.10%

Other allowances

Housing allowances 1,162 1,200 656 1,265 3.30% (45.30%) 92.80% 38 (544) 609 2.90%

Treatment allowances 428 486 519 - 13.60% 6.80% (100.00%) 58 33 (519) (100.00%)

Provision for employees’ end of service benefits

836 744 700 689 (11.00%) (5.90%) (1.60%) (92) (44) (11) (6.20%)

Transportation 399 355 407 359 (11.00%) 14.60% (11.80%) (44) 52 -48 (3.50%)

Vacations 351 394 368 309 12.30% (6.60%) (16.00%) 43 (26) -59 (4.20%)

Others 163 504 1,230 1,129 209.20% 144.00% (8.20%) 341 726 (101) 90.60%

Sub-Total 3,339 3,683 3,880 3,751 10.30% 5.30% (3.30%) 344 197 (129) 4.00%

Total 15,547 16,281 19,070 15,621 4.70% 17.10% (18.10%) 734 2,789 (3,449) 0.20%Source: Company

Salaries, wages and benefits increased by a CAGR of 0.2% from the fiscal year ended on 31 March 2014G to the fiscal year ended on 31 March 2017G. This increase is due to the increase and decrease in salaries and benefits of senior management, employee salaries and other allowances from the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G. It should be noted that bonuses and incentives have a key role in the change in this item. The Company’s salaries, wages and benefits increased by SAR 0.7 million in the fiscal year ended on 31 March 2015G and increased by SAR 2.4 million in the fiscal year ended on 31 March 2016G and decreased by SAR 3.7 million in the fiscal year ended on 31 March 2017G, respectively.

Other “other” expenses represent social insurance expenses for Awazee employees, renewal of of residencies (Iqamas), life insurance, risks and bonuses outside working hours. End of service benefits are calculated based on basic salary, housing and transportation allowance.

Rewards, salaries and benefits of senior managementThe remuneration, salaries and benefits of senior management refer to the remuneration, salaries and benefits of senior management. The remuneration, salaries and benefits of senior management represented 43.3% of total salaries, wages and benefits during the fiscal year ended on 31 March 2014G and 41.6% during the fiscal year ended on 31 March 2015G, 45.1% during the fiscal year ended on 31 March 2016G and 38.7% during the fiscal year ended on 31 March 2017G. The significant increase in the value of the line item for the fiscal year ended on 31 March 2016G and the significant decrease

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in the value of the same line item for the fiscal year ended on 31 March 2017G reflects a clear policy of the Company in the rewards according to the results achieved positively and negatively.

Salaries“Salaries” refers to the salaries of Awazel employees only, while all salary expenses of Awazel subsidiers are recorded as part of sales and marketing expenses. Salary expenses for Awazel did not witness any significant rise or fall. Salaries increased by SAR 0.4 million (8.3%) during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G. During the fiscal year ended on 31 March 2016G, salaries decreased by 0.05 compared to the fiscal year ended on 31 March 2015G, and decreased by SAR 0.2 million or 4.4% during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G.

Rewards“Rewards” refer to what is distributed during the year to Awazel employees, and does not include the sales department employees in these bonuses, which are calculated and distributed based on a specific policy in which the seniority of the employee and his status in the management and annual evaluation are included along with other factors. This system is assessed and updated by the Nomination and Remuneration Committee of the Board of Directors. A total amount of the remuneration is determined as a percentage of the net income of the Company that amounted to SAR 1.2 million during the fiscal year ended on 31 March 2014G and SAR 1.2 million during the fiscal year ended on 31 March 2015G, and SAR 2.0 million during the year for the fiscal year ended on 31 March 2016G and SAR 1.5 million for the fiscal year ended on 31 March 2017G. The decrease in the value of bonuses for the fiscal year ended on 31 March 2017G is in line with the financial results achieved.

Other Allowances“Other allowances” represent all allowances paid to employees of Awazel otger than salaries and bonuses, including end of service benefits, subsistence allowance, transportation, treatment, leave and all other allowances. The balance of other allowances - as a percentage of total general and administrative expenses - represented 19.0% during the fiscal year ended on 31 March 2014G, 20.3% for the fiscal year ended on 31 March 2015G and 20.3% for the fiscal year ended on 31 March 2016G.

Other allowances increased by SAR 0.3 million or 10.3% during the fiscal year ended on 31 March 2015G, and increased by 0.2% increased or 5.3% during the fiscal year ended 31 March 2016G.

“Other” expenses as part of other allowances represent all other allowances other than accommodation, treatment, transportation, leave and provision for end of service benefits. The expense increased by SAR 0.5 million or 122.5% from 0.5% during the fiscal year ended on 31 March 2015G to SAR 1.2 million during the fiscal year ended on 31 March 2016G. This is mainly due to an increase in the food allowance due to new employment in Awazel during the fiscal year ended on 31 March 2016G.

Other expenses decreased by SAR 0.1 million or 8.2% from SAR 1.2 million during the fiscal year ended on 31 March 2016G to SAR 1.1 million during the fiscal year ended on 31 March 2017G. The decrease is due to the food allowance because some employees are on leave and were not paid during their leave.

Professional Service Expenses “Professional Service Expenses” refer to consulting, auditing and legal fees. Professional service expenses did not witness any significant increase or decrease during the fiscal years ended on 31 March 2014G, 2016G and 2016G. The balance of professional service expenses was SAR 0.5 million during the fiscal year ended on 31 March 2014G , SAR 1.0 million for the fiscal year ended on 31 March 2015G and SAR 0.5 million during the fiscal year ended on 31 March 2016G.

Professional service expenses increased by SAR 0.5 million or 93.9% from SAR 0.5 million during the fiscal year ended on 31 March 2014G to SAR 1.0 million during the fiscal year ended on 31 March 2015G, due to the increase in expenses to an experienced company in the development of administrative systems (Trillian Indian Company).

Professional service expenses decreased by SAR 0.5 million or 48.1% from SAR 1.0 million during the fiscal year ended on 31 March 2015G to SAR 0.5 million during the fiscal year ended on 31 March 2016G due to the termination of some professional consultancy activities. Professional service expenses increased by SAR 1.3 million or 263.6%, from SAR 0.5 million during the year ended 31 March 2016G to SAR 1.8 million during the year ended 31 March 2017G. The increase was due to the expense of the auditor of Awazel accounts for the preparation of financial statements and company auditing. In addition to expenses related to customs exemptions expert fees. It should be noted that the expert’s fees related to the exemptions are for a period of five years but have been charged to the financial statement during 2017G

Insurance ExpensesInsurance expenses relates to the insurance premium share of the management’s share of total insurance expenses, which include all the short term assets of the management department in Awazel such as office equipment, furniture and computers. Insurance expenses did not witness any significant increase or decrease during the fiscal years ended on 31 March 2014G and 2015G 2016G and 2017G.

Due to the fact that the balance of net book value of short-term assets was close during the mentioned periods, the balance of insurance expenses was close. The balance of insurance expenses amounted to SAR 0.4 million during the fiscal year ended on 31 March 2014G and SAR 0.3 million during the fiscal year ended on 31 March 2015G and SAR 0.4 million during

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the fiscal year ended on 31 March 2016G and SAR 0.5 million during the fiscal year ended on 31 March 2017G. It should be noted that the insurance expenses mentioned do not include the insurance expenses of the Company’s factories, but are added as part of the cost of the products pursuant to the Company’s policy.

Depreciation of property and equipmentDepreciation of property and equipment refers to the depreciation of non-current assets that are not related to the sale, marketing and non-production operations. as depreciation expenses have not witnessed any significant increase or decrease during the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G. The depreciation expense decreased from SAR 0.115 million during the fiscal year ended on 31 March 2014G to SAR 0.113 million during the fiscal year ended on 31 March 2015G (1.7%).

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, depreciation expenses increased by SAR 1.5 million from SAR 0.113 million to SAR 1.6 million at percentage of 1234.8%. This is due to the start of calculating the depreciation expense on equipment and computers and on (SAP) system which was purchased by Awazel during the fiscal year ended on 31 March 2016G. There was no significant increase or decrease during the fiscal year ended on 31 March 2017G, as the depreciation expense increased by SAR 0.1 million (6.6%) mainly due to the calculation of depreciation on improvements and renovations made to the Company’s premises in Riyadh.

Other ExpensesOther expenses line item includes miscellaneous expenses, subscription fees and recruitment expenses. This line item did not witness any significant changes during the fiscal year ended on 31 March 2014G, 2015G, 2016G and 2017G. The balance of other expenses amounted to SAR 0.8 million during the fiscal year ended on 31 March 2014G, SAR 1.1 million during the fiscal year ended on 31 March 2015G, SAR 1.7 million during the fiscal year ended on 31 March 2016G and SAR 1.8 million during the fiscal year ended on 31 March 2017G.

6-6-5 Income From OperationsOperating income increased at a CAGR of 8.0% during the fiscal year ended on 31 March 2014G and until the end of the fiscal year ended on ended on 31 March 2017G.

Operating income increased by SAR 25.0 million or 40.7% from SAR 61.5 million during the fiscal year ended on 31 March 2014G to SAR 86.5 million during the fiscal year ended on 31 March 2015G. This increase is mainly due to higher sales during the fiscal year ended on 31 March 2015G, due to higher sales of membrane products due to increased demand on the Company’s products by customers. In addition, Al-Sultan Contracting, Trade and Industry Co. contributed to the Company’s sales by SAR 19.8 million during the fiscal year ended on 31 March 2015G, which was acquired by the Company during the fiscal year.

Operating income increased by SAR 11.0 million or 12.7% from SAR 86.5 million during the fiscal year ended on 31 March 2015G to SAR 97.5 million during the fiscal year ended on 31 March 2016G. The increase was due to a decrease in the cost of sales more than the decrease in sales. Sales cost decreased by SAR 23.0 million, which was offset by a decrease of SAR 3.5 million in sales during the fiscal year ended on 31 March 2016G. The decrease in the cost of sales is due to the decrease in raw material prices in general and low export tariffs during the fiscal year ended on 31 March 2016G. The decrease in sales during the fiscal year ended on 31 March 2016G was mainly due to lower sales as the Company reduced its product price due to the reduction of competitors’ prices and the slowdown in urban growth mainly in Saudi Arabia, Kuwait and the UAE. The decrease in export tariffs is also due to the reduction in the amount of exports of bituminous membrane products and to the decrease in the value of the tax levied on the unit (m2) of exported membranes. It should be noted that there is a direct correlation between oil prices and export tariffs.

Operating income decreased by SAR 20.0 million or 20.5% from SAR 97.5 million during the fiscal year ended on 31 March 2016G to SAR 77.5 million during the fiscal year ended on 31 March 2017G mainly due to a decrease in operating income sales of membrane products, lower sales of Al Sultan from stone / marble products and sales of membranes of Awazel in Kuwait and Qatar due to the slowdown in the construction activity.

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6-6-6 (Expenses) / Other Income

4- (Expenses) / Other Income by Item

The table below presents the Company’s other consolidated expenses and income for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (85): Other Consolidated Expenses and Other Income of the Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


CAGR%2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Income from rental of warehouses

264 212 1,035 1,921 (19.7%) 388.20% 85.60% (52) 823 886 93.80%

Income from disposing oil waste

1,190 77 468 - (93.5%) 507.80% (100.0%) (1,113) 391 (468) (100.0)

Income from deposits 202 53 3 1,622 (73.8%) ( 94.3 %) 53966.70% (149) (50) 1,619 100.20%

Foreign exchange Conversion gain (loss)

563 (13,275) 572 (50) (2457.9%) (104.3%) (108.7%) (13,838) 13,847 ()622) (144.6)

Profit from sale of property, plant and equipment

391 82 169 200 (79.0) 106.10% 18.30% (309) 87 31 (20.0)

Sales of scrap and raw materials

45 72 13 46 60.00% (81.95) 253.80% 27 (59) 33 0.70%

Other Income 162 1,841 1,478 1,132 1036.40% (19.75) ( 23.4%) 1,679 (363) (346) 91.20%

Bad debts recovered - - 1,774 - N/A N/A (100.0%) - 1,774 (1,774) N/A

Total 2,817 (10,939) 5,512 4.921 (488.3%) (150.4%) (10.7%) (13,756) 16,451 (591) 20.40%Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

(Expenses) / other income include sub-operations that do not represent the main activity of the Company such as income from warehouse rental, income from waste disposal, income from deposits, and profit / (loss) from foreign currency conversion to and from Saudi Riyal, occasional and non-recurring operations such as profit /(loss) on sale of property, plant and equipment, other income and bad debts that have been recovered.

(Expenses) / other income decreased during the fiscal year ended on 31 March 2015G by SAR 13.8 million or 488.3% from a positive value of SAR 2.8 million during the fiscal year ended on 31 March 2014G to a negative value of SAR 10.9 million during the fiscal year Year period ended on 31 March 2015G. This is mainly due to foreign currency conversion losses of SAR 13.8 million for the fiscal year ended on 31 March 2015G due to the conversion of an amount from EUR to SAR. These losses are incidental and non-recurring.

During the fiscal year ended on 31 March 2016G, other expenses/income increased from the negative value of SAR 10.9 million during the fiscal year ended on 31 March 2015G to a positive value of SAR 5.5 million during the period ended on 31 March 2016G. This was mainly due to achieving profit from foreign currency conversion of SAR 0.6 million during the fiscal year ended on 31 March 2016G. In addition, an amount of SAR 1.8 million that was recorded as bad debts was recovered, rental income increased by SAR 0.8 million and income from disposal of oil waste was increased by SAR 0.5 million during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G.

(Expenses) / other income did not witness any significant increase or decrease during the fiscal year ended on 31 March 2017G, which decreased by SAR 0.6 million or 10.7% from SAR 5.5 million during the fiscal year ended on 31 March 2016G to SAR 4.9 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to achieving no profit from foreign currency conversion and the lack of income from the removal of oil waste or revenue as a result of the recovery of bad debts during the fiscal year ended on 31 March 2017G. In contrast to these decreases in other revenues, revenues from the investment building in Dubai increased by SAR 0.9 million and an income of SAR 1.6 million on bank deposits was also achieved.

Income from rental of WarehousesIncome from rental of warehouses refers to the income from leasing an existing warehouse in the Riyadh region to a third party. Income from rental of warehouses decreased from SAR 0.3 million during the fiscal year ended on 31 March 2014G

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to SAR 0.2 million during the fiscal year ended on 31 March 2015G. The decrease is due to the fact that during the fiscal year ended on 31 March 2014G, there was a late payment from the previous year included in the amount paid by the Company’s customers of SAR 50,000 which did not exist during the fiscal year ended on 31 March 2015G though the lease is fixed at SAR 212,000 during the fiscal year ended on 31 March 2014G and 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, rental income from warehouses increased by SAR 0.8 million from SAR 0.2 million during the fiscal year ended on 31 March 2015G to SAR 1.0 million during the fiscal year ended on 31 March 2016G. This increase was mainly due to the commencement of renting a warehouse and some of the offices owned by the International Waterproofing Company in the United Arab Emirates during the fiscal year ended on 31 March 2016G. The International Waterproofing Company has started renting the warehouse to others during the fiscal year ended on 31 March 2016G at a short-term rent at an amount of SAR 1.0 million payable in four equal installments.

Income from rental of warehouses and offices increased by SAR 0.9 million (85.6%) from SAR 1.0 million during the fiscal year ended on 31 March 2016G to SAR 1.9 million during the fiscal year ended on 31 March 2017G. The increase is mainly due to the completion of construction work in Awazel building In the United Arab Emirates and the commencement of leasing a large size part of the investment property (representing the building designated for leasing) during the fiscal year ended on 31 March 2017G. For more information on the Company’s investment property, please see page (127).

Income From Removal of Oil WasteIncome from the removal of oil waste refers to the income generated by the oil waste removal services provided to Saudi Aramco. Awazel assumes the removal of specific quality of the waste from the Saudi Aramco headquarters in exchange for an agreed amount under an agreement remove oil waste with Saudi Aramco.

Income from the removal of oil waste decreased by SAR 1.1 million or 93.5% from SAR 1.2 million during the fiscal year ended on 31 March 2014G to SAR 0.08 million during the fiscal year ended on 31 March 2015G as a result of the expiry of the waste removal contract during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, the income from the removal of oil waste increased by SAR 0.4 million or 507.8% from SAR 0.08 million during the fiscal year ended on 31 March 2015G to SAR 0.5 million. The reason for this increase is the renewal of the oil waste removal contract concluded with Saudi Aramco on 16 October 2015G. The oil waste is reprocessed and recycled in a Awazel plant. It should be noted that the nature of contracts for the removal of oil wastes with Aramco is not on a regular basis, but are renewed in case there is a quantity of oil wastes at Aramco. Then, Aramco would look for companies that can transport and process the oil waste. Awazel is one of companies qualified for that task.

Income from the removal of oil waste decreased by SAR 0.5 million or 100.0% from SAR 0.5 million during the fiscal year ended on 31 March 2016G to zero during the fiscal year ended on 31 March 2017G due to the fact that no contract was signed with Saudi Aramco to remove oil waste during the fiscal year ended on 31 March 2017G. It should be noted that the mentioned income is not considered continuous, and the contract for removal of oil waste is concluded at the request of Aramco.

Income From DepositsIncome from deposits refers to the interest earned on short-term deposits in financial institutions. Income from deposits decreased by SAR 0.2 million or 73.9% from SAR 0.2 million during the fiscal year ended on 31 March 2014G to SAR 0.05 million during the fiscal year ended on 31 March 2015G. The income from deposits decreased by SAR 0.05 million or 94.3% from SAR 0.05 million during the fiscal year ended on 31 March 2015G to SAR 0.003 million during the fiscal year ended on 31 March 2016G. Noteworthy, the Company did not benefit from its assets in banks to achieve income during this period.

Income from deposits increased by SAR 1.6 million (53966.7%) from SAR 0.003 million during the fiscal year ended on 31 March 2016G to SAR 1.6 million during the fiscal year ended on 31 March 2017G. This was due to Awazel’s deposit of SAR 70.0 million at the Bank as a short-term deposit, resulting in an income of SAR 1.6 million.

Foreign Exchange Gains / (Losses)The gains from foreign exchange conversion gains / (losses) amounted to SAR 0.6 million during the fiscal year ended on 31 March 2014G, as a result of favorable exchange rates. The currency conversion gains were related to Awazel.

During the fiscal year ended on 31 March 2015G, the currency exchange conversion gain / loss amounted to SAR 13.8 million due to the depreciation of the current account denominated in Euros against the Saudi Riyal. The Company has retained this amount in Euros to purchase a production line. The exchange rate of the Euro against the Saudi riyal has declined sharply in a short time. Accordingly, the Company has converted the balance from the Euro to the Saudi Riyal. This loss is exceptional and occasional during the fiscal year ended on 31 March 2015G. The Company’s management has decided not to keep foreign currencies except when there is a confirmed purchase of the Company’s needs.

The Company also made gains from foreign exchange conversion profits of SAR 0.6 million during the fiscal year ended on 31 March 2016G, due to favorable exchange rates related to Awazel operations.

The Company achieved foreign currency conversion losses of SAR 0.05 million during the fiscal year ended on 31 March 2017G due to differences in the exchange rates used in Awazel international companies during the fiscal year ended on 31 March and during the fiscal year ended on 31 March 2017G which was used in the conversion of the currency used in the

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financial statements of the international companies to the local currency of Awazel (Saudi riyals).

Bad Debts RecoveredRecovered bad debts refer to income resulting from impairment of the balance for the provision for doubtful debts due to the reassessment of the collectibility from the Company’s debtors. During the fiscal year ended on 31 March 2016G, the provision for doubtful debts was reduced by SAR 1.8 million, Kuwait Waterproofing Company for Building Materials, and International Waterproofing Company due to the collection of the amount of SAR 1.8 million and was recognized as other income during the fiscal year ended on 31 March 2016G.

No bad debt wee recovered during the fiscal year ended on 31 March 2017G.

5- (Expenses) / Other Income by Company

The following table of (expenses) / other consolidated income is presented by Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (86): (Expenses) / Other Consolidated Income by Company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


CAGR %2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Water-proofing Company

2,130 (10,650) 3,271 2.921 (600.0%) (130.7 %) (10.7%) (12,78) 13,921 (350) 11.10%

Al Sultan Contract-ing, Trading & Industry Co

- 1,586 844 504 N/A (46,8%) (40.3%) 1,586 (742) (340) N/A


- - 0 10 0,0% 0.00% N/A - - 10 N/A

Advanced compa-ny for membrane industry

0 0 0 84 0.00% 0.00% 0.00% 0 0 84 N/A



156 (1,441) 267 (26) (1023,7) (118,5) (109.8) (1,597) 1,708 (293) (155.2)

Interna-tional Wa-terproofing Company

90 1 1,092 2,043 (98,9) 109100.00% 87.10% (89) 1,091 951 183.20%

Interna-tional Wa-terproofing Company Qatar

(5) (2) (23) 50 (60,0) 1050.00% (318.6%) 3 (21) 73 (315.8)

Interna-tional Wa-terproofing Company Indonesia

447 (434) 60 38 (197,1%) (113,8%) (36.2%) (881) 494 (220 (55.9%)

Total 2,817 (10,939) 5.512 4.921 (488,3%) (150.4%) (10.7%) (13,756) 16,451 (591) 20.40%Source: Company

All changes in item (expenses) / other income are detailed on page (109).

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6-6-7 Income Before Zakat And Minority InterestIncome before Zakat and minority interests increased by SAR 11.2 million,representing 17.5% from SAR 64.3 million during the fiscal year ended on 31 March 2014G to SAR 75.6 million during the fiscal year ended on 31 March 2015G, mainly due to an increase in income of operations by SAR 25.0 million or 40.7% which was partially offset by an increase in other expenses of SAR 13.8 million during the fiscal year ended on 31 March 2015G.

Income before Zakat and minority interests increased by SAR 27.4 million or 36.3% from SAR 75.6 million during the fiscal year ended on 31 March 2015G to SAR 103.0 million during the fiscal year ended on 31 March 2016G due to increased operating income by SAR 11.6 million) and the increase in (expenses) / other income by SAR 16.5 million during the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G. The increase in the balance of (expenses) / other income of SAR 16.5 million represents the difference between the balance of loss achieved during the fiscal year ended on 31 March 2015G amounting to SAR 10.9 million (the loss resulted from the depreciation of the euro held by the Company) and the realized gains during the fiscal year ended on 31 March 2016G which amounted to SAR 5.5 million.

Income before Zakat and minority interests decreased by SAR 20.6 million or 20.0% from SAR 103.0 million during the fiscal year ended on 31 March 2016G to 82.4 during the fiscal year ended on 31 March 2017G, mainly due to a decrease in income from operations by SAR 19.5 million due to a decrease in the Company sales by SAR 72.3 million and the decrease of other income by SAR 0.6 million. The decrease in the Company sales is attributable to lower sales of membranes from Awazel, lower sales of Al Sultan from stone/marble products, and sales of membranes from Awazel in Kuwait and Qatar due to the general slowdown in the construction sector during the fiscal year ending 31 March 2017G.

6-6-8 Zakat Expenses The following table shows the Company’s consolidated Zakat expenses for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (87): The Company Consolidated Zakat Expenses for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


CAGR %2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Zakat Expenses (7,200) (7,410) (9,372) (9,377) 2,9% 26,50% 0,10% (210) (1,962) (5) 9.20%Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements

Zakat expenses did not witness any significant rise or decrease during the fiscal year ended 31 March 2014G and 2015G wherein Zakat expenses amounted to SAR 7.2 million during the fiscal year ended on 31 March 2014G and SAR 7.4 million during the fiscal year ended on 31 March 2015G .

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, Zakat expenses increased to SAR 9.3 million or 26.5%. The increase was mainly due to the increase in Zakat income.

Zakat expenses did not witness any significant increase or decrease during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G which decreased by 0.005% or 0.1% from SAR 9.4 million during the fiscal year ended on 31 March 2016G to SAR 9.3 million During the fiscal year ended on 31 March 2017G.

6-6-9 Income Before Minority InterestIncome before minority interests increased from SAR 57.1 million for the fiscal year ended on 31 March 2014G to SAR 73.0 million for the fiscal year ended on 31 March 2017G at a CAGR of 8.5% for the fiscal year ended on 31 March 2014G to the fiscal year ended on 31 March 2017G. This was mainly due to higher income before Zakat and minority interests at a CAGR of 8.6% during the same mentioned period. The increase witnessed in Zakat expense by SAR 2.0 million (during the two fiscal years ended on 31 March 2016G and 31 March 2017G) compared to (the two fiscal years ended on 31 March 2014G and 31 March 2015G) has adversely and directly affected at the same amount the value of income before minority interests (during the two fiscal years ended on 31 March 2016G and 31 March 2017G).

Income before minority interests increased by SAR 11.1 million or 19.4% from SAR 57.1 million during the fiscal year ended on 31 March 2014G to SAR 68.2 million during the fiscal year ended on 31 March 2015G.

During the fiscal year ended on 31 March 2016G, income before minority interests increased by SAR 25.4 million or 37.3%. The increase was due to the increase in income before Zakat and minority interests by SAR 27.4 million during the fiscal year ended on 31 March 2016G. The effect of the increase in Zakat by SAR 2.0 million is obvious here which is the same as the difference between income before minority interests and income before Zakat and minority interest.

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Income before minority interests decreased by SAR 20.6 million or 22.1% from SAR 93.6 million during the fiscal year ended on 31 March 2016G to SAR 73.0 million during the fiscal year ended on 31 March 2017G, mainly due to lower income from Operations by SAR 20.0 million and other income by SAR 0.6 million.

6-6-10 Minority interestsThe table below presents the minority interests in net income before the Company’s consolidated minority interests for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (88): Share of minority interests in net income before the Company’s consolidated minority interests for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


CAGR %2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G




- 1,156 547 (102) N/A (52.7%) (118.6%) 1156 (609) (649) N/A


15 (18) (25) (98) (220.0%) 38.90% 293.50% (33) (7) (73) (287.2%)


- - 110 (76) 0.00% N/A (168.8%) - 110 (186) N/A



20 29 55 25 45.00% 89.70% (54.4%) 9 26 (30) 7.80%

International Waterproof-ing Company

34 22 24 43 (35.3%) 9.1% 78.5% (12) 2 19 8.0%

International Waterproof-ing Company Qatar

62 79 51 (3) 27.40% (35.4%) (105.9%) 17 (28) (54) (136.4)

International Waterproof-ing Company Indonesia

(31) (33) (28) (6) 6.50% (15.2%) (78.8%) (2) 5 22 (42.4%)

Total 69 1,234 733 (217) 1688.4% (40.6%) (129.6%) 1,165 (501) (950) (246.5%)Source: Company

Minority interests refer to the proportion of the ordinary shares of each subsidiary that are not directly or indirectly owned by the Company.

6-6-11 Net IncomeNet income increased at a CAGR of 8.7% during the fiscal year ended on 31 March 2014G to the end of the fiscal year ended on 31 March 2017G. Net income increased from SAR 57.1 million during the fiscal year ended on 31 March 2014G to SAR 73.2 million during the fiscal year ended on 31 March 2017G. The growth in net income is mainly due to the lower cost of sales at a CAGR of 7.9% for the fiscal year ended on 31 March 2014G and until the fiscal year ended on 31 March 2017G. The decrease in the cost of sales is primarily due to the increase in manufacturing efficiency, lower prices of raw materials and lower export duties during the fiscal year ended on 31 March 2016G, in addition to the decrease in sales during the fiscal years ending in 2017G. The reason for the low customs duties on exports is the reduction in the amount of exports of bituminous membrane products and the decrease in the value of the tax levied on the unit (m2) of exported membranes. It should be noted that there is a direct positive correlation between oil prices and export tariffs.

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During the period from 31 March 2014G to 31 March 2017G, the cost of sales decreased by SAR 61.0 million compared to a decrease of SAR 33.3 million resulting in an increase in gross profit of SAR 26.9 million. Additionally, other income increased by SAR 2.0 million. On the other hand, negative effects such as increased sale and marketing expenses increased by SAR 7.4 million and general and administrative expenses increased by SAR 3.5 million. Zakat expense increased by SAR 2.2 million. The outcome of the above mentioned figures explain the increase in net income by SAR 16.2 million for the time period from 31 March 2014G to 31 March 2017G.

Net income increased by SAR 9.9 million or 17.4% from SAR 57.0 million during the fiscal year ended on 31 March 2014G to SAR 66.9 million during the fiscal year ended on 31 March 2015G due to the growth of sales by SAR 42.5 million. This is mainly due to the high sales quantity. Net profit for the year 2015G included a loss of SAR 13.3 million on foreign currency conversion during the fiscal year ended on 31 March 2015G, which resulted from the conversion of the Euro to Saudi Riyals during the said period which is considered to be incidental and non-recurring.

During the fiscal year ended on 31 March 2016G compared to the fiscal year ended on 31 March 2015G, net income increased by SAR 25.9 million (38.8%) mainly due to a decrease in sales cost by SAR 23.0 million (while sales decreased only by 3.5% million) due to lower prices of raw materials and lower customs duties on exports during the fiscal year ended on 31 March 2016G. The decline in prices of raw materials is due to the decline in international oil prices. The decrease in customs duties on exports during the said fiscal year compared to the fiscal year ended on 31 March 2015G is due to the decrease in exports of bitumen membrane products and the value of the tax imposed on the unit (m2) of exported membranes. This is due to the direct correlation between oil prices and tax imposed.

Net income decreased by SAR 19.7 million or 21.2% from SAR 92.9 million during the fiscal year ended on 31 March 2016G to SAR 74.2 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to a decrease in sales by SAR 72.3 million which resulted in a decrease in gross profit by SAR 21.4 million. On the other hand, sales and marketing expenses increased by SAR 0.2 million and other income decreased by SAR 0.6 million. The decrease in the Company sales is due to lower sales of Awazel from membrane products, lower sales of Al Sultan from stone / marble products, and the sales of membranes by Awazel in Kuwait and Qatar. The decrease in the sales of Awazel and sales in Kuwait and Qatar is due to the decrease in the demand for membrane products due to the decline in urban activity and the slowdown in economic activity in the mentioned countries due to the decrease in sales of Al Sultan due as a result of the lack of supply of raw stone as a result of not renewing the license of most of the quarries, including the quarry which was licensed to the Company of Al Sultan Company for Trading and Contracting (which is a subsidiary).

Net Income By CompanyYou may refer to the Sales analysis, Other revenues Section, sales and marketing expenses to find out the reasons for the above mentioned increases and decreases on pages (88), (99) and (107).

The table below shows net profit by company for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (89): Company’s net income for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


CAGR %2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 51,182 61,780 80,958 68,334 20.7% 31.0% (15.6%) 10,598 19,178 (12,624) 10.1%


- (664) 2,733 (510) N/A (524.4%) (118.7%) (644) 3,377 (3,243) N/A


(152) (185) (252) (984) 21.7% 36.2% 290.5% (33) (67) (732) 86.4%


- - 549 (379) N/A N/A (169.0%) - 549 (928) N/A


Kuwait Waterproofing Company for Building Materials

3,375 2,200 2,405 2,508 (34.8%) 9.3% 4.3% (1,175) 205 103 (9.4%)

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SAR’000


CAGR %2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


International Waterproofing Company

2,023 2,857 5,478 4,283 41.2% 91.7% (21.8%) 834 2,621 (1,195) 28.4%

International Waterproofing Company Qatar

1,235 1,580 1,019 (60) 27.9% (35.5%) (105.9%) 345 (561) (1,079) (136.5%)

International Waterproofing Company Indonesia

(622) (664) - - 3.5% (100.0%) N/A (22) 644 - (100.0%)

Company’s Net Profit 57,041 66,944 92,890 73,192 17.4% 38.8% (21.2%) 9,903 25,946 (19,698) 8.7%

Source: Company

Awazel net income increased by SAR 10.6 million or 20.7% from SAR 51.2 million during the fiscal year ended on 31 March 2014G to SAR 61.8 million during the fiscal year ended on 31 March 2015G. This is mainly due to higher sales as mentioned earlier.

Awazel net income increased by SAR 19.2 million or 31.0% from SAR 61.8 million during the fiscal year ended on 31 March 2015G to SAR 81.0 million during the fiscal year ended on 31 March 2016G. This is mainly due to higher sales and lower sales costs.

Net income from Awazel decreased by SAR 12.6 million or 15.6% from SAR 81.0 million during the fiscal year ended on 31 March 2016G to SAR 68.3 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to lower domestic sales (particularly membranes).

The net income of Kuwait Waterproofing Company for Building Materials decreased by SAR 1.1 million (34.8%) from SAR 3.4 million during the fiscal year ended on 31 March 2014G to SAR 2.2 million during the fiscal year ended on 31 March 2015G. This is mainly due to a decrease in other income by SAR 1.6 million. The decrease in other income resulted from other losses of SAR 1.4 million resulting mainly from accidental losses, of significance is the currency exchange losses (from Kuwaiti Dinar to Saudi Riyals) and other expenses. All of these losses are considered incidental and not related to the Company’s main activity. Kuwait Waterproofing Company for building materials net income increased by SAR 0.2 million or 9.3% from SAR 2.2 million during the fiscal year ended on 31 March 2015G to SAR 2.4 million during the fiscal year ended on 31 March 2016G. This is mainly due to the lower cost of sales between the Company and the subsidiary as a result of the lower customs duties on exports, especially on the exported membranes that were supplied to the State of Kuwait. It should be noted that there is a direct positive correlation between oil prices and export tariffs.

The net income of Kuwait Waterproofing Company for Building Materials increased by SAR 0.1 million or 4.3% from SAR 2.4 million during the fiscal year ended on 31 March 2016G to SAR 2.5 million during the fiscal year ended on 31 March 2017G. This is mainly due to lower marketing and sale expenses of SAR 0.4 million. The decrease in sales and marketing expenses is due to lower annual remuneration due to the failure to meet the specific sales targets of Awazel. Noteworthy, the decline in sales by SAR 10.8 million was offset by a decrease in cost of sales of SAR10.9 million.

The net income of International Waterproofing Company Qatar increased by SAR 345 million or 27.9% from SAR 1.235 million during the fiscal year ended on 31 March 2014G to SAR 1.580 million during the fiscal year ended on 31 March 2015G. This is due to the increase in the volume of sales.

International Waterproofing Company Qatar achieved a loss of SAR 0.06 million during the fiscal year ended on 31 March 2017G compared to a net profit of SAR 1.0 million for the fiscal year ended on 31 March 2016G. The decline in income was due to a decrease in sales (mainly the volume of membrane sales) by SAR 6.3 million due to a slowdown in construction activity in the State of Qatar. The decrease in profit is also due to the increase of the provision for doubtful debts.

The net income for International Waterproofing Company in the UAE increased by SAR 0.8 million during the fiscal year ended on 31 March 2015G compared to 2014G. The increase is mainly due to higher sales by SAR 7.4 million due to increased demand on the Company’s products (especially the membranes) in the said country because of the increase in urban activity during the fiscal year ended on 31 March 2015G.

The net income of International Waterproofing Company increased by SAR 2.6 million during the fiscal year ended on 31 March 2016G compared to 2015G. This is mainly due to the increase in the cost of sales and the increase in other income by SAR 1.1 million. The low cost of sales is due to lower prices between the Company and its subsidiaries as a result of lower customs duties on exports, especially on exported membranes. It should be noted that there is a direct positive correlation between oil prices and export duties. The increase in other income is due to the start of the Company to lease parts of its investment property to commercial customers.

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The net income of International Waterproofing Company decreased by SAR 1.2 million or 21.8% from SAR 5.5 million during the fiscal year ended on 31 March 2016G to SAR 4.3 million during the fiscal year ended on 31 March 2017G. The decrease was mainly due to higher marketing expenses snd the sale of SAR 2.3 million, due to the high expense on depreciation of investment properties as a result of the completion of the construction work in the buildings set for leasing to commercial customers due to the increase in provisions for doubtful debts.

The net loss of International Waterproofing Company Indonesia increased by SAR 0.04 million (6.8%) during the fiscal year ended on 31 March 2015G compared to 2014G. The decrease in net income is due to a decrease in sales by SAR 0.9 million due to the deficient selling capacity of the said company.

During the fiscal year ended on 31 March 2016G compared to 2015G, the net loss of International Waterproofing Company Indonesia decreased by SAR 0.1 million or 17.0%. This is due to the increase of other income by SAR 0.5 million as a result of selling the Company’s assets prior to its official closure. The Board of Directors decided to cease its activity on 12 April 2015G, and the activity was officially suspended in April 2016G.

International Waterproofing Company Indonesia achieved a net loss of SAR 0.1 million for the fiscal year ended on 31 March 2017G compared to a net loss of SAR 0.6 million for the fiscal year ended on 31 March 2016G. The loss was due to the suspension of operating activities entirely during the fiscal year ended on 31 March 2017G as mentioned above.

Net income of Al-Sultan Contracting, Trading and Industry Company decreased by SAR 3.4 million (511.6%) from SAR 0.7 million during the fiscal year ended on 31 March 2015G to SAR 2.7 million during the fiscal year ended on 31 March 2016G. This is mainly due to a higher cost of sales by SAR 6.3 million and marketing and sale expenses by SAR 1.8 million. The increase in the cost of sales is due to the fact that the Company has reduced the average price of its products due to the suspension of the Company’s export outside the Kingdom of Saudi Arabia. The increase in marketing and sales expenses is mainly due to the increase in the average salaries of employees and the end of service adjustments.

Net income of Al-Sultan Contracting, Trading and Industry Company Ltd. decreased by SAR 2.2 million or 118.7% from a net profit of SAR 2.7 million during the fiscal year ended on 31 March 2016G to a net loss of SAR 0.5 million for the fiscal year ended on 31 March 2017G. The drop was mainly due to a drop in sales by SAR 7.4 million due to the lack of supply of stones in the local market as a result of not renewing the licenses of most of the quarries within the Kingdom as mentioned above.

The loss of the Advanced Membrane Manufacturing Company amounted to SAR 0.2 million, SAR 0.2 million, SAR 0.3 million and SAR 0.9 million for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G respectively. These losses are mainly attributable to the marketing and sale expenses incurred by the said company without achieving sales during the said financial periods. It is worth mentioning that the Advanced Membrane Manufacturing Company was in the stage of processing the factory and conducting operating tests while is still in the promotion of period of its products. Its products are currently being adopted by the Indian offices and by the relevant government agencies.

The net profit of Al-Takamul Stone Factory Company for Stone and Marble amounted to SAR 0.5 million during the fiscal year ended on 31 March 2016G. The net positive income was primarily due to the sale of SAR 3.2 million during the mentioned period.

The net income of Al-Takamul Stone Factory Company for Stone and Marble has decreased by SAR 0.9 million or 169.0% from a net profit of SAR 0.5 million for the fiscal year ended on 31 March 2016G to a net loss of SAR 0.4 million for the fiscal year ended on 31 March 2017G. This is mainly due to a decrease in sales by SAR 2.3 million due to the payment of Zakat expense by SAR 0.06 million for the fiscal year ended on 31 March 2017G and a change in the employees’ position after acquiring the Company. The decrease in sales is due to the shortage of stones supply in the local market as a result of the non-renewal of licenses for most of the stone quarries inside the city of Riyadh, Saudi Arabia.

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6-7 Statement of Financial PositionThe table below presents a summary of the Company’s consolidated financial position as at 31 March 2014G, 2016G, 2016G and 2017G.

Table (90): Statement of financial position as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000

As of 31 March Increase/(decrease) percentage Increase/(decrease) Amount

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Current assets

Cash and cash equivalents 101,255 119,190 129,664 137,041 17.7% 8.8% 5.7% 17,935 10,474 7,377

Receivables 132,889 132,341 137,370 151,423 (0.4%) 3.8% 10.2% (548) 5,029 14,053

Inventory 59,608 61,874 57,804 56,605 3.8% (6.6%) (2.1%) 2,266 (4,070) (1,199)

Prepaid expenses and other assets 17,952 23,854 17,476 18,144 32.9% (26.7%) 3.8% 5,902 6,378 668

Prepaid expenses and other assets 311,703 337258 342,314 363,213 8.2% 1.5% 6.1% 25,555 5,056 20,899

Non-current assets

Investment property - - 33,284 34,624 N/A N/A 4.0% - 33,284 1,340

Investments avail-able for sale 34 32 25 24 (5.9%) (21.9%) (4.0%) (2) (7) (1)

Property, plant and equipment 92,847 115,578 90,013 84,710 24.5% (22.1%) (5.9%) 22,731 (25,565) (5,303)

Total non - cur-rent assets 92,881 115,610 123,322 119,358 24.5% 6.7% (3.2%) 22,729 7,712 (3,964)

Total assets 404,584 452,868 465,635 482,570 11.9% 2.8% 3.6% 48,284 12,767 16,935

Liabilities

Current liabilities

Accounts payable 7,035 9,939 5,866 8,328 41.3% (41.0%) 42.0% 2,904 (4,073) 2,462

Accrued expenses and other liabil-ities

42,075 48,482 46,052 30,536 15.2% (5.0%) (33.7%) 6,407 (2,430) (15,516)

Zakat due 7,515 7,402 9,486 9,633 (1.5%) 28.2% 1.5% (113) 2,084 147

Total current liabilities 56,625 65,823 61,405 48,497 16.2% (6.7%) (21.0%) 9,198 (4,418) (12,908)

Non-current liabilities

Provision for end of service benefits 5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 2,344

Total non - cur-rent liabilities 5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 3,344

Total liabilities 62,564 72,681 70,220 59,656 16.2% (3.4%) (15.0%) 10,117 (2,461) (10,564)

Equity for the shareholders of the Company

Share Capital 182,000 182,000 273,000 273,000 0.0% 50.0% 0.0% - 91,000 -

Statutory reserve 59,791 66,485 8,774 16,094 11.2% (86.8%) 83.4% 6,694 (57,711) 7,320

Common Reserve 65,051 75,092 67,873 75,192 15.4% (9.6%) 10.8% 10,041 (7,219) 7,319

Fair value reserve 11 9 2 1 (18.2%) (77.8%) (50.0%) (2) (7) (1)

Foreign currency Conversion reserve

984 (29) (123) (295) (102.9%) 324.1% 139.8% (1,013) (94) (172)

Retained earnings 32,880 52,468 41,348 45,635 59.6% (21.2%) 10.4% 19,588 (11,120) 4,287

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SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Total shareholders’ equity

3430,716 376,026 390,874 418,627 10.4% 3.9% 7.1% 35,310 14,848 27,753

Minority Rights 1,304 4,211 4,541 4,288 222.9% 7.8% (5.6%) 2,907 330 (253)

Total equity 342,020 380,236 395,415 422,915 11.2% 4.0% 7.0% 38,216 15,179 27,500

Total Liabilities and Equity 404,584 452,868 465,635 482,570 11.9% 2.8% 3.6% 48,284 12,767 16,935

Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Note: The Company’s consolidated statement of financial position balances for the fiscal year ended on 31 March 2014G has been adjusted to reflect the effect of the restatement and adjustment that occurred to the mentioned financial year. For more details, please see page (75).

