׉?ׁB!uבCט{u׉׉ 7cassandra://ZnhB1M9wcf9luEMzX6UqdHWwtdscP2PFsEFTHdL8sUU2u` ׉ 7cassandra://o_DhDIEbkym4eyS4d9u-64YJCD-9L4L4udMmOUfyJRoVV`S׉ 7cassandra://k_bvehxwzhAyBtAMDiwODUyNn2WZLjaX44CcSGkcjIYD`̵׉ 7cassandra://8Zp7a-lESCV_J5vOglNJXN-Q1XD4l0Igd2gIWEnakF8'͠X;ט{u׈׈EX;׉E׉ 7cassandra://k_bvehxwzhAyBtAMDiwODUyNn2WZLjaX44CcSGkcjIYD`̵X;X;{בCט{u׉׉ 7cassandra://F4PsB248mhpPW5HDLQoTiWxzvk-Jdb274MXs6gA6LVcYh` ׉ 7cassandra://0UGsbLUTgMjxHSDNQM906co6gaHyvNYUrpwiTzDm2SUW`S׉ 7cassandra://eC88XPf-6tdXIDywF-h4eESzPNQzAaEUIVyGagj_n34:`̵׉ 7cassandra://PVA5tfCijV7TMsfeInaInpidPfW-SM-r71PPXOrM2RU  ͠X;ט{u׉׉ 7cassandra://RwknBMbV7fl3ar4W__ibl3wXc3gIMtW9wo51fnD155Ae,` ׉ 7cassandra://j8qhnvE6YPzdp-krS28qK12k3YaXzNRmTYAdNBAUh48+`S׉ 7cassandra://qSsqHOUY-u3UBScdt_dZaHYgP0vOhCtSz34XYwGFmH8`̵׉ 7cassandra://KDW5OTCIivJwaH2n24TBSuJJLTijWhi9LHeLJdeyFcA,͠X;׉EoBefore we began manufacturing, Nigeria was one of the world’s biggest importers of cement. In 2012, our newly opened factories enabled Nigeria to become self-sufficient. In 2016, we transformed Nigeria into a net exporter of cement. Vision and Strength Our inspiration for the 2016 Dangote Cement Annual Report comes from the eagle - a large and graceful bird that soars across the skies of Africa with powerful wings and keen eyesight. Indeed, the eagle is the symbol of Dangote Cement, representing the qualities of vision, strength, tenacity and fearlessness - characteristics we believe are exhibited by our company. In the pages that follow, you will read about how we have performed so robustly in the face of the worst economic climate many of our markets have experienced in decades. Our strong performance in 2016 can be attributed to the vision we have long established for the company and the foresight of strategic decisions that were taken in the recent past. We have shown our resilience in the face of many different challenges across Africa and consolidated our position as the continent’s leading cement producer. ׉ 7cassandra://eC88XPf-6tdXIDywF-h4eESzPNQzAaEUIVyGagj_n34:`̵X;׉ElCONTENTS Introduction Vision, Mission, Values At a Glance Year in Figures Chairman’s Statement About Us Group Overview Our Executive Management Our Operating Environment Our Capacity Our Strategy How We Create Value Our People Staff Development Our Approach to Risk Management Our Approach to Sustainability Operational Review Interview with the Group Chief Executive Officer Review of the Business in 2016 Group Chief Financial Officer’s Review Our Plans for the Future Corporate Governance Corporate Governance Report Board & Committees Structure Board Biographies Report of the Directors 4 5 7 8 14 16 20 22 26 28 30 32 34 41 53 56 65 68 72 85 86 92 Audit, Compliance & Risk Management Committee Report 98 Finance & General Purpose Committee Report Technical & Operations Committee Report Nomination Committee Report Remuneration Report Compliance with SEC Disclosure Requirements Financial Statements Report of the Statutory Audit Committee Independent Joint Auditors’ Report to the Shareholders of Dangote Cement Plc Directors’ Responsibilities for the Preparation & Approval of the Financial Statements Consolidated & Separate Statement of Profit or Loss Consolidated & Separate Statement of Comprehensive Income Consolidated & Separate Statement of Financial Position Consolidated Statement of Changes in Equity Separate Statement of Changes in Equity Consolidated & Separate Statement of Cash Flows 111 115 118 120 129 136 137 138 139 140 141 142 143 144 Notes to the Consolidated & Separate Financial Statements 145 Five Year Financial Summary (Group) Five Year Financial Summary (Company) Statement of Value Added 208 209 210 ׉ 7cassandra://qSsqHOUY-u3UBScdt_dZaHYgP0vOhCtSz34XYwGFmH8`̵X;X;{בCט{u׉׉ 7cassandra://MtMItEDF0VX-bLz6nzSSJfQ1AQiW24TR1jkr4eWNmp4\ ` ׉ 7cassandra://XovzEKaJSBQLvGSQn_ta-qqIf5W0R0y-Vy1Jmd3QuaQ-`S׉ 7cassandra://b4CfPKkz3H7R04FckJwK66nfKZwqV893diC_KWAGRBo `̵׉ 7cassandra://z17oB-nhJfrt9CGjz6sJJl8xnEHC59uevSB295QFYAkU9͠X;ט{u׉׉ 7cassandra://4u-YnLCIGNAy9ETzG9UaTFLWqfnJ4TBIrH-IYGOeWq4B` ׉ 7cassandra://6uzPW7A1ReZBTNu9qAaQe3v7Nn_WskiUUl0LvIzN1K8>[`S׉ 7cassandra://6Uzw9BlQtsGFrGmZvAVT4KXvKzMriECkcJ6fEgr1O6gB`̵׉ 7cassandra://iVrJMYaKCMzVCz7d4AptRUp3GgN7q5sz9xfIs7kMtsIͼk͊͠X;׉EVISION, MISSION, VALUES Our Vision Our vision is to be Africa’s leading cement company, respected for the quality of our products, for our service and for the way we conduct our business. Our Mission Our mission is to deliver strong returns to shareholders by selling high-quality products at affordable prices, backed by excellent customer service. To help Nigeria and other African countries towards self-reliance and selfsufficiency in the production of the world’s most basic commodity, by establishing efficient production facilities in strategic locations close to key markets. To provide economic benefits to local communities by way of direct and indirect employment in all countries in which we operate. To lead the way in areas such as governance and sustainability, setting a good example for other companies to follow. Our Values Service: As a world-class organisation, we understand that we exist to serve and satisfy our customers. Accordingly, our customer orientation reflects intimacy, integrity and learning. Leadership: We thrive on being leaders in our business, markets and communities. To drive this, we focus on continuous improvement, partnership and professionalism. Entrepreneurship: We continuously seek and develop new business, employing state-of-the-art methods to retain our market leadership. Excellence: We are a large organisation, working together to deliver the best products and services to our valuable customers and stakeholders. To achieve this, we demonstrate teamwork, respect and meritocracy. 4 Annual Report 2016 ׉ 7cassandra://b4CfPKkz3H7R04FckJwK66nfKZwqV893diC_KWAGRBo `̵X;׉EHIntroduction AT A GLANCE Operations as at 27th February, 2017 10 Countries 45.8 Mta Capacity 16,272 Employees Capacity as at 27th February, 2017 Volume Growth 25 20 15 10 5 0 2010 2011 Nigeria Senegal Financial Growth 700 600 500 400 300 200 100 0 2010 2011 2012 Revenue ₦B 2013 EBITDA ₦B 2014 2015 2016 2012 2013 Cameroon South Africa 2014 Ethiopia Tanzania 2015 Ghana Zambia 2016 Annual Report 2016 5 ₦ Billion Million tonnes Obajana 13.3 Ibese 12.0 Gboko 4.0 South Africa 3.3 Tanzania 3.0 Ethiopia 2.5 Cameroon 1.5 Congo 1.5 Senegal 1.5 Zambia 1.5 Ghana 1.0 Sierra Leone 0.7 ׉ 7cassandra://6Uzw9BlQtsGFrGmZvAVT4KXvKzMriECkcJ6fEgr1O6gB`̵X;X;{בCט{u׉׉ 7cassandra://u4J_vMTBUYMJS5l6E5qL77FvVI02rFalV78ZCws3-J8` ׉ 7cassandra://VwrkCmqsOX4mLH-kWe6wgXaQvIOFmkYJ7ZaKxC7lrZAls`S׉ 7cassandra://QBwkY3FaofGaL8hD6O5cnom1VYQREIm9lngq2udqPvY$`̵׉ 7cassandra://w9acsVqzrLr5e88ALVPodrmETp-MRwlHh_Zb8YfKg8kՎ͠X;ט{u׉׉ 7cassandra://4Ooqadu-sbHzhgI061dEC-Px86T_WbPRDhcJfi67AGYV` ׉ 7cassandra://nCFHi4s_q1XhmoctplzO2yabswu4Jfx5oxOKVIQxbqcKD`S׉ 7cassandra://CMWA_R36aGRQqK6rVswjxvRLEeU8nB8WgSy6v_xCW5E`̵׉ 7cassandra://1ULsIXv84sdJQw-HNFGR2hP2cFmGUUfKoVZOhpuVATMY`͠X;׉E6 Annual Report 2016 ׉ 7cassandra://QBwkY3FaofGaL8hD6O5cnom1VYQREIm9lngq2udqPvY$`̵X;׉E:Introduction YEAR IN FIGURES Capacity 43.6Mta n/c 14.3 8.6 29.3 420.1* 230.8* Sales volumes Revenues 23.6mt +25.0% 14.8** ₦615.1B +25.1% 195.0 EBITDA ₦257.2B -2.0% 26.4 Nigeria Pan-Africa Earnings per share ₦10.86 ₦251.9B Capex ₦11.34 Dividend per share 4.5% -45.9 % ₦136.2B KEY RATIOS EBITDA margin ₦8.0 Net debt ₦204.2B ₦8.5 6.25% ₦240.8B 17.9% Net debt/EBITDA Net gearing ROCE 41.8% (53.4%) 0.94x (0.7x) 30.2% (31.7%) *After inter-company eliminations ** Excludes inter-company sales of 0.2mt & exports of 0.2mt Annual Report 2016 7 18.0% (20.9%) ׉ 7cassandra://CMWA_R36aGRQqK6rVswjxvRLEeU8nB8WgSy6v_xCW5E`̵X;ƁX;Ł{בCט{u׉׉ 7cassandra://t1Uh6B8JiVIN69KUlZBc7MIziZv_huGfAbsT4CaTkoMlI` ׉ 7cassandra://Vx_10yLjCZZMnWPRPClQrHXhYRfxiIPbouOzZ9MpgigDb`S׉ 7cassandra://5LBcbesnmPvy6RnKpm5Q4EkaJ-yWXutf4CpIyBsg2To`̵׉ 7cassandra://ST4bzEoihUkG3w_Ihn7snrJlk2Am5uOQd2MlgSj7Vhcd͠X;ט{u׉׉ 7cassandra://z5MfuIzh7e5U7ePna-TbKebfvSrNr5hhM7MuKIumLlgw` ׉ 7cassandra://ndFDoroqDSrxcwc4Or863fX_3bSTaqclfK28umtVaBA@`S׉ 7cassandra://FU_Tm_sbmxHeblsbd_dKUMp2-hI9j-uZuRRJidag2sgS`̵׉ 7cassandra://L7B7YHRXv6TNU8iFGgeZ_C6U-GW7Iyo0Loo7NnYBC7cX͠X;׉EMCHAIRMAN’S STATEMENT Dear Shareholders It is my pleasure to deliver this Annual Report at the 8th Annual General Meeting of Dangote Cement. Our 2016 Annual Report contains detailed information about the activities of the Company in what was a challenging year for business across Africa. Yet I am pleased to report that we achieved growth in market share across Africa, opened a new plant in Tanzania, increased our revenues by 25.1% and began preparations to commission new production and import facilities in Congo and Sierra Leone, that will increase our capacity to just under 46 million tonnes per annum (Mta). I am particularly pleased to tell you that in Nigeria, exports of cement exceeded imports for the first time and that we at Dangote Cement have transformed Nigeria from one of the world’s biggest importers of cement, into a net exporter. Aliko Dangote GCON Chairman We have transformed Nigeria into a net exporter of cement. Our success in 2016 has enabled the Board to recommend for your approval a dividend of ₦8.5 per 50 kobo share, which is 6.25% higher than last year and a dividend payout equal to 74.9% of net profits. You may recall that in last year’s Annual Report I highlighted not just our achievements in growth, but more importantly I conveyed to you my belief we had ended the year as a better company. We introduced many improvements to our governance; we successfully diversified our business beyond Nigeria and our new plants were already contributing cash flows to the group. In addition, we were mid-way through the conversion of our Nigerian plants to coal so we could diversify and secure the fuel supplies to our largest and most profitable plants. All of these initiatives were the result of plans we had made in the years before, years in which we enjoyed healthy profits and a stronger and more stable Naira backed by robust economic growth in our main market of Nigeria. But rather than sit back and take our success for granted, we preferred to focus upon investing our funds and our energies into becoming a more resilient and better-managed company. 8 Annual Report 2016 ׉ 7cassandra://5LBcbesnmPvy6RnKpm5Q4EkaJ-yWXutf4CpIyBsg2To`̵X;׉EIntroduction CHAIRMAN’S STATEMENT A year later, as you read our 2016 Annual Report, I hope you will come to understand how prescient those decisions and those actions were. Nigeria has fallen into recession for the first time many people can remember. Inflation stood at 18.6% in December; the Naira was allowed to float against the Dollar and quickly fell from just under $1/₦200 in June to $1/₦320 in late August. At the end of the year it stood at $1/₦304. Not only was our currency worth less in the money markets but the shortage of foreign currency in Nigeria made it difficult to convert our Naira into the Dollars we needed to pay for imports and capital expenditure. Even more disruptive for our business, and Nigeria as a whole, was the resurgence in attacks on oil and gas pipelines in the south of Nigeria that have left homes and factories such as Ibese and Obajana short of fuel, crippled exports and slashed government revenues. Nevertheless, the results of those strategic decisions, taken years ago, enabled us to strengthen our business and consolidate our position in a year when many others in Nigeria and across the rest of Africa have struggled against economic downturn. Our Pan-African diversification has provided cash streams, from countries such as Senegal, Cameroon and Zambia have provided us with essential foreign currency as foreign exchange controls made it difficult for us to obtain Dollars for operations. Furthermore, we were able to borrow money in these countries’ local currencies, thus reducing our exposure to foreign currency shortages in Nigeria. In addition, we began to generate foreign currency sales from exports of cement from Nigeria to Ghana. In 2017 we will begin to benefit from using coal mined in Kogi State by our parent company Dangote Industries. The benefits of this switch are numerous: the coal we buy will be cheaper than alternatives such as gas and imported coal; it will be priced and paid for in Naira, reducing our need for foreign exchange to fund our biggest variable cost; and it allows us to control our own fuel supply chain without dependence on gas pipeline security or importers of coal and LPFO. Looking back at the 2016 financial year, I am pleased to report that our cement sales volumes increased by 25.0% to nearly 23.6Mt. Of this, almost 14.8Mt was sold in the Nigerian market. Revenues increased by 25.1% to ₦615.1B, of which 68.3% was generated in Nigeria (excluding eliminations)and 31.7% from Pan-African operations. Our earnings before interest, depreciation and amortisation (EBITDA) decreased only slightly, to ₦257.2B, with Pan-African operations contributing ₦26.5B, excluding central costs. Earnings per share increased by 4.5% to ₦11.34. We invested ₦136.2B across Africa, including ₦62.9B in Nigeria, and created nearly 2,000 jobs. As I have already stated, the Board proposes a dividend of ₦8.5 per 50 kobo share, subject to your approval, to be paid on 26th May 2017 to shareholders whose names are on the Company’s Register at the close of business on 12th May 2017. The Board believes the recommended dividend is consistent with our aim to deliver excellent returns to shareholders, taking into account the company’s need to invest for growth. Looking at our performance by region, in Nigeria, we increased sales volumes by 11.1% to nearly 14.8Mt in 2016. The year began with strong sales momentum following the price reduction we introduced in September 2015 and this clearly helped to stimulate the market, driving 11 months of strong growth in our home market, through to the end of August 2016. Such strong growth in cement demand bucked the national trend, with Nigeria’s economy falling into recession in the first half of the year. By contrast, in the same six months, our sales volumes rose by 38.8%, an unprecedented level of growth, driven by small-scale building projects such as home improvements. The contraction of Nigeria’s economy was driven by falling government revenues from oil and gas, due to lower international oil prices and increased gas pipeline Annual Report 2016 9 ׉ 7cassandra://FU_Tm_sbmxHeblsbd_dKUMp2-hI9j-uZuRRJidag2sgS`̵X;ʁX;Ɂ{בCט{u׉׉ 7cassandra://k5U7V7UwrPdbPBD5a8iFCQMCtAseg3dLgl2-Z9CB4Bo,f` ׉ 7cassandra://1xe9yl1f6ITyt8pNhvnXSjHIeyLPXD3oSbk86QpbXGML`S׉ 7cassandra://Nex2D8g-wyMJtTGyiJiEsCbajz1yW3MxHOSS_4e8zAc`̵׉ 7cassandra://MpdEGBM2MmFfZ2NmxQGl3rgzrk03-Z3yn356drnvuVMv͠X;ט{u׉׉ 7cassandra://Ts4wVW_bFuL9cNnoZ_ppKC7x5sBKy1O2kuwD-7iUUPwc` ׉ 7cassandra://NUDsLiicmIIMswXsFuIaPtFLLOYrS26vdAdMNKXssZQ>H`S׉ 7cassandra://5neJ334x4O-CtrieKmp5bPviCoMWiutB2H2zhAAVeyM`̵׉ 7cassandra://lkMWlWaCCTE4M0xVUR1NPEZgkxLJ0Cpbz_xqzR2_yIQ^͠X;׉E CHAIRMAN’S STATEMENT vandalism in the Delta. Furthermore, the lack of exports created a shortage of foreign currency that made it difficult for everyone, including Dangote Cement, to source US Dollars to pay for essential imports to support our operations. In June, the Federal Government decided to unpeg the Naira and create a foreign exchange market that to a large extent set the currency’s value. Within