Current assets – as a proportion of total assets-accounted for 77.0% as at 31 March 2014G, 74.5% as at 31 March 2015G, 73.5% as at 31 March 2016G and 75.3% as at 31 March 2017G.

Total assets increased by SAR 48.3 million, representing an increase of 11.9% from SAR 404.6 million as at 31 March 2014G to SAR 452.9 million as at 31 March 2015G, due to an increase in total current assets by SAR 25.6 million or 8.2%, and the non-current assets increased by SAR 22.5 million or 24.5%. The increase in current assets is due to the increase in cash and cash equivalents. The increase in non-current assets is attributable to property, plant and equipment because of the calculation of part of the construction works carried out on land owned by International Waterproofing Company in the UAE which consists of two warehouses, show rooms and offices and due to the addition of the property of AL Sultan Company acquired by the Company to the property, plant and equipment line item.

Total assets increased by SAR 12.8 million or 2.8% from SAR 452.9 million as at 31 March 2015G to SAR 465.6 million as at 31 March 2016G as a result of an increase in the non-current assets by SAR 7.7 million. This is mainly due to the completion of most of the construction works (mentioned above) in the UAE.

Total assets increased by SAR 16.9 million or 3.6% from SAR 465.6 million as at 31 March 2016G to SAR 482.6 million as at 31 March 2017G. This increase ia mainly due to a rise in the current assets by SAR 14.1 million and an increase in cash and cash equivalents by SAR 7.4 million.

The total current liabilities represented as - a ratio of total liabilities - 90.5% as at 31 March 2014G, 90.6% as at 31 March 2015G, 99.9% as at 31 March 2016G and 99.9% as at 31 March 2017G.

Total liabilities increased by SAR 10.1 million or 16.2%, from SAR 62.6 million as of 31 March 2014G to SAR 72.7 million as at 31 March 2015G, mainly due to an increase in total current liabilities by SAR 9.2 million (16.2% %. The rise in import duties is the main factor in the increase in liabilities.

Total liabilities decreased by SAR 2.5 million or 3.4% to SAR 70.2 million as at 31 March 2016G, due to a decrease in current liabilities by SAR 4.4 million or 6.7% as at 31 March 2016G.

Total liabilities decreased by SAR 10.6 million or 15.0% from SAR 70.2 million as at 31 March 2016G to SAR 59.7 million as at 31 March 2017G mainly due to payment of part of the customs duties and accrued expenses.

The Company’s capital was SAR 181,999,810 before 29 September 2015G divided into 18,199,981 shares at a price of SAR 10 per share. On 29 September 2015G, the capital was increased by issuing an additional share for each two shares bringing the number of shares to 27,299,978 shares at a price of SAR 10 per share. Accordingly, the paid-up capital was SAR 273.0 million. The increase was made through the transfer of SAR 67.0 million from the balance of the statutory reserve, and the transfer of SAR 24.0 million from the balance of retained earnings.

In accordance with the Saudi Companies Regulations, the Company maintains a statutory reserve and maintains a Contractual reserve in accordance with its By-Laws.

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The table below presents the main ratios of the Company’s consolidated balance sheet as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (91): Main balance sheet ratios as at 31 March 2014G, 2015G, 2016G and 2017G

As of 31 March Increase/(decrease)percentage

Increase/(decrease) Amount

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Percentage (times) 5.5 5.1 5.6 7.5 (6.8%) 8.8% 34.3% (0.4) 0.5 1.9

Instant liquidity ratio (once) 4.1 5.1 6.4 8.4 23.20% 25.8% 32.3% 1.0 1.3 2.0

Return on Assets (%) 14.1% 14.8% 20.1% 15.4% 4.8% 36.0% (23.3%) 0.7% 5.3% (4.7%)

Return on equity (%) 16.7% 17.8% 23.9% 17.6% 6.6% 34.2% (26.4%) 1.1% 6.1% (6.3%)Source: Company

The liquidity ratio amounted to 5.5 times as at 31 March 2014G and then decreased to 5.1 times as at 31 March 2015G due to the increase in current liabilities compared to the current assets during the fiscal year ended on 31 March 2015G. This increase in current liabilities was resulted from customs duties accrued on imports which increased by SAR 4.3 million, and payables that increased by SAR 2.9 million, accrued expenses and other liabilities that increased by SAR 2.1 million. Traded ratio stood at 5.6 times as at 31 March 2016G. This is due to lower customs duties on imports because of the payment of letters of guarantee accrued to Saudi Customs. The traded ratio was 7.5 times, an increase of 34.3% as at 31 March 2017G due to the increase in the balance of trade receivables and the increase in the balance of cash and cash equivalents and at the same time the payment of part of the customs duties and accrued expenses.

As the inventory did not change significantly during the years 2014G to 2017G and therefore the spot liquidity ratios were exposed to the same factors that affected the traded liquidity ratio; therefore, the ratio of spot liquidity increased from 4.1 times as at 31 March 2014G to 5.1 times as at 31 March 2015G , and then rose to 6.4 times as at 31 March 2016G, and then rose to 8.4 times on 31 March 2017G.

The return on assets increased from 14.1% as at 31 March 2014G to 14.8% as at 31 March 2015G and then to 20.1% as at 31 March 2016G. These increases are due to the growth in net income during the years ended on 31 March 2014G, 2015G and 2016G. Return on assets decreased to 15.2% as at 31 March 2017G due to lower net income and increased total assets.

The return on equity increased from 16.7% as at 31 March 2014G to 17.8% during the fiscal year ended on 31 March 2015G, and to 23.9% as at 31 March 2016G. This came as a result of the increase in net income during the fiscal years ended on 31 March 2014G, 2015G and 2016G. While it fell down to 17.6% as at 31 March 2017G due to lower net income and higher equity.

6-7-1 Current AssetsThe table below presents the Company’s current consolidated assets at 31 March 2014G, 2015G, 2016G and 2017G.

Table (92): Current Assets at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Cash and cash equivalents 101,255 119,190 129,664 137,041 17.70% 8.8% 5.7% 17,935 10,474 7,377

Receivables 132,889 132,341 137,370 151,423 (0.40%) 3.8% 10.2% (548) 5,029 14,053

stock 59,608 61,874 57,804 56,605 3.80% (6.6%) (2.1%) 2,266 (4,070) (1,199)

Prepaid expenses and other assets 17,952 23,854 17,476 18,144 32.9% (26.7%) 3.80% 5,902 (6,378) 668

Total current assets 311,703 337,258 342,314 363,213 8.2% 1.50% 6.105 25,555 5,056 20,899Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Total current assets increased by SAR 25.6 million, an increase of 8.2% from SAR 311.7 million as at 31 March 2014G to SAR 337.3 million as at 31 March 2015G. The increase was mainly due to an increase in cash and cash equivalents by SAR 17.9 million Saudi or 17.7%.

Total current assets increased by SAR 5.1 million (1.5%) from SAR 337.3 million as at 31 March 2015G to SAR 342.3 million as at 31 March 2016G. This resulted mainly from the increase in cash and cash equivalents by SAR 10.5 million, and the

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increase in receivables in the amount of SAR 5.0 million during the fiscal year ended on 31 March 2016G. These increases were offset by a decrease in inventories, a decrease of SAR 4.1 million, an a decrease in the prepaid expenses and other assets by SAR 6.4 million.

Current assets increased by SAR 20.9 million or 6.1% from SAR 342.3 million as at 31 March 2016G to SAR 363.2 million as at 31 March 2017G. The increase was mainly due to an increase in receivables amounting to SAR 14.1 million and the increase in the cash and cash equivalents by SAR 7.4 million. The increase in receivables is due to the increase in trade receivables of both Awazel and its subsidiaries due to the increase in the repayment facilities granted by the Company to its customers to reduce the impact of the slowdown in the contracting sector. The increase in cash and cash equivalents is mainly due to the increase in cash flows primarily from operating activities.

Cash And Cash EquivalentsThe table below presents the Company’s consolidated cash and cash equivalents at 31 March 2014G, 2015G, 2016G and 2017G.

Table (93): Cash and cash equivalents as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Cash in the Fund 725 811 1,003 1,000 12,0% 23.6% 0.20% 87 192 (2,321)

Cash with the Bank 100,530 118,378 128,661 66,041 17.80% 8.7% (48.70%) 17,848 10,283 (62,620)

Short-term deposit - - - 70,000 - - N/A - - 70,000

Total 101,255 119,190 129,664 137,041 17.7% 8.80% 5,705 17,935 10,474 7,377Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Cash in the Fund refers to the cash held by the Company to meet daily indirect expenses related to commercial operations. The cash balance of the Fund was between SAR 0.7 million and SAR 1.0 million during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Cash with the Bank refers to the balance of cash deposited with banks for the Company. Cash and cash equivalents increased by SAR 17.9 million from SAR 101.3 million as at 31 March 2014G to SAR 119.2 million as at 31 March 2015G, a 17.8% increase due to the net inflow in the amount of SAR 18.9 million generated during the fiscal year ended on 31 March 2015G due to net cash flow mainly from operating activities.

Cash and cash equivalents increased by 8.8% from SAR 119.2 million as at 31 March 2015G to SAR 129.7 million as at 31 March 2016G. The increase in the balance was due to the net cash flow of SAR 10.5 million generated During the fiscal year ended on 31 March 2016G, resulting from the Company’s operating activities.

Cash and cash equivalents increased by SAR 7.4 million (5.7%) from SAR 129.7 million as at 31 March 2016G to SAR 137.0 million as at 31 March 2017G. The increase mainly due to the decrease in cash outflow during the fiscal year ended on 31 March 2017G compared to the fiscal year ended on 31 March 2016G, in particular the decrease in cash flows used in investment activities which decreased by SAR 12.4 million and cash flows used in financing activities which decreased by SAR 33.3 million during the said periods.

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Cash at BanksThe table below presents the consolidated financial statements of the Company’s cash with the bank as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (94): Consolidated financial statements of the Company’s cash with the banks by company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Awazel 78,798 93,131 112,942 56,135 18.2% 21.3% (50.3%) 14,333 19,811 (56,807)

Kuwait 4,290 6,029 3,591 2,998 40.5% (40.40%) (16.5%) 1,739 (2,438) (593)

Qatar 2,493 2,166 1,303 1,514 (13.1%) (39.80%) 16.20% (327) (863) 211

United Arab Emirates 4,016 7,339 5,132 2,586 82.7% (30.1%) (49.6%) 3,323 (2,207) (2,546)

Indonesia 1,823 441 202 - (75.8%) (54.2%) (100.0%) (1,382) (239) (202)

Al - Sultan Contracting, Trading & Industry Co

- 162 3,102 689 N/A 1814.8% (77.8%) 162 2,940 (2,413)

Advanced company for Membrane Industry

9,110 9,110 2,389 2,119 0.0% (73.8%) (11.3%) - (6,721) (270)

Stone Takamul Factory Company for Stone and Marble

- - - - N/A N/A N/A - - -

100,530 118,378 128,661 66,041 17.8% 8.7% (48.70%) 17,848 10,283 (62,620)Source: Company

Awazel balance in banks - as a percentage of the Company’s total assets in banks - represented 78.4% as at 31 March 2014G, 78.7% as at 31 March 2015G, 87.8% as at 31 March 2016G and 85.0% as at 31 March 2017G. .

The Bank’s balance increased by SAR 17.8 million or 17.8% from SAR 100.5 million as at 31 March 2014G to SAR 118.4 million as at 31 March 2015G, mainly due to net cash inflows resulting from operating activities.

The Bank’s cash balance increased by SAR 10.3 million or 8.7% from SAR 118.4 million as at 31 March 2015G to SAR 128.7 million as at 31 March 2016G due to net cash inflow from operating activities.

The cash balance decreased by SAR 62.8 million or 48.8% from SAR 128.7 million as at 31 March 2017G to SAR 65.9 million as at 31 March 2017G. This is due to the fact that Awazel have transferred an amount of SAR 70.0 million to short-term deposits. For more information on the deposit, please see the Other Income / Expenditures page (109).

Receivables, Prepayments And Other AssetsThe following table shows the accounts payable, prepayments and other consolidated assets of the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (95): Receivables, prepayments and other consolidated assets of the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Receivables 132,889 132,341 137,370 151,423 (0.4%) 3.8% 10.2% (548) 5,029 14,053

Prepaid expenses and other assets 17,952 23,854 17,476 18,144 32.9% (26.70%) 3.8% 5,902 (6,378) 668

Total 150,841 156,195 154,846 169,567 3.5% (0.9%) 9.5% 5,354 (1,349) 14,721Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Net receivables did not witness any significant increase or decrease on 31 March 2015G compared to 31 March 2014G. The net balance of receivables increased by SAR 5.0 million or 3.8% from SAR 132.9 million as at 31 March 2015G to SAR 132.3 million as at 31 March 2016G, as a result of the increase in the average number of outstanding sales days of from 116 days

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as at 31 March 2015G to 127 days as of 31 March 2016G. Receivables increased by SAR 14.1 million or 10.2% from SAR 137.4 million to SAR 151.4 million as at 31 March 2017G. The increase in receivables is due to the higher commercial receivables for both Awazel and its subsidiaries due to the increased repayment facilities granted by the Company to its customers to reduce the impact of slowdown activity in the contracting sector.

The prepaid expenses increased by SAR 5.9 million or 32.9% from SAR 18.0 million as at 31 March 2014G to SAR 23.9 million as a result of the increase in payments to suppliers by SAR 3.3 million and payments made for investment in Al-Takamul Stone Factory Company for Stone and Marble by Amount of SAR 2.1 million.

Prepaid expenses and other assets decreased by SAR 6.4 million (26.7%) from SAR 23.9 million on 31 March 2015G to SAR 17.5 million on 31 March 2016G mainly due to lower payments to suppliers due to the receipt of goods and services iIn addition to transferring the balance of the advance payments made for investment in Takamul Stone and Marble Company to the ownership rights. The advance payments to invest in Al-Takamul Stone Factory Company for Stone and Marble into property rights.

The prepaid expenses increased by SAR 0.7 million or 3.8% from SAR 17.5 million on 31 March 2016G to SAR 18.1 million as at 31 March 2017G due to higher non-commercial receivables (such as rent of prepaid warehouses and rent of subsidiaries headquarters).

Net Accounts ReceivableThe following table shows the Company’s net accounts receivable on 31 March 2014G, 2015G, 2016G and 2017G.

Table (96): Net receivables of the Company on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Total debtors - Awazel 79,694 74,916 81,579 91904 (6.0%) 8.9% 12.7% (4,778) 6,663 10,325

Total debtors - Subsidiaries 56,976 63,222 61,616 68.29 11.0% (2.5%) 10.8% 6,246 (1,606) 6,674

Related parties - Their activities have been discontinued

- - - 2,377 - - N/A - - 2,377

Less: Provision for doubtful debts (4,534) (6,308) (6,953) (9,179) 39.1% 10.2% 34.6% (1,774) (645) (2,404)

Total 132,136 131,829 137,080 151,015 (0.2%) (40.7%) 10.2% (307) 5,251 13,935

Related Parties 753 511 290 408 (32.10%) (43.20%) (40.7%) (242) (221) (290)

Net accounts receivable 132,889 132,341 137,370 151,423 (0.4%) 3.8% 10.2% (548) 5,029 14,053

Source: Company

Net commercial receivables decreased by SAR 0.5 million (0.4%) from SAR 132.9 million as at 31 March 2014G to SAR 132.3 million as at 31 March 2015G, mainly due to a decrease in the net balance of Awazel debtors (in the Saudi market) for the fiscal year ended on 31 March 2015G compared to the fiscal year ended on 31 March 2014G due to increased collection. During the same period, the balance of the of Al-Sultan Contracting, Trading and Industrial Company debtors increased by SAR 6.4 million and the International Waterproofing Company Qatar debtors by SAR 3.5 million as at 31 March 2015G compared to 31 March 2014G. This increase is due to the increase in the volume of forward sales in Qatar while the increase in Al-Sultan Contracting, Trading and Industrial Company debtors is due to that fact that it was acquired during the fiscal year ended on 31 March 2015G.

Net accounts receivable increased by SAR 5.0 million or 3.8% from SAR 132.3 million as at 31 March 2015G to SAR 137.4 million as at 31 March 2016G due to an increase in the balance of the Company’s debtors as a result of an increase in the net balance of receivables (in the Saudi market) increased by SAR 9.5 million and net balance of Awazel debtors in the State of Qatar by SAR 3.2 million d Saudi Riyals during the fiscal year ended 31 March 2016G compared to the fiscal year ended on 31 March 2015G which was partially offset by the net balance of Kuwait International Waterproofing Company for Building Materials debtors by SAR 3.8 million as well as the net decrease in Al-Sultan Company debtors by SAR 3.6 million as at 31 March 2016G compared to 31 March 2015. The decline in Kuwait is due to the decrease in sales in the said country. The decrease in Al Sultan Company debtors is due to the receipt of deferred documentary credits. The increase in the net balance of Awazel debtors resulted from an increase of SAR 6.2 million in domestic sales. The increase in the net balance of the International Waterproofing Company Qatar led is due to the to increase in sales in Qatar by SAR 2.4 million.

Accounts receivables increased by SAR 14.1 million or 10.2% from SAR 137.4 million as at 31 March 2016G to SAR 151.4 million as at 31 March 2017G. The increase was due to higher commercial receivables of both Awazel and its subsidiaries

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due to the increase of sales on account. Net receivables with Awazel (in the Saudi market) increased by SAR 9.3 million, and with Al Sultan by SAR 0.7 million and the International Waterproofing Company by SAR 4.1 million. The increase in net receivables is mainly due to the slowdown in economic growth, which prompts the Company to grant its customers payment facilities by increasing the forward collection period of sales.

Accounts Receivable By CompanyThe table below shows the Company’s consolidated accounts receivable by Company on 31 March 2014G, 2015G, 2016G and 2017G.

Table (97): Net receivables by company on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 75,913 69,119 78,583 87,845 (8.9%) 13.7% 11.8% (6,794) 9,464 9,262

Al Sultan Contracting, Trading & Industry Co - 6,390 2,805 3,476 N/A (56,1%) 23.9% - (3,585) 671


- - - - 0,0% 0,0% 0.0% - - -



24,070 19,261 15,466 15,472 (20,0%) (19,7%) 0.0% (4,809) (3,795) 6

International Water-proofing Company 19,828 20,910 20,494 24,640 5,5% (2,0%) 20.2% 1,082 (416) 4,146

International Water-proofing Company Qatar

12,974 16,450 19,620 19,612 26,8% 19,3% (0.0%) 3,476 3,170 (8)


104 210 402 378 101,9% 91,4% (5.9%) 106 192 (24)

Total 132,889 132,341 137,370 151,423 (0.4%) 3.8% 10.2% (548) 5,029 14,053Source: Company

Provision For Doubtful DebtsThe table below presents the provision for doubtful debts of the Company on 31 March 2014G, 2015G, 2016G and 2017G.

Table (98): Provision for Doubtful Debts as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000

Increase (decrease) Increase (decrease)

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


As of 01 April 4,511 4,534 6,308 6,953 0.0% 39.1% 10.2% 23 1,774 645

Additions during the fiscal year 344 1,783 2,493 2,445 418.3% 39.8% (1.9%) 1,439 710 (48)

Bad debts during the fiscal year * (321) (8) (1,848) (219) (97.5%) 23000% (88.2%) 313 (1,840) 1,629

As of March 31 4,534 6,308 6,953 9,179 39.1% 10.2% 32.0% 1,774 645 2,226Source: Company

* The numbers inside the brackets mean debts that were considered as bad debts and were recovered.

The Company has an applicable policy to calculate doubtful debts which can be summarized in calculating 10.0% of the total debts that fall between 181 days to 360 days and 20.0% for over 360 days.

The provision for doubtful debts increased by SAR 1.8 million (39.1%) from SAR 4.5 million during the fiscal year ended on 31 March 2014G to SAR 6.3 million during the fiscal year ended on 31 March 2015G.This increase is due to increased sales (by SAR 42.5 million) and the aging of some of the Company’s customer debts.

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The provision for doubtful debts increased by SAR 0.6 million (10.2%) from SAR 6.3 million during the fiscal year ended on 31 March 2015G to SAR 7.0 million during the fiscal year ended on 31 March 2016G. This was due to the aging of debts for the Company du to the increase of the grace period by the Company. Noteworthy, the Company has added SAR 2.5 million to the provision while it was able to recover SAR 1.8 million which was considered to be bad debts.

The provision for doubtful debts increased by SAR 2.2 million (32%) to SAR 9.2 million from SAR 7.0 million as of 31 March 2017G due to the aging of more customers’ debts due to granting its customers higher grace periods due to the slowdown in economic activity.

The following table shows the aging of the Company’s commercial debtors as at 31 March 2017G:

Table (99): The aging of the Company’s commercial debtors as at 31 March 2017G.

SAR’000 0-90 91-120 91-180 181-360 361-720 More than 720 Total

Total Commercial Debtors 53,007 18,084 29,689 35,459 17,938 6,016 160,149Source: Company

Accounts Receivable To Related PartiesThe table below presents the Company’s provision for doubtful debts as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (100): Accounts receivable to related parties as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Mawan’ AL Saree’a ESTABLISHMENT for Contracting & CONSTRUCTION

336 70 276 364 (79.2%) 294.3% 31.9% (266) 206 88

Zamil Company 416 442 14 44 6.3% (96.8%) 214.3% 26 (428) 30

Total 753 511 290 407 (32.1%) (43.2%) 40.3% (242) (221) 117Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

The receivable relates to sales to Mawani’ AL Saree’a Establishment for Contracting & Construction (owned by Firas Al-Suqeer, a board member) and to Zamil Company, which are partially owned by Jamal Al Zamil (Board Member). The two companies are engaged in the installation of water and thermal insulation materials for their commercial customers. The accrual during the fiscal years ended on 31 March 2014G, 2016G and 2016G and 2017G of Mawani’ AL Saree’a Establishment for Contracting & Construction and Zamil Company resulted from Awazel sales of water and thermal insulation materials for those companies, which are considered normal and within the context of purely commercial dealings. For more details on Awazel dealings and its subsidiaries with its related parties, please see page (145).

Prepaid Expenses And Other AssetsThe table below presents the Company’s prepaid expenses and other consolidated assets of theas at 31 March 2014G, 2015G, 2016G and 2017G.

Table (101): Prepaid expenses and other assets as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Payments to suppliers 9,715 12,996 6,942 4,992 33.8% (46.6%) (28.1%) 3,281 (6,054) (1,950)

Expenses paid in advance 4,311 4,572 4,467 4,298 6.1% (2.3%) (3.8%) 261 (105) (169)

Advance payments for investment in Stone Takamul Factory Company for Stone and Marble

- 2,080 - - N/A (100.0%) N/A 2,080 (2,080( -

Employee and prepaid expenses and other related expenses

12,489 15,476 16,506 14,594 23.9% 6.7% (11.6%) 2,987 1,030 (1,912)

123

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Securing bank guarantees 520 976 409 559 87.7% (58.1%) 36.7% 456 (567) 150

Oil waste removal services 1,649 652 457 445 (60.5%) (29.9%) (2.6%) (997) (195) (12)

Other receivables 1,319 452 2,047 6,286 (65.7%) 352.9% 207.1% (867) 1,595 4,239

Total 30,002 37,206 30,827 31,174 24.0% (17.1%) 1.1% 7,204 (6,379) 347

Less: Advance payments against end of service indemnity adjustments

(12,051) (13,351) (13,351) (13,030) 10.8 0.0% (2.4%) (1,300) - 321

17,952 23,854 17,476 18,144 32.9% (26.7%) 3.8% 5,902 (6,378) 668Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Payments Are Provided To Suppliers“Payments to suppliers” refer primarily to payments made to suppliers of raw materials. Payments to suppliers increased by SAR 3.3 million (33.7%) from SAR 9.7 million as at 31 March 2014G to SAR 13.0 million as at 31 March 2015G, mainly as a result of the increase in payments made under the account of imported materials.

On 31 March 2016G, payments to suppliers decreased by SAR 6.1 million (46.6%) to SAR 6.9 million (mainly due to the receipt of imported materials during the fiscal year ended on 31 March 2016G).

Payments to suppliers decreased by SAR 2.0 million (28.1%) from SAR 6.9 million as at 31 March 2016G to SAR 5.0 million as at 31 March 2017G. This is due to the payment of amounts due to suppliers of Awazel against external purchases of raw materials for Awazel during the fiscal year ended on 31 March 2017G and due to the reduction in the volume of purchases due to the aforementioned economic slowdown.

Expenses Paid In Advance“Prepaid expenses” refer to payments made in advance for insurance, rent and other expenses, as they remained short term. Prepaid expenses have not witnessed any significant increase or decrease on 31 March 2015G compared to 31 March 2014G and 31 March 2016G compared to 31 March 2015G, as well as on 31 March 2017G compared to 2016G.

Advance Payments For Investment In Stone Takamul Factory Company For Stone And MarbleThe advance payments for investment in Stone Takamul Factory Company For Stone And Marble made on 31 March 2015G refer to the paid amount of SAR 2.0 million for the acquisition of 80% of Stone Takamul Factory Company For Stone And Marble. The down payment has been paid in one go.

Employee Receivables, Prepaid Expenses And Other Related Expenses“ Employee Receivables,, Prepaid Expenses And Other Expenses Related to staff” refer to existing receivables for the Company vis-à-vis advances made to its employees in the subsidiaries in special cases such as travel and emergency cases for laborers and employees. Additionally, “ Employee Receivables, Prepaid Expenses And Other Expenses Related to staff “ refer to prepaid expenses on behalf of employees and other receivable balances for the Company associated with them such as the cash covenant for the purchase of raw materials, spare parts and the like. It also includes the debit balance of the revised accounting adjustment shown on page (75). The actual Company’s entitlements to employees after excluding end of service benefits are SAR 0.4 million as at 31 March 2014G, SAR 2.1 million as of 31 March 2015G and SAR 3.2 million as at 31 March 2016G. Noteworthy, the Company does not grant advances to Awazel employees, and grants advances to employees of subsidiaries provided that the approval of the holders of the authority is granted and their balance of the end of service benefits is adequate as guarantee for payment.

Employees’ receivables - without adjustment of the end of service benefits - increased by SAR 3.0 million from SAR 12.5 million as of 31 March 2014G to SAR 15.5 million as at 31 March 2015G due to higher advances to employees in the subsidiaries increased in the amount of SAR 0.6 million and one of the partners was granted an advance of SAR 1.1 million. It should be noted that the advance payment granted to one of the partners was fully collected during the fiscal year ended on 31 March 2016G.

Employees› receivables increased by SAR 6.7 million (6.7%) from SAR 15.5 million as at 31 March 2015G to SAR 16.5 million as at 31 March 2016G, mainly due to advances paid to employees in subsidiaries.

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Employees receivables, prepaid and other related expenses decreased by SAR 1.9 million (11.6%) from SAR 16.5 million as at 31 March 2016G to SAR 14.6 million as of 31 March 2017G. This is mainly due to the reimbursement of part of these advances by staff.

Other ReceivablesOther receivables refer to various receivables such as term deposits, payments made to purchase items that are not related to the Company’s main activity, and the cash covenant granted to employees to purchase items that are not related to the Company’s main activity. Other receivables decreased by SAR 0.9 million or 65.7%, from SAR 1.3 million on 31 March 2014G to SAR 0.5 million as at 31 March 2015G which is mainly due to the accruals of term deposit accounts.

However, other receivables increased by SAR 1.6 million (352.9%) as at 31 March 2016G amounting to SAR 2.0 million, due to the increase in non-commercial miscellaneous receivables. The increase in miscellaneous accounts is in the other accounts receivable rose in the overall without being identified. Examples of accounts under this heading include payments for procurement of cleaning materials, petty expenses such as hospitality and other expenses, due-out insurance compensation, and deposit amount as a deposit held with third parties.

Other receivables increased by SAR 4.2 million or 207.1%, from SAR 4.2 million as of 31 March 2016G to SAR 6.3 million as at 31 March 2017G. This is due to the accruals of term deposits account due to the deposit at the bank amounting to SAR 70.0 million. For more information on the short term deposit, please see the bank cash section, page (119).

It is worth mentioning that the initial public offering expenses have been classified in other receivables. These expenses amounted to SAR 3.1 million as at 30 March 2017G.

Advance Payments Against End Of Service Indemnity Adjustments“Payments made against end of service indemnities” represent the annual amounts paid to employees in the years preceding the fiscal year ended on 31 March 2016G under the end of service indemnity account, and as explained in the adjustment and restatement section on page (75). Due to Due to the accounting adjustment in the provision of end of service benefits, the balance of end of service benefits has been adjusted to comply with the provisions of the Labor Law in the Kingdom of Saudi Arabia for the fiscal years ended on 31 March 2014G, 201G, 2016G and 2017G.

InventoryThe table below shows the components of the Company’s consolidated inventory on 31 March 2014G, 2015G, 2016G and 2017G.

Table (102): Consolidated Company’s stock as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Raw materials 39,210 40,857 31,949 27,756 4.2% (21.8%) (13.1%) 1,647 (8,908) (4,193)

Finished products 20,133 18,885 22,876 25.638 (6.2%) 21.1% 12.1% (1,248) 3,991 2,762

spare parts 6,417 5,905 7,126 6,780 (8.0%) 20.7% (4.9%) (512) 1,221 (346)

Movable goods 1,075 1,191 784 228 10.8% (34.2%) (70.9%) 116 (407) (556)

Provision for slow mov-ing goods (7,227) (4,964) (4,933) (3,797) (31.3%) (0.6%) (23.0%) 2,263 31 1,136

Net inventory 59,608 61,874 57,804 56,605 3.8% (6.6%) (2.1%) 2,266 (4,070) (1,199)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Raw materials increased by SAR 1.6 million or 4.2% from SAR 39.2 million as of 31 March 2014G to SAR 40.9 million as at 31 March 2015G. This increase was due to the increased requirements due to increased sales during the fiscal year ended on 31 March 2015G.

Raw materials decreased by SAR 8.9 million or 21.8% from SAR 40.9 million on 31 March 2015G to SAR 31.9 million as at 31 March 2016G. The decrease in the value of raw materials resulted from lower raw material prices during the fiscal year ended on 31 March 2016G, because most of the prices of raw materials are linked to world oil prices, which decreased during the mentioned fiscal year.

Raw materials also decreased by SAR 4.2 million (13.1%) from SAR 31.9 million as at 31 March 2016G to SAR 27.8 million as at 31 March 2017G. This is due to lower requirements for raw materials due to lower production during the fiscal year ended on 31 March 2017G.

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“Finished products” refer mainly to membrane stock. Finished products decreased by SAR 1.2 million or 6.2% from SAR 20.1 million as at 31 March 2014G to SAR 18.9 million as at 31 March 2015G mainly from increased demand for the Company’s products resulting in a shortage of inventory.

As of 31 March 2016G, inventories of finished products increased by SAR 4.0 million or 21.1% to reach SAR 22.9 million. This was due to higher production by the end of the year.

Total finished products increased by SAR 2.8 million (12.1%) from SAR 22.9 million as at 31 March 2016G to SAR 25.6 million as at 31 March 2017G, due to lower demand for products, particularly membranes, during the fiscal year ended on 31 March 2017G as mentioned earlier.

The balance of spare parts decreased by SAR 0.5 million or 8% from SAR 6.4 million as of 31 March 2014G to SAR 5.9 million as at 31 March 2015G, but spare parts increased by SAR 1.2 million or 20.7% SAR 5.9 million on 31 March 2015G to SAR 7.1 million on 31 March 2016G as a result of the purchase of new spare parts to be used for maintenance and refurbishment of parts of the planned production lines during the fiscal year ended on 31 March 2016G and 2017G. In general, the Company carries out maintenance and modernization programs during the month of Ramadan and Eid al-Adha holiday. Such halt will not cause any negative effects due to having a strategic reserve of finished products. The spare parts did not witness any significant increase or decrease as at 31 March 2017G compared to 31 March 2016G.

The item of transported goods refer to the goods that have been purchased but have not yet reached the warehouses yet.

Provision for slow moving mainly refer to spare parts, packaging materials and raw materials. The provision for slow moving goods decreased by SAR 2.3 million or 31.3% from SAR 7.2 million as at 31 March 2014G to SAR 4.9 million as at 31 March 2015G, as a result of adjustment after the actual inventory of stock. The provision for slow moving goods did not witness any significant increase or decrease as of 31 March 2016G.

The slow moving goods decreased by SAR 1.1 million or 23.0% from SAR 4.9 million as at 31 March 2016G to SAR 3.8 million as at 31 March 2017G. This is due to the adjustment after the actual inventory of the Company as mentioned earlier.

Stock By CompanyThe table below shows the Company’s consolidated stock as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (103): Inventories by Company as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 47,497 49,701 41,011 43,489 4,6% (17.5%) 6.0% 2,204 (8,690) 2,478


- 1,104 1,637 2,543 100,0% 48,3% 55.4% N/A 533 906


- - 662 857 N/A N/A 29.5% - 662 195


- - 222 364 N/A N/A 64.1% - 200 142

International Companies

Awazel Kuwait for building Materials 3,145 3,664 3,944 2,987 16,5% 7,6% (24.3%) 519 280 (957)


3,520 4,236 5,814 4,848 20,4% 37,2% (16.6%) 716 1,578 (966)


4,089 3,041 4,415 1,908 (25,6%) 45,2% (56.8%) (1,048) 1,374 (2,507)


1,930 610 100 101 (68,4%) (83,6%) 1.3% (1,320) (510) 1

Disposals to close the account (574) (483) - (492) (15,8%) (100,0%) N/A 91 483 (492)

Inventory, Net 59,608 61,874 57,804 56,605 3.8% (6.6%) (2.1%) 2,266 (4,070) (1,199)Source: Company

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The inventory with Awazel, Al Sultan Contracting, Trading & Industry Co,, Al-Takamul Stone Factory Company for Stone and Marble and Advanced company for membrane industry company’s inventory represents the raw materials, spare parts and finished products. The inventory of the remaining subsidiaries represents finished products only, because the production facilities are located in Kingdom of Saudi Arabia. The operations of subsidiaries in Kuwait, UAE, Qatar and Indonesia are limited to the trade and marketing of finished products.

The inventory of Awazel - as a share of the Company’s total consolidated stock balance - represented 79.7% as at 31 March 2014G, 80.3% as at 31 March 2015G, 70.9% as at 31 March 2016G and 76.8% as at 31 December March 2017G.

6-7-2 Non-Current AssetsThe table below presents the Company’s non-current assets as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (104): Non-current assets of the Company as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Investment property - - 33,284 34,624 0,0% N/A 4.0% - N/A 1,340

Investments available for sale 34 32 25 24 (5,1%) (22,4%) (5.6%) (2) (7) (1)

Property, plant and equipment 92,847 115,578 90,013 84,710 24,5% (22,1%) (5.9%) 22,731 (25,565) (5,303)

Total non-current assets 92,881 115,610 123,322 119,358 %24,5 %6,7 (3.2%) 22,729 7,712 (3,964)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Non-current assets include assets, plant and equipment. Non-current assets increased by SAR 22.7 million or 24.5% from SAR 92.9 million as at 31 March 2014G to SAR 115.6 million as at 31 March 2015G. This increase has resulted from a similar increase to the property, plant and equipment and the Company’s investments in Al Sultan Company, the addition of a production line for the Plastic Membrane Manufacturing Company and the addition of the constructions to the International Waterproofing Company in the United Arab Emirates.

Non-current assets increased by SAR 7.7 million or 6.7% to SAR 123.3 million as at 31 March 2016G, due to the addition of investment structures in the International Waterproofing Company in the UAE.

Non-current assets decreased by SAR 4.0 million or 3.2% from SAR 123.3 million as at 31 March 2016G to SAR 119.4 million as at 31 March 2017G. This is be due to lower property, plant and equipment due to the calculation of annual depreciation.

The table below presents the non-current assets of the Company as of 31 March 2014G, 2015G, 2016G and 2017G.

Table (105): Non-current assets by company as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 76,142 73,307 66,887 62,968 (3.7%) (8.8%) (5.9%) (2,835) (6,420) (3,919)

Al Sultan Contracting, Trading & Industry Co - 8,148 8,398 8,002 - 48,3% (4.7%) 8,148 250 (396)


- - 1,407 1,078 - - (23.4%) - 1,407 (329)

Advanced compa-ny for membrane industry

105 6,767 6,989 6,131 6344.8% 3.3% (12.3%) 6,662 222 (858)



317 223 131 170 (29.7%) (41.3%) 29.5% (94) (92) 39

International Water-proofing Company 16,139 26,960 39,379 40,841 %67 46.1% 3.7% 10,821 12,419 1,462

127

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



127 163 141 144 28.3% (13.5%) 2.1% 36 (22) 3


51 41 - - (19.6%) - - (10) (41) -

Total 92,881 115,610 123,322 119,358 24.5% 6.7% (3.2%) 22,729 7,712 (3,988)Source: Company

The Company’s assets, plant and equipment, as a proportion of the Company’s total consolidated non-current assets represented 82% as at 31 March 2014G, 63.4% as at 31 March 2015G, 54.2% as at 31 March 2016G and 52.8% % As at 31 March 2017G.

Investment PropertyThe table below presents the consolidated financial statements of the Company’s investment properties as at 31 March 2014G, 2016G, 2016G and 2017G.

Table (106): Investment properties at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Cost

April 1 - - - 33,284 N/A N/A N/A - - 33,284

Transferred During The Year - - 33,342 1,888 N/A N/A (94.3%) - 33,342 (3,1454)

- - 33,342 35,230 N/A N/A 5.7% - 33,342 1,888

Accumulated Depreciation

April 1 - - - (58) N/A N/A N/A - - (58)

Transfer Red During The Year - - (58) (548) N/A N/A 844.8% - (58) (490)

- - (58) (606) N/A N/A 944.8% - (58) (548)

Net Book Value - - 33,284 34,624 N/A N/A 4.0% - 33,284 1,340Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements

Investment Property” refers to warehouses, offices and showrooms owned by Awazel International Company and is located on the land owned by the Company, which represents part of the total building area of the said company. The balance of investment properties increased by SAR 33.3 million, from zero as at 31 March 2015G to 33.3 million As at 31 March 2016G, due to the transfer of the balance of projects under implementation in the same amount during the fiscal year ended on 31 March 2016G after completion of construction works on those lands. The projects under implementation have been transferred to the investment properties due to the leasing of the International Waterproofing Company of part of the building area as a warehouse for commercial customers and because Awazel plan to allocate 85.0% of the construction for rent to commercial customers.

An amount of SAR 1.9 million was added to investment property of the projects under construction during the fiscal year ended on 31 March 2017G due to the completion of the works under construction. The investment properties consist of two buildings. The first building consists of two warehouses, consisting of ground floor and two mezzanines, while the second building consists of 4 showrooms and 20 offices for rent to others in the UAE.

128

The following table shows the progress of the two projects as of 31 March 2017G..

Project Contract Value (SAR) Completion percentage completed

First Building 4,571,195 100.8%* 4,856,621

Second Building 19,405,080 100.00% 20,954,882

Complementary Work 1,835,228 100.00% -

Total 25,811,503 N/A 25,811,503Source: Company

* Note: The completion rate increased from 100.0% due to the addition of cost items that were not included in the contract.

Noteworthy, the construction contractor of the investment facilities in the UAE was fined by the Company during the fiscal year ended on 31 March 2017G. The contractor, Dubai City Builders Company, was fined after the completion of the Ras Al Khor warehouse in Dubai, in the United Arab Emirates, due to the contractor’s delay in the execution of the work on the agreed upon date stipulated in the contract. The consultant fined the the contractor by 6.0% of the total business of SAR 276.439. There has been a settlement between the two parties and there is no existing judicial dispute against the fine.

Investments Available For SaleThe table below shows the Company’s available-for-sale investments at 31 March 2014G, 2015G, 2016G and 2017G.

Table (107): Available for sale investments for the Company as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


01 April 38 34 32 25 (10.6%) (5.9%) (22.5%) (4) (2) (7)

Fair value adjustments (4) (2) (7) (1) (57.5%) 250.0% (82.8%) 2 (5) 6

31 March 34 32 25 24 (5.1%) (21.9%) (5.0%) (2) (7) (1)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements

“Available for sale Investments” refer mainly to investments in equity securities held by Awazel. These investments represent the shares held by Riyad Bank but have not witnessed a significant increase or decrease as at 31 March 2014G, 2015G, 2016G and 2017G.

Property, Plant And EquipmentThe following table presents the net book value of property, plant and equipment as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (108): Property, plant and equipment as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Cost

Lands 28,686 33,681 20,542 20,542 17.4% (39.0%) 0.0% 4,994 (13,139) -

Buildings And Improvements On Land And Buildings

58,601 58,781 62,889 63,364 0.3% 7.0% 0.8% 180 4,108 475

Furniture, Fixtures And Cars 45,631 47,141 48,316 49,948 3.3% 2.5% 3.4% 1,510 1,175 1,632

Computers And IT Equipment 5,209 10,833 11,415 11,850 108.0% 5.4% 3.8% 5,624 582 435

Installations And Equipment 102,798 112,179 115,179 116,026 9.1% 2.7% 0.7% 9,382 3,000 847

Capital Work Under Implementation

301 11,414 365 391 3696.1% (96.8%) 7.0% 11,113 (11,049) 26

129

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Total 241,225 274,029 258,706 262,124 13.6% (5.6%) 1.3% 32,803 (15,323) 3,418


Lands - - - - N/A N/A N/A - - -

Buildings And Improvements On Land And Buildings

(16,466) (18,182) (20,028) (21,959) 10.4% 10.2% 9.6% (1,716) (1,846) (1,931)

Furniture, Fixtures And Cars (41,900) (43,079) (44,398) (45,572) 2.8% 3.1% 2.6% (1,179) (1,319) (1,174)

Computers And IT Equipment (5,056) (5,130) (6,648) (8,278) 1.5% 29.6% 24.5% (75) (1,518) (1,630)

Installations And Equipment (84,956) (92,059) (97,619) (101,605) 8.4% 6.0% 4.1% (7,103) (5,560) (3,986)

Capital Work Under Implemen-tation

- - - - N/A N/A N/A - - -

Total (148,378) (158,451) (168,693) (177,414) 6.8% 2.3% 5.2% (10,073) (3,595) (8,721)

Net Book Value 92,847 115,578 90,013 84,710 24.5% (22.1%) (5.9%) 22,731 (25,565) (5.303)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

It should be noted that all property, plant and equipment, including the value of land, are valued at historical cost, at their value at the date of purchase without modification.

It should be noted that the previous table does not include “investment property” as it is a separate item.

Lands“Land” refers primarily to the existing land owned by the Company located inside and outside the Kingdom - in Dubai in Ras Al Khor. The land increased by SAR 5.0 million or 17.4% from SAR 28.7 million as of 31 March 2014G to SAR 33.7 million as at 31 March 2015G, mainly due to the addition of the land of Sultan Contracting, Trading and Industry Company to the Company’s assets.

The land decreased by SAR 13.1 million or 39.0% of SAR 33.7 million as at 31 March 2015G to SAR 20.5 million as at 31 March 2016G, as a result of converting part of the land of International Waterproofing Company to the investment property as mentioned earlier.For more information, please see the Investment Property Section, set out in Section on page (127).

There was no increase or decrease in lands as at 31 March 2017G compared to 31 March 2016G.

Buildings And Improvements On Land And Buildings“Buildings and improvements on land and buildings” refer to the buildings of the Company as well as improvements made to buildings and lands, including factory buildings, offices, warehouses and workers’ housing premise. The item did not witness a significant increase or decrease as at 31 March 2015G compared to 31 March 2014G. Land and building improvements increased by SAR 4.1 million or 7.0% from SAR 58.8 million as at 31 March 2015G to SAR 62.9 million as at 31 March 2016G as a result of capital expenditures to add and complete the construction of Awazel International Company.

Buildings increased by SAR 0.5 million or 0.8% as at 31 March 2017G compared to 31 March 2016G as a result of capital expenditures to mainly add and complete the constructions of Emirates Waterproofing Company.

Furniture, Fixtures And CarsFurniture, fixtures and vehicles mainly refer to office furniture, fixtures, cars and trucks used for business. Furniture, fixtures and vehicles line item increased by SAR 1.5 million or 3.3% from SAR 45.6 million as at 31 March 2014G to SAR 47.1 million as at 31 March 2015G as a result of the additions of mechanical and motor installations, for Al Sultan Contracting, Trading and Industry Company, in addition to cars purchased by Awazel during the mentioned period.

Furniture, fixtures and vehicles increased by SAR 1.2 million or 2.5% from SAR 47.1 million as at 31 March 2015G to SAR 48.3 million as at 31 March 2016G mainly due to vehicles for Awazel during the fiscal year ended on 31 March 2016G. Furniture, fixtures and vehicles increased by SAR 1.6 million (3.4%) as at 31 March 2017G compared to 31 March 2016G for the complete renovation of the office furniture of the Company’s building in Riyadh.

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Computers and Information Technology EquipmentThe “Computers and Information Technology Equipment” line item refers to computers, related equipment, other systems and software products used in offices and manufacturing facilities. The “Computers and Information Technology Equipment” line item increased by SAR 5.6 million (108.0%) from 31 March 2014G to SAR 10.8 million as at 31 March 2015G mainly due to the cost of SAP’s capitalized software and the procurement of full new computer equipment during the year.

As of 31 March 2016G compared to 31 March 2015G, it increased by SAR 0.6 million or 5.4% from SAR 10.8 million as at 31 March 2015G to SAR 11.4 million as at 31 March 2016G due to further investment in the SAP capitalized program during the year. The computers and IT equipment line item did not witness any significant increase or decrease as at 31 March 2017G compared to 31 March 2016G.

Plant And EquipmentThe “plant and equipment” line item refers mainly to the production plants located in Riyadh and Jeddah. The “plant and equipment” line item increased by SAR 9.4 million (9.1%) from SAR 102.8 million as at 31 March 2014G to SAR 112.2 million as at 31 March 2015G. The increase is mainly due to the Al Sultan Contracting, Trading and Industry Company investment of equipment owned by the Company and the production line of the Advanced Membrane Industries Company.

The value of the plant and equipment increased by SAR 3.0 million or 2.7% to SAR 115.2 million as at 31 March 2016G. This increase was due to the Company’s acquisition of Al-Takamul Company For Stone And Marble and Special Equipment during the fiscal year ended on 31 March 2016G. The plant and equipment line item did not witness any significant increase or decrease as at 31 March 2017G compared to 31 March 2016G.

Capital Work Under ImplementationCapital works under construction represent capital expenditures on the of International Waterproofing Company building and office (which was under construction) as well as improvements and renovations to the Awazel’s main headquarters building in Riyadh. The balance of capital works under construction increased by SAR 11.1 million as at 31 March 2015G, to SAR 11.0 million as of 31 March 2016G. This increase and decrease is due to the capital expenditure on the Company’s owned buildings (consrtuctions) in the UAE that were transferred to investment properties upon completion of construction during the fiscal year ended on 31 March 2016G. As of 31 March 2017G, the value of works under construction (the renovation of the Riyadh Administration Building) amounted to SAR 0.4 million.

The following table shows the planned projects for the expansion of the Company, after the date of this Prospectus.

Table (109): Company Expansion Plan after the date of this Prospectus

Project

Expected date of commence-

ment of production

Project cost (SAR) Capacity Brief description

Establishment of factory that belongs to the Al Sultan Company

March 2018G 5,300,00 300,000 M2

As of 31 March 2017G, Al Sultan plant operates semi-mechanically, and the Company wishes to develop the system into a fully integrated mecha-nism to reduce the cost of production and quality of products. Therefore, Al Sultan Company for Contracting, Trading and Industry will be relocated to a new location in Darma.

Production Line for the First Thermal insulation at Awazel Factory in Riyadh

March 2018G 15,500,000 150,000 M3With its current production lines, the Company can provide the market need and meet its growth in the field of waterproofing.

In the area of thermal insulation, the Company had an old production line and was stopped. The Company aims at obtaining a share in this vital field, which complements waterproofing, especially since there is high growth in the field of thermal insulation in order to accommodate the current and expected demand in this field. Two production lines will be purchased and installed for thermal insulation. Awazel is characterized by stable trans-port costs of its products, so transport expenses will decrease in aggregate with the increased production and.

Production Line for the Second Thermal insula-tion at Awazel Factory in Jeddah

June 2018G 8,700,000 72,000 M3

Source: Company

Note: The Company’s management acknowledges that there are no significant assets to be leased as at the date of this Prospectus. It should also be noted that the expansion plan of Al Sultan Company for Contracting, Trading and Industry was delayed by six months due to regulatory measures in the sector.

131

6-7-3 Current LiabilitiesThe table below presents the Company’s current consolidated liabilities as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (110): Current Liabilities as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Accounts Payable 7,035 9,939 5,866 8,328 41.3% (41.0%) 42.0% 2,904 (4,073) 2,462

Accrued Expenses And Other Liabilities 42,075 48,482 46,052 30,536 15.2% (5.0%) (33.7%) 6,407 (2,430) (15,516)

Zakat Due 7,515 7,402 9,486 9,633 (1.5%) 28.2% 1.5% (113) 2,084 147

Total Current Liabilities 56,625 65,823 61,405 48,497 16.2% (6.7%) (21.0%) 9,198 (4,418) (12,908)


Current liabilities increased by SAR 9.2 million (16.2%) from SAR 56.6 million on31 March 2014G to SAR 65.8 million on 31 March 2015G mainly due to an increase in customs duties due on imports during the fiscal year ended on 31 March which amounted to SAR 4.3 million or 16.3%, the accounts payable by SAR 2.9 million or 41.3%, accrued expenses and other liabilities by SAR 2.1 million or 13.4%.

Current liabilities decreased by SAR 4.4 million or 6.7%, from SAR 65.8 million as at 31 March 2015G to SAR 61.4 million as at 31 March 2016G due to a decrease in import duties by SAR 9.4 million against the increase in accounts payable by SAR 1.1 million during the fiscal year ended on 31 March 2016G, and the increase in accrued expenses and other liabilities by SAR 1.8 million and the increase in Zakat due by SAR 2.1 million.

Current liabilities decreased by SAR 12.9 million or 21.0% from SAR 61.4 million as at 31 March 2016G to SAR 48.5 million as at 31 March 2017G due to a decrease in accrued expenses and other liabilities of SAR 3.6 million, lower import duties on imports by SAR 6.8 million and a decrease in payables by to SAR 2.7 million. The decrease in accrued expenses and other. liabilities is due to lower salaries, accrued benefits and due sales incentives. The decrease in the expenses of the raw materials is due to the payment of obligations due to the reduction of customs duties due to imports to pay the amount owed by the Company to the Saudi Customs Authority during the fiscal year ended 31 March 2017G.

PayablesThe table below presents the Company’s consolidated accounts receivable as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (111): Payables as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Trade payables 6,833 9,884 5,866 8.271 44.7% (40.7%) 41.0% 3,051 (4,018) 2,405

Related parties 202 55 - 57 (72,7%) (100.0%) N/A (147) (55) 57

Total 7,035 9,939 5.866 8,328 41.3% (41.0%) 42.0% 2,904 (4,073) 2,462Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Accounts Payables mainly refer to suppliers/vendors in the Kingdom of Saudi Arabia. Trade payables increased by SAR 3.1 million (44.7%) from SAR 6.8 million (31 March 2014G) to SAR 9.9 million (31 March 2015G) due to the increase in local purchases of raw materials and the balance of creditors related to Al Sultan Company for Contracting, Trading and Industry.

As at 31 March 2016G, trade payables decreased by SAR 4.0 million or 40.7% to SAR 5.9 million as a result of the increase in local purchases of raw materials as well as the restatement of certain items within the account into separate accounts during the fiscal year ended on 31 March 2016G pursuant to the establsihed disclosure standards to comply with international standards.

Trade payables increased by SAR 2.4 million as at 31 March 2017G compared to 31 March 2016G. This is due to increased purchases of raw materials and supplies from local and international suppliers.

‘Payables to a related party’ refer to receivables relating to the purchase of Awazel in the State of Kuwait, the UAE and Qatar to the liquid primer products Peto Trade for Industy Ltd. Owned by a related party.

132

Accrued Expenses And Other Current LiabilitiesThe following table presents the Company’s outstanding current and other current liabilities as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (112): Accrued expenses and other current liabilities of the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Customs Duties Pay-able On Imports 26,733 31,080 21,682 14,927 16.3% (30.2%) (31.2%) 4,347 (9,398) (6,755)

Salaries And Benefits Due 6,437 7,529 10,939 9,064 17.0% 45.3% (17.1%) 1,092 3,410 (1,875)

Commissions Payable 3,111 3,256 3,431 3,379 4.7% 5.4% (1.5%) 145 175 (52)

Sales Incentives 1,300 1,344 1,861 200 3.4% 38.5% (89.3%) 44 517 (1,661)

Expenditures Of Raw Materials Receivable 1,465 3,153 5,373 - 115.2% 70.4% (100.0%) 1,688 2,220 (5,373)

Due Transport Expenses 1,315 1,257 1,493 1,034 (4.4%) 18.8% (30.7%) (58) 236 (459)

Payable Retains - - 234 998 N/A N/A 326.5% - 234 764

Benefits 42 306 547 251 628.6% 78.8% (54.1%) 264 241 (296)

Professional Fees 137 272 283 289 98.5% 4.0% 2.1% 135 11 6

Customs Duties On Exports 196 - - - (100.0%) N/A N/A (196) - -

Other Payables 1,338 285 444 394 (78.7%) 55.8% (11.3%) (1,053) 159 (50)

Total 42,075 48,482 46,052 30,536 15.2% (5.0%) (33.7%) 6,407 (2,430) (15,516)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

Import Customs DutiesThe item was analyzed in the Adjustment Of Customs Duties Section due on imports in page (95).

Salaries And Accrued Benefits Salaries and accrued benefits represent all accumulated and accrued salaries and benefits due to the Company employees one month prior to the closure of the annual accounts. Salaries and accrued benefits increased by SAR 1.1 million (17.0%) from SAR 6.4 million on 31 March 2014G to SAR 7.5 million on31 March 2015G due to the increase in average salaries, the number of employees, and due to the addition of Al Sultan Company employees the industry which started its activity during the fiscal year ended on 31 March 2015G, and thus increased the balance by increasing their salaries and accrued benefits.

Salaries and benefits also increased by SAR 3.4 million from SAR 7.5 million on 31 March 2015G to SAR 10.9 million as at 31 March 2016G due to the increase in average salaries and benefits and the adjustment of the provision for the end of service benefits. The remuneration was increased mainly due to achieving an increased net income during the fiscal years ended on 31 March 2015G and 2016G.

Salaries and accrued benefits decreased by SAR 1.9 million (17.1%) as at 31 March 2017G compared to 31 March 2016G. This is mainly due to the payment of some of Awazel employees’ benefits.

Payable Sale CommissionsThe accured sales commissions did not witness a significant increase or decrease as it amounted to SAR 3.1 million as of March 31, 2014G, SAR 3.3 million as of 31 March 2015G, SAR 3.4 million as of 31 March 2016G and SAR 3.4 million as of 31 March 2017G.

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Other PayablesOther payables decreased by SAR 1.1 million or 78.7% from SAR 1.3 million as at 31 March 2014G to SAR 0.3 million as at 31 March 2015G, mainly due to settlement of credit dues to local suppliers. Other payables did not witness any significant increase or decrease in the fiscal year ended on 31 March 2016G compared with 31 March 2017G

Zakat DueThe table below shows the Zakat payable to the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (113): Zakat payable by the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


01 April 1 7,188 7,515 7,402 9,486 4.6% (1.5%) 28.2% 327 (113) 2,084

Provisions 7,200 7,410 9,372 9,377 2.9% 26.5% 0.1% 210 1,962 5

Payments (6,873) (7,523) (7,287) (9,230) 9.5% (3.1%) 26.7% (650) 236 (1,943)

31 March 7,515 7,402 9,486 9,633 (1.5%) 28.2% 1.5% (113) 2,084 147Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

The Company is subject to Zakat according to the applicable regulations of Zakat and Income Tax Department in the Kingdom of Saudi Arabia. The provision for Zakat is charged to the Company’s consolidated statement. In case of any additional amounts payable when final assessments are settled, they will be accounted for when the amounts are determined.

Subsidiaries in the UAE, Qatar, Kuwait and Indonesia are subject to the provisions of the income tax system in their country of origin, and such taxes, if any, are charged to the Company’s consolidated income statement.

The Company shall deduct the special tax on non-residents in the Kingdom of Saudi Arabia prior to the distribution of profits to partners residing outside the Kingdom according to the Kingdom’s tax deduction system for non-residents.

6-7-4 Non-Current LiabilitiesThe table below presents the Company’s unaudited consolidated liabilities as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (114): The Company’s Non-current liabilities as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Provision For End Of Service Benefits 5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 2,344

Total Non - Current Liabilities 5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 2,344


134

Employees’ End of Service BenefitsThe table below presents the end of service benefits of the Company’s consolidated employees as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (115): Employees’ end of service benefits as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000

Increase/(decrease) percentage Increase/(decrease) Amount

2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


01 April before restatement 784 1,018 20,160 22,167 29.8% 1880.4% 10.0% 234 19,142 2,007

Restatement 15,196 16,972 - - 11.7% (100.0%) N/A 1,776 (16,972) -

Total, after restatement 15,980 17,990 20,160 22,167 12.6% 12.1% 10.0% 2,010 2,170 2,007

Less: Advance payments (10,890) (12,051) (13,251) (13,030) 10.7% 10.0% (1.7%) (1,161) (1,200) 221

Total end of service bonus as of 01 April after restatement

5,090 5,939 6,808 9,137 16.7% 14.6% 34.2% 849 869 2,329

Add: Provision 1,633 1,465 2,036 2,562 (10.3%) 39.0% 25.8% (168) 571 526

Less: payments (1,398) (1,316) (29) (540) (5.9%) (97.8%) 1762,1% 82 1,287 (511)

Provision (modified) 615 719 - - 16.9% (100.0%) N/A 104 (719) -

End of service bonus balance, as at 31 March

5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 2,344


Employees’ end of service benefits represent amounts payable as a lump sum to all employees appointed at the end of their contracts in accordance with the Saudi Arabian Labor Law.

It is worth mentioning that at the end of the fiscal year ended on 31 March 2015G, the end of service provision for Awazel and all related balances for the fiscal year ended on 31 March 2014G were adjusted to reflect the accounting adjustment in the provision for end of service benefits which has been calculated for all Company employees on a yearly basis based on the employees’ contracts. The balance for the provision of the end of service indemnity after adjustment with the rules and regulations in accordance with the provisions of the Kingdom of Saudi Arabia Labor Law. For more information about the amendment, please see the restatement section shown on page (75).

The provision for end of service benefits increased by SAR 0.9 million or 15.5% from SAR 5.9 million a Saudi Riyals s at 31 March 2014G to SAR 6.9 million as at 31 March 2015G due to the previously described amendment.

The provision for end of service benefits increased by SAR 2.0 million from SAR 6.9 million on 31 March 2015 to SAR 8.8 million as at 31 March 2016G, mainly due to the addition of SAR 7.4 million in Awazel records to reflect the correction (or adjustment) referred to earlier.

The provision for end of service benefits increased by SAR 2.3 million to SAR 11.2 million as at 31 March 2017G from SAR 8.8 million as at 31 March 2016G. This is due to the fact that the employees of Awazel, Al-Sultan Company and Advanced Company for Membrane Industry are entitled to end of service benefits vis-à-vis their period of service during the fiscal year ended on 31 March 2017G.

135

Employees’ End of Service Benefits By CompanyThe following table shows the Company’s consolidated end of service benefits for employees as of 31 March 2014G, 2015G, 2016G and 2017G.

Table (116): Employees’ end of service benefits and bonuses by the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G



Awazel 4,921 5,690 7,361 9,105 15.6% 29.4% 23.7% 769 1,734 )1,231(

Al Sultan Contracting, Trading & Industry Co - - - 388 N/A N/A N/A - - 388


- - - - N/A N/A N/A - - -

Advanced company for membrane industry - - - 5 N/A N/A N/A - - 5

International companies N/A N/A N/A


643 696 875 985 8.2% 25.7% 12.6% 53 179 110


323 395 463 525 22.3% 17.2% 13.4% 72 68 62


52 77 116 151 48.1% 50.6% 30.2% 25 39 35


- - - - N/A N/A N/A - - -

Total 5,939 6,858 8,815 11,159 15.5% 28.5% 26.6% 919 1,957 2,344Source: Company

The balance of employees’ end of service benefits in the subsidiaries is consistent with the number, periods of service and contribution of employees, in accordance with local laws and regulations in each country.

It is noted that the balance of the end of service benefits for Al Takamul company amounted to zero as of 31 March 2017G, because all the employees of the Company did not complete the necessary period to calculate the end of service benefits within their entitlements to prove compliance in the accounting records.

136

6-7-5 Equity RightsThe table below presents the Company’s consolidated equity as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (117): Equity as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Equity capital 182,000 182,000 273,000 273,000 0.0% 50.0% 0.0% - 91,000 -

Statutory reserve 59,791 66,485 8,774 16,094 11.2% (86.8%) 83.4% 6,694 (57,711) 7,320

Reserve Agreement 65,051 75,092 67,.873 75,192 15.4% (9.6%) 10.8% 10,041 (7,219) 7,319

Fair value reserve 11 9 2 1 (18.2%) (77.8%) (50.0%) (2) (7) (1)

Foreign exchange reserve 984 (29) (123) (295) (102.9%) 324.1% 139.8% (1,013) (94) (172)

Retained earnings 32,880 52,468 41,348 45,635 59.6% (21.2%) 10.4% 19,588 (11,120) 4,287

Total shareholders’ equity 340,716 376,026 390,874 418,627 10.4% 3.9% 7.1% 35,310 14,848 27,753


Changes In Shareholders’ EquityThe table below presents changes in shareholders’ equity as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (118): Changes in shareholders’ equity as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000 Contributing capital

Statutory reserve

Common/General Reserve

Fair value reserve

Foreign Currency exchange

reserve

Retained earnings Total

1 April 2013 as amended 182,000 54,087 56,495 15 838 28,908 322,343

Net income for the year (adjusted) - - - - - 57,041 57,041

Transferred to statutory reserve (adjusted)

- 5,704 - - - (5,704) -

Transferred to Common reserve (adjusted)

- - 8,556 - - (8,556) -

Dividend - - - - - (37,310) (37,310)

Directors’ remuneration - - - - - (1,500) (1,500)

Change in fair value - - - (4) - - (4)

Foreign currency conversion - - - - 146 - 146

31 March 2014G, as amended 182,000 59,971 65,051 11 984 32,880 340,717

Net income for the year - - - - - 66,944 66,944

Transferred to the statutory reserve - 6,694 - - - (6,694) -

Transfer to the Common reserve - - 10,042 - - (10,042) -

Dividend - - - - - (29,120) (29,120)



Foreign currency conversion - - - - (1,013) - (1,013)

137

SAR’000 Contributing capital

Statutory reserve

Common/General Reserve

Fair value reserve

Foreign Currency exchange

reserve

Retained earnings Total

31 March 2015G, as amended 182,000 66,485 75,092 9 (29) 52,468 376,026

Increase in capital 91,000 (67,000) - - - (24,000) -

Net income for the period - - - - - 92,890 92,890


Transfer to the Common/General Reserve

- - 10,182 - - (10,182) -

Transfer from the Common/General Reserve

- - (17,401) - - 17,401 -

Dividend - - - - - (76,440) (76,440)



Effect of foreign currency conversion

- - - - (94) - (94)

Balance as at 1 April 2016G 273,000 8,774 67,873 2 (123) 41,348 390,874

Net income for the period - - - - - 73,192 73,192


Transfer to the Common/General Reserve

- - 7,319 - - (7,319) -

Losses of minority interests - - - - - (86) (86)

Dividend - - - - - (43,680) (43,680)

Directors’ remuneration - - - - - (1,5..) (1,5..)


Effect of foreign currency conversion

- - - - (172) - (172)

Balance as at 31 March 2017G 273 16,094 75,192 1 (295) 54,635 418,627


As of 31 March 2017G, the equity is mainly composed of SAR 273.0 million, the statutory reserve of SAR 16.1 million, the SAR 75.2 million Common/General Reserve, fair value reserve of SAR 0.001 million, foreign exchange reserve and retained earnings of minus SAR 0.3 million. The retained earnings amounted to SAR 54.6 million as at 31 March 2017G.

The total equity balance amounted to SAR 422.9 million as of 31 March 2017G compared to SAR 342.0 million as of 31 March 2014G, and amounted to SAR 380.2 million as at 31 March 2015G and amounted to SAR 395.4 million as at 31 March 2016G.

Share CapitalThe paid-up capital as at 31 March 2017G was SAR 272.999.780 Saudi Riyals with 27,299,978 shares at a nominal price of SAR 10 per share. It should be noted that before 29 September 2015G the capital was divided into 18,199,981 shares at a price of 10 Saudi riyals per share. On 29 September 2015G, the capital was increased by issuing an additional share for each two shares to reach the capital as at 31 March 2016G. The increase was made through the transfer of SAR 67,000,000 Saudi Riyals from the statutory reserve and the transfer of SAR 24,000,000 Saudi Riyals from the retained profits balance.

138

In accordance with the Corporate Regulations in the Kingdom of Saudi Arabia, the Company maintains a statutory reserve and maintains an Contractual Reserve in accordance with its Articles of Association

Statutory ReserveIn accordance with the Corporate Law in the kingdoms of Saudi Arabia and the Articles of Association of the Company, the Company has established a statutory reserve by allocating 10.0% of the annual net profit for this provision until its balance equals 50.0% of the share capital, provided that this reserve is not distributed as annual profits.

The balance of the statutory reserve stood at SAR 59.8 million as at 31 March 2014G, SAR 66.5 million as at 31 March 2015G and SAR 8.8 million as of 31 March 2016G. The decrease in statutory reserve was due to the conversion of 67.0 million to the share capital for the purpose of increasing the capital during the fiscal year ended on 31 March 2016G. The balance amounted to SAR 16.1 million as at 31 March 2017G.

Common/General ReserveAs at 31 March 2017G, and in accordance with the provisions of the Articles of Association of the Company, 10.0% is reserved as a reserve for future dividends and 2.5% as research and development reserve. In accordance with the provisions of the Company’s Articles of Association, research and development reserve shall not exceed 5.0% of the Company’s capital.

Fair Value ReserveAs at 31 March 2017G, the fair value reserve amounted to SAR 0.001 million. It should be noted that the fair market value reserve is maintained to record the fair value fluctuations of the Riyad Bank shares held as available for sale investments.

Foreign Currency Exchange ReserveThe foreign exchange reserve is maintained to record any gains or losses arising from foreign currency financial transactions. The foreign currency exchange reserve decreased by SAR 1.0 million or 102.9% from SAR 0.9 million as at 31 March 2014G to a negative balance of SAR 0.03 million as at 31 March 2015G, as a result of a decrease in the current account value for Awazel denominated inn Euro against the Saudi Riyal. This loss is considered exceptional and accidental. The reserve balance amounted to a negative balance of SAR 0.1 million as of 31 March 2016G and SAR 0.3 million as at 31 March 2017G. The reserve balance is commensurate with the local currency translation profits or losses of subsidiaries outside Saudi Arabia to Awazel local currency (SAR)

Retained EarningsRetained earnings increased by SAR 19.6 million or 59.6% from SAR 32.9 million as at 31 March 2014G to SAR 52.5 million as of 31 March 2015G, due to the increase in net income of the Company during the said fiscal periods.

During the fiscal year ended on 31 March 2016G, retained earnings decreased by SAR 11.1 million to SAR 41.3 million, despite the increase in net income mainly due to the Company’s distribution of dividends by that amounted to SAR 76.7 million and the increase in the share capital of SAR 24.0 million during the fiscal year ended on 31 March 2016G.

The retained earnings balance increased by SAR 4.3 million or 10.4% from SAR 41.3 million as at 31 March 2016G to SAR 45.6 million as at 31 March 2017G as a result of the net income for the fiscal year after the distribution of a dividend of SAR 32.7 million.

DividendsThe Company has declared a dividend of SAR 7.3 million on 29 September 2015G and SAR 0.4 per share as in the Company’s records as at 31 March 2015G for the fourth quarter ended on 31 March 2015G. These profits were distributed during the fiscal period ended on 31 October 2015G. In addition, an Extraordinary dividend of SAR 36.4 million and SAR 2.0 per share were recorded in the Company’s records as at 31 March 2015G. Those dividends were distributed during the fiscal period ending 31 October 2015G. On 29 September 2015G, a dividend of SAR 10.9 million and SAR 0.4 per share relating to the first quarter ended on 30 June 2015G was announced based on the number of new shares on 30 September 2015G paid on 31 December 2015G. The Board of Directors, in its meeting held on 05 January 2016G, agreed on the distribution of profits relating to the second quarter ended on 30 September 2015G by SAR 0.4 Saudi riyals per share at a total value of SAR 10.9 million. These profits were distributed in January 2016G. Dividends for the third quarter ended on 31 December 2015G have been announced at SAR 0.4 per share for shareholders registered on 21 March 2016G. The distribution of SAR 10.9 million was recorded on 27 March 2016G. The Company declared dividends on 20 July 2016G by SAR 0.4 per share amounting to SAR 10.9 million for the fourth quarter ended on 31 March 2016G. The dividend was distributed during August 2016G. For the fiscal year ended on 31 March 2017G, a dividend of SAR 0.4 per share was announced for the first quarter by SAR 0.4 for the second quarter and SAR 0.4 for the third quarter of the fiscal year ended on 31 March 2017G. The total distribution amounted to SAR 32.7 million during the fiscal year ended on 31 March 2017G.

139

Table (119): The Company’s historical profits during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000

As of 31 March

2014G 2015G 2016G 2017G


Declared profits 29,120 29,120 43,679 43,679

Profit paid during the period 29,120 29,120 43,679 32,760

net income 57,041 66,944 92,890 73,192

Percentage of declared profits to net income 51.10% 43.50% 47.0% 59.7%Source: Company

* It is worth mentioning that Awazel has distributed an additional Extraordinary profit of SAR 36.4 million during the fiscal year ended on 31 March 2016G and have not been added to the table due to their non-recurring nature. These profits were distributed from the retained earnings line item.

It is worth mentioning that on 20 July 2016G, the General Assembly approved the distribution of profits for the fourth quarter of the fiscal year ended on 31 March 2016G amounting to SAR 10.9 million to the shareholders registered in the Company’s records on the day of the partners’ meeting. The distribution was made during the month of August 2016G.

It is worth mentioning that, in its meeting held on 15 October 2016G, the Board of Directors approved a dividend of SAR 10.9 million for the quarter ended on 30 June 2016G based on the shareholders’ equity as of 13 October 2016G.

It is also worth mentioning that the Board of Directors approved, in at meeting held on 20 December 2016G, a dividend for the quarter ended on 30 September 2016G that amounted to SAR 10.9 million; SAR 0.4 per share based on the shares of the shareholders registered on 27 March 2017G. Payment was made on 31 March 2017G.

6-7-6 Minority interests“Minority interests” refer to the balance of other shareholders’ equity in the Company’s net equity. Details of the item are listed in the Minority interests section as shown on page (111).

6-7-7 Working CapitalThe following table shows the Company’s working capital as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (120): Company Working Capital as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Receivables 132,889 132,341 137,370 151,423 (0.40%) 3.80% 10.20% (548) 5,029 14,053

Inventory 59,608 61,874 57,804 56,605 3.80% (6.60%) (2.10%) 2,266 (4,070) (91,199)

Accounts Payable (7,035) (9,939) (5,866) (8,328) 41.3% (41.00%) 42.00% (2,904) 4,073 (2,462)

Current Operating Capital 185,462 184,276 189,308 199,700 (0.6%) 2.7% 5.50% (1,186) 5,032 10,392

Due Days Of Sale 130 116 121 162 (10.6%) 4.7% 33.90% (14) 5 41

Days Of Inventory (Average Inventory Turnover In Days)

79 78 79 96 (1.1%) 1.6% 21.70% (1) 1 17

Accrued Credit Days (9) (13) (8) (14) 34.6% (35.8%) 76.80% (3) 5 (6)

Current Capital Cycle (Days) 199 182 193 244 (8.9%) 6.2% 27.10% (18) 11 52


The average working capital cycle amounted to days during the fiscal year ended on 31 March 2014G, 182 days during the fiscal year ended on 31 March 2015G and 193 days during the fiscal year ended on 31 March 2016G.l,

The average working capital cycle declined from 199 days during the fiscal year ended on 31 March 2014G to 182 days during the fiscal year ended on 31 March 2015G. The high turnover of the working capital cycle during the fiscal year ended 31 March 2016G is due to the high balances of debtors and the lack of credit balances.

140

The working capital rate increased from 182 days during the fiscal year ended on 31 March 2015G to 193 days during the fiscal year ended on 31 March 2016G. The high turnover of the working capital during the fiscal year ended on 31 March 2016G was due to the increase in receivables and the lack of creditor balances.

The average working capital cycle increased from 193 days as at 31 March 2016G to 207 days as at 31 March 2017G. This was due to the increase in the number of days of sale due compared to the increase in the balance of commercial receivables due to the slowdown in activity (while the balance of debtors increased by 10%, it is clear that the due days of sales jumped by 34% as a result to the decline in sales) and higher inventory turnover due to lower sales cost during the fiscal year ended on 31 March 2017G.

Contingent Liabilities And ExpensesAs at 31 March 2017G, the Company had letters of guarantee granted to others amounting to SAR 14.0 million. Among those letters:

A letter of financial guarantee issued to the Saudi Customs Authority for an amount of SAR 6.2 million. Letter is valid for one year from the date of issue. It includes the remaining balance of letters of guarantee totaling SAR 7.8 million. The remaining balance includes SAR 7.0 million against a letter of guarantee granted to Aramco for the purchase of asphalt for Awazel. The remaining balance also includes a letter of guarantee in the amount of SAR 140,000 relating to leased land leased from Awazel which was leased from the Saudi Railways Authority.

6-8 Statement of Cash FlowsThe following table summarizes the cash flow statement for the years ended on 31 March 2014G, 2016G, 2016G and 2017G.

Table (121): Summary of the Statement of Cash Flows for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Net cash generated from operating activities

41,546 80,803 107,041 58,578 94.50% 32.50% (45.30%) 39,257 26,238 (48,463)

Net cash generated from investment activities

(32,904) (32,908) (18,148) (5,722) (200.000%) (44.90%) (68.50%) (65,812) 14,760 12,426

Net cash used in financing activities (37,576) (28,947) (78,344) (45,180) (23.0%) 170,6% (42,3%) 8,629 (49.39) 33,164

Increase / (decrease) in cash and cash equivalents

36,874 18,948 10,549 7,676 (48.60%) (44.30%) (27.20%) (17,926) (8,399) (2,873)

Effect of exchange rate conversion in cash and cash equivalents

146 (1,013 (75) (300) (793.80%) (92.60%) 300.00% (1,159) 938 (225)

Cash and cash equivalents at the beginning of the period

64,235 101,255 119,190 129,664 57.60% 17.70% 8.80% 37,020 17,935 10,474

Cash and cash equivalents at the end of the period

101,255 119,190 129,664 137,041 17.70% 8.80% 5.70% 17,935 10,474 7,377


The net cash inflow of SAR 36.9 million during the fiscal year ended on 31 March 2014G resulted from net cash inflows from operating activities and net cash inflows from investing activities partially offset by net cash flows used in financing activities. Cash inflows (positive) from operating activities amounted to SAR 41.5 million and cash inflows (positive) from investment activities amounted to SAR 32.9 million. While cash outflows (negative) from financing activities amounted to SAR 37,576 million.

The net cash inflow of SAR 18.9 million during the fiscal year ended on 31 March 2015G resulted from net cash inflow from operating activities partially offset by the net cash flow used in investment activities and the net cash flow used in financing activities. Cash inflows from operating activities increased by 94.5% to reach SAR 80.8 million. While cash outflows (negative) from investment activities amounted to SAR 32.9 million, a decrease of 200%. In contrast, cash outflows (negative) from financing activities increased by 22.8% to SAR 28.9 million.

141

The net internal cash outflows of SAR 18.9 million during the fiscal year ended on 31 March 2015G resulted from net cash flow from operating activities partially offset by the net cash flow used in investing activities and the net cash flow used in financing activities. Cash inflows from operating activities increased by 94.5% to SAR 80.8 million. While cash outflows from investment activities amounted to SAR 32.9 million, a decrease of 200%. In contrast, cash outflow from financing activities increased by 22.8% to SAR 28.9 million.

During the fiscal year ended on 31 March 2016G, net cash inflows of SAR 10.5 million resulted from a net cash inflow from operations in the amount of SAR 107.0 million, partially offset by net cash flows used in investment activities amounting to SAR 18.1 million and in financing activities amounting to SAR 78.4 million. Adjustments to prepaid expenses and due expenses have had the greatest impact on net cash inflows from operating activities.

During the fiscal year ended on 31 March 2017G, the net positive cash flow of SAR 7.7 million resulted mainly from the net cash inflow from operating activities of SAR 58.6 million, partially offset by the net cash flow used in investment activities of SAR 5.7 million and net cash flow used in financing activities of SAR 45.2 million. Cash inflows from operating activities declined by 45.3% mainly due to lower net income, accrued expenses and other liabilities, as well as an increase in net commercial receivables.

The opening cash balance contributed significantly to the cash balances as at 31 March 2014G, 2015G, 2016G and 2017G. The cash opening balance was SAR 64.2 million, SAR 101.3 million, SAR 119.2 million and SAR 129.7 million, respectively.

6-8-1 Cash Flow From Operating ActivitiesThe following table summarizes the Company’s consolidated cash flow from operating activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (122): Cash flow from operating activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Net income for the year 57,041 66,944 92,890 73,192 17.4% 38.8% (21.2%) 9,903 25,946 (19,698)

Non-monetary item adjustments

Provision for doubtful debts 344 1,783 2,493 2,456 418.3% 39.8% (1.5%) 1,439 710 (37)

Custom slow moving inventory goods. Clear

(2,117) (2,263) (32) (1,136) 6.9% (98.6%) 3450.0% (146) 2,231 (1,104)

Provision for Zakat 7,200 7,410 9,371 - 2.9% 26.5% (100.0%) 2,10 1,961 (9,371)

Provision for employees’ end of service benefits

2,247 2,185 2,036 2,562 (2.8%) (6.8%) 25.8% (62) (149) 526

Depreciation 10,952 10,230 10,579 9,890 (6.6%) 3.4% (6.5%) (722) 349 (689)

Profit from the sale of property plant equipment

(391) (82) (169) (200) (79.0%) 106.1% 18.3% 309 (87) (31)

Income attributable to minority interest

69 1,234 733 - 1688.4% (40.6%) (100.0%) 1,165 (501) (733)

75,345 87,441 117,901 95,924 16.1% 34.8% (18.6%) 12,096 30,460 (21,977)

Changes in working capital

accounts receivable (15,751) (1,235) (7,522) (16,509) (92.2%) 509.1% 119.5% 14,516 (6,287) (8,987)

Inventory (6,847) (3) 4,102 2,335 (100.0%) (136833.3%) (43.1%) 6,844 4,105 (1,767)

Prepaid expenses and other assets (8,773) (5,903) 6,378 (668) (32.7%) (208.0%) (110.5%) 2,870 12,281 (7,046)

Payables (1,212) 2,904 (4,073) (2,677) (339.6%) (240.3%) (34.3%) 4,116 (6,977) 1,396

142

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Accrued expenses and other liabilities

580 2,088 6,969 (10,378) 260.0% 233.8% (248.9%) 1,508 4,881 (17,347)

Import duties 6,474 4,348 (9,399) - (32.8%) (316.2%) (100.0%) (2,126) (13,747) 9,399

Zakat paid (6,873) (7,523) (7,287) - 9.5% (3.1%) (100.0%) (650) 236 7,287

Employees’ end of service benefits (1,398) (1,315) (29) (219) (5.9%) (97.8%) 655.2% 83 1,286 (190)

Net cash generated from operating activities

41,546 80,803 107,041 58,578 94.5% 32.5% (45.3%) 39,257 26,238 (48,463)


* It is worth mentioning that the import fee has been reclassified among the accrued expenses and other liabilities during the fiscal year ended on 31 March 2017G.

Net cash generated from operating activities amounted to SAR 41.5 million for the fiscal year ended on 31 March 2014G, SAR 80.8 million for the fiscal year ended on 31 March 2015G and SAR 107.0 million for the fiscal year ended on 31 March 2016G, And SAR 58.6 million during the fiscal year ended on 31 March 2017G.

During the fiscal year ended on 31 March 2014G, the balance of operating activities amounted to SAR 41.5 million. The balance mainly resulted from non-cash settlements to a net profit of SAR 17.6 million. In contrast, there was a negative impact of net change in working capital amounting to SAR 33.8 million, mainly due to higher receivables, inventory and prepaid expenses.

During the fiscal year ended on 31 March 2015G, the balance generated from operational activities amounted to SAR 80.8 million. The balance mainly resulted from non-cash settlement of a net positive profit amounting to SAR 20.5 million. On the other hand, the net change in working capital had a negative impact of SAR 6.6 million, mainly due to higher prepaid expenses.

During the fiscal year ended on 31 March 2016G, the balance generated from operating activities amounted to SAR 107.0 million. The balance was mainly due to the settlement of non-cash expenses to a net positive profit of SAR 25.0 million. On the other hand, there was a negative effect of net negative change in the working capital by SAR 10.9 million, mainly due to higher receivables and import charges.

During the fiscal year ended on 31 March 2017G, the balance generated from operating activities amounted to SAR 58.6 million. The balance was mainly due to the settlements of non-cash expenses to the net profit which amounted to SAR 13.6 million. On the other hand, net negative change in the working capital was SAR 28.1 million mainly due to higher net accounts receivable, lower accrued expenses and other liabilities where the Company paid part of them.

The remuneration paid to the Board of Directors amounted to SAR 1.5 million during each of the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

143

6-8-2 Cash Flow From Investment ActivitiesThe table below presents the Company’s consolidated cash flow from investment activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (123): Cash Flow used in Investment Activities for the Fiscal years Ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Purchase of Property, factory and equipment

(2,499) (33,069) (19,187) (4,086) 1223.3% (42.00%) (78.70%) (30.57) 13,882 15,101

Purchase of investment property

- - - (1,888) N/A N/A N/A - - (1,888)

Proceeds from the sale of property, plant and equipment

403 162 1,038 253 (59,80%) 540.70% (75.60%) (241) 876 (785)

Short-term deposits 35,000 - - - (100.0%) N/A N/A (35,000) - -

Net cash from (used in) investment activities

32,904 (32,908) (18,148) (5,722) (200.00%) (44.9%) (68.5%) (65,812) 14,760 12,426


The Company achieved net cash from investment activities amounting to SAR 32.9 million during the fiscal year ended on 31 March 2014G as a result of cash inflow from the return of investment from short term deposits by SAR 35.0 million. While the Company used net cash in investment activities of SAR 32.9 million, SAR 18.1 million during the fiscal year ended on 31 March 2016G and SAR 5.7 million as at 31 March 2017G.

The cash used in investment activities mainly covers the purchase of property, plant and equipment during the fiscal years ended in 2014G, 2015G and 2016G.

During the fiscal year ended on 31 March 2014G, the balance generated from investment activities amounted to SAR 32.9 million. The balance represented mainly payments for additions in the property and equipment account and plant amounting to SAR 2.5 million and cash generated from short term deposit withdrawals amounting to SAR 35.0 million.

During the fiscal year ended on 31 March 2015G, the balance used in investment activities amounted to SAR 32.9 million. The balance mainly represented payments for additions to the property, equipment and plant account amounting to SAR 33.1 million for the construction of buildings (for investment purposes) for the UAE subsidiary and to purchase 80% of Al Sultan factory Company for Contracting, Trading and Industry, Land and Equipment for Al Sultan Company for Contracting, Trading and Industry, and assets for the Advanced Company for Membrane Industry.

During the fiscal year ended on 31 March 2016G, the balance used in investing activities amounted to SAR 18.1 million. The balance mainly represents payments for additions to the property and equipment and plant account amounting to SAR 19.2 million mainly to complete the construction work in the buildings of the UAE subsidiary company and assets for Stone Takamul factory Company for Stone and Marble and for the purchase of the SAP software system.

During the fiscal year ended on 31 March 2017G, the balance used in investment activities amounted to SAR 5.7 million, payments for additions to the property and equipment, and plant account amounting to SAR 4.1 million and payments to purchase of investment property amounting to SAR 1.9 million mainly related to improvements in administrative buildings, and plants for the main center.

It is worth noting that the Company has a short term deposit that was held during the fiscal year ended on 31 March 2017G in the amount of SAR 70.0 million with a local bank. For more information on the short term deposit, please see the Other Income / Expenditures section on page (109).

144

6-8-3 Cash Flow From Financing ActivitiesThe table below presents the Company’s consolidated cash flow from financing activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (124): Cash flow from financing activities for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Dividend paid (37,310) (29,120) (76,440) (43,680) (22.00%) 162.5% (42.9%) 8,190 (47,320) 32,760

Change in minority interests 1,234 1,673 (404) - 35.60% (124.1%) (100.00%) 439 (2,077) 404

Board of Directors’ remuneration (1,500) (1,500) (1,500) (1,500) 0.0% 0.0% 0.0% - - -

Net cash used in financing activities (37,576) (28,947) (78,344) (45,180) (23.00%) 170,6% (42,3%) 8,629 (49,397) 33,164


The Company used net cash in financing activities of SAR 37.6 million for the fiscal year ended on 31 March 2014G, SAR 28.9 million for the fiscal year ended on 31 March 2015G and SAR 78.3 million for the fiscal year ended on 31 March 2016G And SAR 45.2 million for the fiscal year ended on 31 March 2017G. Cash used in financing activities mainly covers dividends paid to shareholders and directors’ remuneration during the fiscal years 2014G, 2015G, 2016G and 2017G.