weeks the Naira had fallen from ₦198 per Dollar, to more than ₦300 per Dollar. As a result, our costs increased substantially because nearly 60% of our cash costs, including gas, are exposed to fluctuations in the exchange rate against the US Dollar. Costs also came under pressure from Nigeria’s high inflation and from the fact that disruption to the nation’s gas supplies forced us to use unprecedented quantities of expensive LPFO as a back-up fuel. Against such cost pressures, we took action to protect our margins and in early September we increased our ex-factory prices, as we had previously indicated we would. Accounting for inflation, that increase returned pricing to just a little higher than where it was in August 2015, before the price cut that stimulated so much of our volume growth in late 2015 and much of 2016. The combination of the price increase, fuel shortages, economic and seasonal factors in Nigeria led to a slowing of sales in the last four months of the year and, having sold almost 8.8Mt in the first half of 2016, we ended the year selling nearly 14.8Mt within Nigeria. However, because of the higher pricing and more favourable fuel mix, margins recovered very strongly in Nigeria in the final quarter, which bodes well for 2017. Across the rest of Africa we increased cement volumes by 54.0%% to more than 8.6Mt, including a maiden contribution from Tanzania, which quickly made an impact in its market. This was a commendable result in the face of many challenges across the region, including economic downturns in South Africa and Zambia, as well as civil unrest in Ethiopia. Against these challenges, we performed very well across the continent, with all our operations increasing sales and gaining market share to strengthen our position as the leading cement manufacturer in SubSaharan Africa. As a result, Pan-African operations contributed ₦195.0B to Group revenues, or 31.4%, (excl. eliminations) up 88.5% on 2015. EBITDA was ₦26.5B, making up 9.9% of Group EBITDA (excluding central costs). 10 Annual Report 2016 ׉ 7cassandra://Nex2D8g-wyMJtTGyiJiEsCbajz1yW3MxHOSS_4e8zAc`̵X;׉EIntroduction CHAIRMAN’S STATEMENT In addition, in the second half of 2016 we began exporting cement from Nigeria to Ghana, reducing our need to import Far Eastern cement and generating useful foreign currency sales. By the end of the year we had exported 0.2Mt of cement to Ghana, out of total sales there of 1.1Mt. We sold large quantities of cement into other export markets and through our efforts, we believe Nigeria became a net exporter of cement. As the year closed we were completing building work on our 0.7Mta import facility in Sierra Leone and a 1.5Mta integrated plant in Mfila, Congo. I look forward to their contribution to the business in 2017. Given the currency restrictions we now face in Nigeria, our Pan-African operations will provide useful sources of foreign currency to fund our expansion across Africa, albeit at a more measured pace than we outlined in last year’s Annual Report. I hope you will appreciate our robust response to challenges we have faced from the devaluation and associated currency restrictions. I am confident these actions will support our progress to be a global force in cement production and the strongest producer in Africa. Compared to other African cement producers, we have a strong balance sheet to support significant strategic and operational advantages in the African cement market, which I still consider to have the highest growth potential of any in the coming years. Indeed, in its latest report on Africa, Lions on the move II: Realizing the potential of Africa’s economies,the McKinsey Global Institute believes that despite recent challenges, growth will accelerate across Africa. Driving growth will be four factors: rapid urbanisation, a growing workforce, technological advances and abundant natural resources, including fertile land. Urbanisation needs housing and infrastructure, workers need factories, offices and shops, and natural resources need to be extracted and transported to markets. Supporting all of these activities will require millions of tonnes of cement in the coming decades. Turning now to governance, we continued to make good progress improving the quality of our business. Annual Report 2016 11 I am delighted to welcome Dorothy Ufot as our first female Director, following the recognition by our Board that we needed to improve our efforts on gender diversity. Dorothy is one of Nigeria’s leading commercial lawyers and adds formidable legal expertise to our Board. I have no doubt she will make a substantial contribution to our business in the coming years. In the area of Sustainability, we are working hard to prepare Dangote Cement to comply with new requirements for Nigerian companies to report on the impact they are having on the environment and on local people. In this Annual Report, we outline the steps we are taking to ensure that regard for Sustainability is part of our way of doing business. I know this is becoming increasingly important to investors and am happy that Dangote Cement is taking the issue seriously. In summary, 2016 was a year in which we were tested by economic and other forces well beyond our control, not just in Nigeria but across Africa as well. But I am pleased to say that thanks to the hard work and dedication of our staff, and the long-term strategies we have been pursuing, Dangote Cement has proved itself to be robust. As others have struggled in these times, I believe we have demonstrated the resilience and determination to achieve our very high ambitions. Looking ahead to the coming years, we remain focused upon improving and expanding our business to create even more shareholder value. In doing so we will help to build a strong and successful Africa. I thank you, our shareholders, for your support and I hope you will continue to share in our success. Aliko Dangote Chairman ׉ 7cassandra://5neJ334x4O-CtrieKmp5bPviCoMWiutB2H2zhAAVeyM`̵X;΁X;́{בCט{u׉׉ 7cassandra://qGWKd2R9gY6JUpQTa0vWDOsovtIqOk0G6Cfp_iO_M7Ub` ׉ 7cassandra://JUDVc69sJtg4uNkhXtVOiZuvV3QxoFaYluQhOUlEXb0:d`S׉ 7cassandra://9gbEgm5Lp6GD9Cmlj1vqe5lMahIu6F7yjuy39y1zsdkK`̵׉ 7cassandra://dISLgNHIFYyKrOXZ7N0CIS9BrxF19UfoOgM7sU7xicU38F͠X;ט{u׉׉ 7cassandra://ETKzFW15mPKs1apInfeXz1pfCbCqWGQMHyjCG0FVnDw7%` ׉ 7cassandra://EqBjSG9MyUbQH2pawHurDJgzqcgEyXFcGmiX6Furz_I[T`S׉ 7cassandra://-O7bgyvdWRh2L-j_2ZqzeYNF4MQ2BcCuIaEV8_av5y8!`̵׉ 7cassandra://vEcHhV9-ahIawgUsLrV__Eha0d6RgLSJFGjMfDpvA0kJ͠X;׉EAbout Us Group Overview Executive Management Our Operating Environment Our Capacity Our Strategy How We Create Value Our People Our Approach to Risk Management Our Approach to Sustainability 14 16 20 22 26 28 30 34 41 12 Annual Report 2016 ׉ 7cassandra://9gbEgm5Lp6GD9Cmlj1vqe5lMahIu6F7yjuy39y1zsdkK`̵X;׉EAnnual Report 2016 13 ׉ 7cassandra://-O7bgyvdWRh2L-j_2ZqzeYNF4MQ2BcCuIaEV8_av5y8!