During the fiscal year ended on 31 March 2014G, SAR 37.3 million was distributed during the fiscal year ended on 31 March 2014G, SAR 29.1 million during the fiscal year ended on 31 March 2015G, SAR 76.4 million for the fiscal year ended on 31 March 2016G and 43.7 million SAR. For more information on dividends during the fiscal year ended on 31 March 2017G, please read the subsequent events section on page (147).

The balance due to minority interests increased resulting in generated cash flows of SAR 1.2 million for the fiscal year ended on 31 March 2014G, SAR 1.7 million for the fiscal year ended on 31 March 2015G and the Company used cash for settlement of minority interests of 0.4 million during the fiscal year ended on 31 March 2016G.

Board of Directors’ remuneration for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G was SAR 1,500 thousand.

6-9 Capitalization And IndebtednessThe table below presents the Company’s consolidated capitalization and debt as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (125): Company Consolidated capitalization and debt for the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Liabilities

Total current liabilities 56,625 65,823 61,405 48,497 16.2% (6.7%) (21.0%) 9,198 (4,418) (12,908)

Total non - current liabilities 5,939 6,808 8.815 11,159 14.6% 29.5% 26.6% 869 2,007 2,344

Total liabilities 62,564 72,631 70.220 59,656 16.1% (3.3%) (15.00%) 10,076 (2,411) (10,564)

Ownership rights of the shareholders of the Company

Equity capital 182,000 182,000 273,000 273,000 0.00% 50.00% 0.00% - 91.00 -

Statutory reserve 59,791 66,485 8,774 16,094 11.20% (86.80%) 83.40% 6,694 (57,711) 7.320

Reserve Agreement 65,051 75,092 67,873 75,192 15.40% 9.60% 10.80% 10,041 (7,219) 7,319

Fair value reserv 11 9 2 1 (18.20%) (77.80%) (50.00%) (2) (7) (1)

145

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Foreign exchange reserve 984 (29) (123) (295) (102,90%) 324,10% 139.80% (1,013) (94) (172)

Retained earnings 32.880 52,468 41,348 45,635 59.60% (21.20%) 10.40% 19,588 (11,120) 4,287

Total shareholders’ equity 340,716 376,026 390,874 418,627 10.40% 3.9% 7.10% 35,310 14,848 27,753

Minority interests 1,304 4,211 4,541 4,288 222.9% 7.8% (5.60%) 2,907 330 (253)

Total equity 342.020 380,236 395,415 422,915 11.20% 4.00% 7.00% 38,216 15,179 27,500

Total liabilities and equity 404,584 452,868 465,635 482.570 11.90% 2.80% 3.6% 48,284 12,767 16,935


6-10 Related Party TransactionsThe table below presents the related party transactions of the Company as at 31 March 2014G, 2016G, 2016G and 2017G.

Table (126): Company Related party transactions of the Company as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Sales 2,495 2,174 948 1,347 (12.9%) (56.4%) 42.1% (321) (1,226) 399

License Usage Rights Expenses 388 371 464 - (4.4%) 25.1% (100.00%) (17) 93 (464)

Purchases 2,620 1,904 2,950 3,210 (27.30%) 54.90% 8.8% (716) 1,046 260

Expenses - - 526 688 0.0% N/A 30.8% - 526 162

Sale Incentives - - 8,603 6,053 0.0% N/A (29.6%) - 8,603 (2.55)Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements.

The Company enters into certain financial transactions with related parties in accordance with terms and conditions approved by the management of the Company. The Board of Directors approves these operations, which take into account primarily the interest of the Company. The approval of the General Assembly will be taken on such transactions each year, with the renewal of dealing with such parties for another year

Due From Related PartiesThe table below presents the Company’s consolidated balances due from related parties as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (127): Due from related parties as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


Mawani’ Al Saree’a for Contracting and Construction

336 70 276 364 (79.2%) 294.3% 31.90% (266) 206 88

Zamil Company 416 442 14 44 6.3% 96.80% 214.2% 26 (428) 30

Total 753 511 290 407 (32.10%) (43.2%) 40.30% (242) (221) 117Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements

The entitlements relate to sales to Saree’a for Contracting and Construction, a company owned by a shareholder of the Company. While the entitlements of parties related to Zamil Company are related to a company owned by a member of the Board of Directors. It has been working in the field of installation of insulation (waterproofing) for a long time, and there is no policy of preference for these companies different from their counterparts toward company customers.

146

Due To Related PartiesThe table below presents the Company’s consolidated balances due to related parties as at 31 March 2014G, 2015G, 2016G and 2017G.

Table (128): Due to related parties as at 31 March 2014G, 2015G, 2016G and 2017G

SAR’000


2014G 2015G 2016G 2017G 2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G


BETO TRADE INDUSTRIES CO., LTD 202 55 - 57 (72.7%) (100.0%) N/A (147) (55) 57

Total 202 55 - 57 (72.7%) (100.0%) N/A (147) (55) 57Source: Financial statements prepared for a special purpose and the Company’s consolidated and audited financial statements

The entitlement relates to the parties involved in the procurement of the marble from Al Sultan Company for Contracting, Trading and Industry, and the International Waterproofing Company in Qatar, and the procurement of the liquid primer between Beto Trade Company and the international subsidiaries.

The following table presents the Company’s financial transactions with related parties during the fiscal years ended on 31 March 2014G, 2015G, 2016G and 2017G.

Table (129): Transactions with related parties as at 31 March 2014G, 2015G, 2016G and 2017G.

SAR’000


Nature of Financial

TransactionsType

2014G 2015G 2016G 2017G2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


Awazel and financial transactions with related parties

International Waterproof-ing Compa-ny LLC

Sales Related Party 42,116 49,093 41,018 36,780 16.6% (16.40%) (10.30%) 6,977 (8,075) (4,238)


Sales Subsidiary 61,501 68,199 51,889 39,332 10.9% (23.9%) (24.2%) 6,698 (16,310) (12,557)


Sales Subsidiary 23,993 25,684 25,503 6,801 0.7% (0.7%) (73.3%) 1,691 (181) (18,702)

International Water-proofing Company Indonesia

Sales Subsidiary 2,499 918 - - (63.3%) (100.0%) N/A (1,581) (918) -


Financing the purchase of a production line

Subsidiary - 5,574 - - N/A (100.0%) N/A 5,574 (5,574) -

Al - Sultan Contracting, Trading & Industry Co

Consultations Subsidiary - 6,720 - - N/A (100.0%) N/A 6,720 (6,720) -

Zamil Com-pany (Saudi Arabia)

Sales

Owned by a company share-holder

1,543 1,847 548 971 19.7% (70.3%) 77.2% 304 (1,299) 423

Mawani’ Al Saree’a Establish-ment for Contracting and Consr-tuction

Sales


951 327 400 375 (65.6%) 22.3% (6.3%) (624) 73 (25)

147

SAR’000


Nature of Financial

TransactionsType

2014G 2015G 2016G 2017G2014 –2015G

2015 –2016G

2016 –2017G

2014 –2015G

2015 –2016G

2016 –2017G


OZAREX Bahrain Company

Repayment of license expenses Use of the technol-ogy used in the collection and refining of oil waste

Owned by a number of share-holders

388 371 464 - (4.4%) 25.1% (100.0%) (17) 93 (464)

Rital International Training Center

Training payments for new Saudi employees


- - 494 - N/A N/A 36.8% - 494 182


Financing the construction of a building

Related Party 11,127 15,597 - - 40.2% (100.0%) N/A 4,470 (15,597) -

The financial transactions of PetoTrade with its subsidiaries


Procurement of a Primer


874 703 938 1,236 (19.6%) 33.4% 31.8% (171) 235 298




1,166 826 902 807 (29.2%) 9.2% (10.5%) (340) 76 (95)




579 579 1,110 1,166 0.0% 91.7% 50% - 531 56

Financial transactions between subsidiaries

Qatar Wa-terproofing Company – for Al Sultan

Procurement of Stones and Marble


- - 132 0 N/A N/A (100.0%) - 132 (132)

Stone Takamul factory Company for Al Sultan

Sales of Carved Stone

A subsidi-ary owned by Awazel

- - 3,187 903 N/A N/A (71.7%) - 3,187 (2,284)

Advanced membranes Company for industry - Riyadh

Purchase of Plastic Membrane Products

Subsidiary - - - 119 N/A N/A N/A - - 119

Source: Company

Additional information and details of related parties are available in the section Legal Information of the prospectus.

6-11 Subsequent eventsThe Extraordinary General Assembly meeting was held on 14 August 2017G, in which the amended Basic Law was approved and the members of the new Audit Committee were elected.

6-12 The Company’s Plan To Apply International Accounting StandardsThe Company’s management has prepared a transformation plan to transition from the accounting standards issued by the Saudi Organization of Certified Public Accountants to the International Accounting Standards, which aims at ensuring that the process of transition to the international standards is carried out efficiently and smoothly so that it ultimately includes the complete transition from the current accounting framework governed by the Saudi Accounting Standards to the International Accounting Standards in accordance with the version adopted by the Saudi Organization for Certified Public Accountants in preparing the Company’s financial statements for the financial periods beginning from 1 April 2017G and ending on 31 March 2018.

148

The transformation plan includes the following key actions:

� The Board of Directors approved the application of international standards. The contract was signed with UHI Abdul Jabbar Legal Accountants and Consultants on 29 March 2017G as an external expert to assist in developing a study to identify the required adjustments in the Company’s accounting systems to meet the measurement and disclosure requirements. Effects on the financial results of the Company and its financial position have been measured with the transfer of financial statements in accordance with International Accounting Standards. It was agreed in accordance with the schedule that the consolidated statement of financial position shall be prepared with opening balances as of 1 April 2015G.

� Work started on the he project started on 25 April 2017G. The previous Company budgets were analyzed and the study was prepared. The International Accounting Standards were compared to the accounting standards issued by the Saudi Organization for Certified Public Accountants. The criteria for differences and impact on the Company’s financial statements were determined. The required amendments to the Company’s accounting systems were identified to meet the measurement and disclosure requirements. The impacts on the Company’s financial results and financial position were measured. The report was issued on 10 May 2017G.

� Quarterly budgets have been transferred in accordance with accounting standards issued by the Saudi Organization of Certified Public Accountants to the International Accounting Standards for the fiscal periods ended on 30 July 2016G, 30 September 2016G and 31 December 2016G on 20 May 2017G.

� The Company’s consolidated financial statements for the year ended on 31 March 2017G and the accompanying notes have been issued in accordance with International Accounting Standards by the legal auditor UHI Abdul Jabbar “Legal Accountants and Consultants” on 05 June 2017G.

� From the study of determining the required adjustments in the Company’s accounting systems to meet the measurement and disclosure requirements, the financial impact on both the income statement and the statement of financial position is summarized as follows:

The following table shows the effect of the transformation on the statement of income for the fiscal years ended on 31 March 2015G, 2016G and 2017G:

Table (130): Effect of the shift on the statement of income in the fiscal years ended on 31 March 2015G, 2016G and 2017G.

Fiscal Year ended on 31 March 2017Fiscal Year ended on 31 March 2016Fiscal Year ended on 31

March 2017 International Standards

International Standards





341,026-341,026413,280-413,280Sales

(214,544)426(214,971)(265,314)255(265,569)Cost Of Sales

126,482426126,056147,966255147,711Gross Profit

4,921504,8715,512-5,512Other Income Or Expens-es, Net

(26,702)299(27,001)(26,527)85 (26,612)Sale And Marketing Expenses

(21,047)528(21,574)(23,247)369(23,616)General And Administra-tive Expenses

83,6551,30382,352103,704709102,995Income Before Zakat And Minority Interest

(9,377)-(9,377)(9,372)-(9,372)Zakat

74,2781,30372,97594,33270939,623Net Income Before Minority Interest

217-217(733)-(733)Minority interests

74,4961,30373,19293,59970992.89Net Income

Source: Company

149

The following table shows the effect of the transformation on the statement of financial position for the fiscal years ended on 31 March 2015G, 2016G and 2017G.

Table (131): Effect of the transformation on the statement of financial position in the fiscal years ended on 31 March 2015G, 2016G and 2017G.

As at 31 March 2017GAs at 31 March 2016GAs at 31 March 2015G

SAR’000

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

Current assets

136,872169137,041129,664-129,664119,190-119,190Cash and cash equivalents

153,4211,998151,423137,370-137,370132,341-132,341Receivables

56,503(101)56,60557,804-57,80461,874-61,874stock

18,144-18,14417,476-17,47623,854-23,854Prepaid expenses and other assets

364,9411,728363,213342,314-342,314337,258-337,258Total current assets

Non-current assets

24-2425-2532-32Investments available for sale

34,624-34,62433,284-33,284---Investment property

84,710-84,71090,013-90,013115,578-115,578Property, plant and equipment

119,358-119,358123,322-123,322115,610-115,610Total non - current assets

484,2981,728482,570465,635-465,635452,868-452,868Total assets

Current liabilities

8,328-8,3285,866-5,8669,939-9,939Accounts payable

30,536-30,53646,052-46,05248,482-48,482Accrued expenses and other liabilities

9,633-9,6339,486-9,4867,402-7,402Zakat due

48,497-48,49761,405-61,40565,823-65,823Total current liabilities

Non-current liabilities

8,247(2,912)11,1597,878(938)8,8156,859506,808Provision for end of service benefits

8,247(2,912)11,1597,878(938)8,8156,859506,808Total non - current liabilities

Ownership rights of the shareholders of the Company

273,000-273,000273,000-273,000182,000-182,000Equity capital

16,094-16,0948,774-8,77466,485-66,485Statutory reserve

-(75,192)75,192-(67,873)67,873-(75,092)75,092Reserve Agreement

1-12-29-9Fair value reserve

(295)(1)(295)(123)-(123)(29)-(29)Foreign exchange reserve

150

As at 31 March 2017GAs at 31 March 2016GAs at 31 March 2015G

SAR’000

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

Inte

rnat

iona

l Sta

ndar

ds

Impa

ct

Stan

dard

s is

sued

by

the

Saud

i C

omm

issi

on fo

r Ce

rtifi

ed P

ublic

A

ccou

ntan

ts

870870-8080-(199)(199)-Gain / (loss) from actuarial operations

133,51278,87754,635110,07967,87341,348127,70975,24252,468Retained earnings

423,1814,554418,627391,812938390,874375,975(50)376,026Shareholders’ equity

4,374864,2884,541-4,5414,211-4,211Minority interests

427,5554,640422,915396,353938395,415380,186(50)380,236Total equity

484,2981,728482,570465,635-465,635452,868-452,868Total liabilities and equity

Source: Company

151

7. Dividend Distribution PolicyIn accordance with the Company’s By-Laws, the distribution of cash dividends is subject to the approval of the Ordinary General Assembly based on the recommendations of the Board after taking into account various factors prevailing then such as the financial condition of the Company and its commitments that may restrict the distribution of cash dividends under the credit facilities agreements concluded by the Company with its financing banks, the current and expected business results, its cash needs and expansion plans.

The Company intends to distribute dividends to its shareholders in order to enhance the value of their investments in a manner consistent with its capital expenditure and investment requirements based on the Company’s profits and financial condition, market conditions, the general economic climate and other factors that include the Company’s urgent need to reinvest such profits as well as capital needs, future prospects, economic activity, and other legal and regulatory considerations. Dividends will be distributed in Saudi Riyals.

In addition, investors wishing to invest in the Offered Shares should be aware that the dividend distribution policy may change from time to time

Although the Company intends to pay annual dividends to its Shareholders, it does not make any assurance that any dividends will actually be paid nor any assurance as to the amount, which will be paid in any given year. The distribution of dividends is subject to certain limitations contained in the Company’s By-Laws. Article 40 of the Company’s By-Laws stipulates that annual net profits shall be distributed after deducting all other expenses and costs as follows:

1- 10% of the annual net profits shall be set aside to form a statutory reserve. Such setting aside may be discontinued by the Ordinary General Assembly when the statutory reserve totals one-half of the Company’s capital.

2- A provisional (special purpose) reserve shall be set aside for the following purposes and in the following percentage:

2-1- A reserve to ensure future dividend distribution of 10% of net profits.

2-2- Development and research reserve at 2.5% of net profits. The development and research reserve shall be discontinued when the accumulated balance reaches 5% of the capital.

3- The Ordinary General Assembly may, on the proposal of the Board of Directors, set aside a certain percentage of net profits to form general reserves, so that the total amount of the provisional and general reserves shall not exceed 40% per annum. The deduction shall be discontinued when the provisional and contractual reserve equals half the capital.

4- The balance shall be distributed subject to the General Meeting’s approval, as a first payment in the amount of at least five percent (5%) of paid-up capital to the Shareholders.

5- Out of the remaining balance, the General Meeting may distribute not more than 10% as compensation for the Directors provided that it shall not exceed the limits set out in the instructions of the Ministry of Commerce and Investment in this respect. The remaining balance may be distributed among Shareholders as an additional share of the profits.

Table (132): Profits Declared during the Years 2014G, 2015G, 2016G and 2017G in Saudi Riyals

SAR’ 000 2014G 2015G 2016G* 2017G**

Declared profits 29,120 29,120 43,679 43,679

Dividends paid during the Year 29,120 29,120 43,679 32,759

Net Income 57,041 66,944 92,890 73,192

Ration of declared profits to net income 51.10% 43.50% 47.00% 59.70%Source: The Company

* During the year ended 31 March 2016G, exceptional dividends were distributed to the partners amounting to SAR 36.4 million.

** Dividends for the fourth quarter ended 31 March 2017 amounting to SAR 10,919 thousand will be distributed after the General Assembly meeting.

152

8. Use of ProceedsThe total proceeds from the Offering are estimated at SAR [•] of which approximately SAR [•] will be used to settle all expenses relating to the Offering, which includes the fees of the Financial Advisor, Legal Advisor, Auditors, Underwriter, Receiving Agents, marketing, printing, distribution and other fees relating to the Offering. The Company will not bear any of the expenses relating to the subscription amounting to [•] Saudi Riyals (SAR [•]), but will be deducted from the proceeds. The Selling Shareholders will settle all subscription expenses incurred by the Company upon completion of the Subscription.

The total proceeds from the Offering are estimated to be SAR [•] will be distributed to the Selling Shareholders on pro rata basis according to the number of Offer Shares held by each Selling Shareholder. The Company will not take any amount of the Offering Proceeds for use in its future projects.

153

9. Expert StatementsThe financial advisor, legal advisor, Auditor, Due Diligence Advisor and market consultant whose names are included in page (vi) have given and, as at the date of this Prospectus, have not withdrawn their written consent to the publication of their names, addresses, logos and the statements attributed to each of them in the context in which they appear in this Prospectus, and do not themselves, their employees or their employees’ relatives have any shareholding or interest of any kind in the Company.

154

10. DeclarationsThe Board members (directors) declare the following:

1- None of them or any of the Senior Executives or the Board’s Secretary has ever been declared bankrupt or subject to bankruptcy proceedings.

2- No insolvency or bankruptcy has been declared during the last five years for a company in which any board member, senior executive or board’s secretary was assigned in an administrative or supervisory position.

3- Except as described in Section 11.9 (Agreements with Related Parties), none of the board members, any senior executives, Board’s secretary or any of their relatives or affiliates have any material interest in any existing contracts or arrangements either written or oral, or contract or other arrangements under study until the date of this Prospectus and have an effect on the business of the Company or any of its subsidiaries.

4- Except as described in Section 2.2 (Board of Directors), and unlike the security shares, neither the directors, senior executives, secretary of the board of directors nor any of their relatives have any shares or interest in the Company or its subsidiaries. The Company and its subsidiaries shall not provide a cash loan of any kind to the members of the Board of Directors or guarantee any loan made by any one of them.

5- There were no commissions, discounts, brokerage fees or any other non-cash compensation by the Company or any of its Subsidiaries granted during the three years preceding directly the date of submission and acceptance of listing application in connection with the issue or sale of any securities.

6- There has been no interruption in the business of the Company or its subsidiaries that may affect or have had material impact on the Company’s financial position during the past twelve (12) months prior to the date of this Prospectus.

7- There is no intention to materially change the nature of business of the Company or its subsidiaries.

8- The Board’s members shall not vote on decisions related to business and contracts with related parties and contracts in which they have a direct or indirect interest.

9- There has been no material adverse change in the financial and trading position of the Company and its subsidiaries during the three years immediately preceding the date of submitting the listing and admission application, in addition to the period covered by the Chartered Accountant’s report until the date of adoption of this Prospectus.

10- As at the date of this Prospectus, the Company has been no staff share scheme or any other arrangements.

11- The Company does not own any securities (contractual or otherwise) or any assets whose value is subject to fluctuations, which has a negative and material impact on the assessment of the financial position.

12- Except as disclosed in Section [2] (risks relating to the Company’s operations, subsidiaries and operations), the Company is not aware of any information relating to any governmental, economic, financial, monetary, political or any other factors that had affect or may affect (Either directly or indirectly) its operations.

13- Except as disclosed in Section [2] (Risks Related to the Company, its Subsidiaries and Operations), the Company is not aware of any seasonal factors or economic cycles relating to its activity that may have an impact on the Company’s business or financial position.

14- The statistical information used in Section [3] (Market and Sector Information) obtained from external sources represents the most up-to-date information available from the source concerned, as at the date of preparation of the market study.

15- The Company’s insurance policies provide insurance coverage with sufficient limits for the Company to operate its business. The Company renews insurance policies and contracts periodically to ensure that there is continuous insurance coverage.

16- Except as noted in this Prospectus, all contracts and agreements that the Company believes to be significant or material or that may affect the investor’s decisions to invest in the Offering Shares have been disclosed. There are no other significant agreements that have not been disclosed.

17- All terms and conditions that may affect investors’ decisions to invest in offering shares have been disclosed.

18- As at the date of this Prospectus, there are no significant contracts or transactions with related parties that have a significant impact on the business of the Company or any of its subsidiaries.

19- The legal and beneficial ownership of shares in the Company as at the date of this Prospectus belongs to the persons whose names appear in Table (2) (Ownership Structure)

20- The Company has absolute control over the operations of the beneficial subsidiaries in the United Arab Emirates, Qatar and Kuwait, in accordance with the rights associated with the shares as per agreements signed with the shareholders owning informally the shares on behalf of the Company.

21- All increases in the Company’s capital do not conflict with the regulations and bylaws applied in the Kingdom and the Company did not resort to use external financing.

22- Except as disclosed in Section [2] (Risk Factors), and to the best of their knowledge and belief, there are no other significant risks that may affect the decision of potential investors to invest in the Offering Shares.

155

23- As at the date of this Prospectus, the Company has all the necessary licenses and approvals required for the exercise of its activities.

24- Except as disclosed in Section [1-1-15] (Risks related to Litigation), the Company and its subsidiaries are not parties to any existing disputes, claims, cases or investigation procedures that may have a material impact on the Company’s operations or financial position.

25- The Company and its subsidiaries have not issued any debt instruments, received any forward loans or any outstanding loans or debts (including bank overdraft, financial obligations under acceptance, acceptances or purchase commitments).

26- There is no guarantee, mortgage or financial burden on any of the Company’s assets and shares in the subsidiaries or by subsidiaries’ on any of their assets.

27- There are no members of the Company’s Board who are Board members managing or owning shares in related companies, through direct or indirect ownership in completion with the Company’s business.

28- The Company individually or in partnership with its subsidiaries have sufficient amounts to meet the working capital requirements for a period of twelve months from the date of this Prospectus.

29- None of the Company’s shares or shares of its subsidiaries are subject to any rights of option.

30- The financial information presented in this prospectus and the audited and consolidated financial statements for the financial years ended 31 March 2014, 2016, 2016 and 2017, and the accompanying notes have been prepared and reviewed by the Chartered Accountant in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization For Certified Public Accountants (SOCPA).

31- Except as stated in Section [1.1.17] (Zakat) of this Prospectus, there is currently no objection with the General Authority of Zakat and Income.

32- Except as provided in Section 4.4 Subsidiary Companies, the Company does not own outside the Kingdom assets or business that constitute a significant part or proportion of the Company’s assets or business, and of its profits and cash flows.

33- The membership of Mr. Firas Bin Ali Al-Suqair as a director in the Board of Directors of the Advanced Membrane Industries Company and Mr. Jamal Bin Abdulrahman Al Zamil as a member of the Board of Directors of Zamil Industrial, Trading and Transport Company do not compete with the Company’s business and therefore do not conflict with the provisions of the current Articles of Association of the Company or with Companies Law. The membership of Mr. Firas Al-Suqair is in a company owned by a majority share of (90%) by the Company and thus the economic benefit of the subsidiary goes to the Company. The membership of Mr. Jamal Zamil is in a company engaged in trading insulation materials and water tank industries and not in the insulation industries.

34- The financial information presented in this Prospectus has been extracted from the audited financial statements prepared for the financial years ended 31 March 2014, 2015, 2016 and 2017, without any material adjustments except for rounding.

35- The Company is able to prepare the required reports at the specified time according to the implementing regulations issued by CMA.

36- There are no lending entities to which the Company is committed to obtain their approval to offer thirty percent (30%) of the Company’s shares in public subscription, so that the Company becomes a public joint stock company.

37- The Company is committed to all provisions and conditions under agreements with parties granted all facilities and financing.

38- Boubyan Company is not subject to foreign investment laws as a public stock company listed on the Kuwaiti market.

39- All the properties of concerned persons (companies) who are shareholders in the Company are consistent with the provisions and requirements of the Foreign Investment Regulations in the Kingdom for Companies wholly owned by Gulf or Saudi partners or shareholders and they are not subject to the foreign investment regulations.

40- There are no declared profits that have not been distributed and are not mentioned in this Prospectus.

41- The provisions of the Audit Committee in the Articles of Association of the Company are not contrary to the provisions of the Companies Law.

42- The Company and the Board of Directors are committed to the provisions of the Companies Law in their day-to-day business and internal procedures, and the current Articles of Association of the Company are in accordance with the latest requirements of the Ministry of Commerce and Investment.

In addition to the representations referred to above, the Directors acknowledge the following:

1- The information and data contained in this Prospectus obtained from third parties, including information obtained from the market research report prepared by the market consultant, can be relied upon and there is no reason for the Company to believe that such information is materially inaccurate.

2- The internal control regulations and controls have been prepared by the Company on a sound basis. A written policy has been developed to regulate conflicts of interest and to address potential conflicts. In addition, the Company has ascertained the soundness of the financial and operational regulations and the application of appropriate risk management controls in accordance with the requirements of Article Ten (10) of the Corporate Governance Regulations. The Board of Directors also reviews annually the Company’s internal control procedures.

156

3- Internal control, accounting and information technology systems are adequate and appropriate.

4- As at the date of this Prospectus, there is no conflict of interest relating to the Directors in respect of contracts or transactions entered into with the Company.

5- None of the Board members has participated in any similar or competing activities to the Company or any of its subsidiaries. The Board members undertake to comply with this requirement in the future in accordance with Article 72 of the Companies Law and Article 18 of the Corporate Governance Regulations.

6- Any Board member, Board’s Secretary or any senior executives may not have a direct or indirect interest in the business and contracts which are made for the Company’s account, except with the authorization from the General Assembly.

7- Board members shall notify the Board of their personal interests directly or indirectly in the works and contracts that are made for the Company’s account, provided that it is recorded in the minutes of the Board meeting.

8- All transactions with the related parties will be made on a competitive basis and voting will occur for transactions and contracts with the related parties at the meetings of the Board of Directors and the General Assembly of the Company. Any Director or shareholder, who has direct or indirect interest in works and contracts made for the Company’s account, shall be prohibited from voting on decisions related to such works and contracts, either in the Board of Directors or the General Assembly in accordance with Article 71 of the Companies Law and Article 18 of the Corporate Governance Regulations.

9- Directors and the CEO are not entitled to vote on the fees and bonuses granted to them.

10- Directors or any senior executive shall not borrow from the Company or its subsidiaries or the Company shall not guarantee any loan received by any of the Directors

The Board members undertake that:

1- There is no intention, direction or study until the date of this Prospectus to make any material change to the Company’s activity.

2- All Board decisions and deliberations will be registered in the form of written minutes of meeting signed by them.

3- Details of any transactions with related parties shall be disclosed in accordance with the requirements of the Companies Law and the Corporate Governance Regulations in the General Assemblies agenda in order to give shareholders the opportunity to approve such transactions at that meeting.

4- There will be compliance with Articles (71), (72) and (73) of the Companies Law and Article (18) of the Corporate Governance Regulations.

157

11. Legal Information

11-1 The CompanyThe Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000). The capital was formed from in-kind cash equivalents and cash shares of equal value and registered in Commercial Register No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) with a capital of twelve million Saudi Riyals (SAR 12,000,000). On 21/01/1402H (corresponding to 18/11/1981G) the Company increased its capital to fourteen million Saudi Riyals (SAR 14,000,000) by two million Saudi Riyal (SAR 2 million) in cash divided into fourteen thousand (14,000) cash shares each of cash value of SAR 1,000, paid by the partners based on their ownership ratios.









158

11-2 Shareholding StructureCompany Ownership Structure before and after the Offering

Table (133): Company Ownership Structure before and after the Offering

No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares

Percent-age


Value (SAR)


5,672,036 20.78% 0.00% 56,720,360 3,970,424 14.54% 0.00% 39,704,240

2 Ibrahim Ali Ibra-him Al-Suqair 1,837,547 6.73% 0.36% 18,375,470 1,286,282 4.71% 0.25% 12,862,820


1,783,023 6.53% 0.00% 17,830,230 1,248,115 4.57% 0.00% 12,481,150

4 Samama Invest-ment Company 1,736,949 6.36% 0.00% 17,369,490 1,215,863 4.45% 0.00% 12,158,630


6 Firas Ali Ibrahim Al-Suqair 1,493,919 5.47% 0.00% 14,939,190 1,045,742 3.83% 0.00% 10,457,420

7 Mansour Ali Ibra-him Al-Suqair 1,493,919 5.47% 0.00% 14,939,190 1,045,743 3.83% 0.00% 10,457,430


9 Rumaih Ali Ibra-him Al-Suqair 1,386,795 5.08% 0.00% 13,867,950 970,757 3.56% 0.00% 9,707,570



12 Munira Ali Ibra-him Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810


14 Huda Ali Ibrahim Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

15 Sarah Ali Ibrahim Al-Suqair 693,401 2.54% 0.00% 6,934,010 485,381 1.78% 0.00% 4,853,810

16


506,292 1.85% 0.00% 5,062,920 354,404 1.30% 0.00% 3,544,040

17 Al Mutlaq Group Company 436,295 1.60% 0.00% 4,362,950 305,407 1.12% 0.00% 3,054,070


397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230

19


397,176 1.45% 0.00% 3,971,760 278,023 1.02% 0.00% 2,780,230


312,071 1.14% 0.00% 3,120,710 218,450 0.80% 0.00% 2,184,500

159

No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares

Percent-age


Value (SAR)

21


260,316 0.95% 0.00% 2,603,160 182,221 0.67% 0.00% 1,822,210


23 Abdullah bin Saad Al Rashed 218,145 0.80% 0.00% 2,181,450 152,702 0.56% 0.00% 1,527,020

24

Essam Moham-med Khairi Qab-bani Holding Company

209,999 0.77% 0.00% 2,099,990 146,999 0.54% 0.00% 1,469,990

25 Reham Sulaiman Aba-Nami 198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120

26 Reem Sulaiman Aba-Nami 198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120



198,588 0.73% 0.00% 1,985,880 139,012 0.51% 0.00% 1,390,120


30 Hana Abdulrah-man Al Suqair 150,000 0.55% 0.00% 1,500,000 105,000 0.38% 0.00% 1,050,000

31 Jamal Abdulrah-man Al Zamil 109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

32 Hisham Abdul-rahman Al Zamil 109,073 0.40% 0.00% 1,090,730 76,351 0.28% 0.00% 763,510

33 Saad Abdelmo-hsen Swailem 65,444 0.24% 0.00% 654,440 45,811 0.17% 0.00% 458,110

34 Hatoun Ibrahim Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000

35 Hadeel Ibrahim Al-Suqair 50,000 0.18% 0.00% 500,000 35,000 0.13% 0.00% 350,000


37Ibrahim Ab-dulmohsen Al - Swailem

43,629 0.16% 0.00% 436,290 30,540 0.11% 0.00% 305,400


21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710


21,815 0.08% 0.00% 218,150 15,271 0.06% 0.00% 152,710


21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700


21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

42 Ibtisam Abdul-mohsen Swailem 21,814 0.08% 0.00% 218,140 15,270 0.06% 0.00% 152,700

160

No Shareholders


No. of Shares

Percent-age


Value (SAR)

No. of Shares

Percent-age


Value (SAR)

43 public - - - 8,189,994 30.00% 81,899,943

Total 27,299,978 27,299,978 100% 272,999,780 27,299,978 100% Source: The Company

* The indirect ownership of Ibrahim Ali Al-Squair was created by his minor sons Hattoun Ibrahim Al- Squair, who owns 50,000 shares and Ali Ibrahim Al- Squair who owns 50,000 shares.

11-3 Subsidiaries/Affiliates

11-3-1 Branches / AffiliatesThe Company has a branch registered in the city of Riyadh under Commercial Registration No. 1010431578 dated 17/07/1436H (corresponding to 6 May 2016G) valid until 28/05/1441H (corresponding to 23 January 2020G). The activities of this branch are limited to ground freight operations in accordance with the license No. 010111043700 valid until 08/07/1439H (corresponding to 25 March 2018G).

11-3-2 Affiliated subsidiariesThe Company has the following subsidiaries/affiliates

Table (134): Subsidiaries/Affiliates


Registration / Commercial Regis-

tration Number


Company Status


As of March 31

2014G 2015G 2016G 2017G

International Wa-terproofing Com-pany Indonesia

Limited liability

The decision to liquidate this com-pany was taken on 12/4/2015G

Indonesia Affiliated 100% 100% 100% 0%

Advanced Compa-ny for Membrane Industry

Limited liability 1010386193 Saudi Arabia Affiliated - 90.00% 90.00% 90.00%

Al Sultan Con-tracting, Trading & Industry Com-pany

Limited liability 1010192171 Saudi Arabia Affiliated - 80.00% 80.00% 80.00%


Limited liability 1010272852 Saudi Arabia Affiliated - - 80.00% 80.00%

Source: The Company

Advanced Membrane Manufacturing CompanyAdvanced Membrane Manufacturing Company is a limited liability company registered in Saudi Arabia and operates under Commercial Registration No. 1010386193 and is engaged in the production of plastic membranes.

The Advanced Membrane Manufacturing Company was established during the fiscal year ended 31 March 2014G.

Having reviewed the Memorandum of Association dated 06/04/1434H (corresponding to 16/02/2013G), it was found that the Company’s capital is SAR 10 million, divided into 1 million cash shares of SR10 per share. Waterproofing Company has a stake of 90% where KalKal National Company for Building Materials Ltd. (owned by Firas Al-Squair, Ibrahim Al-Squair and Mansour Al-Squair) owns 10%.

The Advanced Membrane Manufacturing Company started its operations during the third quarter of the fiscal year ended 31 March 2017G.

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Al-Sultan Contracting, Trading & Manufacturing CompanyAl-Sultan Contracting, Trading & Manufacturing Co is a limited liability company registered in the Kingdom of Saudi Arabia and operates under the Commercial Register No. 1010192171 issued in Riyadh on 22/10/1424H and expires on 24/01/1440H.

Al-Sultan Contracting, Trading & Manufacturing Co was established on 14/08/1435H (corresponding to 11/06/2014G) with a capital of SAR 1,200,000, divided into 120,000 shares of SAR 10 each. Awazel owns 96,000 shares representing 80% of the Company’s shares, while Ali Saeed Al Mubarak holds 24,000 shares representing 20% of the Company’s shares

Al-Takamul Stone and Marble Factory CompanyAl-Takamul Stone and Marble Factory Company was previously a subsidiary of Sultan Contracting, Trading and Manufacturing Company until it was established as a separate legal entity during the fiscal year ended 31 March 2015G.

Al-Takamul Stone and Marble Factory Company is a limited liability company registered in the Kingdom of Saudi Arabia and operates under Commercial Register No. 1010272852 dated 25/08/1430H valid until 13/01/1441H, with a capital of SAR 2.6 million divided into 260,000 shares of cash value of SAR 10. Awazel Company holds 208,000 shares, representing 80% of the capital of Al-Takamul Stone and Marble Factory Company, while Ali Saeed Al-Mubarak holds 52,000 shares representing 20% of the capital.

11-3-3 Beneficially owned subsidiariesTable (135): Beneficially Owned Companies


Registration / Commercial Registration

Number


Company Status


As of March 31

2014G 2015G 2016G 2017G

Kuwait Waterproof-ing Company for Building Materials

Limited Liability 96304 Kuwait Affiliated 99.0% 99.0% 99.0% 99.0%

Awazel Interna-tional

Limited Liability 535107 United Arab

Emirates Affiliated 99.0% 99.0% 99.0% 99.0%

Awazel Internation-al Waterproofing Company Qatar

Limited Liability 38673 Qatar Affiliated 95.0% 95.0% 95.0% 95.0%

Source: The Company

Waterproofing (Awazel ) International CompanyAwazel International Company was established under Commercial License No. 535107 dated 22 June 2002G and valid until 21 June 2018G.

Having reviewed the Memorandum of Association dated 13/5/2002G, Awazel Company is a limited liability company, was found in agreement between Salem Al Jabri and Firas Al-Suqair. The Memorandum of Association allows the establishment of branches in the UAE. The Company shares are 30,000, where Salem owns 51% and Firas owns 49%. It was agreed to appoint Firas Al-Suqair as Chairman of the Board of Directors.

On 28/2/2012G, all the shares of Salam Al-Jabri were sold to Ibrahim Al-Squair as a third party. Firas sold 48% of his shares to Ibrahim Al-Squair and retained 1% of the shares. The legal ownership became 99% % for Ibrahim Al-Squair and 1% for Firas al-Squair.

The capital was increased to AED 3,000,000 divided into 300,000 shares.

The Company owns 99% of Awazel International Company’s shares, and is a beneficial owner of the Company under the agreement dated 3/1/2016G. The remaining 1% of the shares are owned by Firas Al-Squair

Waterproofing (Awazel ) Company Kuwait for Building MaterialsAwazel Company Kuwait was established on 22/09/2003G under the registration number 96304, by agreement between Firas Al-Squair and Ibrahim Al-Squair. Firas owns 51% of the shares and Ibrahim owns 49%. Amendments to the Memorandum of Association relate to the Company’s financial year, so that it now starts at the beginning of April and ends on 31 March.

The Company owns 99% stake in Awazel Kuwait for Building Materials which is beneficially owned by the Company under the agreement between them and the Company on 3/1/2016G. The remaining 1% of the shares are owned by Firas Al-Squair.

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Waterproofing (Awazel ) International Company Qatar Awazel International Qatar was established on 31/03/2008G as a limited liability company registered in the State of Qatar under Commercial Registration No. 38673, in agreement between Qatar International Trading and Investment Company and Firas Al-Squair, so that Firas Al-Squair owns 50% of the shares and Qatar International Trading & Investment Company owns 50% of the share capital of Awazel International Qatar. Awazel International Qatar conducts business mainly in the field of trading of building materials and roofing and ground waterproofing materials.

The Company owns beneficially a 95% stake in Awazel International Qatar, under agreement between Firas Al-Squair and Qatar International Trading & Investment Company in 2008, as well as the declaration of Firas Al- Squair’s on 1/1/2009 stating that the Company owns beneficially 95% of the shares of Awazel International Qatar. The remaining 5% of the shares are owned by Firas Al Squair.

11-4 Basic Licenses and ApprovalsThe Board of Directors declares that the Company and its subsidiaries have all the essential licenses and approvals required to carry out their activities, as follows:

Table (136): Basic Licenses and ApprovalsType of License Purpose License No. Expiry Date Issuing authority

Basic licenses and approvals issued for Arabian Waterproofing Company

Registration certificate of a closed joint stock company

Commercial Registra-tion of the Company 1010039827

29/05/1443H

2/1/2022GMinistry of Commerce and Investment

Industrial license Factory License 314610/11/1439H


Industrial License* Factory License / Jeddah S336 Ministry of Commerce and

Investment

Environmental license ** Environmental approval 26878/36/S 396

10/8/1436H

29/5/2015G

Valid for two years

General Authority of Mete-orology and Environmental Protection

Environmental license Environmental approval 12M/31/7053

17/3/1431 H

3/3/2010 G

Open

General Authority of Mete-orology and Environmental Protection

Factory operating license 28023523/9/1439H

6/6/2018G

The civil defense license was replaced with the factory oper-ating license issued by

Saudi Organization for Indus-trial Estates and Technology Zones (Modon)

Certificate of Chamber of Commerce and Industry

Registration with the Chamber of Com-merce and Industry in Riyadh

1010000063178/4/1439H

27/12/2017GRiyadh Chamber of Commerce and Industry

Trademark registration certificate Trademark protection

1027/85

1027/65

6/11/1438H


Saudization certificate Renewal of licenses 2000170601772824/12/1438H

15/9/2017GMinistry of Labor and Social Development

Social Insurance (GOSI) certificate

Statement on the number of employees registered in social insurance

2285953820/10/1438H

14/7/2017GGeneral Organization for Social Insurance

Certificate of Zakat for Dammam and Jeddah branches

1883127/11/1438H

31/7/2017GGeneral Authority for Zakat and Income Tax (GAZT)

Zakat Certificate 1183127/11/1438H

31/7/2017GGeneral Authority for Zakat and Income Tax (GAZT)

Al-Sultan Contracting, Trad-ing and Industry’s Quarry License

A quarry license W/101/1898/32Under renewal await-ing the new ministry instructions

Ministry of Energy, Industry and Mineral Resources

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Type of License Purpose License No. Expiry Date Issuing authority

Intertek Saudi Certificate Compliance of admin-istrative standards ISO 9001:2008

3/1/1440H

14/9/2018GIntertek Saudi Arabia

Land Transport License for the Company Branch 010111043700

Valid through 8/7/1439H

25/3/2018GMinistry of Transportation

Basic licenses and approvals issued for Subsidiaries/Affiliates

Tax certificate for Awazel International Qatar 1989558483

30/1/1439H

(21/10/2017G)

Commercial license for Awazel International Qatar

Building and insulation materials trade license 74614

17/11/1438H

(10/8/2017G)Ministry of Economy and Trade in Qatar

Commercial Register of Awazel International Qatar 38673

20/12/1439H

(31/3/2018G)Ministry of Economy and Trade in Qatar

License to import and export of Awazel Interna-tional Qatar

License to import and export building and insulation materials

Not separately

Covered by the expi-ry of the Commercial Register

20/12/1439H

(31/3/2018G)

Not separately

Membership certificate from the Chamber of Commerce and Industry for Awazel International Qatar

It turns out that Awazel International Qatar is a member of the Chamber and does not have any branches.