`̵X;ҁX;с{בCט{u׉׉ 7cassandra://laggoJ8ALlgK1Is8nToAUsVdmtsGZLqZXN6zX7OKO5Q0H` ׉ 7cassandra://OTMAjeYliV-GKK7G_INk9uMnze2cRg0wScU-2c4UJG8K`S׉ 7cassandra://F4ErgjWe10VeyH23Qod83XN0ccKQGAAnDasDmXhYJGA`̵׉ 7cassandra://Qr7UoqqsjWs3i-of_kF3v1pRpb2OT40HpR__WyE1BZU+_8:͠X;ט{u׉׉ 7cassandra://_5rziycitt2F1VeW7Cp2Jwy--22o24tRaz8QRWy-dVQN` ׉ 7cassandra://sCV1c6c6GULBXwp1bC2spJhv8TfdL6SgoMi1ywYfvY8<(`S׉ 7cassandra://nT7lz8duscBBKAmjXC412ilmEUXGere0r8OyWY6cC3c`̵׉ 7cassandra://9KQzMt5J41FTZ33DLgHEg2pXob2TxrQnnBT82GqYwzEI82͠X;׉E GROUP OVERVIEW The Company that became Dangote Cement was founded at a time when Nigeria was almost entirely dependent on imports. Indeed, importation of cement was our main business for many years until the Federal Government launched its industrial policy of Backward Integration in 2002. This initiative was designed to reduce Nigeria’s dependence on imports by encouraging the industry to build enough capacity to serve Nigeria’s needs, not just in that decade but long into the future. Probably Africa’s most attractive market for cement, Nigeria has substantial limestone and energy resources, a large and increasingly prosperous population and a massive need for infrastructure and housing.. We have invested billions of dollars building new capacity that has made Nigeria not just self-sufficient in cement but also an exporter. In the process we have created thousands of jobs across the country in factories, logistics, sales and support services. At 13.25Mta, our Obajana Cement Plant in Kogi State, Nigeria, is the largest in Africa and one of the largest and most profitable cement factories in the world. Employing thousands of people directly and indirectly, it was opened in 2008 as a 5Mta plant and has twice been extended in size. Dangote Cement is Africa’s leading cement producer with 44 million tonnes per annum (Mta) of production or import capacity operational at the end of 2016 in Nigeria, Cameroon, Ethiopia, Ghana, Senegal, South Africa, Tanzania and Zambia. In the first quarter of 2017, new facilities totalling 2.2Mta will begin operations in Congo and Sierra Leone. Headquartered in Lagos, the Group is managed by an executive team led by the Group Chief Executive Officer (GCEO), who reports to the Chairman and the Board of Directors. Dangote Cement has two operating regions: Nigeria and Pan-Africa. Each has its own Chief Executive and Chief Financial Officer reporting to the Group Chief Executive Officer and Group Chief Financial Officer respectively. 14 Annual Report 2016 Although Obajana was initially designed to be fuelled by gas, with low-pour fuel oil (LPFO) as a back-up, we recently installed coal facilities to fire its four kilns as well. This has helped to reduce our dependence on gas following the serious shortages we experienced in 2016 because of disruption to gas pipelines in the south of Nigeria. It has also eliminated our need to use LPFO as a back-up fuel, which costs 2.5x as much as gas per tonne of finished cement. Our Ibese plant in Ogun State has four cement lines with a total capacity of 12Mta. Its first two lines opened in February 2012 and the second pair came onstream in February 2015. Like Obajana, Ibese was originally designed to use gas and LPFO but we have now abandoned LPFO at Ibese in favour of coal, which can be used to run all four kilns if needed. ׉ 7cassandra://F4ErgjWe10VeyH23Qod83XN0ccKQGAAnDasDmXhYJGA`̵X;׉EAbout Us GROUP OVERVIEW Our Gboko Cement Plant in Benue State has 4Mta of capacity. Acquired originally during a privatisation exercise in Nigeria, we refurbished and upgraded the plant to its present capacity. Originally designed to use just LPFO, because no gas pipelines ran anywhere near the plant, Gboko has recently been equipped with coal milling facilities so that its kilns can run more costeffectively on the cheaper fuel. Gboko was mothballed throughout most of 2016 as we shifted production to alternate lines at Obajana and Ibese, which enjoy Pioneer tax status. Over the past few years, the profitability and strong cash generation of our operations in Nigeria have helped us to expand our business across Sub-Saharan Africa with a mixture of integrated, grinding and import facilities to meet the demands of local markets. We began 2016 with approximately 44Mta of production and import capacity across Africa. Our 3.0Mta plant in Tanzania made its maiden contribution to Group sales in the first quarter of the year and very quickly established itself as a leading supplier, achieving a 23% market share by June 2016. The rapid success of plants that we have opened beyond Nigeria is testament to our strategy of competing on costs, service and selling higher-quality cement at competitive prices for local needs. This success has given us the confidence to continue expanding. By 2023, we plan to augment our existing operations in Nigeria, Cameroon, Ethiopia, Senegal and Zambia and establish new facilities in Kenya, Liberia, Mali, Niger and Zimbabwe. In September 2015, we announced plans to venture beyond Africa for the first time and build a plant in Nepal to serve local and export markets. With this expansion, Dangote Cement will truly be a global force in cement production, operating in some of the most exciting growth markets in the world where demand is set to rise substantially in the coming years. We will take advantage of being able to operate within trading blocks that enable us to export our cement Annual Report 2016 15 from one country and import it into our own facilities elsewhere. Such an export-to-import strategy makes great sense in West Africa, where many countries lack the limestone necessary to make cement. Although the pace of our expansion is unprecedented in the history of the cement industry, we are investing for growth at a time when many of the world’s largest cement companies are focusing more upon debt reduction than capacity expansion. However, as a result of our financial strength, we have an opportunity to enter these markets and gain share very quickly. This is our strategic advantage. Our operational advantage in Sub-Saharan Africa is our ability to enter new markets and build modern, energyefficient factories that will provide strong competition for many of the ageing cement plants that serve the region at present. We will take high-quality limestone from newly mined quarries and produce higher-quality, stronger and quicker-setting cement at lower cost than many other producers can achieve in these markets. We will support these facilities with strong logistics and the ability to buy resources in bulk across the Group, thereby reducing costs. These strategic and operational advantages will fortify our position as the leading provider of cement in a rapidly growing continent that is embarking on a huge build-out of its infrastructure, housing and commercial space. The experience of other emerging markets shows that this will take more than one generation of Africans to complete, but we believe it is a great opportunity for us to become a global force in cement production. We are confident that the strategy we are pursuing will ensure that Dangote Cement becomes and remains the partner of choice for those who are building a new African continent. ׉ 7cassandra://nT7lz8duscBBKAmjXC412ilmEUXGere0r8OyWY6cC3c`̵X;ցX;Ձ{בCט{u׉׉ 7cassandra://3YmuoO-NjekDOAN0qCGezTm364K__EDxQnwkOYVoRMwg` ׉ 7cassandra://VIQlwNCiniLzT18YLbRARC9Jna-vQlfYeBBGSPVHHPQF`S׉ 7cassandra://xNOHFm-itYzTBEQpXNg-5V15m98V2zitzkBDSOqdVOU`̵׉ 7cassandra://shjPV8pLdSHozVaEn5-GCbtzJFBwvu9rcOhF3typnwU]͠X;ט{u׉׉ 7cassandra://qptlakDRBOdOMnInLJ6FuAzyiOOLCvf7kCaNO3qXKCw` ׉ 7cassandra://GIRT-jv84qXLatze0vn0k2YKn8ieTIPOGqo4nYdyiNw;`S׉ 7cassandra://W_JbNvaGz6t27tb7xpy92KkOrmt9zU58pVQQPxBJxok`̵׉ 7cassandra://Ti_4uwr1OLv9_xwXF4pSEHwF5HqdCOTFz5gR18COB6oP 8B͠X;׉EEXECUTIVE MANAGEMENT Onne van der Weijde Brian Egan Anantharaman Vellore Rao Kallepalli Kashinath Bhairappa Oare Ojeikere Mahmud Kazaure Juan Carlos Rincon Knut Ulvmoen MFR Emmanuel Imoagene Oliver Obu 16 Annual Report 2016 ׉ 7cassandra://xNOHFm-itYzTBEQpXNg-5V15m98V2zitzkBDSOqdVOU`̵X;׉E MAbout Us EXECUTIVE MANAGEMENT Onne van der Weijde Group Chief Executive Officer Onne is a seasoned cement industry professional and joined Dangote Cement as Chief Executive Officer in February 2015. He brings with him a wealth of experience in the management of international businesses, having held many senior level positions during his 23 years in the cement industry, during which time he worked at notable organisations including