01/1590520/12/1439H

(31/3/2018G)Issued by Qatar Chamber of Commerce and Industry.

Certificate (to whom it concerns) for Awazel Ku-wait for Building Materials

Awazel Kuwait for Building Materials was established on

25/7/1424H (22/9/2003G)

None None Ministry of Industry and Com-merce of Kuwait.

Commercial Register for Awazel UAE

Certificate of registration announcement in the Commercial Register

5970929/9/1439H

(21/6/2018G)Economic Development De-partment in Dubai.

Commercial license for Awazel UAE Business license 535107

29/9/1439H

(21/6/2018G)Economic Development De-partment in Dubai.

Source: The Company

* This license was issued by the Ministry of Commerce and Investment without an expiry date as it is an old licenses. The Company submitted to the Ministry of Energy, Industry and Mineral Resources by virtue of the transfer of jurisdiction to renew the license and update its data according to the new automatic system. The License No. 63024 was issued with an expiry date on 12/3/1439H.

** License is under renewal by the General Authority of Meteorology and Environmental Protection

11-5 Summary of By-Laws

Chapter (1): Company Incorporation

Company Name:

Arabian Waterproofing Industries Company (Awazel) – A Saudi Joint Stock Company.

Company Objectives:





5- Production of all types of thermal & accoustic insulator;



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12- The Company exercises its activities only after obtaining necessary licenses from the competent authorities.

The Company’s Head Office

The Company’s head office is located in the city of Riyadh, Kingdom of Saudi Arabia and the Board of Directors may establish branches, offices or agencies in or out of the Kingdom of Saudi Arabia.

Company Term:

The term of the Company will be 99 Gregorian years commencing from the issuance date of the resolution of the Minister of Commerce and Investment announcing the transformation thereof, which term can always be extended by a resolution of the Extra-Ordinary General Meeting one year at least prior to expiry of such term.

Chapter (2): Company Capital

Company Capital

The share capital of the Company is Two Hundred Seventy Two Million Nine Hundred Ninety Nine Thousand Seven Hundred Eighty Saudi Riyals (SAR 272,999,780) divided into 27,299,978 (Twenty Seven Million Two Hundred Ninety Nine Thousand Nine Hundred Seventy Eight) equal Shares, each of a nominal value of SAR 10 (Ten Saudi Riyals), all of which are ordinary & cash shares and of equal value.

Subscription to the Shares: The founders have subscribed in the whole share capital totaling (27,299,978) shares (Twenty Seven Million Two Hundred Ninety Nine Thousand Seven Hundred Seventy Eighty shares) for a value of SAR 272,999,780 (Two Hundred Seventy Two Million Nine Hundred Ninety Nine Thousand Seven Hundred Eighty Saudi Riyals). The Company shares have been distributed to the shareholders and their value has been completely satisfied.

Preferential Shares:

The Extraordinary General Assembly of the Company may, subject to the rules prescribed by the competent authority, issue preferential shares, decide to buy them, transfer ordinary shares into preferential shares or transfer preferential shares into ordinary ones. Preferential shares are not given voting right in the shareholders’ general assemblies and shall arrange the right for its holders to secure higher percentage of the Company’s net profits than the ordinary shareholders after setting aside the statutory reserve.

Selling of shares falling short of the value

A shareholder shall pay the share value within the prescribed dates. In the event of the shareholder default to comply with the maturity date thereof, the Board of Directors may, after serving a registered letter to him, sell the share in public auction or in the stock market, as the case may be, in accordance with the applicable rules set by the competent authority.

Out of the sale proceeds, the Company shall recover its due amounts and return the balance to the shareholder. In the event that sale proceeds are not sufficient to satisfy such amounts, the Company may collect the balance from the whole amounts of the shareholder.

However, a shareholder failing to pay till the sale day may pay the due amount plus the expenses incurred by the Company in this regard.

The Company will cancel the sold share in accordance with the provisions herein, give the purchaser a new share bearing the sold share number and denote in the share register that the share has been sold along with listing the name of the new shareholder.

Share issuance: Shares will be nominal and shall not be issued with lower than their nominal value but with higher value. In the latter case, the value difference shall be added in separate item within the shareholders equity and may not be distributed as dividends to shareholders. A share is indivisible against the Company and if owned by several shareholders, they shall select one shareholder to act on behalf of them to use the equity. Such shareholders will be held jointly responsible for the obligations arising out of the shareholder equity.

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Share trading

Shares subscribed by the founding shareholders are not tradable before publication of the financial statements for at least two consecutive years each of which is 12 months with effect from the incorporation date of the Company. Title deeds of such shares shall be denoted indicating their type, company incorporation and restriction period of trading.

However, shares are transferable during the restriction period in compliance with the provisions of equity sale from one founder to another or from heirs of one founder upon his death to third parties or upon enforcement on a bankrupt or insolvent founder. Other founders shall have priority on the ownership of such shares

Provisions of this Article shall apply to what founders subscribe in the event of capital increase prior to elapse of the restriction period.

Shares Register:

The Company’s Shares shall be traded by recording them in the Shareholders’ register prepared by the Company or prepared by contract with the Company. The register shall contain the names of the Shareholders, their nationalities, domiciles, occupations, the serial numbers of the shares and the amount paid-up on such shares. A share shall be denoted in this register. The transfer of title of the nominal share shall not be effective vis-à-vis the Company or any third party except from the date on which the transfer is recorded in the said register.

The Company shares will be traded upon listing in accordance with the provisions of Capital Market Authority.

Capital Increase:

The Extraordinary General Assembly may decide to increase the Company’s capital, provided that the Company’s capital shall have been paid in full. It is not a precondition that the capital has been fully paid if the unpaid portion of the capital belongs to shares that have been issued against the transfer of debt instruments or finance bonds into shares and that the period for transferring them into shares has not yet expired.

In all cases, the Extraordinary General Assembly shall allot the issued shares upon capital increase or part thereof to the Company employees and its subsidiaries or some of them or either of them. Shareholders may not exercise the priority right when the Company issues the shares allotted for the employees.

A shareholder owning a share, upon issuance of the resolution by the EGA approving the capital increase shall have the priority of subscription with the new shares issued against cash shares. These shareholders will be notified of their priority by publication in a daily newspaper or by registered mail about the resolution of capital increase, conditions for subscription, subscription term, its commencement & closing date.

The EGA is entitled to suspend the exercise of the priority right for the shareholders in the subscription by increasing capital against cash shares or by giving priority to non-shareholders in the cases that it deems appropriate for the Company interest.

A shareholder shall have the right to sell the priority right or waive it during the period from the issuance date of the resolution of the General Assembly by which it approves the capital increase up to the last day of subscription in the new shares relating to these rights in accordance with the rules set forth by the competent authorities.

Subject to the aforesaid Paragraph (4), the new shares shall be allotted to the priority right holders who applied for subscription in proportion of what the priority rights they own to their total priority rights resulting from the capital increase, provided that what they will obtain shall not exceed what new shares they have applied for. The remaining new shares shall be allotted to the priority right holders who applied for more than their entitlement in proportion of what priority rights they own to the total priority rights resulting from the capital increase, provided that what they will obtain shall not exceed the new shares they have applied for. The remaining shares shall be offered for others, unless otherwise decided by the EGA or provided for by CMA.

Capital Decrease

The Extraordinary General Assembly may decide to reduce its capital if deemed in excess of the Company need or if the Company has incurred losses. Only in the latter case the capital may be reduced to below the limit provided for in Article (Fifty Four) of the Companies Law. The resolution of capital decrease shall be issued only after reading a special report prepared by the Company’s auditors setting out the reasons for the reduction of the Company’s capital, the liabilities on the Company and the effect of such decrease on such liabilities.

If the capital decrease is due to being in excess of the Company need, the Company shall invite the creditors to express their objection to such decrease in capital within 60 days from the date of publication of the decrease resolution in a daily newspaper distributed in the city where the Company head office is located. Should any creditor objects to the decrease of capital and submits his documents to the Company within the stipulated period, the Company must immediately settle such debt if it is due, or provide adequate security for its payment if it has not fallen due at the time.

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Chapter (3): The Board of Directors

Company Management

The Company shall be managed by a Board of Directors consisting of nine (9) members elected by the Ordinary General Assembly of the shareholders for a term not exceeding three (3) years. As an exception, the shareholders have appointed the first Board of Directors for a five (5) year term.

A Board member shall own a number of shares with minimum value of SAR 40,000.00 (Forty Thousand Saudi Riyals) deposited within thirty days from the appointment date of the Board member. Such shares shall be allocated to secure responsibility of the directors and are not tradable till expiry of the prescribed period of hearing the liability claim in Article (78) of the Companies Law. In the event that the director fails to provide qualification shares within the set period, his membership will be deemed null & void. It is preconditioned that at any time no director shall combine membership in Awazel and membership of board of directors (or corporate secretary) in any other company operating in the same business as the Company. If at a later time a director of Awazel accepts membership of the Board in a company operating in the same area as Awazel , his membership with Awazel will be immediately terminated and the Company may claim indemnity against him.

Expiry of the Board Term

The Board membership shall expire with the expiry of its term or with the expiry of the member’s eligibility for such membership pursuant to any prevailing law or instructions in the Kingdom of Saudi Arabia. However, the Ordinary General Assembly may dismiss all or some members of the Board without prejudice to the ousted member’s right to claim the Company for indemnity if such dismissal was not justifiable or has taken place at inconvenient time. A board member may resign; provided that such resignation takes place at convenient time otherwise he will be liable before the Company for damages resulting from the resignation.

Vacancies

If the seat of a Director becomes vacant, the Board may appoint a temporary member to the vacant seat according to the order of votes secured in the assembly which elected the Board of Directors, provided that the nominee shall have sufficient expertise & adequacy. The Ministry shall be duly informed thereof within five business days from the appointment date and such appointment shall be laid before the Ordinary General Assembly in its first meeting. The new Director shall complete the rest of his predecessor’s term. If the required conditions for holding the Board of Directors’ meeting are not met because the number of Directors falls below the required quorum provided for in the Companies Law or this Bylaw, the remaining directors shall call the Ordinary General Assembly for meeting within sixty days to elect the required number of the members.

Powers of the Board of Directors

The Board of Directors shall appoint one of its members as Chairman and may also appoint a Managing Director and a Vice Chairman for the Company from the members of the Board. By a resolution, the Board of Directors shall set out the tasks & powers of both the Chairman and Managing Director. The Chairman or his delegate represents the Company in its relations with others and before the judicial bodies and is entitled to delegate others in pleading & defending the Company. Both the Chairman and the Managing Director shall have the right to sign off bylaws of companies where the Company is a partner, or to sign other contracts, title deeds and resolutions of whatever type before the notaries or official bodies.

The Board of Directors shall appoint a Corporate Secretary from among its members or from others and shall set out the Corporate Secretary’s remunerations. The membership term of the Chairman, Managing Director & Corporate Secretary as board members shall not exceed the membership term of each one of them in the Board. However, they may be re-appointed in accordance with the Law & its effective amendments upon the renewal of the term.

Subject to the tasks prescribed for the General Assembly, the Board of Directors shall have the widest authorities to manage the Company along with the right to hold partnership in other companies. The Board is also entitled to delegate one or more of its members or others to perform specific business (s). The Board may also sell the Company’s real estates, provided that the minutes of the Board meeting and grounds of its resolution on disposition of the real estates shall to into account the following conditions:

1- The Board shall specify in its resolution to sell such real estates the reasons and justifications of such sale;

2- The sale price shall be at least equal to the market price of such real estates;

3- The sale shall be undertaken with immediate effect unless the circumstances necessitate otherwise, in which case, sufficient guarantees should be obtained;

4- Such sale does not result in the suspension of some activities of the Company; subject it to grave damage or holding it liable for any other obligations.

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The Board may conclude loan agreements with governmental funds and finance institutions regardless of the term of such agreements and conclude commercial loans which terms do not exceed the Company’s term. The Board shall observe the following conditions in respect of any loan having a term exceeding three years:

a- The value of loans which the board is entitled to obtain during any one fiscal year shall not exceed 50% of the Company’s capital unless otherwise decided by the General Assembly;

b- The board shall specify, in its resolution to approve any such loan, the manner in which the loan will be used and how it will be repaid by the Company;

c- That the terms of the loans and the guarantees provided in relation thereto do not prejudice the Company, its shareholders or the securities offered to the Company’s creditors.

The Board shall also be entitled to conclude compromise, assign, enter into contracts, commit and engage in the Company’s name and on its behalf.

The Board is also empowered to undertake all works and actions in order to achieve the Company’s objectives.

The Company’s board of directors, in the cases it deems appropriate at its discretion, may relieve the liability of Company’s debtors in line with the Company’s interests provided the board’s minutes of meeting shall include the justifications & grounds for such resolution and shall also take the following into consideration:

1- Release of debtors’ liability shall only take effect after the lapse of at least one year from the commencement of debt;

2- Release of debtor liability shall be for a specific amount as a maximum per year per one debtor.

3- Release is a right of the Board and may not be delegated.

Within the limits of its jurisdictions, the Board may delegate on behalf of it one or more of its members or others to take a specific action or act or to perform a specific work (s).

Board remuneration:

The remunerations of the board directors shall be from the percentage of the profits in accordance with Clause (4) of Article (46) of this Bylaw and shall be within the limits stipulated in the Companies Law & its rules. The board’s report to the Ordinary General Assembly shall include full details of the remunerations paid to the directors of the Board during the financial year including allowances, expenses and other benefits. The report shall also include details of remunerations paid to directors in their capacity as staff members, administrators or any technical, administrative activities or advisories and shall include a statement of numbers of the board sessions and sessions attended by each member with effect from the last meeting of the General Assembly.

Board Meetings:

The board shall be called to convene by its chairman at least two times within a fiscal year. The call to convene shall be in writing and may be delivered personally or sent by mail, fax, telegram or e-mail at least one week before the prescribed date of the meeting, unless otherwise agreed by the board members. The chairman shall call the board to convene if requested by two directors at least.

Quorum and Board resolutions:

The meeting of the board shall not have a quorum unless attended by at least 5 members. A board member may delegate another director to represent him at the board meetings in accordance with the following guidelines:

1- A director may not represent more than one member at the same meeting

2- Representation shall be documented and in respect of a fixed meeting only.

3- A Director may not vote at the resolutions which the delegating director cannot vote at under the rules.

The board’s resolutions shall be passed by absolute majority vote of the present or represented members, and in case of equal votes the vote of the chairman or his representative at the meeting will be casting.

Minutes of Meetings and deliberations:

The deliberations & resolutions of the board shall be written in minutes to be signed by the chairman, present board members and corporate secretary. Such minutes shall be recorded in a special register and signed by both the chairman and corporate secretary.

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Chapter (4): General Assemblies

Attendance at Assemblies

Each subscriber with whatever number of shares shall have the right to attend the Constituent Assembly, and every shareholder has the right to attend the shareholders’ general assembly and to delegate any other person who is neither a member of the Board of Directors nor an employee of the Company to attend the General Assembly on his behalf.

The Constituent Assembly

Founders shall call all subscribers for the Constituent Assembly within forty five days from the resolution date by the Ministry to license incorporation of the Company. The meeting will be valid only with the presence of subscribers representing at least half of the Company capital. Failure to satisfy this provision requires holding the second meeting after one hour from the time set for holding the first meeting, provided that the first meeting shall include this text.

In all cases, the second meeting will be valid irrespective of the number of subscribers represented therein.

Constituent Assembly Tasks

The Constituent Assembly is assigned the following tasks:

� Ensuring subscription with all capital and compliance, as per the Companies Law, with the minimum capital and due amount of the shares’ value;

� Conducting deliberations on the report of evaluating the shares in kind;

� Drafting the final texts of the Company Bylaw. However, the Assembly may not introduce material changes on the Bylaw presented to it without the approval of all the subscribers represented therein;

� Appointing the first comptroller for the Company; and

� Approving the shareholders’ report on the businesses & expenses required for the Company incorporation.

Validity of the Constituent Assembly meeting requires the presence of subscribers representing at least half of the Company capital. Each subscriber in the Constituent Assembly shall have one vote for each share which he subscribes & represents.

Ordinary General Assembly Tasks

Except for matters falling within the jurisdiction of the Extraordinary General Meeting, the Ordinary General Meeting shall have jurisdiction to deal with all matters that concern the Company. It shall be held at least once a year within six months following the end of the Company’s financial year. Other Ordinary General Meetings may be convened whenever needed.

Extraordinary General Assembly Tasks

The Extraordinary General Assembly is tasked with amending the Company Bylaws with exception to the provisions which amendment is restricted by Law. It shall issue decisions on matters which are within the jurisdictions of the Ordinary General Assembly with the same conditions and status prescribed for the latter.

Convocation of Assemblies

Shareholders’ General or Special Assemblies will be held upon convocation by the Board of Directors. The Board calls the Ordinary General Assembly for a meeting if so required by the Auditor, Audit Committee or a number of shareholders representing at least (5%) of the Company capital. The Auditor may call the Assembly for a meeting if the Board fails to convene the Assembly within thirty days from the date when the Auditor calls for the Assembly meeting.

The call for holding the General Assembly shall be published in the daily gazette circulated in the Company head office at least ten days before the prescribed date of the meeting. However, it will be sufficient to send convocation on the prescribed date to all shareholders via the registered mail. Copy of such convocation & agenda shall be sent to the Ministry within the set period for publication.

Assemblies Attendance Register

Shareholders wishing to attend the general or special assemblies shall register their names at the Company head office before the prescribed date of the meeting.

Ordinary General Meeting Quorum:

The ordinary General Meeting shall be valid only if attended by shareholders representing at least one half of the share capital. In case this quorum is not attained at the first meeting, the second meeting will be held within one hour from the expiry of the prescribed time of the first meeting, provided that the call for the first meeting should include whatever announcement about the possibility of holding this meeting. If the first call did not include possibility of holding the

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second meeting, a second meeting should be called for to be held within thirty days following the preceding meeting. Such invitation should be published in the manner stipulated in Article (Thirty) hereof.

Extra-Ordinary General Meeting Quorum

The Extraordinary General Meeting shall be valid only if attended by shareholders representing at least one half of the share capital. In case this quorum is not attained at the first meeting, the second meeting will be held within one hour from the expiry of the prescribed time of the first meeting, provided that the call for the first meeting should include whatever announcement about the possibility of holding this meeting. If the first call did not include possibility of holding the second meeting, a second meeting should be called for to be held within thirty days following the preceding meeting to be held under the same situations provided for in Article (thirty) hereof.

In all cases, the second meeting shall be valid if attended by a number of shareholders representing at least one quarter of the Share Capital

In case the required quorum for the second meeting is not attained, a third meeting should be called to be held under the same situations stipulated in Article (Thirty) hereof. The third meeting shall be valid irrespective of the number of shares represented therein after approval by the competent authority.

Voting Powers:

Each subscriber shall have one vote for each share he holds at the constituent assembly. Each shareholder shall have one vote for each share he holds at the general assemblies. Election of the board of directors will be in accordance with the accumulative voting principle.

Discussions in Assemblies

Each shareholder shall have the right to discuss the issues listed in the Meeting agenda and raise questions in connection therewith to the directors and Auditor. The Board of Directors or Auditor shall respond to the shareholders ‘enquiries in a manner that would not prejudice the Company interest. In the event that a shareholder is not satisfied with the response to his question, he shall resort to the Assembly which decision in this regard is valid.

Chairmanship of assemblies & preparation of minutes of meetings

Meetings of the shareholders’ general assemblies shall be presided by the chairman, his deputy upon his absence or his delegated director from the board in the absence of both the chairman and deputy chairman.

At the General meeting, minutes shall be written that comprise the number of present shareholders or their representatives, number of shares under their acquisition in person or by proxy, number of votes prescribed for such shares, resolutions taken, number of votes for or against and comprehensive summary of the deliberations during the meeting. Meeting minutes shall be written regularly at the end of each meeting in a special register to be signed off by the chairman of the Assembly, its secretary and vote collector.

Chapter (5): Audit Committee

Committee Formation

The Audit Committee shall be formed by resolution of the Ordinary General Assembly. It consists of three (3) non-executive board members, whether or not they are shareholders. Tasks, business controls & member remunerations of the Audit Committee shall be set forth by such resolution.

Audit Committee meeting Quorum

The meeting of the audit Committee would not be valid unless attended by majority of its members. The Committee resolutions shall be issued with majority votes of the present members. In the event of tie vote, the chairman’s vote shall prevail.

The Audi Committee tasks

The Audit Committee is tasked with monitoring the Company businesses. To do so, the Committee shall have the right to review the Company records & documents and request any clarification or statement from the board of directors or the executive management. The Audit Committee may also request the board of directors to call the General Assembly for meeting if the board of directors hinders its business or if the Company is subject to grave damages or losses.

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Audit Committee Reports

The Audit Committee shall look into the Company’s financial statements, reports and comments set by the Auditor and express its opinions toward the same, if any. The Committee shall also prepare a report on its onion with respect to the extent of sufficiency of the internal audit within the Company and on what other actions it has undertaken within its jurisdiction. The board of directors shall lodge enough copies of such report at the Company head office at least ten days before the meeting of the General Assembly in order to provide each shareholder with a copy thereof if required. Such a report shall be read during the General Assembly meeting.

Chapter (6): Auditor

Appointment of the Auditor

The General Assembly shall appoint one (or more) auditors annually from among the auditors licensed to work in the Kingdom of Saudi Arabia and shall determine their fees and term. The Assembly may also replace the auditor at any time, without prejudice to his right for compensation if such replacement has taken place at inconvenient time and for unjustifiable cause.

Auditor jurisdictions

The auditor shall have access to the Company books, records and other documents at any time at its discretion. He is also entitled to require any data & clarifications whenever deemed necessary and to check the Company’s assets & liabilities within the jurisdiction of his work. The chairman of the Board shall enable the Auditor to perform his duty. In the event that the Auditor encounters any difficulty in this regard, he shall evidence the same in a report to be submitted to the board of directors. If the board fails to facilitate the Auditor work, he shall ask the board of director to call the Ordinary General Assembly for a meeting to look into the matter.

Chapter (7): Company Accounts and Profit Distribution

Fiscal Year:

The fiscal year of the Company shall commence on April 1 and end on March 31st of each year. However, the first fiscal year of the Company shall commence on the date of the ministerial resolution declaring the Company incorporation and shall end at the end of March of the following year.

Financial Documentation

The board of directors shall prepare at the end of each financial year the financial statements of the Company and a report as to the Company’s activities and financial position for the previous fiscal year. The report shall include the proposed manner for the profit distribution. The Board shall place these documents under the disposal of the Company Auditor at least forty five days before the set date for the General Assembly meeting.

The Company’s Chairman of the board, CEO and Auditor shall sign the documents referred to in Paragraph (A) hereof. Copies of such documents shall be placed at the disposal of the shareholders in the Company’s head office at least 10 days before the prescribed date of the general assembly meeting.

The Chairman of the Board shall provide the shareholders with the Company’s financial statements, the Board report and the Auditor report, unless these are published in a daily newspaper circulated at the Company head office. The Chairman shall also provide the Ministry with copies of such documents at least fifteen days prior to the scheduled date of the General Assembly meeting.

Distribution of profits:

The Company’s annual net profits shall be distributed as follows:-

10% of the annual net profits shall be set aside to form a statutory reserve. Such setting aside may be discontinued by the Ordinary General Assembly when the statutory reserve totals one-half of the Company’s capital.

1- The Ordinary General Assembly may, on the proposal of the Board of Directors, set aside a certain percentage of net profits to form general reserves, so that the total amount of the provisional and general reserves shall not exceed 40% per annum. The deduction shall be discontinued when the provisional and contractual reserve equals half the capital.

2- The balance shall be distributed subject to the General Meeting’s approval, as a first payment in the amount of at least five percent (5%) of paid-up capital to the Shareholders.

3- Out of the remaining balance, the General Meeting may distribute not more than 10% as compensation for the Directors provided that it shall not exceed the limits set out in the instructions of the Ministry of Commerce and

171

Investment in this respect. The remaining balance may be distributed among Shareholders as an additional share of the profits.

The ordinary general meeting may, at the board’s proposal, set aside a specific percentage of the net profits to form a provisional (special purpose) reserve for the following purposes and in the following percentage:

a- A reserve to ensure future dividend distribution of 10% of net profits;

b- Development and research reserve at 2.5% of net profits.

The development and research reserve shall be discontinued when the accumulated balance reaches 5% of the capital.

The Ordinary General Assembly may decide to set aside a certain percentage of net profits to form general reserves, to the extent that achieves the Company interest or ensures as far as possible the distribution of fixed profits to shareholders. The said assembly shall also withhold an amount from the net profit to establish social institutions for the Company employees or to support those standing institutions.

Out of the remaining balance, a percentage of (5%) of the paid up capital shall then be distributed to shareholders.

Subject to Article (20) of this By-Laws, and Article (76) of the Companies Law, after the above (10%) of the balance shall be allocated as remuneration to the Board of Directors, provided that the remuneration is commensurate with the number of meetings attended by the member. The remaining shall be distributed to the shareholders as an additional share from the profits.

Entitlement for Profits

A shareholder is entitled for his share in profit in accordance with the General Assembly resolution issued in this regard. Such a resolution shall set forth the entitlement date and distribution date. Priority of profit will be for those shareholders registered in the shareholders register at the end of the specified day of entitlement.

Distribution of Preferential Shares’ Profits

If not profits have been distributed for any financial year, profits for the next years may be distributed only after payment of the percentage specified in accordance with the provision of Article (One Hundred Fourteen) of the Companies Law to the preferential shareholders for this year.

In the event that the Company fails to pay off the prescribed percentage of profits pursuant to the provision of Article (One Hundred Fourteen) for three consecutive years, the Special Assembly of these shareholders held in accordance with the provisions of Article (Eighty Nine) of the Companies Law may decide either they attend the General Assembly meetings of the Company for participation in the voting, or appoint representatives for them in the board of directors in proportionate with their shares in the capital, until the time when the Company is able to pay all the priority profits allocated for such shareholders for the preceding years.

Company Losses

If at any time during the fiscal year that the losses of the Joint Stock Company amount to half of its paid capital, any official in the Company or the Auditor once he learns about this, shall immediately inform the Chairman of the Board of such losses. The Chairman of the Board shall forthwith inform the board members of the same. The Board of Directors shall, within fifteen days from the date of learning about the losses, call an EGM within forty five days from the date of its knowledge of the losses to consider either to increase or decrease the Company capital in accordance with the Companies Law to the extent to reduce the losses ratio to below half of the paid capital or to dissolve the Company prior to its expiry date specified in the Companies Law.

The Company shall be deemed to have expired by force of the Companies Law in the event that the General Assembly fails to meet within the period specified in Paragraph (1) hereof, or if the General Assembly has actually met but failed to issue a decision on such matter, or if it decides to increase the Company capital according to the situations prescribed herein, but subscription for the whole capital increase was not attained within ninety days from the issuance date of the General Assembly resolution for capital increase.

Chapter (8): Disputes

Liability Claim

Each shareholder is entitled to file the Company’s prescribed liability claim against board members if the error committed by them inflicts damages to such shareholder. A shareholder may not file the said claim unless the Company right for filing the claim is still standing. The shareholder shall advise the Company of his intention to file the case.

172

Chapter (9): Dissolution and Liquidation of the Company

Expiry of the Company’s term

Upon the expiry of the Company’s term, the Company shall enter the liquidation stage and retain the legal personality to the extent necessary for liquidation. The optional liquidation decision shall be issued by the Extraordinary General Assembly The liquidation decision shall include the appointment of the liquidator, the determination of his powers and fees, the restrictions imposed on his authorities and the time required for liquidation. The optional liquidation period shall not exceed five years and may not be extended without a judicial order. The authority of the Board of Directors of the Company shall be terminated by then. However, they shall remain in charge of the management of the Company and shall be appointed in respect of others in the Liquidators’ judgment until the Liquidator is appointed. Shareholders’ assemblies shall remain in existence during the period of liquidation and their role shall be limited to the exercise of their competencies which do not conflict with the terms of reference of the liquidator.

Chapter (8): Concluding ProvisionsCompanies Law and its Implementing Regulations shall be applied in full unless otherwise provided for in these By-Laws.

These By-Laws shall be deposited and published in accordance with the provisions of the Companies Law and its Implementing Regulations.

11-6 Summary of Meterial Contracts

11-6-1 Supply

Company’s Supply Contracts

Table (137): Summary of material contract terms

BG Plast Impianti SRL

Item Description

Agreement Subject Provide the Company with a special plastic film production line

Agreement Amount 1,270,000 euros

Method of Payment Under an irrevocable letter of guarantee

Agreement Term Not specified / implemented and reimbursed under the Agreement

Governing Law and Jurisdiction Arbitration in Saudi Arabia according to Saudi regulationsArabian Oil Company

Item Description

Agreement Subject Purchase of oil products

Agreement Amount 0,061791 SAR per kilo with purchasing a minimum of 300,000 liters per month


Agreement Term One year automatically renewed as of 20/3/2007

Governing Law and Jurisdiction Arbitration in Saudi Arabia according to Saudi regulationsArabian Oil Company

Item Description

Agreement Subject Purchase of asphalt products

Agreement Amount 300 SAR per ton with a minimum of 7,750 tons per month


Agreement Term One year automatically renewed as of 1/3/2005

Governing Law and Jurisdiction Arbitration in Saudi Arabia according to Saudi regulationsSource: The Company

173

11-6-2 Lease ContractsTable (138): Company’s lease Contracts

Lessor Lessee Contract Date Term Rent (SAR) Renewal Type of Leased Asset

Saudi Industrial Property Authority

The Com-pany

15/6/1428H

Corresponding to

30/6/2007G

25 Years138,000 SAR Per year

With agreement of parties two months before the end of the original period

A land plot in the second indus-trial city in Riyadh with an area of 34,500 square meters, plot number 280235


The Com-pany

15/6/1428H

Corresponding

30/6/2007G



A land plot in the second indus-trial city in Riyadh with an area of 12,500 square meters, plot number 280234


The Com-pany

7/6/1427H

Corresponding

30/6/2006G

25 Years 3,000 SAR Per year


A land plot in the second industrial city in Jeddah with an area of 1,000 square meters, plot number 31055


The Com-pany

11/9/1425H

Corresponding

25/10/2004G



A land plot in the second industrial city in Jeddah with an area of 3,000 square meters, plot number 31107


The Com-pany

16/9/1436H

Corresponding

2/7/2015g



A land plot in the second industrial city in Jeddah with an area of 4,758 square meters, plot number 0030C00051


The Com-pany

2/2/1435H

Corresponding to

5/12/2013G



A land plot in the second indus-trial city in Jeddah with an area of 10,913 square meters, plot number 0030C00065


The Com-pany 15/6/1428H 25 Years 8,840 SAR

Per year


A land plot in the second industrial city in Riyadh with an area of 2210 square meters, plot number 804146

Abdul Aziz and Maha and Nawal al-Busaily

The Com-pany 1/1/1438H 5 Years

105,000 SAR Per year

Non-definite Office Building in Riyadh

Abdul Aziz Khudri The Com-pany

21/6/1418H

Corresponding to

22/10/1997G

Non-defi-nite

25,900 SAR Per year

Automatic renewal Office in Jeddah

Abdul Aziz Khudri The Com-pany

13/4/1419H

Corresponding to

26/8/1998G

Non-defi-nite

21,420 SAR Per year

Automatic renewal Office in Jeddah

Mohammed Al Fayez The Com-pany 30/4/1438H Year

60,000 SAR Per year

Automatic renewal Office in Dammam

Zuhair Meera The Com-pany 1/3/1438H One Higrah

year

45,000 SAR Per year

Renewed by written agreement of both parties

Warehouse in Dammam

Lolwa Al - Khuraisi The Com-pany 1/5/1438H Year

14,240 SAR Per year

Renewed by written agreement of the lessor

Bachelor Housing

Saudi Railways Organization The Com-pany 20/5/1432H 10 Years

140,626 SAR Per year

Renewed by written agreement of the lessor

Warehouse in Riyadh

174

Table (139): Lease Contracts of Affiliate (Subsidiaries)*

Lessor Lessee Contract Date Term Rent (SAR) City

Purp

ose

of

lwas

e

Type

of

Leas

ed A

sset

Renewal Remarks

1 Ali Al - Ansari(Awazel) International - Qatar

01/02/2014G 4 Years & 8 Months Q R 24,000 Doha Office Room

Renewal option not available

2 Ali Al - Ansari(Awazel) International - Qatar

10/09/2013G 5 Years Q R 480,000 Doha Warehouse WarehouseRenewal option not available

3 Retaj Companyy(Awazel) International - Qatar

08/09/2015G1 Year On

31/10/2017G

Q R 175,692 subject

to annual increase of

10%

Doha Office Office

Renewal option available by approval of lessor. Owner have the right to terminate the contract by 2 month notice

4 (Awazel) International

Future Communications Company

01/03/2017G 1 year AUE D 64,560 Dubai Offices Offices

Renewal with the consent of the lessor only


Future Communications Company



6 (Awazel) International Big Team Company 01/04/2017G 1 year AUE D

60,000 Dubai Offices Offices


7 (Awazel) International Big Team Company 20/04/2017G 1 year AUE D




Smiley World Cleaning 15/03/2017G 1 year AUE D




Amwaj Al Rida Trading Company 24/11/2016G 1 year AUE D




Strong Wood Trading 01/12/2016G 13 Months AUE D




Cisco Steel Company 12/12/2016G 13 Months AUE D




Peace Limousine Company 01/01/2017G 1 year AUE D




Best Choice Contracting Company




Smiley World Cleaning Company 01/05/2017G 1 year AUE D




Seven Harvest Trading Company 15/01/2017G 1 year AUE D




Seven Harvest Trading Company 21/01/2017G 1 year AUE D



175

Lessor Lessee Contract Date Term Rent (SAR) City

Purp

ose

of

lwas

e

Type

of

Leas

ed A

sset

Renewal Remarks

17 paradise (Awazel) International 01/04/2015G

1 year expires on

16/11/2017

AUE D 160,000 Abu-Dhabi Reserves

and ExtrasWarehouses and shops


18 Saeed Balilah (Awazel) International 29/03/2014G 1 year expires

on 30/4/2018AUE D

180,000 Dubai warehouse warehouse


19 Saeed Balilah (Awazel) International 29/03/2014G 1 year expires

on 30/4/2018AUE D

205,000 Dubai warehouse warehouse


20 (Awazel) International Omar Al - Marzaki 05/06/2017G 1 year AUE D

65,400 Dubai Office Office



Molto care for disinfection services

10/07/2016G 1 year AUE D 67,816 Dubai Office Office Renewal under

renewal.


Super World Construction 1/08/2016G 1 year AUE D




Modern Style for decoration 5/10/2016G 1 year AUE D




Park & Roll Swarner Middle East 01/06/201G 1 year AUE D



25 (Awazel) International Adrauit Contracting 05/06/201G 1 year AUE D



26 Al-Thmar Al Alamia Firas Al Suqair 11/02/201G 1 year K D 10,200 Kuwait Office Office Automatic

renewal

27 Al-Thmar Al Alamia Firas Al Suqair 1/07/2014G 1 year K D 8,400 Kuwait Office Office Automatic

renewal

28 Kuwait Industrial Center Company

(Awazel) Kuwait for Building Materials Co

1/03/2014g 1 year K D 9,240 Kuwait warehouse warehouse Renewable

29 Kuwait Industrial Center Company


1/02/201G 1 year K D 10,200 Kuwait warehouse warehouse Renewable

30 Abdul Aziz Al-Flaij


5/01/201G 1 year K D 24,000 Kuwait warehouse warehouse Renewable

Source: The Company

* The rental contracts for the State of Kuwait are valid for 5 years from the date of the contract

176

11-6-3 Credit facilities and loans The following table details the credit facilities with the Company provided by commercial banks

5-A Credit facilities agreement

Table (140): Terms of the Credit Facilities Agreement with the Saudi British Bank

Item Description

Total facilities SAR 30,000,000

Facilities Expiry Date 31/01/2018G

1. Documentary credits, import loans and guarantees Facility limit: SAR 15,000,000 (basic limit - 1)

Documentary Credits at sight and bills of ex-change withdrawn thereunder Including the facility limit: SAR 6,000,000 (sub-limit within the basic limit - 1)

Documentary letters of credit and bills of ex-change withdrawn thereunder Including the facility limit: SAR 6,000,000 (sub-limit within the basic limit - 1)

Shipment Guarantees Including the facility limit: SAR 6,000,000 (sub-limit within the basic limit - 1)

Import loans Including the facility limit: SAR 6,000,000 (sub-limit within the basic limit - 1)

Miscellaneous guarantees (within the facility limit) Including the facility limit: SAR 7,000,000 (sub-limit within the basic limit - 1)

Initial / Final / Advance payment guarantees Including the facility limit: SAR 2,000,000 (sub-limit within the basic limit - 1)

2. Various guarantees for one time Facility limit: SAR 15,000,000

GuaranteesPromissory Note on demand at SAR 30,000,000

Assignment of insurance policy against fire No /R6 P-020-2011-2-205-0010Source: The Company

Table (141): Terms of the Credit Facilities Agreement with Al Awwal Bank

Item Description

Total facilities SAR 29,000,000

Facilities Expiry Date 31/9/2017G

Facilities for opening letters of credit at sight, han-dling of import bonds, opening forward documenta-ry credits and accepting bills drawn

Maximum Limit 6,000,000 (basic limit – 1)

Financing facilities for Payment of documentary credits in the form of short-term loans Of which a maximum of SAR 5,000,000 (sub-limit within the basic limit -1)

Facilities for issuance of initial guarantees, perfor-mance guarantees and advance payment guarantees for government and semi-governmental entities only

Of which a maximum of SAR 5,000,000 (sub-limit within the basic limit -1)

Facilities in the form of a debit current account Maximum limit SAR 2,000,000

Payment Guarantee for Aramco and Customs Maximum limit SAR 2,000,000

Collaterals for forward financial Contracts Maximum limit SAR 3,000,000 – Exchange rate fluctuations offset contract

Guarantees1- Promissory Note on demand at SAR 29,000,000

2- Assignment of insurance policy for the Company Plant in favor of the bank in the amount of SAR 43,000,000

Source: The Company

177

Table (142): Summary of details of private loans and facilities

Lender (SAR) Expiry dates of Facilities Credit Limit (SAR) Due Amounts (SAR) Repaid Amounts (SAR) Repayment

Timing

Saudi British Bank 31/01/2018 SAR 30,000,000SAR 6,891,288 for Saudi Customs Authority

Two letters of guarantee

20/9/2017

12/11/2017

Variable by type of facilities

Al Awwal Bank 21/9/2017 SAR 29,000,000SAR 7 million against payments guarantee to Aramco

Bank guarantee (paya-ble when each invoice is submitted) and payment is made with each invoice

Variable by type of facilities

Source: The Company

11-7 InsuranceThe Company and its subsidiaries maintain valid insurance policies as follows:

Table (143): Insurance ContractsInsurance Company Insured Policy No. Risks Insurance

CoverPaid value of

policy Starting

date Expiry date

1The National Insurance Company

Company P-02-2011-4-412-0035-R6

Including motor insur-ance

SAR 14,817,088.21 SAR 519,332 13/01/2017 12/1/2018


Company P-02-2011-6-603-0007/R6

General Civil Liability and Products

SAR 10,000,000 SAR 20,025 13/01/2017 12/1/2018


Company P-02-2011-6-605-0008/R6

Cash Insur-ance

SAR 4,350,000 SAR 1,916 13/01/2017 12/1/2018


Company P-02-2011-1-114-0226/R6

Land Trans-portation

The total limit is SAR 24,000,000 up to a max-imum of SAR 100,000 Saudi for one car

SAR 21,000 13/01/2017 12/1/2018


Company P-02-2011-6-603-004/R6

The general liability of any third party includ-ing liability arising from food and drink poison-ing

SAR 2,500,000 SAR 12,525 13/01/2017 12/1/2018


Company P-02-2011-2-205-0010/R6

Property against all risks

Total value of insur-ance SAR 579,230,283

SAR 1,534,985 13/01/2017 12/1/2018


Company P-02-2013-8-802-000001/R4

Group Life Insurance

SAR 71,696,336 SAR 265,963 1/1/2017 31/12/2017


Company P-02-2011-1-112-0073/R6

Marine insur-ance

SAR 7,500,000

At least 100 SAR per shipment plus a war allow-ance premium. According to the following: Container: 0.17% plus war allowance pre-mium. Non-con-tainers 0.25% in addition to war allowance premium

13/01/2017 12/1/2018

178

Insurance Company Insured Policy No. Risks Insurance

CoverPaid value of

policy Starting

date Expiry date

9Bupa United Arab Com-pany

Company Customer # 39546300 Health insur-ance - SAR 1,560,055 10/9/2016 10/9/2017

10 Al-Etihad for Insurance

Awazel Interna-tional.

IDPLI2015000044/0002Insurance against third party liability

Varies depending on the type of risk and location of the assets se-cured. (UED)

AUE D 19,000 10/3/2017 9/3/2018



ID-CIT2015000007/00002

Cash Insur-ance

AUE D 165,000 AUE D 1,025 10/3/2017 9/3/2018



IDW-CP2015000043/0002

Workers’ compensa-tion

AUE D 984,468 AUE D 1,994 10/3/2017 9/3/2018



IDPAR2015000031/000Property against all risks

AUE D 23,445.806 AUE D 45,744 10/3/2017 9/3/2018



IDP 15000043/1 Vehicles AUE D 2,000,000 AUE D 1,690 25/60/2016 22/06/2018



IDP 16000018 Vehicles AUE D 2,000,000 AUE D 1,950 2/30/2016 12/4/2018

16 Takaful HouseAwazel Interna-tional.

50/901/1500112/00/00 Health insur-ance - AUE D

207,656,000 10/10/2016 9/10/2017

17 First Takaful Insurance

Water-proofing (Awazel) Kuwait for Building Materials

01/60/2016/150/3150 Vehicles K D 4,200 K D 198,500 29/12/2016 28/12/2017

18Arabian Insurance Company


KT/VHC/2016/2227 Vehicles K D 2,150 K D 147 10/10/2016 9/10/2017

19Arabian Insurance Company


KT/VHC/2017/1978 Vehicles K D 2,025 K D 132 24/05/2017 23/05/2018

20American Life Insurance Company


4040235688 Health insur-ance

K D 8,500 per annum per insured

- 4/3/2017 3/3/2018

21 Retaj Takaful Insurance


2001/01/2016/15 Cash Insur-ance

Varies depending on the type of risk and the maxi-mum is KD 25,000,000

- 29/3/2017 28/03/2018

22 Retaj Takaful Insurance


1001/01/2015/287Property against all risks

K D 848,161,000 - 29/3/2017 28/03/2018

179

Insurance Company Insured Policy No. Risks Insurance

CoverPaid value of

policy Starting

date Expiry date

23 Taazur


001/00431/2016

Group Takaful insur-ance against personal accidents and workers compensa-tion

The basic insured amount: 12 times the monthly basic salary

6.55% of the basic insurance

amount9/1/2016 9/10/2017

24 Misr Insurance Company

Water-proofing (Awazel) Interna-tional - Qatar

298927 Vehicles insurance

Against others Q R 750 26/10/2016 25/10/2017

25 Sepp Com-pany

Awazel Interna-tional Qatar

MG-2015-01-512/R1 Health insur-ance

QAR 100,000 per person per annum

Q R 39,998,800 7/9/2016 7/9/2017

26 Misr Insurance Company



Against others Q R 400 26/10/2016 26/10/2017

27 Doha Takaful Company


07/50/2016/015634

07/50/201

6/015634

Vehicles insurance Q R 800 30/10/2016 29/10/2017

28Qatar Insurance Company



Third Party Liability + vehicle body QR 54,000

- 14/07/2016 13/07/2017

Source: The Company

The insurance coverage currently available to the Company and its subsidiaries through the insurance policies mentioned above is sufficient to cover the risks related to the Company’s property and business from a commercial perspective and in accordance with current insurance standards in the Kingdom.

11-8 The Company’s real estate assetsThe Company owns either directly or through its subsidiary Real Estate as follows:

Table (144): Directly or indirectly owned assets by the Company

Deed Number Deed date Registered Owner Location Area (m2)

Purchase value record-

ed in the instrument

Current Usage

Value of additions

1 410115032298 19/5/1434The Company (Issuer)

Al - Zahra neighbor-hood - Riyadh

1,550.38 SAR 3,587,500 Villa SAR

211,540

2 8/9731 4/9/1424The Company (Issuer)

Al-Kharj Road - Kilo 27 - Riyadh

30,000 SAR 11,900,000

Residential Compound, storage and production yards

SAR 2,743,199

3 310106029462 19/5/1434The Company (Issuer)

Al Malaz - Riyadh 520 SAR 624,000 Empty land -

4 29 27/3/1430HThe Company (Issuer)

Al Kharj - Riyadh 61,250 SAR 612,500

Residential Compound and storage

SAR 20,612,596

5 28 27/3/1430HThe Company (Issuer)

Al Kharj - Riyadh 61,250 SAR 600,000

180

Deed Number Deed date Registered Owner Location Area (m2)

Purchase value record-

ed in the instrument

Current Usage

Value of additions

6 41/383/B/1403 41/383/B/1403The Company (Issuer)

Jeddah 820.5 SAR 100,000

Residential Compound

SAR 589,395


Jeddah 820.5 SAR 100,000


Jeddah 600 SAR 75,000


Jeddah 600 SAR 75,000

10 22905/15 20/6/1424 Ali Sultan Industrial Climate 2,660 SAR

*5,000,000

Land on which there is a factory construction

-

11 613-765 22/4/2013Awazel In-ternational.(AEU)

Ras Al Khor, Dubai 3,088.14 AED

8,808,628

Land on which there are offices and shops

AED 20,523,881

12 613-764 22/4/2013Awazel In-ternational.(AEU)

Ras Al Khor, Dubai 2,553.48 AED

6,184,022

Land on which there are ware-houses

AED 4,756,730

Source: The Company

* Constitute the amount of the purchase from Ali Al-Sultan registered in the Company’s books

11-9 Agreements with related partiesThe Company entered into the following agreements with related parties. The Ordinary General Meeting of the Company approved on 15/10/1437H (corresponding to 20/7/2016) the following agreements:

Table (145): Summary of related parties’ agreements as at 31 March 2017 (SAR)

Party Shareholder abstain from voting Subject Remarks Transaction

amount

1 Awazel Indonesia Naser Ali Al Suqair Supply of finished ma-terials

Firas Ali Al- Suqair owns a stake in Awazel Indonesia 0

2 Zamil Saudi Arabia *

Jamal Abdulrahman Al Zamil

The Company sells its products to his company

Jamal al-Zamil owns a stake in Awazel, and the sale is done with-out preferential prices

971,214

3 Quick contraindi-cations * Naser Ali Al Suqair The Company sells its

products to his company

Firas Ali Al- Suqair owns a stake in Mawane’ Al-Sarea’ah Company, and the sale is done without pref-erential prices

375,309

4Advanced Compa-ny for Membrane Industry

Ibrahim Ali Al Suqair

Firas Ali Al Suqair

Mansour Ali Al Suqair

Purchase a production line

All of them are owners of Kalkal, which owns 10% of the Advanced Membrane Manufacturing Com-pany

119,328

5 Ozorex BahrainIbrahim Ali Al Suqair

Mansour Ali Al Suqair

License agreement to use technical knowledge

Ibrahim Ali Al- Suqair and Mansour Ali Al- Suqair, owners of Ozorex Bahrain

0

6 Awazel Interna-tional (AEU) Naser Ali Al Suqair Supply of primer to the

Company

Firas Ali Al- Suqair owns a stake in PetroTrade Company -UAE, which supplies primer to the Company

1,235,754

7 Awazel Kuwait for Building Materials Naser Ali Al Suqair Supply of primer to the

Company


807,366

181

Party Shareholder abstain from voting Subject Remarks Transaction

amount

8 Awazel Interna-tional Qatar Naser Ali Al Suqair Supply of primer to the

Company


1,166,454

9 Rital Training Academy Naser Ali Al Suqair Training contract Firas Ali Al-Suqair owns Retal

Training Academy 676,000

Total 5,351,425Source: The Company

11-10 Trade Marks

Company’s Logo

The Company has registered the logo of Arabian Waterproofing Industries Co. (Awazel) - a Saudi joint stock company (as indicated above in its name with the Ministry of Commerce and Investment under the Ministry’s No. 85/1027, category 2 and No. 86/1027, category 19. The trademark license for the logo expires on 09/10/1438H (corresponding to 03/07/2017G). Registration may be renewed for similar periods in accordance with applicable regulations. The name and trademarks registered in the name of the Company support its work and help to differentiate it in the market clearly for both customers and suppliers. The competitive position of the Company depends on several factors, including the ability to continue using its trademark to provide its services in the sector in which it operates, and protecting its associated rights from any illegal use.

11-11 Lawsuits, Claims and Statutory ProceduresThe Company filed a lawsuit against Saudi Customs Authority demanding a financial claim amounting to eighty nine million five hundred and sixty five thousand and eighty six Saudi Riyals (SAR 89,565,086), which constitutes export duties on the Company products exported abroad. The Company requires to recover this amount on the basis of incorrect estimate and imposition of duties on the Company. The decision of the Appeal Customs Committee was issued at the end of July 2017 by rejecting the appeal.

The members of the Board of Directors declare that there are no actual or potential legal disputes, cases, complaints or investigation procedures that may have material and significant impact on the Company, collectively or individually. The Company is not aware of any material disputes currently foreseen or potential, or facts that may result, collectively or individually, an imminent risk of a material dispute other than those mentioned in this Prospectus.

11-12 Description of Shares

11-12-1 Share CapitalThe Company’s nominal issued and paid up capital is SAR 272,999,780 divided into 27,299,978 Shares, with an equal nominal value of SAR 10 each, all of which are ordinary shares.

11-12-2 SharesThe Shares shall be nominal shares, and may not be issued at less than their nominal value. However, the Shares may be issued at a value higher than their nominal value, in which case the difference in value shall be added as a separate item in Shareholders Equity, and may not be distributed as dividends to the Shareholders. A Share shall not be indivisible vis-à-vis the Company. In the event that a Share is owned by several persons, they shall select one person from amongst themselves to exercise, on their behalf, the rights pertaining to such Share, and they shall be jointly responsible for the obligations arising from the ownership of such Share.

182

11-12-3 Re-purchase of SharesPursuant to Article 112 of the Companies’ Regulations, the Company shall not purchase or mortgage its Shares, except in the following cases:

1- The Company may purchase or pledge its Shares in accordance with the measures imposed by the competent authority. Shares held by the Company shall not have any votes at the Assemblies of the Shareholders.

2- Shares may be mortgaged in accordance with the measures imposed by the competent authority. The mortgagee creditor may receive profits and exercise the rights attached to such Shares unless the mortgage contract provides otherwise. The mortgagee creditor may not attend the meetings of the General Assembly of the Shareholders or vote thereat.

11-12-4 General AssemblyA General Assembly duly convened shall be deemed to represent all the Shareholders, and shall be held in the city where the Company’s head office is located. Any Shareholder, regardless of the Shares he holds, has the right to attend the constituent General Assembly, whether in person or by proxy. Each shareholder has the right to attend the General Shareholders Assembly, and may authorise in writing another Shareholder, other than the Directors or Company employees, to attend the General Assembly on his behalf.

Except for matters falling within the jurisdiction of the Extraordinary General Assembly, the Ordinary General Assembly shall be competent to deal with all other matters related to the Company and shall be convened at least once a year during the first six months following the end of the Company’s financial year. Other Ordinary General Assembly meetings may be called upon when necessary. The meeting of the Ordinary General Meeting shall be valid only if attended by shareholders representing at least half of the capital. If such quorum is not available at the meeting, a second meeting shall be convened during the thirty days following the previous meeting. The invitation shall be announced in the manner provided for in Article 29 of the Company By-Laws The second meeting shall be valid regardless of the number of shares represented therein.

The Extraordinary General Assembly shall be competent to amend the provisions of the By-Laws, to the extent permitted under the law. Furthermore, the Extraordinary General Assembly shall be empowered to adopt resolutions in matters within the jurisdiction of the Ordinary General Assembly under the same conditions and manners as prescribed for the latter. The meeting of the Extraordinary General Assembly shall not be valid unless attended by shareholders representing at least two thirds of the capital. If such quorum is not available at the first meeting, a second meeting shall be convened in the same manner as stated in the preceding paragraph. The second meeting shall be valid if attended by a number of shareholders representing at least 40% of the capital.

11-12-5 Voting RightsEach Shareholder shall have a vote for every Share represented by him in the General Assembly meeting. Votes at the meetings of the Ordinary General Assembly and the Extraordinary General Assembly shall be computed based on the number of Shares represented at the meeting. However, no shareholder, by proxy or in person or together, shall have a number of votes exceeding 20% of the total shares of the Company in respect of the resolutions of the General Assembly of the Company relating to the appointment and dismissal of members of the Board of Directors, auditors and amend the Company’s By-Laws.

Resolutions of the Ordinary General Assembly shall be adopted by majority vote. Resolutions of the Extraordinary General Assembly shall be adopted by a majority vote of two-thirds of the Shares represented at the meeting. However, if the resolution to be adopted is related to increasing or reducing the capital, extending the Company’s term, dissolving the Company prior to the expiry of the term specified under the By-Laws or merging the Company with another company or establishment, then such resolution shall be valid only if adopted by a majority vote of three-quarters of the Shares represented at the meeting.

11-12-6 Approvals required amend voting rightsEach shareholder shall have one vote for each share he represents in the General Assembly. Votes shall be counted in ordinary and Extraordinary general assemblies on the basis of one vote per share. This right shall be amended only by a decision of the Extraordinary General Assembly which shall be adopted by a two-thirds majority of the members.

11-12-7 Term of the CompanyThe term of the Company shall be 99 years commencing from the date of issue of the resolution of the Minister of Commerce and Investment announcing the Company’s transformation into a goint stock company on 26/01/1426H (corresponding to 07/03/2005G). The term of the Company may always be extended by a resolution issued by the Extraordinary General Assembly at least one year prior to the expiration of its term.

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11-12-8 Dissolution and Liquidation of the CompanyUpon the expiry of the Company’s term, or if it is dissolved prior to the time set for the expiry thereof, the Extraordinary General Assembly shall, based on the proposal of the Board of Directors, decide the method of liquidation, appoint one or more liquidators and specify their powers and fees. The powers of the Board of Directors shall cease upon the Company’s dissolution. However, the Board of Directors shall remain responsible for the management of the Company until the liquidators are appointed. The Company’s departments shall maintain their powers to the extent that they do not interfere with the powers of the liquidators.

11-13 The participation of Directors in other companies that perform similar or competitive business for the Company

Table (146): Summary of Directors’ Statements who hold other positions or have direct shareholding in companies conducting similar business or that may compete with the Company’s business

Related Company

Capacity of the director in the related company

Nature of related company’s business

Does it compete with the Company’s

businessBoard

member / Executive

Owner (direct ownership)

Ibrahim Ali Ibrahim Al Suqair

Arabian Lemar Company for Investment and Real Estate Development Manager Partner investment and real estate

development No

Kalkal National Company for building materials Partner Establish factories and wholesale

in building materials No

Inmaeyah Investment and Real Estate Development Company (TDIC)

Board Member Partner

Land ownership, development, and construction of residential, commercial and recreational buildings

No

Ozorex International Company Manager PartnerProcessing oils, processing and packaging of all derivatives of asphalt

No

Kuwait Waterproofing (Awazel) Compa-ny for Building Materials Acting Partner

Building materials trading, marketing materials of Awazel Company

No

International Waterproofing (Awazel) Co Acting Partner Building materials trading, marketing materials of Awazel Company

No

Retem Hydraulic Equipment Mainte-nance Company Manager Partner Maintenance of hydraulic

equipment No

Source: The Company

Related Company




businessBoard

member / Executive


Walid Sulaiman Abdulmohsen Abanami

Inmaia Investment and Real Estate and Tourism Development Company

Member of the Board Partner

Land ownership, development, and construction of residential, commercial and recreational buildings

No

Source: The Company

Related Company




businessBoard

member / Executive


Turki Naser Mohammed Al Motawwaa Al Otaibi

184

Samama Holding Company Member of the Board Partner Contracting and Investments No

Related Company




businessBoard

member / Executive


Tarek Mutlaq Abdullah Al Mutlaq

Al Mutlaq Group Company Managing Director

A company operating in the field of commercial, industrial and real estate

No

Arabian Water and Energy Projects Com-pany, Aqua Power

Non-Executive

A company operating in the water desalination sector No

Riyadh Cable Company Board Member

A company operating in cables production No

Saudi Arabian Daikin Company Board Chairman

A company operating in im-porting and exporting house-hold, electrical and electronic appliances

No

Al Mutlaq Real Estate Investment Company

Board Chairman

A company operating in real estate investment No

Related Company




businessBoard

member / Executive


Naser Ali Ibrahim Al Suqair

Retem Hydraulic Equipment Mainte-nance Company Partner Maintenance of hydraulic

equipment No

Related Company




businessBoard

member / Executive


Mohammed Abdulaziz Ali Bahar

Boubyan Plastic Industries Company Board Chairman Manufacture of plastic products No

Kuwaiti Olefins Company Board Member Manufacture of olefins No

Al Jubail Integrated Packing Company Board Chairman Manufacture of plastic products No

Nama Chemicals Company Board Member

Manufacturing of intermediate chemicals No

Related Company




businessBoard

member / Executive


Firas Ali Ibrahim Al Suqair

Kuwait Waterproofing (Awazel) Compa-ny for Building Materials Manager


No

International Waterproofing (Awazel) Company Qatar Manager


No

185

Related Company




businessBoard

member / Executive


Advanced Company for Membrane Industry Manager Production of plastic films and

thermal insulation

No

This company is a subsidiary and therefore is not sub-ject to the concept of competition as it supports the Com-pany’s business

Related Company

Capacity of the director in the related company Nature of related company’s

business

Does it compete with the

Company’s business

Board member / Executive


Jamal Abdulrahman Abdullah Al Zamil

Al Zamil Company for Industry, Trade and Transport

Member of the Board of Directors and Chairman of the Executive Committee

Wholesale and retail trade, water and thermal insulation contrac-tors, water tanks manufacturing and floor coverings

No

Related Company Capacity of the director in the related company



businessBoard

member / Executive


Mansour Ali Ibrahim Al Suqair

Lemar Arabian Company for Investment and Real Estate Development Partner Investment and Real Estate

Development, No

Afa el International Trading Company General Manager Partner Commercial and Industrial No

Kalkal National Company for building materials Partner Construction of factories and

wholesale of building materials No

Ozorex International – Company, Bahrain Manager PartnerProcessing oils, processing and packaging of all derivatives of asphalt

No

Retem Hydraulic Equipment Mainte-nance Company Partner Hydraulic Equipment Mainte-

nance No

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12. Underwriting

12-1 Name and address of UnderwriterRiyadh Capital has undertaken, under the Underwriting Agreement with the Company and the Selling Shareholders, to underwrite in full the shares offered for subscription amounting to eight million one hundred and eighty nine thousand nine hundred and ninety four (8,189,994) Ordinary Shares, representing all of the shares offered for subscription at an Offer Price of SAR [••] per share

Riyad Capital Company


P.O. Box 21116, Riyadh 11475


Tel: +966 (11) 486 5695

Fax: +966 (11) 2826823

Websitewww.riyadcapital.com


12-2 Summary of Underwriting AgreementUnder the terms of the Underwriting Agreement:

a- The Selling Shareholders undertake to the Underwriters that, on the first business day after the CMA approves the allocation of the Offer Shares following the end of the Subscription Period, they will:

� sell and allocate the Offer Shares to Subscribers/Investors whose subscription application for Offer Shares has been accepted by Selling Agents; and/or

� sell and allocate to the Underwriters any Offer Shares that are not purchased by Individual Investors or Institutional Investors pursuant to the terms of the Offering; and

b- The Underwriter undertakes to the Selling Shareholders that, on the Allocation Date, it will purchase any Offer Shares that are not subscribed for by Individual Investors or Institutional Investors. The Company and the Selling Shareholders undertake to the Underwriter that they are committed to all terms indicated in this Prospectus and conditions of the Underwriting Agreement.

c- A fee shall be paid to the Underwriter against its undertaking to underwrite the Offer Shares. This fee represents a specified percentage of the of the Offering total proceeds.

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13. IPO ExpensesThe Selling Shareholders will bear all costs relating to the IPO, which is expected to reach about SAR [••]. Such expenses will be deducted from the total Offering Proceeds amounting to SAR [••] million. Offering expenses include fees of the Financial Advisor, Legal Advisor to the Offering, Financial Due Diligence Consultant,, underwriting expenses, Selling Agents’ expenses, marketing, printing and distribution expenses, in addition to other Offering related expenses.

Notably, the Company will not bear any of the expenses related to the Offering, but they will be deducted from the Offering Proceeds. The Selling Shareholders will pay all subscription fees incurred by the Company immediately upon completion of the IPO process.

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14. ExemptionsThe Company or the Financial Advisor has not submitted any request to CMA to be exempted from any requirements stipulated in the Listing Rules.

189

15. Subscription Terms and ConditionsAn application for admission and listing of the Shares has been submitted to CMA, in accordance with the Listing Rules. All Subscribers must carefully read the subscription terms and conditions prior to completing the Subscription Application Form, since signing the Subscription Application Form constitutes acceptance and agreement to the subscription terms and conditions.

15-1 Subscription to Offer SharesThe Initial Public Offering of eight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Ordinary Shares with a fully paid nominal value of ten Saudi Riyals (SAR 10) per share and at an offer price of SAR ([•]) each, representing thirty percent (30%) of the issued share capital of the Company, is directed at and may be accepted by two tranches of investors:

15-1-1 Tranche (A): Institutional Investors This Tranche is consisting of a number of institutions and companies including investment funds, qualified foreign financial institutions, and Gulf investors with legal personality (see Section 1, Definitions and Abbreviations). The number of Offer Shares to be allocated to Institutional Investors is 8,189,994 representing 100% of the Offer Shares. In the event that Individual Investors demonstrate sufficient demand of Offered Shares, the Institutional Bookrunner has the right, subject to the Capital Market Authority’s consent, to reduce the number of Offer Shares allocated to Institutional Investors to 6,551,995 Shares, representing up to 80% of the Offer Shares. Eighty percent (80%) of the Tranche (A) Offer Shares are to be allocated to investment funds, which percentage shall be subject to adjustment, in the event that other institutions, excluding investment funds, do not fully subscribe to the remaining twenty percent (20%) of the Offer Shares allocated to them, or in the event that the mutual funds do not subscribe to the full portion allocated to them (80%).

15-1-2 Tranche (B): Individual Investors This Tranche is including Saudi Arabian natural persons, including Saudi women who are divorced or widowed and who have children by a non-Saudi husband who may subscribe to Offer Shares in the name(s) of any of those children who are minors for her benefit provided that any such woman provides evidence that she is the child’s mother and that she is widowed or divorced, in addition to GCC natural investors (collectively “Individual Investors” and severally an “Individual Investor”). The subscription by a person in the name of his divorced wife shall be deemed invalid and in such cases, the relevant regulations shall be enforced against that person. A maximum of (1,637,999) Shares representing up to 20% of the Offer Shares shall be allocated to Individual Investors. If the Individual Investors do not subscribe to the full amount of Offered Shares allocated to them, the Bookrunner may, subject to the CMA’s consent, reduce the number of Offered Shares to match the number actually subscribed to by the Individual Investors.

15-1-3 Bookbuilding process for Institutional InvestorsThe price range upon which the Book for Institutional Investors will be determined by the Bookrunner and the Company.

The Institutional Investors must submit an irrevocable subscription order (application) in order to purchase the specified number of Offer Shares, together with a financial obligation before determining the Offer price, which will take place before the start of offering period. The number of Shares to be subscribed to by each Institutional Investor shall not be less than (100,000) Ordinary Shares, and the number of Shares requested shall be subject to allocation. The Institutional Investors Bookrunner shall notify the Institutional Investors concerning the Offer Price and number of Offer Shares allocated primarily to them. The Subscription of Institutional Investors shall begin during the Subscription period, which also includes Individual Investors, as per the Subscription Terms and Instructions detailed in the Subscription Application Forms.

Having completed the Book-building process for Institutional Investors, the Bookrunner shall declare the percentage of coverage percentage by the Institutional Investors.

The Bookrunner and the Company shall have the power to determine the Offer Price according to supply and demand, provided that it does not exceed the prices specified in the Underwriting Agreement, and that investment funds subscribe to the percentage set out in the Prospectus.

15-1-4 Subscription by Individual InvestorsEvery Individual Subscriber must subscribe to a minimum number of(10), and no more than (250,000). No change or withdrawal of the Subscription Application Forms shall be permitted after delivery.

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15-1-5 Subscription Application FormsSubscription Application Forms will be available during the Offering Period at the branches of the Selling Agents. Applicationws should be filled as per relevant instructions below. Subscription may also be made through the Internet, banking phone or ATMs at any of the Selling Agents, which offer such services to the subscribers provided that the following requirements are satisfied:

1- the subscriber must have a bank account at the Selling Agents which offer such services; and

2- there should have been no changes in the personal information of the Subscriber since he has participated in a recent subscription.

Once submitted, a Subscription Application Form shall represent a legally binding contract between the applicant and the Company.

Subscribers can obtain a copy of this Prospectus and Subscription Application Forms from the following recipient branches (or through the websites of Receiving Agents providing such a service):

Receiving Agents

Riyad Bank

King Abdul-Aziz Road

P.O. Box 22622, Riyadh 11614


Tel: +966 (11) 401 3030

Fax: +966 (11) 404 2618

Website: www.riyadhbank.com





Saudi Arabia

Tel: 966 (11) 405 0677

Fax: 966 (11) 405 0660



Samba Financial Group, Main branch

King Abdulaziz Road - Riyadh


Saudi Arabia

Tel: +966 (11) 477 4770

Fax: +966 (11) 479 9402

Website: www.samba.com


Al Rajhi Bank

Olaya Road



Tel: +966 (11) 2116000

Fax: +966 (11) 4600705

Website: www.alrajhibank.com.sa


Banque Saudi Fransi

Ma’ather Road

P.O. Box: 56006, Riyadh 11554


Tel.: +996 (11) 4042222

Fax: +966 (11) 4042311


Website: www.alfransi.com.sa

191

The Selling Agents will commence receiving Subscription Application Forms at their branches throughout Saudi Arabia commencing from 10/02/1439H (corresponding to 30/10/2017G) to 16/02/1439H (corresponding to 05/11/2017G). Once the Subscription Application Form is signed and submitted, the Selling Agents will stamp it and provide the Subscriber with a copy of the completed Subscription Application Form. In the event that the information provided in the Subscription Application Form is incomplete or inaccurate, or not stamped by the Selling Agents, the Subscription Application Form will be considered void. The Subscriber may not then claim any compensation for any damage sustained from the cancellation.

Each Subscriber is required to specify the number of Offer Shares applied for in the Subscription Application Form, so that the total subscription amount is the outcome of multiplying the number of requested shares by the Offer Price which is SAR [••] per share.

Subscriptions for less than (10) Offer Shares or fractional numbers will not be accepted. Increments are to be made in multiples of this number. The maximum number of subscription will be (250,000) Offer Shares.

The Subscription Application Form must be submitted together with the following documents, as applicable, and the Selling Agents shall match the copy of each document with the original document and then return the original documents to the Subscriber.

a- original and copy of the Subscriber’s national identification card (in case of individuals);

b- original and copy of the Subscriber’s national identification card (in case of GCC individuals);

c- original and copy of the family identification card (issued in favor of the person submitting the Subscription Application Form on behalf of family members);

d- original and copy of a power of attorney (for orphans);

e- original and copy of certificate of guardianship (for orphans);

f- original and copy of the divorce deed (in the case of minor children of a Saudi woman who is divorced);

g- original and copy of the death certificate (in the case of minor children of a Saudi woman who is widowed); and

h- original and copy of the birth certificate (in the case of a Saudi woman who is widowed or divorced).

In the event that a Subscription Application Form is made on behalf of an Individual Subscriber (parents and children only), a statement that “the person’s name signing the application is authorized to act on behalf of the Subscriber” should be inserted in the Subscription Application Form, which shall be accompanied by a power of attorney supporting such person’s authority to act on the behalf of the Subscriber. The power of attorney must be issued before a notary public for those who are in Saudi Arabia, while those who reside abroad must legalize the power of attorney through a Saudi embassy or consulate in the relevant country where they reside outside Saudi Arabia. The relevant staff in the Receiving Agent must match copies with the originals and return originals to the subscriber.

One Subscription Application Form should be completed for each head of family applying for himself and members appearing on his family identification card if dependent subscribers apply for the same number of Offer Shares as the prime Subscriber. In this case:

(i) all Offer Shares allocated to the prime Subscriber and dependent subscribers will be registered in the prime Subscriber’s name;

(ii) the prime Subscriber will receive any refund in respect of amounts not allocated and paid for by himself and dependent subscribers; and

(iii) the prime Subscriber will receive all dividends distributed in respect of the Offer Shares allocated to himself and the dependent subscribers (in the event the Shares are not sold or transferred).

Separate Subscription Application Forms must be used if:

(i) The Offer Shares that will be allocated are to be registered in a name other than the name of the prime Subscriber/head;

(ii) Dependent Subscribers wish to apply for a different number of Offer Shares than the prime Subscriber; and

(iii) A wife subscribes for Offer Shares in her name and to her account (in which case she must complete a separate Subscription Application Form as a prime Subscriber). In the latter case, the Subscription Application Forms made by husbands on behalf of their spouses will be cancelled and the independent application of the wives will be processed by the Selling Agent.

Saudi women who are divorced or widowed and who have children by a non-Saudi husband may subscribe for Offer Shares in the name(s) of any of those children who are minors for her benefit providing that she introduce evident to prove that she is their mother. The subscription by a person in the name of his divorced wife shall be deemed invalid and in such cases, the relevant regulations shall be enforced against that person.

During the Offering Period, only a valid Iqama will be an acceptable form of identification for non-Saudi dependents. Passports or birth certificates will not be accepted. Non Saudi dependents can only be included as dependents with their mother and cannot subscribe as Prime Subscribers. The maximum age for non-Saudi dependents to be included with their mother is 18. Any documents issued by a foreign Government must be notarized (attested) by a Saudi consulate or embassy in the relevant country.

192

Each Subscriber agrees to subscribe for and purchase the number of Offer Shares specified in the Subscription Application Form submitted by the Subscriber for an amount equal to the number of Offer Shares applied for multiplied by the Offer Price SAR [••] per share. Each Subscriber shall be deemed to have purchased the number of Offer Shares allotted to him/her upon:

a- delivery by the Subscriber of the completed Subscription Application Form to the Selling Agents;

b- payment in full by the Subscriber to the Selling Agents of the total value of Offer Shares subscribed for; and

c- delivery to the Subscriber by the Selling Agents the allotment letter specifying the number of Offer Shares allotted to him/her.

The total value of the Offer Shares subscribed for must be paid in full to a branch of the Selling Agents by the Subscriber authorizing a debit of its account held with the Selling Agent where the Subscription Application Form is being submitted.

If a submitted Subscription Application Form is not in compliance with the terms and conditions of the Offering, the Company shall have the right to reject, in full or in part, such an application. The Subscriber shall accept any number of Offer Shares allocated to him/her, as long as the number does not exceed the number of Offer Shares he has subscribed for.

15-2 Allocation and RefundsThe Selling Agents shall open and operate an escrow account named “Arabian Waterproofing Industrial Company IPO”. Each of the Selling Agents shall deposit all amount received by the Subscribers into the escrow accounts mentioned above.

The Receiving Agents will send notifications to the Subscribers to inform them of the final number of the Offer Shares allocated thereto, along with the amounts that will be refunded. Excess Subscription monies, if any, will be refunded to the Subscribers without any charge or withholding, and will be deposited to the relevant Receiving Agent in the Subscriber’s account. Notification of the final allocation and refund of Subscription monies will be made no later than 23/02/1439H (corresponding to 12/11/2017G). (For more details, refer to Section ‘Key Dates and Subscription Procedures’ page (xiv) and Section (12) (“Subscription Terms and Conditions”). For more details, the Subscriber may communicate with the Receiving Agent branch to which he/she submitted the Subscription Application Form.

15-2-1 Allocation of Offer Shares to Institutional InvestorsAfter the allocation of the Offer Shares to Individual Investors, the Institutional Bookrunner will, at it’s discretion, allocate the Offer Shares to the Institutional Investors, provided that the Offer Shares allocated to the Institutional Investors shall not be fewer than 6,551,995 Ordinary Shares representing (80%)of the Offer Shares. (80%) of the Shares of this Tranche will be allocated to investment funds, and such percentage shall be subject to the level of demand on the Offer Shares by the investment funds, and such percentage shall be subject to amendment in the event that: (a) Other Institutional Investors (except for investment funds) do not subscribe to the entire remaining (20%) or (b) demand for Offer Shares by investment funds is less than(80%).

15-2-2 Allocation of Offer Shares to Individual InvestorsThe minimum allocation to each Individual Investor shall be 10 Shares. The remaining Offer Shares, if any, will be allocated on proportional basis. If the number of Individual Investors exceeds [••], allocation of a minimum of 10 Shares cannot be guaranteed. In the event that the number of Individual Investors exceeds [••], the Offer Shares shall be allocated as per the instructions of the Company and Lead Manager. Excess subscription monies (if any) will be refunded to the subscribers without any charge or withholding by the Receiving Agents.

15-3 Times and Circumstances when Listing may be Suspended or Cancelled

15-3-1 Authority of Listing Suspension or CancellationThe CMA may at any time suspend or cancel the listing as it deems fit, in any of the following circumstances:

A- the CMA considers it necessary for the protection of investors or the maintenance of an orderly market.

B- the issuer fails, in a manner which the CMA considers material, to comply with the Capital Market Law and its Implementing Regulations, including a failure to pay on time any fees or fines due to the CMA.

C- the liquidity requirements set out in paragraph (a) of Article 13 of the Listing Rules are no longer met.

D- the CMA considers that the issuer does not have a sufficient level of operations or sufficient assets to warrant the continued trading of its securities on the Exchange.

E- the CMA considers that the issuer or its business is no longer suitable to warrant the continued listing of its securities on the Exchange.

F- the listing of securities of the foreign company in another financial market is suspended or canceled in case of dual listing of the securities.

193

Where a suspension of an issuer continues for six (6) months, without the issuer taking appropriate action to resume its trading, the CMA may cancel the listing. .

Upon an announcement of an Extraordinary General Assembly’s approval on a capital increase resulting in a reverse takeover, the issuer’s listing shall be cancelled. The issuer must submit a new application for registration and admission to listing in accordance with these Rules, should it wish to list its securities.

15-3-2 Voluntary Cancellation or Suspension of a ListingAn issuer whose securities have been admitted to listing may not suspend or cancel the listing of its securities on the Exchange without the prior approval of the CMA. The issuer must provide the following to the CMA:

A- Specific reasons for the request for the suspension or cancellation.

B- A copy of the announcement on the reason of cancellation.

C- A copy of the relevant documentation and a copy of each related communication to shareholders, If the cancellation is to take place as a result of a takeover or other corporate action by the issuer.

Once receiving approval from the CMA for the cancellation of listing, an issuer must obtain the consent of its Extraordinary General Assembly.

Where a suspension or cancellation is made at the issuer’s request, the issuer must announce as soon as possible the reason for the suspension or cancellation, the anticipated period of the suspension, the nature of the event resulting in the suspension or the cancellation which affects the issuer’s activities.

The CMA may accept or reject the request for suspension or cancellation in its discretion.

15-3-3 Temporary SuspensionAn issuer may request a temporary suspension upon the occurrence of an event during trading period which requires immediate disclosure under the Listing Rules, where the issuer cannot maintain the confidentiality of this information until the end of the trading period.

To enable the CMA to assess the need for the temporary suspension and the appropriate duration of suspension, the request must be supported by:

� Specific reasons for the request for the suspension and the duration of the requested suspension; and

� A copy of the announcement on the reason of cancellation, anticipated suspended period nature of event causing suspension.

Where a suspension is made at the issuer’s request, the issuer must announce, as soon as possibly practicable, the reason for suspension, the anticipated period of suspension, and the event affecting the issuer’s activities.

The CMA may accept or reject the request for suspension in its discretion.

The CMA may impose a temporary suspension without a request from the issuer where the CMA becomes aware of information or circumstances affecting the issuer’s activities which the CMA considers would be likely to interrupt the operation of the Exchange or the protection of investors. An issuer whose securities are subject to suspension must continue to comply with the Capital Markets Law and its Implementing Regulations.

The temporary suspension will be lifted following the elapse of the period referred to in the announcement specified in paragraph (3) of this Article, unless the CMA decides otherwise.

15-3-4 Lifting of SuspensionWhere a listing has been suspended, the lifting of such suspension will depend on:

� the events which led to the suspension have been sufficiently remedied, and the suspension is no longer necessary for the protection of investors.

� the issuer complying with any other conditions that the CMA may require.

The CMA may lift a suspension even where the issuer has not requested it.

15-3-5 Re-listing of Cancelled SecuritiesAn issuer is required to submit a new application for registration and admission to listing in order to re-list securities which have been cancelled.

194

15-4 Approvals and decisions under which shares are offeredThe resolutions and approvals under which the offering shares will be offered are as follows:

A- Board of Directors’ decision to issue shares for public subscription.

B- Extraordinary General Assembly’s approval.

C- Copy of CMA’s announcement regarding the approval of the Offering

15-5 Lock-up periodThe persons whose names are included in the Prospectus as Company Shareholders as indicated on page (32) of the Prospectus shall be restricted from disposing of their Shares for six (6) months starting from the date on which trading of the Offer Shares commences on Tadawul (“Lock-in Period”). After the expiry of this period, they may dispose of their Shares subject to the CMA’s prior consent.

15-6 Subscribers AcknowledgmentsBy completing and delivering the Subscription Application Form, the Subscriber:

A- agrees to subscribe to the Company’s Shares in the number of such Shares specified in the Subscription Application Form;

B- declares that he/she has read the Prospectus and understood all its contents;

C- accepts the Bylaws, all subscription instructions and terms mentioned in the Prospectus and Subscription Application Form and subscribe to the Shares accordingly;

D- declares that neither he/she nor any of his/her family members included in the Subscription Application Form has previously subscribed to Shares and that the Company has the right to reject all duplicate applications;

E- accepts the number of Shares allocated to him/her (within the limit of the subscribed amount as a maximum) according to the the Subscription Application Form

F- declares not to cancel or amend the Subscription Application Form after submitting it to the Receiving Agents; and

15-7 Shares Register and Transaction ArrangementsTadawul holds a register of shareholders containing their names, nationalities, addresses of residence, occupation, shares owned and the amounts paid for such shares.

15-8 Saudi Stock ExchangeIn 1990, full electronic trading in Saudi Arabian equities was introduced. Tadawul was founded in 2001G as the successor to the Securities Information System. Trading in shares occurs on the ‘Tadawul’ system through an integrated trading mechanism covering the entire trading process, from execution of the trade transaction through to settlement thereof. Trading is conducted on each business day at one go from 10 a.m. until 3:00 p.m., from Sunday to Thursday of every week, during which orders are executed. Beyond such times, orders are permitted to be inserted, amended, and cancelled from 9:30 a.m. until 10 a.m. Exchange times change in the holy month of Ramadan and such times are announced via Tadawul. Transactions are conducted through an automatic matching of orders. Each valid order shall be executed according to the price level. In general, market orders (orders made based on the best price) will be executed first, followed by the fixed price orders (orders made based on a fixed price), taking into consideration cases in which multiple orders are made for the same price and shall be executed first based on the time of entry. The Tadawul system distributes a comprehensive range of information through different channels, most notably the Tadawul website on the Internet and the electronic link to Tadawul’s information, which provides up-to-date market information for information providers such as Reuters. A transaction is automatically settled during the day, i.e. transfer of share ownership is directly performed after the transaction is concluded.

Listed companies must disclose all decisions, material and important information through Tadawul, which is responsible for monitoring the market in its capacity as the operator of the mechanism through which the market works in order to ensure the fairness and easy flow of share exchange.

15-9 Trading in the Company’s SharesIt is expected that trading in the Shares will commence on Tadawul after finalization of the allocation process and the announcement of the start date of trading by Tadawul. Dates and times included in this Prospectus are indicative and may be changed or extended subject to the approval of the CMA. Saudi nationals as well as non-Saudi individuals who are legal residents in the Kingdom, nationals of other GCC countries, companies, banks and Saudi and GCC funds, will be permitted

195

to trade in the Shares. Qualified Foreign Investors and approved QFI Clients will be permitted to trade in the Shares in accordance with Rules for Qualified Foreign Financial Institutions Investment in Listed Shares. Furthermore, non-Saudi natural persons who are not residents in the Kingdom and institutions incorporated outside the Kingdom are permitted to acquire an economic interest in the Shares by entering into a swap agreement with a person authorized by the CMA to acquire, hold and trade in shares on Tadawul on behalf of a Foreign Investor. Under such swap agreements, the Authorized Person will be the registered legal owner of such Shares.

Furthermore, Offer Shares can only be traded after all allocated Shares have been credited to Subscribers’ accounts on Tadawul, the Company has been registered in the Official List and its Shares listed on the Exchange. Pre-trading is strictly prohibited, and Subscribers entering into any pre-trading activities will be acting at their own risk. The Company shall have no legal responsibility in such an event.

15-10 MiscellaneousThe Subscription Application Form and all related terms, conditions and covenants hereof shall be binding upon and for the benefit of the parties to the subscription and their respective successors, permitted assignees, executors, administrators and heirs. Except as specifically contemplated herein, neither the Subscription Application Form nor any of the rights, interests or obligations arising pursuant thereto shall be assigned or delegated by any of the parties to the Subscription without the prior written consent of the other party.

These instructions, the conditions and the receipt of any Subscription Application Forms or related contracts shall be governed, construed and enforced in accordance with the laws of the Kingdom of Saudi Arabia.

This Prospectus has been issued in both Arabic and English. If any difference exists between the Arabic and English texts, the Arabic text shall prevail.

The distribution of this Prospectus or the sale of the Offer Shares to any person in any country other than the Kingdom is expressly prohibited. The Company, the Selling Shareholders, the Financial Advisor, the Lead Manager and the Underwriter require all recipients of this Prospectus to review and comply with all statutory restrictions relating to the Offer Shares.

196

16. Documents Available for InspectionThe following documents will be available for inspection at the Company’s head office at (Address), between 9:00 am to 5:00 pm 25/01/1439H (corresponding to 15/10/2017G) to 16/02/1439H (corresponding to 05/11/2017G) for two weeks before the Offering and during the subscription period, provided that the inspection period shall not be less than 20 days prior to the end of the Offering Period:

� CMA’s approval of the Initial Public Offering

� the Company’s Commercial Registration Certificate issued from the Ministry of Commerce and Investment;

� The Shareholders’ resolution to convert the Company from a limited liability company to a joint stock company;

� Ministerial Resolution No. 1247 issued on 26/01/1426H (corresponding to 07/03/2005G) announcing the conversion of the Company to a joint stock company.

� The Board’s resolution to Offer the Shares for IPO;

� The Company’s Bylaws, together with any amendments thereto;

� Valuation Report prepared by the Financial Advisor;

� The consolidated audited financial statements for the financial years ending on 31 March 2014G, 2015G, 2016G and 2017G as well as the audited financial statements for the affiliates.

� The Company’s consolidated audited financial statements for the financial year ending on 31 March 2017Gl prepared based on International Financial Reporting Standards.

� letters of consent from:

� The Financial Advisor, Lead Manager and Underwriter, Riyadh Capital, to the inclusion of their name and logo in the Prospectus;

� The Legal Advisor, Mohammed Aldhabaan & Partners in association with Eversheds Sutherland to the inclusion of their name and logo in the Prospectus;

� Market Study Advisor, Frost & Sullivan,, to the publication of their name and logo in the Prospectus;

� Due Diligence and Working Capital Consultant, KPMG – Al Fozan & Partners, to the inclusion of their name and logo in the Prospectus;

� The Auditors, PricewaterhouseCoopers and Ernest & Young, to the publication of their Accountant’s audit Report and the inclusion of their name and logo in the Prospectus;

� The Market Report prepared by Forest and Sullivan;

� Working capital report prepared by KPMG – Al Fozan & Partners;

� The Company agreements/contracts with related parties.

197

17. Consolidated Financial Statements and Audor’s Report

198

Arabian Waterproofing Industries Company and Its Subsidiaries(A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017

199

200


CONSOLIDATED BALANCE SHEETAs at 31 March 2017

Notes2017 2016

SR SR

ASSETS

CURRENT ASSETS

Cash and cash equivalents 4 137,040,864 129,664,059

Accounts receivable 5 151,422,832 137,369,818

Inventories 6 56,604,734 57,803,540

Prepayments and other receivables 7 18,144,079 17,476,097

TOTAL CURRENT ASSETS 363,212,509 342,313,514

NON-CURRENT ASSETS

Available-for-sale investments 8 23,593 24,838

Investment property 9 34,623,970 33,283,877

Property, plant and equipment 10 84,709,948 90,012,845

TOTAL NON-CURRENT ASSETS 119,357,511 123,321,560

TOTAL ASSETS 482,570,020 465,635,074

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable 11 8,327,982 11,004,841

Accrued expenses and other liabilities 12 30,535,831 40,913,456

Zakat payable 13 9,632,917 9,486,390

TOTAL CURRENT LIABILITIES 48,496,730 61,404,687

NON-CURRENT LIABILITY

Employees’ terminal benefits, net 14 11,158,570 8,815,444

TOTAL LIABILITIES 59,655,300 70,220,131

EQUITY

SHAREHOLDERS’ EQUITY

Share capital 16 272,999,780 272,999,780

Statutory reserve 17 16,093,517 8,774,283

Contractual reserve 18 75,192,437 67,873,203

Fair value reserve 767 2,012

Foreign currency translation reserve (294,818) (122,924)

Retained earnings 54,635,446 41,347,948

TOTAL SHAREHOLDERS’ EQUITY 418,627,129 390,874,302

Minority interests 19 4,287,591 4,540,641

TOTAL EQUITY 422,914,720 395,414,943

TOTAL LIABILITIES AND EQUITY 482,570,020 465,635,074

The attached notes 1 to 31 form part of these consolidated financial statements.