Holcim (Indonesia and India) and ACC Limited in India. Prior to his appointment at Dangote Cement, he was the CEO of Ambuja Cements Limited in India, a 62Mta division of LafargeHolcim (previously Holcim). A Dutch Citizen, he holds a Bachelor’s Degree in Economics and Accounting from the Hague University of Applied Sciences in the Netherlands and an MBA from the University of Bradford in the United Kingdom. Anantharaman Vellore Acting Regional CEO, Nigeria Anantharaman joined Dangote Cement as Managing Director of Benue Cement in 2008. He previously had a long career in the Indian cement industry, spending 31 years with ACC Limited, one of the country’s leading producers, where he held various roles overseeing plant operations in India and abroad. He led the ACC team that provided consulting services to Dangote Industries during the planning stages of Benue and Obajana Cement Plants. In 2010, he became Director of Technical Services for cement plant operations in Nigeria. He became Group Technical Director in 2015 and is now Acting Regional CEO for Nigeria. He holds a Masters in Industrial Engineering & Operations Research from IIT,Kharagpur, as well as a Post-Graduate Diplomas in Management and a PGdip. in Energy, Environment and Sustainable Development from United Nations University in Tokyo. Annual Report 2016 17 Brian Egan Group Chief Financial Officer Brian joined Dangote Cement as Group Chief Financial Officer in April 2014, having previously been an Executive Director and CFO of Petropavlovsk Plc and of Aricom Plc, both of which were listed on the Main Board of the London Stock Exchange. Prior to joining Aricom, he was Chief Financial Officer of Gloria-Jeans Corporation, the leading Russian apparel manufacturer and retailer. He has more than 20 years’ international experience in senior financial roles with Associated British Foods plc, Georgia-Pacific Ireland Limited and Coca-Cola HBC. He trained as an accountant with KPMG and is a member of The Institute of Chartered Accountants in Ireland. Rao Kallepalli Acting Regional CEO, Pan-Africa Rao joined Dangote Cement in 2006 to manage some of the Group’s expansion projects. His experience in project management spans 30 years holding senior positions in management consultancy and industrial engineering. He is now Acting Regional CEO for Pan-Africa. He holds a B.Tech in Electrical Engineering and an M.Tech in Industrial Engineering and Operations Research. ׉ 7cassandra://W_JbNvaGz6t27tb7xpy92KkOrmt9zU58pVQQPxBJxok`̵X;ځX;ف{בCט{u׉׉ 7cassandra://7xFXSLYoaoN2ZWvFefeFEp8qbeEBKpzrKKQSz8E5jBI" ` ׉ 7cassandra://TZXCvsXKES_a5_HI_e0soMthFvNLRbCsYeT_uCL6VBU5}`S׉ 7cassandra://rrIZSVAG8KjmHGBaaKh2CD5Y_YMMUrfIEqBkgdofAE4`̵׉ 7cassandra://E80ui2D8o0FUYr0KXL2K7uDvOWRprbxZ_DsIJQ6IA3MfP͠X;ט{u׉׉ 7cassandra://Z5tU7adp1ZPm1_WbPntUMELMHESTZlL0o9wpdAG71ag` ׉ 7cassandra://iSk45_5LBD4RRWLylTzsVmTtDIpGR3QiAWsCEDKtZTo/4`S׉ 7cassandra://LS7uh24WJ6TYXt_S_CX0o5i_IAakO59J_PcfrVN2XvM`̵׉ 7cassandra://kEFsqQjuT2rR3CKWEA_zAgRuUo9sO10EUt4fpD8SCzAM 8>͠X;׉E jEXECUTIVE MANAGEMENT Kashinath Bhairappa Director of Projects Kashinath joined Dangote Cement in February 2001 as a General Manager and was subsequently elevated to Deputy Director of Projects, responsible for looking after Cement’s Projects. He is also Acting Regional CEO with responsibility for operations in Ghana, Tanzania, Zambia and Cote d’Ivoire. He previously worked with different cement manufacturers in India, including BK Birla Group (Cement), Ambuja Cements and Grasim Industries Limited at different levels in project management and execution. He has a degree in Mechanical Engineering. Oare Ojeikere Group Chief Sales & Marketing Officer Oare joined Dangote Cement in February 2014, with significant cross-industry marketing experience, after having previously worked as Marketing Director, CocaCola Nigeria and of Airtel Ghana. He also held the position of Group Brand Director Africa, for the Zain Group in the Netherlands and Kenya, as well as management roles in Coca-Cola, Accenture and Xerox. He brings vast experience of fast-moving consumer goods and has driven Dangote Cement’s new marketing initiatives since 2015, with a strong focus on the development of retail sales outlets Mahmud Kazaure Group Chief Legal Counsel & Company Secretary Mahmud joined Dangote Cement in 2011 and has broad legal experience including commercial law, international business and civil litigation as well as contractual and legislative drafting. He is licensed to practice law in Nigeria, in the States of Maryland and New York in the United States of America, and also before the Supreme Court of the United States. He has a Master of Law from Howard University School of Law, Washington DC. Juan-Carlos Rincon Head of Transport Juan-Carlos joined Dangote Cement in 2012 and has 24 years’ experience in the cement industry, having worked in multinational cement groups such as Diamante, Cemex, Asamer, and the Austrian engineering consultancy firm AUSTROPLAN. He brings to the Group a high degree of managerial knowledge and international experience gained from working in the global cement industry at sites in different countries. He has held senior management positions in different parts of the world, including time as CEO of the Libyan Cement Company, as President of Dalmatia Cement in Croatia, and as Regional Human Resources Director for Cemex in South-East Asia. 18 Annual Report 2016 ׉ 7cassandra://rrIZSVAG8KjmHGBaaKh2CD5Y_YMMUrfIEqBkgdofAE4`̵X;׉E=About Us EXECUTIVE MANAGEMENT Knut Ulvmoen, MFR Supply Chain Director Knut joined Dangote Industries in 1996 as Finance Director. He previouly had extensive finance experience in companies including Revisor-Centret, Norcem, Bulkcem and Scancem. As Group Managing Director of Dangote Group, from 2002 to 2007, he was instrumental in Dangote Cement’s transition from importing cement to becoming Nigeria’s leading manufacturer. As part of this expansion, he was a key figure in the acquistion of Benue Cement Company and in the development of plans to build the Obajana Cement factory in Kogi State. In addition to his work in cement, he was also involved in the development of Dangote Industries’ flour and sugar operations. Emmanuel Imoagene Group Chief HR Officer Emmanuel joined Dangote Cement in June 2016 as Group Human Assets Management and Administration Director. He has diverse private-sector experience spanning three decades and was previously Human Resources Director (West Africa) of Cadbury Nigeria, where he was part of the team credited with returning the company to profitable growth. He has significant experience in many other aspects of business including supply chain management, corporate governance and general management practice. He has worked for other blue-chip companies including Shell, Unilever Ghana and Nigerian Breweries. Oliver Obu Group Financial Controller Designate Oliver joined Dangote Industries as a management trainee in January 2012, specialising in finance. After substantial in-house training he was subsequently assigned to Dangote Cement in January 2015 as the Head of Internal Reporting & Planning. He is a key member of the Company’s Finance team, shaping its internal reporting & planning framework and working on the development of financial models for numerous projects embarked upon by the Group. In addition, he plays a key role in corporate finance activities in Dangote Cement. Oliver holds a Bachelor’s Degree in Economics and Statistics from the University of Benin and an MBA from the Lagos Business School in Nigeria. Annual Report 2016 19 ׉ 7cassandra://LS7uh24WJ6TYXt_S_CX0o5i_IAakO59J_PcfrVN2XvM`̵X;ށX;݁{בCט{u׉׉ 7cassandra://mzBMBRNN7Fs66AVH8BBku28f5w4MwesFvEzNXDDlZCw^` ׉ 7cassandra://46jmpOy0maQVxJagStKM-rM-8RFzS0LPI-Ut9EcrC-8:`S׉ 7cassandra://OybQ0Pd_uMFXFKKwNGv7YhYuaPyYhVHa9YB_R0h7y2I`̵׉ 7cassandra://7FmYvhAc7PVIEaE0K5gsYm_V4AtD4r9Sch6YpPjXi4o͋@͠X;ט{u׉׉ 7cassandra://j1VF6NsK5zadpCUP44YKLUemYq5du2Zoh0_V2vdsGfU]` ׉ 7cassandra://IQ7irXM-2cil6KTQ-wqets-M28j8x846OxkIwgzYECI?