201


CONSOLIDATED STATEMENT OF INCOMEFor the year ended 31 March 2017

Notes2017 2016

SR SR

Sales 341,026,472 413,279,664

Cost of sales (214,970,606) (265,569,009)

GROSS PROFIT 126,055,866 147,710,655

EXPENSES

Selling and marketing expenses 20 (27,000,707) (26,611,972)

General and administrative expenses 21 (21,574,364) (23,615,561)

INCOME FROM MAIN OPERATIONS 77,480,795 97,483,122

Other income, net 22 4,871,238 5,511,591

INCOME BEFORE ZAKAT AND MINORITY INTERESTS 82,352,033 102,994,713

Zakat 13 (9,376,815) (9,371,595)

INCOME BEFORE MINORITY INTERESTS 72,975,218 93,623,118

Minority interests 19 217,126 (733,437)

NET INCOME FOR THE YEAR 73,192,344 92,889,681

EARNINGS PER SHARE

Attributable to income from main operations 23 2.84 3.57

Attributable to net income for the year 23 2.68 3.40

The attached notes 1 to 31 form part of these consolidated financial statements.

202


CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 March 2017

Notes2017 2016

SR SR

OPERATING ACTIVITIES

Income before zakat 82,352,033 102,994,713

Adjustments for:

Provision for doubtful debts, net 5 2,456,038 2,493,044

Reversal of slow moving inventory, net 6 (1,135,734) (31,827)

Provision for employee termination benefits 14 2,562,069 2,035,867

Depreciation on property, plant and equipment 10 9,341,722 10,579,352

Depreciation on investment property 9 547,572 -

Gain on disposal of property, plant and equipment 22 (199,668) (169,130)

95,924,032 117,902,019

Changes in operating assets and liabilities:

Accounts receivable (16,509,052) (7,522,275)

Inventories 2,334,540 4,101,867

Prepayments and other current assets (667,982) 6,378,185

Accounts payable (2,676,859) 1,065,682

Accrued expenses and other current liabilities (10,377,625) (7,568,886)

Net changes from operations 68,027,054 114,356,592

Zakat paid 13 (9,230,288) (7,287,100)

Employee termination benefits paid (218,943) (28,781)

Net cash from operating activities 58,577,823 107,040,711

INVESTING ACTIVITIES

Purchase of investment property 9 (1,887,665) -

Purchase of property, plant and equipment 10 (4,086,373) (19,186,704)

Proceeds from sale of property, plant and equipment 252,533 1,038,376

Net cash used in investing activities (5,721,505) (18,148,328)

FINANCING ACTIVITIES

Dividends paid 27 (43,679,964) (76,439,927)

Board members’ remuneration paid 29 (1,500,000) (1,500,000)

Cash used in financing activities (45,179,964) (77,939,927)

NET INCREASE IN CASH AND CASH EQUIVALENTS DURING THE YEAR 7,676,354 10,952,456

Cash and cash equivalents at the beginning of year 129,664,059 119,189,678

Effect of exchange rate changes in cash and cash equivalents (299,549) (478,075)

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4 137,040,864 129,664,059

SIGNIFICANT NON-CASH TRANSACTIONS:

Change in fair value of available for sale investments 8 (1,245) (7,220)

Transfer from property, plant and equipment to investment property 9 - 33,283,877

The attached notes 1 to 31 form part of these consolidated financial statements

203

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204


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2017

1. ACTIVITIESArabian Waterproofing Industries Company (the “Company”) is a Saudi joint stock company which was converted from a limited liability company on 15 Safar 1426H (corresponding to 25 March 2005). The Company commenced its operation on 14 Sha’aban 1401H (corresponding to 17 June 1981) under the Commercial Registration No. 1010039827. The Company has branches in Jeddah and Dammam under Commercial Registration No. 4030045288 and 2050020686, respectively.

The Company and its subsidiaries (collectively the “Group”) consists of the Company and its various foreign subsidiaries listed below. The Group is engaged in the manufacture of waterproofing products and heat insulation material and purchasing, processing and selling of stone and marble processing.

The accompanying consolidated financial statements include the financial statements of the Company and its following subsidiaries, operating under individual commercial registrations:

Subsidiary Country of incorporationEffective ownership as at 31 March

2017 2016

Awazel International Company, LLC UAE 99% 99%

Awazel Kuwait Company for Building Materials Kuwait 99% 99%

Awazel Qatar International Company Qatar 95% 95%

Awazel Indonesia International Company Indonesia See note 1.1 95%

Advanced Membrane Company for Industry Saudi Arabia 90% 90%

Al Sultan Contracting Trading Company Limited Saudi Arabia 80% 80%

Al Takamal Company for Marble Limited Saudi Arabia 80% 80%

1.1 During the current year, Awazel Indonesia International Company has been liquidated. The assets, liabilities and results of operations of the Indonesian subsidiary of the Group are not material to the Group and therefore have not been disclosed separately.

During the current year, the Company has made an in-principle decision to seek an initial public offering (IPO). The Board of Directors of the Company has approved the application to the related authorities to obtain an approval on offering 30% of the Company’s shares to public by way of an IPO.

As of the date of approval of these consolidated financial statements, the Company has submitted the prospectus for approval to Capital Market Authority for offering 30% of the Company’s shares to public by way of an IPO.

2. BASIS OF CONSOLIDATIONThese consolidated financial statements include the assets and liabilities and the results of operations of the Company and its subsidiaries (the “Group”) listed in note 1 above.

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies to obtain economic benefits generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given or liabilities incurred or assumed at the date of acquisition, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of identifiable net assets acquired is recorded as goodwill. Goodwill, if any, arising from acquisition of subsidiaries is reported under “intangible assets” in consolidated balance sheet. Goodwill is tested annually for impairment and carried at cost, net of any impairment losses, if any.

Subsidiaries’ financial statements for the same year are prepared using accounting policies consistent with those used by the Company.

205


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)At 31 March 2017

3.1 BASIS OF CONSOLIDATION (continued)Minority interests represent the portion of profit or loss and net assets that are not held by the Group and are presented separately in the consolidated statement of income and within equity in the consolidated balance sheet, separately from parent shareholders’ equity, if material.

All significant inter-company transactions have been eliminated on consolidation.

3.1 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. The consolidated financial statements have been prepared under the historical cost convention, as modified by measurement of available-for-sale investments at fair value, on an accrual basis of accounting and in compliance with accounting standards promulgated by the Saudi Organization for Certified Public Accountants. These policies have been consistently applied to all period presented, unless otherwise stated.

Cash and cash equivalentsCash and cash equivalents include cash in hand, bank balances and other short term highly liquid investments that are readily convertible into known amounts of cash and have maturities of three months or less from the date of acquisition.

Short-term depositsShort-term deposits include placements with banks and other short-term highly liquid investments with original maturities of three months or more but not more than one year from the purchase date.

Accounts receivableAccounts receivable are carried at original invoice amount less provision for doubtful debts. A provision against doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Such provisions are charged to consolidated income statement and reported under “selling and marketing expenses”. When an account receivable is uncollectible, it is written-off against the provision for doubtful accounts. Any subsequent recoveries of amounts previously written-off are credited in other income in the consolidated income statement.

InventoriesInventories are carried at the lower of cost or net realizable value. Cost is determined as follows:

Raw material purchase cost on a weighted average basis

Finished goods cost of direct materials and labour plus attributable overheads

Spare parts purchase price

Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

Available-for sale investmentsAvailable-for-sale investments principally consist of investments of less than 20% in the capital of other companies and investments in commission bearing instruments. These investments are included in non-current assets unless management intends to sell such investments within twelve months from the reporting date. These investments are initially recognized at cost and are subsequently re-measured at fair value at each reporting date as follows:

i- Fair values of quoted securities are based on available market prices at the reporting date; and

ii- Fair values of unquoted securities are based on a reasonable estimate determined by reference to the current market value of other similar quoted investment securities or is based on the expected discounted cash flows.

Cumulative adjustments arising from revaluation of these investments are reported as separate component of equity as fair value reserve until the investment is disposed.

206



3.1 SIGNIFICANT ACCOUNTING POLICIES (continued)

Available-for sale investments (continued)Where there is an objective evidence that investments may be impaired, the estimated recoverable amount of those investments is determined and any impairment loss for the difference between the recoverable amount and the carrying amount is recognized in the consolidated statement of income. In assessing impairment, expected future cash flows and other factors are taken into consideration.

Investment propertyProperty held to earn rentals or for capital appreciation or both, which is not occupied by the Group is classified as investment property. Investment property is recorded at historical cost, net of accumulated depreciation and impairment loss, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset’s carrying amount will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred. Land is not depreciated. Investment properties are depreciated on a straight line basis over their estimated useful lives.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment in value. Freehold lands and construction work in progress are not depreciated. The cost less estimated residual value of other items of property, plant and equipment is depreciated on a straight line basis over the estimated useful lives of the assets.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

Leasehold improvements are amortised on a straight-line basis over the shorter of the useful life of the improvements or the term of the lease.

Expenditure for repair and maintenance are charged to the consolidated statement of income. Betterments that increase the value or materially extend the life of the related assets are capitalized.

Impairment of non-current assetsNon-current assets other than goodwill, if any, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill, if any, is tested for impairment annually. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets are grouped at lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-current assets other than goodwill, if any, that suffered impairment are reviewed for possible reversal of impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined, had no impairment loss been recognized for the assets or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately in the consolidated income statement. Impairment losses recognized on goodwill are not reversible.

Accounts payableLiabilities are recognized for amounts to be paid for goods and services received, whether or not billed to the Group.

ProvisionsProvisions are recognized when the Group has a present legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

207




ZakatThe Group is subject to zakat in accordance with the regulations of the General Authority of Zakat and Tax (“GAZT”) in the Kingdom of Saudi Arabia. Provision for zakat of the Group, if any, is accrued and zakat is charged to the consolidated income statement. Additional amounts payable, if any, at the finalization of final assessments are accounted for when such amounts are determined.

The Company withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as required under Saudi Arabian Income Tax Law.

Employees’ terminal benefitsEmployees’ terminal benefits required by Saudi Arabian Labor Law are accrued by the Company and its Saudi Arabian subsidiaries and charged to the consolidated income statement. The liability is calculated; as the current value of the vested benefits to which the employee is entitled, should the employee leave at the reporting date. Termination payments are based on employees’ final salaries and allowances and their cumulative years of service, as stated in the laws of Saudi Arabia.

The foreign subsidiaries provide currently for employee termination and other benefits as required under the laws of their respective countries of domicile.

Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be reliably measured. Revenue from sale of goods is recognized when the rewards of ownership of the goods have passed to the buyer upon delivery. Revenue is shown net of discounts and after eliminating sales within the Group.

Selling and marketing and general and administrative expensesSelling and marketing and general and administrative expenses include direct and indirect costs not specifically part of production costs as required under generally accepted accounting standards. Allocations between selling and marketing, general and administrative expenses and production costs, when required, are made on a consistent basis.

DividendsDividends are recorded in the consolidated financial statements in the period in which they are approved by the Board of Directors based on the authority vested by the shareholders of the Company in the general assembly meeting.

Segment reporting

Business segment

A business segment is a group of assets, operations or entities:

i- engaged in revenue producing activities;

ii- for which results of its operations are continuously analyzed by management in order to make decisions related to resource allocation and performance assessment; and

iii- for which financial information is separately available.

Geographical segment

A geographical segment is group of assets, operations or entities engaged in revenue producing activities within a particular economic environment that are subject to risks and returns different from those operating in other economic environments.

Foreign currency translation

Reporting currency

These consolidated financial statements are presented in Saudi Riyals (SR) which is the reporting and functional currency of the Company.

208




Foreign currency translation (continued)

Transactions and balances

Transactions in foreign currencies are recorded in the functional currency at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated in the functional currency at the rate of exchange prevailing at the reporting date. All differences are taken to the consolidated income statement.

Subsidiary companies

The results and financial position of all the subsidiaries that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

i- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

ii- items of equity (except retained earnings) are translated at the rate prevailing on the acquisition date;

iii- income and expenses are translated at average exchange rates; and

iv- all resulting exchange differences are recognized as a separate component of equity.

3-2 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSThe preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the use of certain critical estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Provision for doubtful debts

A provision for impairment of accounts receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the accounts receivable is impaired.

Provision for inventory obsolescence

Provision for inventory obsolescence is maintained at a level considered adequate to provide for potential loss on inventory items. The level of allowance is determined and guided by the Group’s policy and other factors affecting the obsolescence of inventory items. An evaluation of inventories, designed to identify potential charges to provision, is performed on a continuous basis throughout the year. Management uses judgment based on the best available facts and circumstances, including but not limited to evaluation of individual inventory items’ future utilization. The amount and timing of recorded expenses for any period would therefore differ based on the judgments or estimates made. An increase in provision for inventory obsolescence would increase the Group’s recorded expenses and decrease current assets.

4. CASH AND CASH EQUIVALENTS2017 2016

SR SR

Deposits 70,000,000 -

Bank balances 66,040,570 128,661,444

Cash in hand 1,000,294 1,002,615

137,040,864 129,664,059

209



5. ACCOUNTS RECEIVABLE

2017 2016

SR SR

Trade receivables 160,194,292 144,033,183

Less: provision for doubtful debts (9,179,357) (6,953,433)

151,014,935 137,079,750

Due from related parties (note 15.2) 407,897 290,068

151,422,832 137,369,818

Movement in provision for doubtful debts is as follows:

2017 2016

SR SR

At beginning of the year 6,953,433 6,308,388

Charge for the year (note 20) 2,456,038 2,493,044

Written off (230,114) (1,847,999)

At the end of the year 9,179,357 6,953,433

6. INVENTORIES

2017 2016

SR SR

Raw materials 27,756,295 31,949,268

Finished products 25,637,711 22,876,498

Spare parts 6,779,618 7,126,094

Goods-in-transit 227,994 784,298

60,401,618 62,736,158

Less: provision for slow moving inventory (3,796,884) (4,932,618)

56,604,734 57,803,540

Movement in provision for slow moving inventory is as follows:

2017 2016

SR SR


Charge for the year 1,501,295 9,770,857

Reversal during the year (2,637,029) (9,802,684)

At the end of the year 3,796,884 4,932,618

210



7. PREPAYMENTS AND OTHER RECEIVABLES

2017 2016

SR SR

Staff receivable and others 14,593,931 16,506,215

Advances to suppliers 4,992,379 6,941,706

Prepayments 4,297,995 4,466,991

Margin on bank guarantees 558,869 408,910

Receivable on sludge lifting service 444,688 456,902

Others 6,285,987 2,046,609

Prepayments and other receivables, gross 31,173,849 30,827,333

Less: advance to employees (note 14) (13,029,770) (13,351,236)

18,144,079 17,476,097

8. AVAILABLE FOR SALE INVESTMENTS

2017 2016

SR SR

Quoted securities

At beginning of the year 24,838 32,058

Movement during the year (1,245) (7,220)

At end of the year 23,593 24,838

9. INVESTMENT PROPERTY

2017 2016

SR SR

Cost:

At beginning of the year 33,341,907 -

Additions during the year 1,887,665 -

Transfers from property, plant and equipment during the year - 33,341,907

At end of the year 35,229,572 33,341,907

Accumulated depreciation:

At beginning of the year (58,030) -

Depreciation charge for the year (547,572) -

Relating to transfer - (58,030)

At end of the year (605,602) (58,030)

Net book value at end of the year 34,623,970 33,283,877

211

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212



9.PROPERTY, PLANT AND EQUIPMENT (continued):The depreciation expense provided during the year has been allocated to the following

2017 2016

SR SR

Cost of sales 6,619,895 7,942,832

Selling and marketing expenses (note 20) 1,004,512 1,026,311

General and administrative expenses (note 21) 1,717,315 1,610,209

9,341,722 10,579,352

11. ACCOUNTS PAYABLE

2017 2016

SR SR

Trade payables 8,270,632 11,004,841

Due to a related party (note 15.2) 57,350 -

8,327,982 11,004,841

12. ACCRUED EXPENSES AND OTHER LIABILITIES

2017 2016

SR SR

Accrued custom duty on import (note 12.1) 14,926,877 21,681,786

Employee related accruals 9,063,540 10,939,446

Accrued sales commission 3,378,776 3,431,314

Accrued transportation charges 1,034,275 1,492,537

Retentions payables 998,734 234,079

Accrued professional fees 288,657 282,774

Accrued utilities expenses 251,033 547,190

Accrued sales incentive 200,000 1,860,601

Others 393,939 443,729

30,535,831 40,913,456

12.1 Accrued custom duty on importThis balance mainly represents custom duty accrued on import of raw materials which are subject to custom duty during prior years.

During the year, the Company has received a claim for SR 6,150,756 for the aforesaid balance from the Saudi Custom Authorities for which a bank guarantee was issued during the year.

213



13. ZAKAT PAYABLECharge for the year:The Group’s zakat charge for the year consists of current year provision of SR 9,376,815 (2016: SR 9,371,595).

Movement in the provision during the year:

2017 2016

SR SR



Payment during the year (9,230,288) (7,287,100)

At end of the year 9,632,917 9,486,390

Status of assessments:The Company has obtained zakat certificates from the General Authority of Zakat and Tax (the “GAZT”) up to 31 March 2016. The assessments up to the year 31 March 2011 have been finalised, whereas assessments from the year 31 March 2012 to 31 March 2016 have not yet been raised by the GAZT.

14. EMPLOYEES’ TERMINAL BENEFITS, NET

2017 2016

SR SR



Payments during the year (540,409) (28,781)

Employees’ terminal benefits, gross, as at 31 March 24,188,340 22,166,680

Less: advance to employees (note 7) (13,029,770) (13,351,236)

At end of the year 11,158,570 8,815,444

214



15. RELATED PARTY TRANSACTIONS AND BALANCESThe Group enters into certain transactions with related parties for which the terms and conditions are approved by the Group’s management.

15.1 Related party transactionsSignificant transactions with related parties in the ordinary course of business included in the consolidated financial statements are summarized below:

Related Party Nature of transactions

Amount of transactions

2017 2016

SR SR

Affiliates Sales 1,346,523 948,155

Royalty expense - 463,813

Purchases 3,209,574 2,494,585

Expenses 688,033 526,250

Senior management Remuneration 6,052,763 8,602,541

Board remuneration is disclosed in note 29 to these consolidated financial statements.

15.2 Related party balancesSignificant year end balances arising from transactions with related parties are as follows:

(i) Due from related parties:

2017 2016

SR SR

Al-Zamil Company 363,737 13,920

Mawana Fast Contracting and Establishment 44,160 276,148

407,897 290,068

(ii) Due to a related party:

2017 2016

SR SR

Bitutrade Industries Co. LLC 57,350 -

57,350 -

215



16. SHARE CAPITALThe share capital of the Company is divided into 27,299,978 shares of SR 10 each (31 March 2016: 27,299,978 of SR 10 each) owned by the following shareholders:

2017 2016

Number of Shares Number of Shares

Boubyan Petrochemical Company 5,672,036 5,672,036

Mr. Ibrahim Ali Al Sugair 1,837,547 1,837,547

Mrs. Hela Abdul Rahman Issa Al Remaiah 1,783,023 1,783,023

Samama Investment Company 1,736,949 1,736,949

Mr. Nasir Ali Al Sugair 1,663,740 1,663,740

Mr. Firas Ali Al Sugair 1,493,919 1,493,919

Mr. Mansour Ali Al Sugair 1,493,919 1,493,919

Mr. Sugair Ali Ibrahim Al Sugair 1,386,798 1,386,798

Other shareholders 10,232,047 10,232,047

27,299,978 27,299,978

The shareholders of the Company in their General Assembly meeting held on 29 September 2015 approved to increase the share capital of the Company from SR 181,999,810 to SR 272,999,780 through the transfer of SR 67,000,000 and SR 23,999,970 from statutory reserve and retained earnings, respectively.

17. STATUTORY RESERVEAs required by Saudi Arabian Regulations for Companies and Company’s by-laws, 10% of the income for the year (after zakat and income tax) has been transferred to the statutory reserve. The Group may resolve to discontinue such transfers when the reserve totals 50% of the share capital. The reserve is not available for distribution.

18. CONTRACTUAL RESERVEIn prior years, the Company established a contractual reserve by appropriation of 10%, 2.5% and 2.5% of net income for future dividend protection, research and development and product liability reserve respectively.

The Shareholders of the Company in the Annual General Assembly meeting held on 29 September 2015 restricted the transfer of accumulated research and development reserve to maximum 5% of the share capital of the Company.

Accordingly, the Company restricted transfer of net income to research and development related reserve only to the extent that it reaches 5% of the Company’s capital. In addition to above, the Company has transferred 10% of net income of the year to dividend reserve.

The Shareholders, in the aforementioned Annual General Meeting, also resolved to transfer full amount of product liability reserve to retained earnings. Accordingly, full amount of product liability reserve was transferred from contractual reserve to retained earnings and further transfer from retained earnings to contractual reserve for the purpose of product liability reserve was stopped. The contractual reserve will be used as per Board of Directors decision in the manner as stipulated in the Company’s By-laws.

216



19. MINORITY INTERESTSThis balance represents the share of the minority shareholders in the following consolidated subsidiaries:

Name of the entity

2017 2016

Total minority interests

Share in net (income)/ loss


Share in net (income)/

loss

SR SR SR SR

Al Sultan Contracting Trading Company Limited 2,236,776 102,012 2,458,788 (546,563)

Advanced Membrane Company for Industry 842,770 98,369 941,139 25,195

Al Takamal Company for Marble Limited 554,096 75,718 629,814 (109,814)

Awazel International Company, LLC 247,203 (42,828) 204,175 (54,782)

Awazel Kuwait Company for Building Materials 225,713 (25,080) 202,412 (24,048)

Awazel Qatar International Company 181,033 2,992 183,626 (50,961)

Awazel Indonesia International Company - 5,943 (79,313) 27,536

4,287,591 217,126 4,540,641 (733,437)

20. SELLING AND MARKETING EXPENSES

2017 2016

SR SR

Salaries and employees’ benefits 11,809,659 11,986,949

Rental expense 2,761,818 2,646,422

Doubtful debts expense (note 5) 2,456,038 2,493,044

Sales commission expense 2,432,681 3,061,705

Depreciation on property, plant and equipment (note 10) 1,004,512 1,026,311

Advertising and promotion expense 1,353,349 1,420,234

Repairs and maintenance expense 600,072 356,770

Depreciation on investment property (note 9) 547,572 -

Travel expense 345,575 255,681

Communication expense 326,589 302,651

Bank charges 319,085 340,423

Insurance expense 287,203 366,076

Office utilities 235,865 165,628

Other expenses 2,520,689 2,190,078

27,000,707 26,611,972

217



21. GENERAL AND ADMINISTRATIVE EXPENSES

2017 2016

SR SR

Salaries and employees’ benefits 15,620,837 19,069,688

Professional services 1,799,835 494,570

Depreciation on property plant and equipment (note 10) 1,717,315 1,610,209

Insurance expense 450,480 360,255

Travel expense 151,305 324,633

Bank charges 82,954 37,406

Other expenses 1,751,638 1,718,800

21,574,364 23,615,561

22. OTHER INCOME, NET

2017 2016

SR SR

Income from rental of warehouse and store 1,920,845 1,034,939

Income from short term deposits 1,622,472 3,470

Gain on disposal of property, plant and equipment 199,668 169,130

Foreign currency exchange (loss) gain (49,675) 571,919

Sale of scrap and raw material 45,520 12,840

Recoveries of bad debts written off - 1,773,628

Income from lifting of sludge - 468,116

Others 1,132,408 1,477,549

4,871,238 5,511,591

23. EARNINGS PER SHAREEarnings per share for the year ended 31 March 2017 and 2016 have been computed by dividing the income for the year from main operations and net income for the year by the weighted average number of shares outstanding during the year.

The weighted average number of outstanding shares during the year ended 31 March 2016 have been retrospectively adjusted to reflect the bonus element for the shares issued during the year ended 31 March 2016.

218



24. FINANCIAL INSTRUMENT AND RISK MANAGEMENTThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value and cash flow commission rate risks and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Risk management is carried out by senior management. The most important types of risk are summarized below:

Foreign currency riskForeign currency risk is the risk that the fair value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group’s transactions are principally denominated in Saudi Riyals, Qatari Riyals, Kuwaiti Dinars and UAE Dirham. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The Group has investments in foreign subsidiaries, whose net assets are also exposed to currency translation risk. Management monitors such exposures and believes that Group’s exposure to currency risk is not significant as of the balance sheet date. Management mitigates foreign currency risk of the Group by regularly monitoring foreign currency rates of the currencies that the Group deals in.

Fair value and cash flow commission rate risksFair value and cash flow commission rate risks are the exposures to various risks associated with the effect of fluctuations in the prevailing commission rates on the Group’s financial position and cash flows. The Group’s commission rate risks arise mainly from short-term deposits, if any. Management believes that Group’s exposure to commission rate risk is not significant.

Price riskPrice risk is the risk that the value of Group’s financial instruments will fluctuate as a result of changes in market prices, whether these changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The price risk of the Group mainly arises from its available for sale investments which are carried at fair value. Management believes that Group’s exposure to price risk is not significant.

Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and will cause the other party to incur a financial loss. Management assesses the credit quality of the customer by taking into account its financial position, past experience and other factors and accordingly assigns credit limit. Cash is placed with banks with sound credit ratings. Accounts receivable are carried net of provision for doubtful debts.

Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by management by regularly monitoring that sufficient funds are available through committed credit facilities and other arrangements to meet any future commitments.

25. FAIR VALUES OF FINANCIAL INSTRUMENTSFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The financial instruments consist of financial assets and financial liabilities. The Company’s financial assets consist of bank balances and cash, trade and other receivables and available-for-sale investments. Its financial liabilities consist of accounts and other payables, accrued expenses, dividend payable and other liabilities.

The fair values of financial instruments are not materially different from their carrying value at the balance sheet date.

219



26. SEGMENT INFORMATIONThe Company’s operations are conducted mainly in GCC countries. Selected financial information as of year end summarized by geographical area, was as follows:

GCC countries Rest of the world Total

SR SR SR

As at and for the year ended 31 March 2017:

Total assets 481,921,336 648,684 482,570,020

Total liabilities 59,655,300 - 59,655,300

Sales 339,978,422 1,048,050 341,026,472

Gross profit 125,668,468 387,398 126,055,866

Net income 72,750,949 224,269 72,975,218

Depreciation 9,341,722 - 9,341,722

Property, plant and equipment 84,709,948 - 84,709,948


Total assets 464,762,518 872,556 465,635,074


Sales 412,683,794 595,870 413,279,664

Gross profit 147,497,685 212,970 147,710,655

Net income 93,488,131 134,987 93,623,118

Depreciation 10,579,352 - 10,579,352


220



The Group is organised into the following main business segments:

Waterproofing and heat insulation

material

Marble and stone processing Total

SR SR SR


Total assets 464,508,776 18,061,244 482,570,020

Total liabilities 55,548,418 4,106,882 59,655,300

Sales 322,145,670 18,880,802 341,026,472

Gross profit 124,084,145 1,971,721 126,055,866

Net income (loss) 73,686,136 (710,918) 72,975,218

Depreciation 8,480,699 861,023 9,341,722

Property, plant and equipment 75,629,530 9,080,418 84,709,948


Total assets 446,005,926 19,629,148 465,635,074


Sales 384,754,700 28,524,964 413,279,664

Gross profit 142,266,144 5,444,511 147,710,655

Net income 90,997,614 2,625,504 93,623,118

Depreciation 9,873,143 706,209 10,579,352

Property, plant and equipment 80,217,098 9,795,747 90,012,845

27. DIVIDENDSThe General Assembly in its meeting held on 20 July 2016 approved the distribution of dividend for the quarter ended 31 March 2016, at the rate of SR 0.4 per share amounting to SR 10,919,991 which has been paid during the current year.

During October 2016, the Board of Directors approved distribution of dividend for the quarter ended 30 June 2016, at the rate of SR 0.4 per share based on shares outstanding as of 13 October 2016 amounting to SR 10,919,991 which was paid on 18 October 2016.

The Board of Directors in their meeting held on 20 December 2016 approved the distribution of dividend for the quarter ended 30 September 2016, at the rate of SR 0.4 per share based on shares outstanding as of 20 December 2016 amounting to SR 10,919,991 which has been paid during the current year.

The Board of Directors also approved in its meeting held on 27 March 2017 the distribution of dividend for the quarter ended 31 December 2016, at the rate of SR 0.4 per share based on the shares outstanding as of 27 March 2017, amounting to SR 10,919,991 which was paid on 31 March 2017.

The General Assembly of the Company, in its meeting held on 29 September 2015, approved distribution of dividends, at the rate of SR 0.4 per share based on shares outstanding as of 31 March 2015, in respect of the quarter ended 31 March 2015, amounting to SR 7,279,992 which was paid by 31 October 2015. The General Assembly of the Company also approved in its forementioned meeting distribution of special dividend, at the rate of SR 2 per share based on shares outstanding as of 31 March 2015, amounting to SR 36,399,962 which was paid on 31 October 2015.

The Board of Directors of the Company, in their meeting held on 29 September 2015, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share, for the first quarter ended 30 June 2015, amounting to Saudi Riyals 10,919,991 which was paid on 31 December 2015.

221



27. DIVIDENDS (continued)The Board of Directors of the Company, in their meeting held on 5 January 2016, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share, for the second quarter ended 30 September 2015, amounting to Saudi Riyals 10,919,991 which weas paid in January 2016.

The Board of Directors of the Company, in their meeting held on 21 March 2016, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share based on the shares outstanding as of 21 March 2016, for third quarter ended 31 December 2015, amounting to Saudi Riyal 10,919,991 which was paid on 27 March 2016.

28. CONTINGENT LIABILITIESThe Group had contingent liabilities arising in the normal course of business, in respect of performance guarantees, amounting to SR 14,031,915 (2016: SR 13,720,773). The aforementioned performance guarantees include bank guarantees amounting to SR 6,150,756 (2016: SR 6,545,626) against custom duty raised by Saudi Custom Authorities. This guarantee is valid for one year from date of issue.

29. BOARD MEMBERS’ REMUNERATIONThe General Assembly in its meeting held on 20 July 2016 approved the board members’ remuneration amounting to SR 1,500,000 for the year ended 31 March 2016.

Further, the General Assembly in its meeting held on 29 September 2015 approved the board members’ remuneration amounting to SR 1,500,000 for the year ended 31 March 2015.

30. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTSThe Board of Directors approved these consolidated financial statements in its meeting dated 10 Ramadan 1438H (corresponding to 5 June 2017).

31. COMPARATIVE FIGURESCertain of the prior year amounts have been reclassified to conform to the presentation in the current year.

222

Arabian Waterproofing Industries Company(A Saudi Closed Joint Stock Company)

SPECIAL PURPOSE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED MARCH 31, 2016

AND INDEPENDENT AUDITORS’ REPORT ON SPECIALPURPOSE CONSOLIDATED FINANCIAL STATEMENTS

223

224

Arabian Waterproofing Industries Company(A Saudi Closed Joint Stock Company)

Special purpose consolidated balance sheet(All amounts in Saudi Riyals unless otherwise stated)

NoteAs at March 31,

2016 2015 2014

28 (Restated) (Restated)

Assets

Current assets

Cash and cash equivalents 4 129,664,059 119,189,678 101,254,974

Accounts receivable 5 137,369,818 132,340,587 132,888,885

Inventories 6 57,803,540 61,873,580 59,607,517

Prepayments and other assets 7,28 17,476,097 23,854,282 17,951,651

342,313,514 337,258,127 311,703,027

Non-current assets

Available-for-sale Investments 8 24,838 32,058 33,764

Investment property 9 33,283,877 - -

Property, plant and equipment 10 90,012,845 115,577,847 92,847,140

123,321,560 115,609,905 92,880,904

Total assets 465,635,074 452,868,032 404,583,931

Liabilities

Current liabilities

Accounts payable 11 5,865,810 9,939,159 7,034,801

Accrued expenses and other liabilities 12 24,370,701 17,401,740 15,342,220

Accrued custom duty on imports 13 21,681,786 31,080,602 26,732,658

Zakat payable 14 9,486,390 7,401,895 7,514,911

61,404,687 65,823,396 56,624,590

Non-current liability

Employee termination benefits, net 15,28 8,815,444 6,808,358 5,938,980


Equity

Equity attributable to shareholders of the Company:

Share capital 17 272,999,780 181,999,810 181,999,810

Statutory reserve 18,28 8,774,283 66,485,313 59,790,937

Contractual reserve 19,28 67,873,203 75,092,480 65,050,915

Fair value reserve 2,012 9,232 10,938

Foreign currency translation reserve (122,924) (29,164) 984,070

Retained earnings 28 41,347,948 52,467,857 32,879,999

Total shareholders’ equity 390,874,302 376,025,528 340,716,669

Minority interest 20 4,540,641 4,210,750 1,303,692

Total equity 395,414,943 380,236,278 342,020,361

Total liabilities and equity 465,635,074 452,868,032 404,583,931

Contingencies 27

The notes on pages 7 to 24 form an integral part of these special purpose consolidated financial statements.

225

ARABIAN WATERPROOFING INDUSTRIES COMPANY(A Saudi Closed Joint Stock Company)

Special purpose consolidated income statement(All amounts in Saudi Riyals unless otherwise stated)

NoteYear ended March 31,

2016 2015 2014


Sales 16 413,279,664 416,810,483 374,334,675

Cost of sales 16,28 (265,569,009) (288,542,203) (275,180,323)

Gross profit 147,710,655 128,268,280 99,154,352

Operating expenses

Selling and marketing 21,28 (26,611,972) (22,108,071) (19,565,030)

General and administrative 22,28 (23,615,561) (19,632,920) (18,095,783)

Income from operations 97,483,122 86,527,289 61,493,539

Other income(expenses)

Other income (expenses), net 23 5,511,591 (10,939,160) 2,817,304

Income before zakat and minority interest 102,994,713 75,588,129 64,310,843

Zakat 14 (9,371,595) (7,410,000) (7,200,000)

Income before minority interest 93,623,118 68,178,129 57,110,843

Minority interest 20 (733,437) (1,234,362) (69,435)

Net income for the year 28 92,889,681 66,943,767 57,041,408

Earnings / (loss) per share: 24,28

Income from operations 4.28 3.80 2.70

Non-operating income (expenses) 0.24 (0.48) 0.12

Net income for the year 4.08 2.94 2.50

Weighted average number of shares 22,776,430 22,776,430 22,776,430


226


Special purpose consolidated cash flow statement(All amounts in Saudi Riyals unless otherwise stated)

NoteYear ended March 31,

2016 2015 2014


Cash flows from operating activities

Net income for the year 28 92,889,681 66,943,767 57,041,408

Adjustments for non-cash items

Provision for doubtful debts 5 2,493,044 1,782,851 343,726

Reversal of provision for inventory obsolescence, net 6 (31,827) (2,262,891) (2,116,993)

Provision for zakat 14 9,371,595 7,410,000 7,200,000

Provision for employee termination benefits 15,28 2,035,867 2,184,840 2,247,070

Depreciation 10 10,579,352 10,229,982 10,952,270

Gain from sale of property, plant and equipment 23 (169,130) (81,536) (391,308)

Income attributable to minority interest 20 733,437 1,234,362 69,435

Changes in working capital

Accounts receivable (7,522,275) (1,234,553) (15,750,501)

Inventories 4,101,867 (3,172) (6,847,355)

Prepayments and other assets 6,378,185 (5,902,631) (8,773,162)

Accounts payable (4,073,349) 2,904,358 (1,211,794)

Accrued expenses and other liabilities 6,968,961 2,088,303 580,229

Accrued custom duty on imports (9,398,816) 4,347,944 6,473,894

Zakat paid 14 (7,287,100) (7,523,016) (6,872,861)

Employee termination benefits paid 15 (28,781) (1,315,462) (1,398,436)

Net cash generated from operating activities 107,040,711 80,803,146 41,545,622

Cash flow from investing activities

Purchase of property, plant and equipment 10 (19,186,704) (33,069,461) (2,499,436)

Proceeds from sale of property, plant and equipment 1,038,376 161,525 403,319

Short-term deposits - - 35,000,000

Net cash (utilized in) generated from investing activities (18,148,328) (32,907,936) 32,903,883

Cash flow from financing activities

Dividends paid (76,439,927) (29,119,968) (37,309,958)

Changes in minority interest (403,546) 1,672,696 1,234,257

Board members’ remuneration paid (1,500,000) (1,500,000) (1,500,000)

Net cash utilized in financing activities (78,343,473) (28,947,272) (37,575,701)

Net increasein cash and cash equivalents 10,548,910 18,947,938 36,873,804

Effect of exchange rate changes in cash and cash equivalents (74,529) (1,013,234) 145,673

Cash and cash equivalents at beginning of year 119,189,678 101,254,974 64,235,497

Cash and cash equivalents at end of year 4 129,664,059 119,189,678 101,254,974

Non-cash information

Change in fair value of available-for-sale investments8 (7,220) (1,706) (4,014)


227

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228


Notes to the special purpose consolidated financial statements For the year ended March 31, 2016

(All amounts in Saudi Riyals unless otherwise stated)

1. General informationArabian Waterproofing Industries Company (the “Company”) is a Saudi closed joint stock company which was converted from a limited liability company on 15 Safar 1426H (corresponding to March 25, 2005). The Company initially commenced trading on Sha’aban 14, 1401H (corresponding to June 24, 1981) and still operates under the Commercial Registration No. 1010039827 dated Sha’aban 14, 1401H (corresponding to June 24, 1981) with branches in Jeddah and Dammam under Commercial Registration No. 1010039827/001 and 2050020686, respectively.

Arabian Waterproofing Industries Company and its subsidiaries (collectively the “Group”) consist of the Company and its various subsidiaries listed below. The Group is engaged in the manufacture of waterproofing products and heat insulation material and extraction and processing of marble.

The accompanying special purpose consolidated financial statements include the accounts of the Company and its following subsidiaries, operating under individual commercial registrations:

Subsidiary Country of incorporationEffective ownership at March 31,

2016 2015 2014

Awazel International Company, LLC UAE 99% 99% 99%

Awazel Kuwait Company for Building Materials Kuwait 99% 99% 99%

Awazel Qatar International Company Qatar 95% 95% 95%

Awazel Indonesia International Company Indonesia 95% 95% 95%

Advanced Membrane Company for Industry Saudi Arabia 90% 90% 90%

Al Sultan Contracting Trading Company Limited Saudi Arabia 80% 80% -

Al Takamal Company for Marble Limited Saudi Arabia 80% - -

During the quarter ended September 30, 2015, the Company made an investment of Saudi Riyals 2,080,000 for the acquisition of 80%share in Al Takamal Company for Marble Limited at its fair value. Al Takamal Company for Marble Limited was registered in the Kingdom of Saudi Arabia under Commercial Registration No. 1010272852 dated 25 Rajab, 1430H (corresponding to August 16,2009). Al Takamal Company started its operations after its acquisition by the Company.

During the quarter ended June 30, 2014, the Company made an investment of Saudi Riyals 960,000 for the acquisition of 80% share in Al Sultan Contracting Trading Company Limited at its fair value. Al Sultan Contracting Trading Company Limited was registered in Kingdom of Saudi Arabia under Commercial Registration No. 1010192171 dated 24 Muharram, 1435H (correspondence to November 27, 2013).During the quarter ended March 31, 2015, the Company contributed an additional amount of Saudi Riyals 5,760,000 for the increase in share capital of Al Sultan Contracting Trading Company Limited.

2. Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these special purpose financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

2.1 Basis of preparationThe accompanying special purpose consolidated financial statements have been prepared under the historical cost convention, as modified by revaluation of available-for-sale investments to fair value, on the accrual basis of accounting and in compliance with standards promulgated by Saudi Organization for Certified Public Accountants. The accompanying 2016 special purpose consolidated financial statements, prepared for management purposes,include the comparative financial information as of and for the year ended March 31, 2014 which have been presented for information purpose only. The Company has also prepared statutory consolidated financial statements for each of the years ended March 31, 2016, 2015 and 2014in which one year comparative financial information has been presented as required under the accounting standards generally accepted in Saudi Arabia.

229




2.2 Critical accounting estimates and judgmentsThe preparation of special purpose financial statements in conformity with generally accepted accounting standards requires the use of certain critical estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.The estimates and assumptions that have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Provision for doubtful debtsA provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

(b) Provision for inventory obsolescenceProvision for inventory obsolescence is maintained at a level considered adequate to provide for potential loss on inventory items. The level of allowance is determined and guided by the Company’s policy and other factors affecting the obsolescence of inventory items. An evaluation of inventories, designed to identify potential charges to provision, is performed on a continuous basis throughout the year. Management uses judgment based on the best available facts and circumstances, including but not limited to evaluation of individual inventory items’ future utilization. The amount and timing of recorded expenses for any period would therefore differ based on the judgments or estimates made. An increase in provision for inventory obsolescence would increase the Company’s recorded expenses and decrease current assets.

2.3 Investments

(a) SubsidiariesSubsidiaries are entities over which the Group has the power to govern the financial and operating policies to obtain economic benefit generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition, if any, is measured as the fair value of the assets given or liabilities incurred or assumed at the date of acquisition, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Goodwill arising from acquisition of subsidiaries is reported under “intangible assets” in special purpose consolidated balance sheets. Goodwill is tested annually for impairment and carried at cost, net of any impairment losses, if any.

Inter-company transactions, balances and unrealized gains on transactions between the Companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the special purpose consolidated income statement and special purpose consolidated balance sheet.

230




2.3 Investments

b) Investment in available-for-sale investmentsAvailable-for-sale investments principally consist of investments of less than 20% in the capital of other companies and investments in commission bearing instruments. These investments are included in non-current assets unless management intends to sell such investments within twelve months from the balance sheet date. These investments are initially recognized at cost and are subsequently re-measured at fair value at each reporting date as follows:

i- Fair values of quoted securities are based on available market prices at the reporting date adjusted for any restriction on the transfer or sale of such investments; and

ii- Fair values of unquoted securities are based on a reasonable estimate determined by reference to the current market value of other similar quoted investment securities or is based on the expected discounted cash flows.

Cumulative adjustments arising from revaluation of these investments are reported as separate component of equity as fair value reserve until the investment is disposed.

c) Investment propertyProperty held to earn rentals or for capital appreciation or both, which is not occupied by the Group is classified as investment property. Investment property is recorded at historical cost, net of accumulated depreciation and impairment loss, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset’s carrying amount will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance costs are charged to the special purpose consolidated income statement during the financial period in which they are incurred. Land is not depreciated. Investment properties are depreciated on a straight line basis over their estimated useful lives.