`S׉ 7cassandra://zlF2YMKkNz2lTMPCGtU2LpY2k-WMv5TQQk72aSqi0sAn`̵׉ 7cassandra://jOpmBBCLnSrC12YzPR0Zahthsc0_XjmSrIrGHGwHFp4<͌ ͠X;׉E8OUR OPERATING ENVIRONMENT SUB-SAHARAN AFRICA Population GDP Cement capacity 1,000 $1,573 139 84 Million Billion Mta Per-capita consumption Total consumption Kg 84Mt Africa’s cities will be home to 190 million more people over the next decade. This rapid urbanization has the potential to bring significant economic benefits, provided governments prepare for it now. They need to improve planning processes, build more affordable housing, design and invest in efficient mass transit systems, increase access to electricity, and install more information and communication technology infrastructure. Consumer and business spending ($B) Business spending Consumer spending 0 500 1000 1500 2015 2000 2500 2025E Sources: Lions on the Move II, McKinsey Global Institute, Global Cement Report 20 Annual Report 2016 3000 3500 4000 ׉ 7cassandra://OybQ0Pd_uMFXFKKwNGv7YhYuaPyYhVHa9YB_R0h7y2I`̵X;׉E@About Us DANGOTE OPERATING COUNTRIES Population 489 Million GDP Cement capacity $1,155 96 112 Billion Mta Per-capita consumption Total consumption Kg 55Mt Africa has the advantage of a young and growing population and will soon have the fastest urbanization rate in the world. By 2034, the region is expected to have a larger workforce than either China or India and, so far, job creation is outpacing growth in the labor force. Accelerating technological change is unlocking new opportunities for consumers and businesses, and Africa still has abundant resources. Household consumption ($B) 100 200 300 400 500 0 Nigeria Egypt South Africa 2015 East Africa Francophone Africa 2025E Rest of North Africa Rest of Sub-Saharan Africa Sources: Lions on the Move II, McKinsey Global Institute, Global Cement Report Annual Report 2016 21 ׉ 7cassandra://zlF2YMKkNz2lTMPCGtU2LpY2k-WMv5TQQk72aSqi0sAn`̵X;X;{בCט{u׉׉ 7cassandra://vVki5qRIJ7n3Fh-WYrACgdmHQttR68xKU9P-Q7vzKHgd` ׉ 7cassandra://gcqRq11QCHWKQy93nE1zh7vpxLYkM9dfds30YWRf0qER`S׉ 7cassandra://zGgKvKwiD-1uffqWFB9pmnye0fAfaUYnsdizRDF-H0Y`̵׉ 7cassandra://SW9ggzpnLSoHF1zpX61yjRWRNlOnK1gPdzon03VH6HEn:͠X;ט{u׉׉ 7cassandra://th9ytJrvEENm4eHk1C0GwOSdFu0Y0K-uNgdq3GU7Sa0 t` ׉ 7cassandra://RMS-QoJawEqL8_8C30JlPS9ZTF1krl7wtWhQrE5q4O4P`S׉ 7cassandra://p40Yq6MZIbUtgIMrF_Ti9EbuhGAvBfYcCTQN4R8p_KY`̵׉ 7cassandra://lN7F3vnNbrjDVdqm0oW9pFUFMsDUXxgUHVNIga_Y214ǥJ<͠X;׉EOUR CAPACITY SENEGAL 1.5Mta POPULATION 15M URBANISATION 43% PER-CAPITA GNI $5,000 PER-CAPITA CEMENT CONSUMPTION 102kg SIERRA LEONE 0.7Mta POPULATION 6M URBANISATION 40% PER-CAPITA GNI $1,750 PER-CAPITA CEMENT CONSUMPTION 121kg LOCATION Freetown PLANT TYPE Import & bagging OPERATIONAL Q1 2017 DATE LOCATION Pout PLANT TYPE Integrated OPERATIONAL SINCE 2014 DATE GHANA 1.0Mta POPULATION 28M URBANISATION 53% PER-CAPITA GNI $3,880 PER-CAPITA CEMENT CONSUMPTION 211kg LOCATION Tema PLANT TYPE Import & bagging OPERATIONAL SINCE 2011 DATE NIGERIA 29.25Mta POPULATION 188M URBANISATION 47% PER-CAPITA GNI $5,600 PER-CAPITA CEMENT CONSUMPTION 121kg LOCATION Obajana, Ibese, Gboko PLANT TYPE OPERATIONAL SINCE 2007 Integrated DATE CAMEROON 1.5Mta POPULATION 24M URBANISATION 54% PER-CAPITA GNI $2,660 PER-CAPITA CEMENT CONSUMPTION 83kg LOCATION Douala PLANT TYPE Grinding OPERATIONAL SINCE 2015 DATE 22 Annual Report 2016 ׉ 7cassandra://zGgKvKwiD-1uffqWFB9pmnye0fAfaUYnsdizRDF-H0Y`̵X;׉EAbout Us ETHIOPIA 2.5Mta POPULATION 101M URBANISATION 19% PER-CAPITA GNI $1,350 PER-CAPITA CEMENT CONSUMPTION 61kg LOCATION Mugher PLANT TYPE Integrated SINCE 2015 PER-CAPITA GNI $4,700 OPERATIONAL DATE PER-CAPITA CEMENT CONSUMPTION 282kg LOCATION Mfila PLANT TYPE Integrated OPERATIONAL Q1 2017 DATE POPULATION 5M URBANISATION 64% CONGO 1.5Mta TANZANIA 3.0Mta ZAMBIA 1.5Mta POPULATION 16M URBANISATION 42% SOUTH AFRICA 3.3Mta POPULATION 54M URBANISATION 64% PER-CAPITA GNI $12,240 PER-CAPITA CEMENT CONSUMPTION 230kg LOCATION Aganang, Delmas PLANT TYPE OPERATIONAL Integrated SINCE 2014 PER-CAPITA GNI $3,070 PER-CAPITA CEMENT CONSUMPTION 95kg LOCATION Ndola PLANT TYPE Integrated SINCE 2015 OPERATIONAL POPULATION 52M URBANISATION 31% PER-CAPITA GNI $1,750 PER-CAPITA CEMENT CONSUMPTION 65kg LOCATION Mtwara PLANT TYPE Integrated SINCE 2016 DATE OPERATIONAL DATE DATE Sources: Global Cement Report 2015, World Bank, UN Population Division. Annual Report 2016 23 ׉ 7cassandra://p40Yq6MZIbUtgIMrF_Ti9EbuhGAvBfYcCTQN4R8p_KY`̵X;X;{בCט{u׉׉ 7cassandra://DNCs-kM46xtXL48Itp3utW7Qfp7HwUyZSUPjoOQnwLAyd` ׉ 7cassandra://tfFfJIwAVn3mhMOjxP4QOKt0WmMn-TYt1hN7-LTSMFg0`S׉ 7cassandra://SsG6Y6912NdmpVz3Y0m5qUTuXySymOPgoxRWFiE5Zu4`̵׉ 7cassandra://LsnvlZ4oDxt6TYzkyyVyx4jMRuytkjY-W5TgWPnjHqc,͠X;ט{u׉׉ 7cassandra://vV08hL68LNY4HVdW-LpQsA6Tl-Y8O3WDK9-MZQRVx9k63` ׉ 7cassandra://IKOXzcFph7k7iGPuSNk2E7B7t5nE7QIb__Kmdn5X5hM:`S׉ 7cassandra://ycigIE6svVhPPqGsQfjoxCuZUZYE2G0EcxQ5GM6BOlM$`̵׉ 7cassandra://OwrZHWHxEeJFbKv0vjwZ4C9znNV3_td5g5TslvYvc5Q͠X;׉E׉ 7cassandra://SsG6Y6912NdmpVz3Y0m5qUTuXySymOPgoxRWFiE5Zu4`̵X;׉E׉ 7cassandra://ycigIE6svVhPPqGsQfjoxCuZUZYE2G0EcxQ5GM6BOlM$`̵X;X;{בCט{u׉׉ 7cassandra://hpZJpjJjr6fmfzB54HRjvcIyU7b-ztiSfCDNsYLDkVU` ׉ 7cassandra://rUn3zQE-Ql_t-JneAvPKXpzKrvDk-dNc5EtrTlkjDeAH`S׉ 7cassandra://Zt6_uxS8hXMr_Y1vfDixUS49py84gTTsRCvtzWP3e5M{`̵׉ 7cassandra://3GEKePTk9dFXCf_lMl6BWhYlofBrQcIno6FWhYI2sD4D ͠X;ט{u׉׉ 7cassandra://Zmx8iAJtmyFa8aVe8cHXvK6gr1Liv8KPBuQXyoeydYMi` ׉ 7cassandra://rGDELlzryst-nxzLzzpMh-F9md8fcLmy3uOd3t3DpI4@`S׉ 7cassandra://kw7xsHvixFfq_HAVLNr_6xirdGOtQAnXU4bs9ycKFvo``̵׉ 7cassandra://WFLJIUc43zf0Xck2cf-jwcyPs4_2a6NbVJ1qO8RWb0wMk͠X;׉E OUR STRATEGY Although the market had around 136Mta capacity in 2016, we believe this capacity, much of which is ageing and inefficient, could soon be overwhelmed by demand as population growth, increasing urbanisation and rising GDP continue to drive consumption upwards. Our strategy to expand rapidly and serve this growing market began in 2007 when we took the first steps into manufacturing cement in our home country of Nigeria, which is perhaps Africa’s most attractive market for cement. Dangote Cement is well on the way to becoming one of the world’s leading cement companies and certainly the largest in Sub-Saharan Africa, which we believe will be the next big growth market for cement. Sub-Saharan Africa is home to a billion people and has a population growth rate of nearly 3% per year. By 2050, the UN estimates, the region will have a population of more than two billion. Furthermore, SubSaharan Africa is experiencing greater stability, less conflict and economic growth above global averages. The World Bank estimates that Sub-Saharan Africa experienced GDP growth of 3.0% in 2015, slower than the 4.5% recorded the previous year. It forecast subdued growth of 2.5% for 2016, picking up to 3.9% in 2017 and 4.4% in 2018. It attributes this slowdown, compared with higher growth in previous years, to lower oil prices and the ending of the commodity supercycle. Despite the recent slowing of its economies, SubSaharan Africa will need considerable investment in infrastructure and housing as urbanisation increases and economies diversify from dependence on agriculture, minerals and oil towards manufacturing, retailing and services. Increasing personal wealth and the ongoing shift towards younger, more affluent and more mobile populations will also increase demand for property as household occupancy falls. The combination of these drivers will see Sub-Saharan Africa’s demand for cement increase significantly in the coming years, from about 84Mt at present. 26 Annual Report 2016 Benefiting from competitive pricing, tight cost controls and investment incentives in the form of tax holidays, our strong cash generation in Nigeria funded our expansion both inside our home country and beyond its borders into key African markets where we are building new capacity that will serve the needs of Africans for the coming decades. Our entire production base now consists of almost 46Mta of production and import capacity in a total of ten countries spanning Africa, from Senegal to Ethiopia and down to South Africa. The success of our expansion is seen in the rapid gains in market share we achieved across Africa soon after our plants were opened, despite the presence of strong incumbents. When we search for new opportunities we look for several key features in the market: the availability of good limestone from which to make cement; the availability of investment incentives, usually in the form of tax holidays; a large population with a growing economy; access to good transport infrastructure; access to low-cost fuel; a cement deficit; strong commitments to investment in infrastructure and housing; and an industry that is characterised by substantial imports, as well as older, less-efficient, more costly and sub-scale plants. Our strategy in every country is to be the leader on costs, quality and service. We build large, modern, highly efficient plants that combine the latest equipment from Europe, China and beyond to enable us to make higher-quality cement at lower costs, thereby giving us strong competitive advantages. ׉ 7cassandra://Zt6_uxS8hXMr_Y1vfDixUS49py84gTTsRCvtzWP3e5M{`̵X;׉EVAbout Us OUR STRATEGY In this way we can sell higher-grade cement at a price that will compete with lower-grade products already in the market. Furthermore, our plants are designed to make the higher-strength cements (such as 42.5 and 52.5 grades) that will increasingly be required as the size and height of buildings increase in Africa’s growing and urbanising economies. This is an inevitable shift in the market from which we will benefit. The advantages accrued by our factories will be augmented by the advantages that we can achieve in logistics and procurement, where our size and financial strength enable us to invest in strong distribution capabilities at costs unattainable by smaller and less financially strong competitors. A good example of this is the outline agreement we have with the Industrial and Commercial Bank of China to fund our expansion at very attractive terms, albeit at a more modest pace than we outlined in our 2015 Annual Report, because of continuing difficulties in obtaining foreign currency. Our business is organised into two strategic regions: Nigeria and the Rest of Africa. Each region pursues its business plan in line with the overall corporate strategy set out by the Group’s Board and Executive Management, but mindful of the prevailing conditions in each market. Nigeria is Sub-Saharan Africa’s largest market for cement, consuming more than 22.7Mt in 2016. From the 29.25Mta capacity of our three factories, all located south of the country’s two main rivers, we can reach every local market in Nigeria with our extensive and market-leading fleet of distribution trucks. In 2016, we sold almost 14.8Mt of cement, representing 65% share of the Nigerian market. Nigeria has substantial limestone deposits and is surrounded by countries that do not have sufficient limestone to make their own cement. Because of this deficiency they must import bulk cement or clinker. In fact, many of the 15 countries in the Economic Community of West African States (ECOWAS), especially those on the coast, are obligatory importers of cement, reliant mainly on imports from outside ECOWAS. By trading within the ECOWAS region we are able to offer a product that is free of import duties, compared to the non-ECOWAS products the region currently imports. Because we ourselves import bulk cement into Ghana and clinker into Cameroon, our goal is to substitute these imports for products we make in Nigeria. By manufacturing additional cement in Nigeria, we will increase the capacity utilisation of our plants, thereby increasing their efficiency and profitability, which is an obvious benefit to our Nigerian business. Our operations in West Africa and Central Africa are located in Senegal, Sierra Leone, Ghana, Cameroon and the Republic of Congo. In the coming years we plan to extend our reach with a new plant in Niger and grinding plants in Mali, Ghana, Côte d’Ivoire and Liberia. We will, in time, increase the size of our plants in Senegal and Ethiopia and look to double the scale of our operations in Cameroon. In the east and south of Africa we have existing or planned operations in Ethiopia, South Africa, Zambia, Tanzania, Kenya and Zimbabwe. All these countries have ample native limestone, so all our facilities there will be integrated factories, with the exception of the Delmas cement milling plant in South Africa. Countries on Africa’s east coast are to some degree exposed to cheap imports from Pakistan and the Far East. As a result, our strategy is in most cases to site our factories well inland, where pricing is higher and where imported cement would face additional shipping costs to reach the market. We have achieved successful market entries in Ethiopia, South Africa, Tanzania and Zambia because of our strategy to be the leader on costs, quality and service. The markets we have entered have been characterised by competitors with older factories that may be smaller-scale or less efficient than our own. As a result, we believe we will surely benefit from the numerous competitive advantages we have achieved in Sub-Saharan Africa’s rapidly growing markets for high-quality cement. Annual Report 2016 27 ׉ 7cassandra://kw7xsHvixFfq_HAVLNr_6xirdGOtQAnXU4bs9ycKFvo``̵X;X;{בCט{u׉׉ 7cassandra://0xNBzAZUFih2vwong4yUW8UNPIL6ku5zHsfyw7OXLDw4` ׉ 7cassandra://pBke-66OMIdGsyMgE5a0EyVc-wW8kHJkZyu2OZ7fUgMJ`S׉ 7cassandra://kCWci5Crlxrh97AWPw5zD_dg-2LR0r8GDU3-wqtjoC8`̵׉ 7cassandra://E3ZxOH6WlWivDqBkZNaYp6UhhpyMLQhC8i4uceZ45qQe͠X ;ט{u׉׉ 7cassandra://EWGd63GlXQ0rNb5FDUu2RDMJQqClRdPIsy6RSPUuHD4ʸ` ׉ 7cassandra://c7Ha6_neW67coT830q-9fZB56yzkiPwDmYmNdeppreYD`S׉ 7cassandra://3YzkOj310rWgH8m6vZRfcdPGNZT3hOA7dTVCz9MIFnM`̵׉ 7cassandra://lDb42b-1-iJtgwfwu7cSLbVslBdUCD-Tp4W9g6h0RXsDV͠X ;׉ERHOW WE CREATE VALUE 4 1 Procurement of plants 2 Astute market selection Economies of scale at plants 5 Larger, more efficient kilns C6ost-effective fuel strategy 3 1 Favourable procurement of plants Our size and the scale of our ambition enables us to negotiate the procurement and construction of not just one factory but several from the same builder, using best-of-breed technologies from Europe and China. Furthermore, our plants are created with a high degree of standardisation and prefabrication to help reduce our construction costs. We are negotiating attractive financing packages that not only reduce our need to source US dollars, but also enable us to repay much of the cost after the plant has opened and begun to generate profits. 4 Economies of scale at larger plants Our production lines are built in two standard sizes of 1.5Mta and 3.0Mta, significantly bigger than the global average size of about 1.0Mta. Therefore, we gain significant economies of scale, particularly when we put several lines together at mega-factories such as Ibese, in Nigeria, which has two pairs of 3.0Mta capacity lines in a relatively compact site. This enables a single team to manage two lines at the same time and ensures we can always have a line producing clinker and cement even if another is taken offline for maintenance. 