2.4 Segment reporting

(a) Business segmentA business segment is a group of assets, operations or entities:

i- engaged in revenue producing activities;

ii- results of its operations are continuously analyzed by management in order to make decisions related to resource allocation and performance assessment; and

iii- financial information is separately available.

(b) Geographical segmentA geographical segment is group of assets, operations or entities engaged in revenue producing activities within a particular economic environment that are subject to risks and returns different from those operating in other economic environments.

231



(All amounts in Saudi Riyals unless otherwise stated

2.5 Foreign currency translation

(a) Reporting currencyThese special purpose consolidated financial statements are presented in Saudi Riyals which is the reporting currency of the Company.

(b) Transactions and balancesTransactions in foreign currencies are recorded in Saudi Riyals at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the special purpose consolidated income statement.

(c) Subsidiary companiesThe results and financial position of all the subsidiaries that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

i- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

ii- Items of equity (except retained earnings) are translated at the rate prevailing on the acquisition date;

iii- income and expenses for each income statement are translated at average exchange rates; and

iv- All resulting exchange differences are recognized as a separate component of equity.

2.6 Cash and cash equivalentsCash and cash equivalents include cash in hand, bank balances and other short term highly liquid investments that are readily convertible into known amounts of cash and have maturities of three months or less from the date of acquisition.

2.7 Short-term depositsShort-term deposits include placements with banks and other short-term highly liquid investments with original maturities of three months or more but not more than one year from the purchase date.

2.8 Accounts receivableAccounts receivable are carried at original invoice amount less provision for doubtful debts. A provision against doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Such provisions are charged to special purpose consolidated income statement and reported under “selling and marketing expenses”. When an account receivable is uncollectible, it is written-off against the provision for doubtful accounts. Any subsequent recoveries of amounts previously written-off are credited in other income in the special purpose consolidated income statement.

2.9 InventoriesInventories are carried at the lower of cost or net realizable value. Cost is determined as follows:

Average costRaw material

Standard costFinished Goods

Purchase priceSpare parts

The cost of finished goods include the cost of raw materials, labor and production overheads. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

232




2.10 Property, plant and equipmentProperty, plant and equipment are carried at cost less accumulated depreciation except construction in progress which is carried at cost. Land is not depreciated. Depreciation is charged to the specialpurpose consolidated income statement, using the straight-line method, to allocate the costs of the related assets to their residual values over the following estimated useful lives:

Number of years

Land improvements 20

Buildings 33

Building improvements 33

Furniture and fixtures 10

Computer and IT equipment 4

Motor vehicles 4

Plant and equipment 4 to 13

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in special purpose consolidated income statement.

Maintenance and normal repairs which do not materially extend the estimated useful life of an asset are charged to special purpose consolidated income statement as and when incurred. Major renewals and improvements, if any, are capitalized when it is probable that future economic benefits associated with the items will flow to the entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized.

2.11 Impairment of non-financial assetsNon-financial assets other than goodwill, if any, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill, if any, is tested for impairment annually. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets are grouped at lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill, if any, that suffered impairment are reviewed for possible reversal of impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined, had no impairment loss been recognized for the assets or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately in the special purpose consolidated income statement. Impairment losses recognized on goodwill are not reversible.

2.12 Accounts payable and accrualsLiabilities are recognized for amounts to be paid for goods and services received, whether or not billed to the Group.

2.13 ProvisionsProvisions are recognized when the Group has a present legal or constructive obligation as a result of a past event; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

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2.14 ZakatThe Group is subject to zakat in accordance with the regulations of the Department of Zakat and Income Tax (“DZIT”) in the Kingdom of Saudi Arabia. Provision for zakat of the Group, if any, is accrued and zakat is charged to the special purpose consolidated income statement. Additional amounts payable, if any, at the finalization of final assessments are accounted for when such amounts are determined.

The Company withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as required under Saudi Arabian Income Tax Law.

Foreign subsidiaries are subject to income taxes in their respective countries of domicile. Such income taxes, if any, are charged to the special purpose consolidated income statement.

2.15 Employee termination benefitsEmployee termination benefits required by Saudi Labor and Workman Law are accrued by the Company and its Saudi Arabian subsidiaries and charged to the income statement. The liability is calculated at the current value of the vested benefits to which the employee is entitled, should the employee leave at the balance sheet date. Termination payments are based on employees’ final salaries and allowances and their cumulative years of service, as stated in the laws of Saudi Arabia.

The foreign subsidiaries provide currently for employee termination and other benefits as required under the laws of their respective countries of domicile.

2.16 Revenue recognitionRevenues are recognized upon delivery of products. Revenues are shown net of discounts and after eliminating sales within the Group.

2.17 Selling, marketing, general and administrative expensesSelling, marketing, general and administrative expenses include direct and indirect costs not specifically part of production costs as required under generally accepted accounting standards. Allocations between selling, marketing and general and administrative expenses and production costs, when required, are made on a consistent basis.

2.18 DividendsDividends are recorded in the special purpose consolidated financial statements in the period in which they are approved by the Board of Directors based on the authority vested by the shareholders of the Company in the general assembly meeting.

3. Financial instruments and risk managementThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value and cash flow interest rate risks and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

Financial instruments carried on the balance sheet include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

Financial asset and liability is offset and net amounts reported in the special purpose consolidated financial statements, when the Group has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and liability simultaneously.

Risk management is carried out by senior management. The most important types of risk are summarized below:

ARABIAN WATERPROOFING INDUSTRIES COMPANY

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(A Saudi Closed Joint Stock Company)



3.1 Currency riskCurrency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group’s transactions are principally in Saudi Riyals, Kuwaiti Dinars and Emirati Dirham.

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. The Group has investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. Management monitors such exposures and believes that Group’s exposure to currency risk was not significant as of the balance sheet date.

3.2 Fair value and cash flow interest rate risksFair value and cash flow interest rate risks are the exposures to various risks associated with the effect of fluctuations in the prevailing interest rates on the Group’s financial position and cash flows. Management believes that Group’s exposure to commission rate risk is not significant.

3.3 Price riskPrice risk is the risk that the value of financial instrument will fluctuate as a result of changes in market prices, whether these changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The price risk of the Group mainly arises from its investment in Riyad Bank which is carried at fair value. Management believes that Group’s exposure to price risk is not significant.

3.4 Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Management assesses the credit quality of the customer taking into account its financial position, past experience and other factors and accordingly assigns credit limit. Cash is placed with banks with sound credit ratings. Accounts receivable are carried net of provision for doubtful debts.

3.5 Liquidity riskLiquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available through committed credit facilities and other arrangements to meet any future commitments. The Company is currently debt free.

3.6 Fair valueFair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. As the Group’s financial instruments are compiled under the historical cost convention, differences can arise between the book values and fair value estimates. Management believes that the fair values of the Group’s financial assets and liabilities are not materially different from their carrying values.

4. Cash and cash equivalents

2016 2015 2014

Cash at bank 128,661,444 118,378,454 100,530,423

Cash in hand 1,002,615 811,224 724,551

129,664,059 119,189,678 101,254,974

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5. Accounts receivable

Note 2016 2015 2014

Trade receivable 144,033,183 138,137,576 136,669,920

Less: Provision for doubtful debts (6,953,433) (6,308,388) (4,533,971)

137,079,750 131,829,188 132,135,949

Related parties 16 290,068 511,399 752,936

137,369,818 132,340,587 132,888,885

Movement in provision for doubtful debts is as follows:

Note 2016 2015 2014

April 1, 2015, 2014 and 2013 6,308,388 4,533,971 4,511,047

Additions 21 2,493,044 1,782,851 343,726

Write-offs (1,847,999) (8,434) (320,802)

March 31 6,953,433 6,308,388 4,533,971

6. Inventories

2016 2015 2014

Raw materials 31,949,268 40,857,230 39,210,107

Finished products 22,876,498 18,884,794 20,133,050

Spare parts 7,126,094 5,904,795 6,416,751

Goods-in-transit 784,298 1,191,206 1,074,945

Provision for inventory obsolescence (4,932,618) (4,964,445) (7,227,336)

57,803,540 61,873,580 59,607,517

Movement in provision for inventory obsolescence is as follows:

2016 2015 2014

April 1, 2015, 2014 and 2013 4,964,445 7,227,336 9,344,329

Additions 9,770,857 1,288,614 795,473

Reversal (9,802,684) (3,551,505) (2,912,466)

March 31 4,932,618 4,964,445 7,227,336

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7. Prepayments and other current assets

Note2016 2015 2014

(Restated) (Restated)

Staff advances, receivables and others 16,506,215 15,476,343 12,488,699

Advances to suppliers 6,941,706 12,996,413 9,714,599

Prepaid expenses 4,466,991 4,572,152 4,311,321

Receivable on sludge lifting service 456,902 651,820 1,648,822

Margin on bank guarantees 408,910 976,430 519,641

Advance for investment in Al Takamal Company - 2,080,000 -

Other 2,046,609 452,360 1,319,337

Prepayments and other current assets, gross 30,827,333 37,205,518 30,002,419

Less: Advance to employees 15,28 (13,351,236) (13,351,236) (12,050,768)

17,476,097 23,854,282 17,951,651

8. Available-for-sale investments

2016 2015 2014

Quoted securities

April 1, 2015 and 2014 32,058 33,764 37,778

Fair value adjustments (7,220) (1,706) (4,014)

March 31 24,838 32,058 33,764

9. Investment property

Note 2016 2015 2014

Cost

April 1, 2015, 2014 and 2013 - - -

Transfer during the year 10 33,341,907 - -

Depreciation

April 1 - - -

Transfer during the year 10 (58,030) - -

March 31 33,283,877 - -

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10. Property, plant and equipment

April 1, 2015 Additions DisposalsCurrency

translation difference

Transfer to investment

property (Note 9)

March 31, 2016

Cost

Land 33,680,507 - (770,000) (9,160) (12,358,875) 20,542,472

Land improvements, buildings and building improvements 58,781,091 6,536,194 - (17,203) (2,411,142) 62,888,940

Furniture, fixtures and motor vehicles 47,140,826 1,447,965 (260,579) (12,063) - 48,316,149

Computer and IT equipment 10,833,216 597,812 (15,093) (1,186) - 11,414,749

Plant and equipment 112,179,249 3,074,825 (75,000) (195) - 115,178,879

Capital work-in-progress 11,413,687 7,529,908 - (6,558) (18,571,890) 365,147

274,028,576 19,186,704 (1,120,672) (46,365) (33,341,907) 258,706,336


Land improvements, buildings and building improvements (18,182,138) (1,920,982) - 17,003 58,030 (20,028,087)

Furniture, fixtures and motor vehicles (43,079,159) (1,563,242) 235,004 9,062 - (44,398,335)

Computer and IT equipment (5,130,446) (1,531,407) 12,516 1,349 - (6,647,988)

Plant and equipment (92,058,986) (5,563,721) 3,906 (280) - (97,619,081)

(158,450,729) (10,579,352) 251,426 27,134 58,030 (168,693,491)

115,577,847 90,012,845

Capital work-in-progress represents amounts paid in respect of the construction of building and machinery in Riyadh and Dubai.

The depreciation expense provided during the years has been allocated to the following:

Note 2016 2015 2014

Cost of sales 7,915,698 9,128,414 9,960,705

Selling and marketing expenses 21 1,026,311 867,752 798,258

General and administrative expenses 22 1,610,209 112,900 114,726

10,552,218 10,109,066 10,873,689

Foreign currency exchange loss 27,134 120,916 78,581

10,579,352 10,229,982 10,952,270

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April 1, 2014 Additions Disposals Currency trans-lation difference March 31, 2015

Cost

Land 28,686,157 5,000,000 - (5,650) 33,680,507

Land improvements, buildings and building improvements 58,600,718 538,002 - (357,629) 58,781,091

Furniture, fixtures and motor vehicles 45,631,047 1,693,985 (116,348) (67,858) 47,140,826

Computer and IT equipment 5,209,064 5,630,345 - (6,193) 10,833,216

Plant and equipment 102,797,508 9,382,347 - (606) 112,179,249

Capital work-in-progress 300,668 10,824,782 - 288,237 11,413,687

241,225,162 33,069,461 (116,348) (149,699) 274,028,576


Land improvements, buildings and building improvements (16,466,174) (1,785,371) - 69,407 (18,182,138)

Furniture, fixtures and motor vehicles (41,900,167) (1,261,119) 36,359 45,768 (43,079,159)

Computer and IT equipment (5,055,829) (79,986) - 5,369 (5,130,446)

Plant and equipment (84,955,852) (7,103,506) - 372 (92,058,986)

(148,378,022) (10,229,982) 36,359 120,916 (158,450,729)

92,847,140 115,577,847

April 1, 2013 Additions Disposals Currency trans-lation difference March 31, 2014

Cost

Land 28,686,157 - - 28,686,157

Land improvements, buildings and building improvements 57,590,546 1,111,723 (28,243) (73,308) 58,600,718

Furniture, fixtures and motor vehicles 45,592,532 768,653 (713,691) (16,447) 45,631,047

Computer and IT equipment 5,133,923 76,576 - (1,435) 5,209,064

Plant and equipment 102,270,242 527,243 - 23 102,797,508

Capital work-in-progress 285,427 15,241 - - 300,668

239,558,827 2,499,436 (741,934) (91,167) 241,225,162


Land improvements, buildings and building improvements (14,839,267) (1,726,467) 28,243 71,317 (16,466,174)

Furniture, fixtures and motor vehicles (40,708,289) (1,899,706) 701,680 6,148 (41,900,167)

Computer and IT equipment (4,977,802) (78,877) - 850 (5,055,829)

Plant and equipment (77,708,898) (7,247,220) - 266 (84,955,852)

(138,234,256) (10,952,270) 729,923 78,581 (148,378,022)

101,324,571 92,847,140

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11. Accounts payable

Note 2016 2015 2014

Trade 5,865,810 9,883,886 6,832,540

Related party 16 - 55,273 202,261

5,865,810 9,939,159 7,034,801

12. Accrued expenses and other current liabilities

2016 2015 2014

Salaries and benefits 10,939,446 7,528,522 6,437,347

Accrued material expense 5,373,110 3,153,240 1,464,745

Sales commission 3,431,314 3,255,893 3,111,361

Sales incentive 1,860,601 1,344,424 1,300,000

Accrued transportation charges 1,492,537 1,257,492 1,315,136

Utilities 547,190 305,527 42,283

Professional fees 282,774 272,044 137,238

Customs duty on exports - - 196,142

Other 443,729 284,598 1,337,968

24,370,701 17,401,740 15,342,220

13. Accrued custom duty on importsThis balance represents custom duty accrued on import of raw materials subject to custom duty during the last 5 years.

14. Zakat payableZakat is payable at 2.5 percent of higher of the approximate zakat base and adjusted net income.

14.1 Components of zakat base The significant components of the zakat base of the Company under zakat regulations are as follows:

Note 2016 2015 2014

Components of zakat base

Shareholders’ equity at beginning of year, as adjusted 349,526,343 315,002,806 308,083,864

Provisions at beginning of year less utilized during the year 11,354,761 8,201,368 10,937,019

Adjusted net income for the year 14.2 107,967,396 80,596,825 68,864,622

Other 20,422,502 (5,849,522) (5,468,997)

Property, plant and equipment, as adjusted (120,773,247) (106,467,476) (81,482,133)

Investments - - (33,764)

Estimated zakat base 368,497,755 291,484,001 300,900,611

ARABIAN WATERPROOFING INDUSTRIES COMPANY

240

(A Saudi Closed Joint Stock Company)



14.2 Adjusted net income for the year

2016 2015 2014

Income before zakat and minority interest 102,994,713 75,588,129 64,310,843

Adjustment:

Depreciation differences 61,495 806,294 2,138,716

Provisions 4,528,911 3,248,244 2,771,661

Other 382,277 954,158 (356,598)

Adjusted net income for year 107,967,396 80,596,825 68,864,622

14.3 zakat payable

2016 2015 2014

April 1, 2015, 2014 and 2013 7,401,895 7,514,911 7,187,772

Provisions 9,371,595 7,410,000 7,200,000

Payments (7,287,100) (7,523,016) (6,872,861)

March 31 9,486,390 7,401,895 7,514,911

14.4 Status of assessmentsThe Company has received final zakat certificate through the years ended March 31, 2015 from the DZIT.

15. Employee termination benefitsFollowing is the movement in the employee termination benefits account for the years ended March 31:

Note2016 2015 2014


As at April 1, before restatement 28 20,159,594 1,017,923 783,897

Restatement 28 - 16,971,825 15,196,275

As at April 1, gross as restated 28 20,159,594 17,989,748 15,980,172

Advances to employees, as restated 28 (13,351,236) (12,050,768) (10,889,826)

As at April 1, net as restated 28 6,808,358 5,938,980 5,090,346

Provisions 2,035,867 1,465,393 1,632,462

Payments (28,781) (1,315,462) (1,398,436)

Restatement - provision 28 - 719,447 614,608

As at March 31, net as restated 28 8,815,444 6,808,358 5,938,980

Employee termination benefits, net as at March 31, is summarized as follows:

2016 2015 2014

Employee termination benefits, gross 22,166,680 20,159,594 17,989,748

Less: Advances to employees (13,351,236) (13,351,236) (12,050,768)

8,815,444 6,808,358 5,938,980

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16. Related party mattersThe Group enters into certain transactions with related parties of which the terms and conditions are approved by management of the Group.

16.1 Related party transactionsSignificant transactions with related parties in the ordinary course of business included in the financial statements are summarized below:

2016 2015 2014

Sales 948,155 2,174,129 2,494,632

Royalty expenses 463,813 370,768 388,425

Purchases 2,494,585 1,904,313 2,619,720

Repair and maintenance 32,250 - -

Training 494,000 - -

16.2 Related party balancesSignificant year end balances arising from transactions with related parties are as follows:

(i) Due from related parties

Relationship 2016 2015 2014

Mawana Fast Contracting and Establishment Affiliate 276,148 69,708 336,437

Al-Zamil Company Affiliate 13,920 441,691 416,499

290,068 511,399 752,936

(i) Due to related party

Relationship 2016 2015 2014

Bitutrade Industries Co. LLC Affiliate - 55,273 202,261

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17. Share capitalThe share capital of the Company is divided into 27,299,978 shares and 18,199,981 shares as at March 31, 2016 and March 31, 2015 respectively, of Saudi Riyals 10 each owned by the following shareholders:

2016 2015 2014

Boubyan Petrochemical Company 5,672,036 3,781,357 3,781,357

Mr. Ibrahim Ali Al Sugair 1,837,547 1,425,031 1,425,031

Mr. Hela Abdul RahmanIssa Al Remaiah 1,783,023 1,188,682 1,188,682

Samama Investment Company 1,736,949 1,157,966 1,157,966

Mr. Nasir Ali Al Sugair 1,663,740 1,109,160 1,109,160

Mr. Firas Ali Al Sugair 1,493,919 995,946 995,946

Mr. Mansour Ali Al Sugair 1,493,919 995,946 995,946

Mr. Sugair Ali Ibrahim Al Sugair 1,386,798 924,532 924,532

Mr. Sulaiman Bin Abdul MohsinAbanmi - 1,664,359 1,664,359

Other shareholders 10,232,047 4,957,002 4,957,002

27,299,978 18,199,981 18,199,981

The shareholders of the Company in their annual general meeting held on September 29, 2015 approved to increase the share capital of the Company from Saudi Riyals 181,999,810 to Saudi Riyals 272,999,780 through the transfer of Saudi Riyals 67,000,000 and Saudi Riyals 23,999,970 from statutory reserve and retained earnings, respectively.

18. Statutory reserveIn accordance with Regulations for Companies in Saudi Arabia and the Company’s By-laws, the Company has established a statutory reserve by the appropriation of 10% of annual net income until the reserve equals 50% of the share capital. This reserve is not available for dividend distribution.

19. Contractual reserveAs at March 31, 2015, the Company has established a contractual reserve by appropriation of 10%, 2.5% and 2.5% of net income to dividend, research and development and product liability reserve respectively.

The Shareholders of the Company in the Annual General Meeting held on September 29,2015 restricted the transfer of accumulated research and development reserve to maximum 5% of the share capital of the Company. Accordingly, the Company transferred net income for the year to research and development reserve only to the extent that is required to reach 5% of its share capital as of September 30, 2015. In addition to above, the Company has transferred 10% of net income for the year to dividend reserve.

The Shareholders, in the aforementioned Annual General meeting, also resolved to transfer full amount of product liability reserve to retained earnings. Accordingly, product liability reserve amounting to Saudi Riyals 17,401,359 has been transferred to retained earnings during the year ended March 31, 2016. Further recognition of product liability reserve will seize immediately.

The Contractual reserve will be used as per Board of Directors decision in the manner as stipulated in the Company’s by-laws.

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20. Minority interestThis balance represents the share of the minority stakeholders in the following consolidated companies:

Name of the entity

2016 2015 2014


Share in net income (loss)





Al Sultan Company 2,458,788 546,563 2,836,466 1,156,466 - -

Advanced Membrane Company for Industry 941,139 (25,195) 966,334 (18,458) 984,792 (15,207)

Al Takamal Company 629,814 109,814 - - - -

Awazel International Company, LLC 204,175 54,782 149,480 28,574 120,932 20,238

Awazel Kuwait Company for Building Materials 202,412 24,048 179,616 21,995 167,819 33,750

Awazel Qatar International Company 183,626 50,961 132,793 78,979 53,825 61,744

Awazel Indonesia International Company (79,313) (27,536) (53,939) (33,194) (23,676) (31,090)

4,540,641 733,437 4,210,750 1,234,362 1,303,692 69,435

21. Selling and marketing expenses

Note2016 2015 2014


Salaries, wages and benefits 11,986,949 9,565,363 8,563,012

Sales commission 3,061,705 2,721,157 2,579,794

Rentals 2,646,422 2,530,682 2,307,001

Provision for doubtful debts 5 2,493,044 1,782,851 343,726

Advertising and promotion 1,420,234 1,102,253 1,136,728

Depreciation 10 1,026,311 867,752 798,258

Insurance 366,076 327,525 270,061

Bank charges 340,423 167,146 226,975

Communication 302,651 414,244 413,638

Travel 255,681 275,626 172,396

Other 2,712,476 2,353,472 2,753,441

28 26,611,972 22,108,071 19,565,030

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22. General and administrative expenses

Note2016 2015 2014


Salaries, wages and benefits 19,069,688 16,281,089 15,546,829

Depreciation 10 1,610,209 112,900 114,726

Professional services 494,570 953,663 491,843

Insurance 360,255 344,380 350,235

Travel 324,633 693,481 708,826

Bank charges 37,406 172,342 93,549

Other 1,718,800 1,075,065 789,775

28 23,615,561 19,632,920 18,095,783

23. Otherincome (expenses), net

2016 2015 2014

Bad debts recovered 1,773,628 - -

Income from rental of warehouse and store 1,034,939 212,000 264,153

Foreign currency exchange gain (loss), net 571,919 (13,275,198) 562,689

Income from lifting of sludge 468,116 76,873 1,190,367

Gain from sale of property, plant and equipment 169,130 81,536 391,308

Sale of scrap and raw material 12,840 72,311 44,879

Income from deposits 3,470 52,717 202,289

Other 1,477,549 1,840,601 161,619

5,511,591 (10,939,160) 2,817,304

24. Earnings (loss) per shareEarnings (loss) per share for the years ended March 31, 2016, 2015 and 2014 have been computed by dividing the income from operations, non-operating income (expenses) and net income for each year by weighted number of shares outstanding during such years.

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25. Segment informationThe Company’s operations are conducted mainly in GCCcountries. Selected financial information as of March 31 and for the years then ended summarized by geographical area, was as follows:

GCCcountries Rest of the world Total

March 31, 2016

Total assets 464,762,518 872,556 465,635,074


Sales 412,683,794 595,870 413,279,664

Net income 92,755,752 133,929 92,889,681

Gross profit 147,622,001 88,654 147,710,655

Depreciation 10,579,352 - 10,579,352


March 31, 2015

Total assets 450,971,357 1,896,675 452,868,032

Total liabilities (restated) 72,531,144 100,610 72,631,754

Sales 413,938,805 2,871,678 416,810,483

Net income (restated) 66,482,548 461,219 66,943,767

Gross profit (restated) 127,760,760 507,520 128,268,280

Depreciation 9,737,796 492,186 10,229,982

Property, plant and equipment 115,536,644 41,203 115,577,847

GCC countries Rest of the world Total

March 31, 2014

Total assets 400,026,377 4,557,554 404,583,931

Total liabilities (restated) 62,414,718 148,852 62,563,570

Sales 371,633,343 2,701,332 374,334,675

Net income (restated) 56,629,777 411,631 57,041,408

Gross profit (restated) 98,875,517 278,835 99,154,352

Depreciation 10,417,654 534,616 10,952,270

Property, plant and equipment 92,795,859 51,281 92,847,140

Operating segment disclosure is not relevant to the Group since the Group is mainly engaged in the manufacture of waterproofing product and heat insulation material.

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26. DividendsThe General Assembly of the Company, in its meeting held on September 29, 2015, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share based on shares outstanding as of March 31, 2015, for the fourth quarter ended March 31, 2015, amounting to Saudi Riyals 7,279,992 which were paid by October 31, 2015. The General Assembly of the Company also approved in its aforementioned meeting distribution of special dividends, at the rate of Saudi Riyals 2 per share based on shares outstanding as of 31 March 2015, amounting to Saudi Riyals 36,399,962 which were paid by October 31, 2015.

The Board of Directors of the Company, in their meeting held on September 29, 2015, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share, for the first quarter ended June 30, 2015, amounting to Saudi Riyals 10,919,991 which was paid in December 31, 2015.

The Board of Directors of the Company, in their meeting held on January 05, 2016, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per share, for the second quarter ended September 30, 2015, amounting to Saudi Riyals 10,919,991 which was paid in January 2016.

The Board of Directors of the Company, in their meeting held on March 21, 2016, approved distribution of dividends, at the rate of Saudi Riyals 0.4 per sharebased on the shares outstanding as of March 21, 2016,for third quarter ended December 31, 2015, amounting to Saudi Riyal 10,919,991which was paid on March 27, 2016.

27. ContingenciesOn March 31, 2016, the Group had contingent liabilities arising in the normal course of business, in respect of performance guarantees, amounting to Saudi Riyals 13,720,773, (March 31, 2015: Saudi Riyals 19,684,560, March 31, 2014: Saudi Riyals 15,000,579).

The above amount includes bank guarantee for Saudi Riyals 6,545,626 (March 31, 2015: Saudi Riyals 14,159,082, March 31, 2014: Nil) issued to Saudi custom department which will be cashed on June 17, 2016.

247




28. RestatementsThe Company has restated the retained earnings and other related balances as of April 1, 2013 and certain income statement and balance sheet accounts as of and for the years ended March 31, 2014and 2015to correct the errors in recording of provision for employee termination benefits, which was previously made for all employees on a yearly basis and also settled at the end of each year based on contractual arrangements with the employees. Such provision has now been made considering the requirements of the Labor laws in Saudi Arabia based on cumulative period of service of employees with the Company and calculated accordingly. The yearly payments made to the employees for termination benefits in prior years have now been recorded as advances to employees and presented net of the provision for employee termination benefits considering the legal right to set-off available with the Company. The impact of such restatement has been reflected for the comparative information presented in the accompanying consolidated financial statements as follows:

Before restatement Restatement After restatement

Balance sheet as at March 31, 2015:


Less: Advances to employees - (13,351,236) (13,351,236)

Employee termination benefits, net 1,167,854 5,640,504 6,808,358

Statutory reserve 67,049,364 (564,051) 66,485,313

Contractual reserve 75,938,555 (846,075) 75,092,480

Retained earnings 56,698,235 (4,230,378) 52,467,857

Balance sheet as at March 31, 2014:



Employee termination benefits, net 1,017,923 4,921,057 5,938,980




Balancesas at April 1, 2013

Employee termination benefits, gross 783,897 15,196,275 15,980,172


Employee termination benefits, net 783,897 4,306,449 5,090,346




248





Income statement for the year ended March 31, 2015:

Cost of sales 288,308,801 233,402 288,542,203

Selling and marketing expenses 22,008,177 99,894 22,108,071

General and administrative expenses 19,246,769 386,151 19,632,920

Net income for the year 67,663,214 (719,447) 66,943,767

Earnings / (loss) per share

Income from operations 4.79 (0.99) 3.80

Net income for the year 3.72 (0.78) 2.94

Income statement for the year ended March 31, 2014:

Cost of sales 275,038,485 141,838 275,180,323

Selling and marketing expenses 19,469,204 95,826 19,565,030

General and administrative expenses 17,718,839 376,944 18,095,783

Net income for the year 57,656,016 (614,608) 57,041,408

Earnings / (loss) per share

Income from operations 3.41 (0.71) 2.70

Net income for the year 3.17 (0.67) 2.50


Cash flow statement for the year ended March 31, 2015:

Provision for employee termination benefit 1,465,393 719,447 2,184,840

Cash flow statement for the year ended March 31, 2014:

Provision for employee termination benefit 1,632,462 614,608 2,247,070


Statement of changes in shareholders’ equity for the year ended March 31, 2015 :

Transfer to statutory reserve 6,766,321 (71,945) 6,694,376

Transfer to contractual reserve 10,149,482 (107,917) 10,041,565

Statement of changes in shareholders’ equity for the year ended March 31, 2014 :

Transfer to statutory reserve 5,765,602 (61,461) 5,704,141

Transfer to contractual reserve 8,648,403 (92,192) 8,556,211

29. ReclassificationsCertain amounts presented in the comparative financial information have been reclassified to conform with the current year presentation.

30. Approval of the financial statementsThese special purpose consolidated financial statements were approved by the Board of Directors on July 19, 2016.

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Financial Advisor, Lead Manager, Institutional Bookrunner and Underwriter

Receiving Agents

Arabian Waterproo�ng Industries Company (Awazel) (“the Company” or “the Issuer”) is a Saudi joint stock company under Commercial Registration No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) and Ministerial Resolution No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G).

The Company was established as a limited liability company on 14/06/1401H (corresponding to 18/04/1981G) by Hamad Al-Mubarak Al-Hameed, Nasser Abdul Aziz Al-Salama, Ali Ibrahim Al-Suqair, Hamad Saleh Al- Suqair and Marcel Warner Steiger with a capital of twelve million Saudi Riyals (SAR 12,000,000). The capital was formed from in-kind cash equivalents and cash shares of equal value and registered in Commercial Register No. 1010039827, dated 14/08/1401H (corresponding to 17/06/1981G) with a capital of twelve million Saudi Riyals (SAR 12,000,000). On 21/01/1402H (corresponding to 18/11/1981G) the Company increased its capital to fourteen million Saudi Riyals (SAR 14,000,000) by increasing the cash portion by two million Saudi Riyal (SAR 2 million) divided into fourteen thousand (14,000) cash shares of cash value of SAR 1,000 each, paid by the partners based on their ownership ratios. On 23/04/1413H (corresponding to 20/10/1992G), the Company increased its capital to thirty million Saudi Riyals (SAR 30,000,000) by capitalizing sixteen million Saudi Riyals (SAR 16,000,000) from retained earnings according to the last approved budget for the year 1991G. The capital was divided into thirty thousand (30,000) shares of equal value of (SAR 1,000) each. On 11/09/1425H (corresponding to 25/10/2004G), the partners decided to transform the Company into a Saudi closed joint stock company with a capital of sixty �ve million Saudi Riyals (SAR 65,000,000). The partners also decided in the same decision to increase the Company›s Share Capital to sixty �ve million Saudi Riyals (SAR 65,000,000).

The Minister of Commerce and Investment issued the Ministerial Decision No. 1247, dated 26/01/1426H (corresponding to 07/03/2005G) announcing the transformation of the Company into a closed joint stock company with a capital of sixty �ve million Saudi Riyals (SAR 65,000,000) divided into one million and three hundred thousand (1,300,000) shares at a nominal value of �fty Saudi Riyals (SAR 50) per share. The capital of the Company was increased by capitalization of thirty �ve million Saudi Riyals (SAR 35,000,000) from the retained earnings account. New investors were also entered as shareholders in the Company through a private placement of shares.

On 17/08/1428H (corresponding to 10/09/2006G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to eighty one million two hundred and �fty thousand Saudi Riyals (SAR 81,250,000). The increase was covered by capitalization of sixteen million and two hundred and �fty thousand Saudi Riyals (SAR 16,250,000) from the retained earnings account.

On 23/08/1428H (corresponding to 05/09/2007G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and eight million three hundred and thirty three thousand two hundred and eighty Saudi Riyals (108,333,280) �nanced from the retained earnings by issuing one new share for each holder of three previous shares registered in the Company›s records at the end of the day of the meeting.

On 27/06/1429H (corresponding 01/07/2008H), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and �fty one million six hundred and sixty six thousand �ve hundred and ninety Saudi Riyals (SAR 151,666,590) �nanced from the retained earnings by issuing four new share for each holder of ten previous shares registered in the Company›s records at the end of the day of the meeting.

On 04/08/1430H (corresponding to 26/07/2009G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s Capital to one hundred and eighty-one million nine hundred and ninety nine thousand eight hundred and ten Saudi Riyals (SAR 181,999,810) �nanced from the retained earnings by issuing one share for each holder of �ve previous shares registered in the Company›s records at the end of the day of the meeting.

On 16/12/1436H (corresponding to 29/9/2015G), the Extraordinary General Assembly of the Company decided to approve the increase of the Company›s capital to two hundred and seventy-two million nine hundred and ninety-nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) by granting one free share for each two shares held by the registered shareholders on the date of the Extraordinary General Assembly meeting. The proposed capital increase shall be covered by transferring twenty three million nine hundred and ninety nine thousand nine hundred and seventy Saudi Riyals (SAR 23,999,970) from the retained earnings and transfer an amount of (SR 67,000,000) from the statutory reserve item as at the date of the audited �nancial statements ended on 31 March 2016G. The fractures of shares are aggregated and sold to shareholders.

The Company›s current Share Capital stands at two hundred and seventy-two million nine hundred and ninety nine thousand seven hundred and eighty Saudi Riyals (SAR 272,999,780) divided into twenty seven million two hundred and ninety-nine hundred and seventy-eight shares (27,299,978) with a nominal value of ten Saudi Riyals (SAR 10) per share.

The Initial Public O�ering (the “O�ering”) of eight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Ordinary Shares (the “O�er Shares”) and each is (“an O�er Share”) with a fully paid nominal value of ten Saudi Riyals (SAR 10) per share and at an O�er Price of SAR([•]) each, representing thirty percent (30%) of the issued Share Capital of the Company, is directed at and may be accepted by two tranches of investors:

Tranche (A): Institutional Investors consisting of a number of institutions and companies including investment funds (the “Institutional Investors”) (see section 1 (“De�nitions and Abbreviations”). The number of O�er Shares to be allocated to Institutional Investors is eight million one hundred and eighty nine thousand and nine hundred and ninety four (8,189,994) Shares, representing 100% of the O�er Shares. In the event that Individual Investors (as de�ned in Tranche (B) below) subscribe to all the O�er Shares allocated to them, the Institutional Bookrunner has the right, subject to the Capital Market Authority›s (“CMA”) consent, to reduce the number of O�er Shares allocated to Institutional Investors to six million and �ve hundred and �fty one thousand and nine hundred and ninety �ve (6,551,995) Shares, representing up to 80% of the O�er Shares. Eighty percent (80%) of the Tranche (A) O�er Shares are to be allocated to investment funds, which percentage shall be subject to adjustment, in the event that other institutions, excluding investment funds, do not fully subscribe to the remaining twenty percent (20%) of the O�er Shares allocated to them, or in the event that the mutual funds do not subscribe to the full portion allocated to them

eighty percent (80%). The shares will be allocated to Tranche (A) in accordance with the coordination between the �nancial advisor and the Company using the discretionary allocation mechanism.

Tranche (B): Individual Investors including Saudi Arabian natural persons, including Saudi women who are divorced or widowed and who have children by a non-Saudi husband who may subscribe to O�er Shares in the name(s) of any of those children who are minors for her bene�t provided that any such woman provides evidence that she is the child›s mother and that she is widowed or divorced, in addition to GCC natural investors (collectively “Individual Investors” and severally an “Individual Investor”) (all of them with the Institutional Investors are “Subscribers”). The subscription by a person in the name of his divorced wife shall be deemed invalid and in such cases, the relevant regulations shall be enforced against that person. A maximum of (1,637,999) Shares representing up to 20 % of the O�er Shares shall be allocated to Individual Investors. If the Individual Investors do not subscribe to the full amount of O�ered Shares allocated to them, the Bookrunner may, subject to the CMA›s consent, reduce the number of O�ered Shares to match the number actually subscribed to by the Individual Investors.

The O�er Shares are being sold by the Selling Shareholders, whose names appear on pages 32 (collectively, the “Selling Shareholders”), who collectively own 100% of the Company’s pre-O�ering Shares. Upon completion of the O�ering, the Selling Shareholders will collectively own 70% of the Company’s Share Capital and will consequently retain a controlling interest in the Company. The proceeds from the O�ering, after deducting the O�ering expenses (the “Net Proceeds”), will be distributed to the Selling Shareholders on a pro-rata basis based on each Selling Shareholder›s percentage of ownership in the O�er Shares being sold in the O�ering and the Company will not receive any part of the Net Proceeds (see section 8 (“Use of Proceeds”). The Underwriter has committed to fully underwrite the O�ering (see section 12 “Underwriting"). The persons whose names are included in the Prospectus as Company Shareholders as indicated on page (32) of the Prospectus shall be restricted from disposing of their Shares for six (6) months starting from the date on which trading of the O�er Shares commences on Tadawul (“Lock-in Period”) Following the end of their respective Lock-in Periods, they may only dispose of their respective Shares after obtaining the approval of the CMA. The names of the Substantial Shareholder who own 5% or more in the Company’s share Capital are listed on page (36) of this Prospectus.

The O�ering will commence on 10/02/1439H (corresponding to 30/10/2017]G) and will remain open for a period of seven (7) days up to and including16/02/1439H (corresponding to 05/11/2017G) (the “O�ering Period”). Subscription to the O�er Shares can be made through branches of the selling agents (“Selling Agents”) listed on pages (viii) during the O�ering Period (see “Key Dates and How to Apply” Section and Section 15 “Subscription Terms and Conditions”). Subscribers of Institutional tranche may subscribe to the O�er Shares through the Bookrunner during the Bookrunning process that takes place prior to o�ering to Individual Investors.

Each Individual Investor who subscribes to the O�er Shares must apply for a minimum of ten (10) O�er Shares. The minimum allocation per Subscriber is (10) O�er Shares, while maximum number of O�er Shares that may be allocated for a Subscriber is two hundred and �fty thousan (250,000) shares. The balance of the O�er Shares (if any) will be allocated to subscribers on a pro-rata basis based on the number of O�er Shares they subscribed for. In the event that the number of Individual Subscribers exceeds ([•]) ([•]), the Company will not guarantee the minimum allocation of ten (10) O�er Shares per Subscriber, and the O�er Shares will be allocated equally between all Subscribers. If the number of Subscribers exceeds ([•]) ([•]), the Company will not guarantee the minimum allocation of (10) O�er Shares per Subscriber and the allocation will be determined in accordance with the recommendation of the Company and the Financial Advisor. Excess subscription monies, if any, will be refunded to the Subscribers without any charge or withholding by the Selling Agents. Noti�cation of the �nal allotment and refund of excess subscription monies, if any, will be made by 23/02/1439H (corresponding to 12/11/2017G) (see subsection entitled “Allocation and Refund” in Section 15 (“Subscription Terms and Conditions”).

The Company has one class of shares. Each Share entitles its holder to one vote, and each shareholder has the right to attend and vote at a General Shareholders Assembly (“General Meeting”). No Shareholder bene�ts from any preferential voting rights. The O�er Shares shall be entitled to receive dividends declared by the Company from the date of this Prospectus and during subsequent �scal years (see section 7 (”Dividend Policy”).

Prior to the O�ering, there has been no public market for the Shares in Saudi Arabia or elsewhere. An application has been made to the CMA for the admission of the Shares to the Saudi Stock Exchange (Tadawul). All supporting documents required by the CMA have been supplied, and all relevant approvals pertaining to this O�ering have been granted. Trading in the O�er Shares on the Saudi Stock Exchange (the “Exchange” or the “Tadawul”) is expected to commence shortly after the �nal allocation of the O�er Shares and the satisfaction of necessary conditions and procedures (see the section “Key Dates for Investors and How to Apply”). Following the trading of Shares on the Exchange (Tadawul), Saudi nationals as well as non-Saudi individuals who are residents in the Kingdom, companies, banks and funds and nationals of other GCC countries, will be permitted to trade in the Shares. Moreover, Quali�ed Foreign Investors (“Quali�ed Foreign Investors”) and approved QFI Clients (“Approved QFI Clients”) will be permitted to trade in the Shares in accordance with Rules for Quali�ed Foreign Financial Institutions Investment in Listed Shares. Furthermore, non-Saudi natural persons who are not residents in the Kingdom and institutions incorporated outside the Kingdom (“Foreign Investors”) are permitted to acquire an economic interest in the Shares by entering into a swap agreement with a person authorized by the CMA to acquire, hold and trade in shares on Tadawul on behalf of a Foreign Investor (the “Authorized Person”). Under such swap agreements, the Authorized Person will be the registered legal owner of such Shares.

Application has been made to the CMA for admission of the Shares to the Saudi Stock Exchange (Tadawul) and all requirements have been met.

The “Important Notice”, page i and section 2 (“Risk Factors”) of this Prospectus should be considered carefully prior to making a decision to invest in the O�er Shares.

This Prospectus includes information given in compliance with the Listing Rules of CMA. The Directors, whose names appear on page (d), collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and con�rm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. CMA and the Saudi Stock Exchange do not take any responsibility for the contents of this Prospectus, do not make any representation as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this ProspectusThis uno�cial English translation of the o�cial Arabic Prospectus is provided for information purposes only. The Arabic prospectus published on the CMA’s website (www.cma.org.sa) remains the only o�cial, legally binding version and shall prevail in the event of any con�ict between the two texts.This Prospectus is dated 11/01/1439H (corresponding 01/10/2017G)

Prospectus Awazel Waterproofing Industries CompanyA Saudi Joint Stock Company in accordance with the Commercial Registration No 1010039827, dat-ed 14/08/1401H (corresponding to 17/06/1981G) and the Ministerial Resolution number 1247, dated 26/01/1426H (corresponding to 07/03/2005G)

Sale of eight million one hundred and eighty nine thousand nine hundred and ninety four (8,189,994) Shares representing 30% of Awazel Waterproo�ng Industries Company (Awazel) Capital through an Initial Public O�ering at an O�er Price of SAR (•) per Share

O�ering Period: Seven (7) days starting from 10/02/1439H (corresponding to 30/10/2017G) to 16/02/1439H (corresponding to 05/11/2017G)