28 Annual Report 2016 New quarries, easier mining 2 Astute market selection We choose to build factories in countries with large populations and healthy economies that have plenty of potential for construction and housing to drive per-capita demand for cement from low levels. We look for substantial limestone reserves linked by good roads to nearby growth and export markets. Many such markets are served by older, less efficient factories with higher costs of production than our modern, high-tech factories. Sub-Saharan governments are keen to attract investment and reduce imports, so we are able to benefit from tax incentives. 5 Larger, more efficient kilns A consequence of building larger factories is that we achieve considerable efficiencies through the larger sizes of their kilns, which is where a significant proportion of costs are spent. Raw materials are dropped through a preheater tower where they are heated using exhaust gases from the kiln below. In this way, our large and modern rotary kilns achieve rapid creation of clinker for relatively low energy usage, thanks to the efficiencies of the heat recycling systems deployed. Larger kilns therefore benefit from more efficient use of energy. 3 New quarries enable easier mining When we open a new factory we also open a new quarry from which to mine limestone and other raw materials such as laterite and shale. This means that we can optimise mineral extraction to get the best material more easily and at relatively low cost, when compared with other manufacturers who might be mining a quarry that is perhaps 20-30+ years old. Furthermore, we equip our mines with advanced analytical systems to ensure the optimal quality of material passing to the factory for processing into clinker and then cement. 6 Cost-efficient fuel strategy We have now converted all our large Nigerian lines to run on coal as well as gas – a project we began more than two years ago as part of our efforts to diversify fuel supplies, reduce costs and mitigate risks. By sourcing coal from our parent company, Dangote Industries, we achieve several competitive advantages in NIgeria: protection from disruption of gas supplies, margin improvements compared to gas, elimination of highly expensive LPFO and a significant reduction in the need for foreign currency in a time of shortage. ׉ 7cassandra://kCWci5Crlxrh97AWPw5zD_dg-2LR0r8GDU3-wqtjoC8`̵X ;׉Eje 9 8 e Good emissions control Finer grinding, better cement 10 Automated loading 12 7 Strong focus on quality 7 Strong focus on quality The heart of our strategy is to offer higherquality products than competitors, but made at lower cost. This relies on us deploying the most modern production techniques, backed by a constant focus on quality control throughout the entire process. We use gamma ray analysers in the quarries to ensure the best mixture of raw materials enters the production line. On the line itself we have automated sample collection that feeds limestone, clinker and cement samples to a modern robotic laboratory for instant analysis so that only an optimum product is ever sold to customers. 10 Automated bagging and loading Packing and loading bags is a critical end stage of the production process. Our rotary bagging systems are becoming increasingly automated, thus avoiding the need for workers to place bags onto the packing system itself. After weighing, bags pass by conveyors to the autoloaders that can load 800 50kg bags in less than 30 minutes, thus ensuring a much more rapid throughput when compared to manual loading by our own staff or by third-party distributors - an obvious benefit that makes our factories more appealing to customers. 8 Good emissions control Our plants are designed to perform at better than European standards of emissions, dust control and noise abatement. As outlined elsewhere in this report, we plan to introduce global standards of sustainability reporting from the beginning of 2017, so that we measure and disclose key variables such as CO2 emissions, dust control and water usage. We believe our focus on environmental care will bring advantages as African countries increasingly impose stronger regulations to protect the environment, thus obliging other operators to invest more in pollution control. 11 Superior distribution capabilities As one of the largest fleet operators in Sub-Saharan Africa, we control much of our own distribution and achieve significant cost savings and a deeper relationship with customers, to whom we can deliver cement directly. We procure large numbers of trucks that competitors simply cannot match, and manage them with GPS-based systems that ensure higher standards of fleet management. This is particularly advantageous when we export by truck from Nigeria to nearby countries such as Ghana, avoiding costly delays at borders. 11 Superior distribution 9 Finer grinding, better cement Our plants use the latest vertical rolling mill (VRM) technology to grind clinker and other additives into cement. Compared with legacy horizontal ball mills that are still common in Africa, VRMs enable us to grind a finer, stronger and more rapidsetting product than is achievable with the older technology. Stronger and more rapid-setting cements are increasingly in demand across Africa as building sizes increase and speed of construction becomes paramount. Rapid-setting products are especially popular with block makers, enabling more turnover of blocks from a single mould. 12 Strong brand appreciation Our cement is recognised as a premium product in the market, thanks to our strong focus on quality control at the factory and our customer service beyond. Our efforts in these crucial, market-facing areas help us to differentiate what could be regarded as a largely commoditised product. We support our products with strong marketing efforts that focus on brand building and raising the visibility of our bagged cement and the retail outlets through which it is sold, providing them with colourfully branded point-of-sale materials to attract customers. Annual Report 2016 29 Strong brands ׉ 7cassandra://3YzkOj310rWgH8m6vZRfcdPGNZT3hOA7dTVCz9MIFnM`̵X ;X ;{בCט{u׉׉ 7cassandra://upWfV3oZVTyUREhyDh8ENUGgj6J28DAaM3ffdfkeG7k` ׉ 7cassandra://tyEppM-TnNpRpCfIomyVwJNy27SLU_4Vcm1vMuC0iHc8`S׉ 7cassandra://8Hov2Bc6Mrd6aJmKQJBiYRixXEAWJMSFP96FJb8zKEQ`̵׉ 7cassandra://Ew5zZs3tp7NfDOYgBY8CyKbV3coImoRd-912uYuArM0s͠X ;ט{u׉׉ 7cassandra://r4hy-eWT8Y28fQcdr6oeAPvs2vX2QWzbH0VOeX9Me0Uz` ׉ 7cassandra://VEwHNKw7QjubaA74yO-_ul1tfyAC7ifuLxAej3JRsRcH`S׉ 7cassandra://cOp9_8u1yavVrF8dfv_Y5ON7d9sv-hroWxNbCMGhJjg2`̵׉ 7cassandra://g-xROWxH6giN-AuZ6BEiew8HwxBp91rQDJHLFaR4Ta0N8>͠X ;׉E OUR PEOPLE Dangote Cement is one of the largest employers in Nigeria with more than 14,000 staff working in production, marketing, administration, logistics and many other functions. In total, we have 16,272 employees across Africa. With such a large workforce comes a responsibility to those we employ and so Dangote Cement strives to respect the dignity of its employees and their rights to decent working conditions. We believe in ‘unity in diversity’ and accordingly we seek to employ and retain the best human resources irrespective of disability, gender, race, ethnic origin or religion. We strive to provide employees with an atmosphere that promotes their develops their potential. The Company achieves this by continuously rolling out strategic initiatives and programmes that ensure a conducive work environment and create the atmosphere for sustainable growth and development of our staff. In line with our strategy to become a global and leading player in the cement industry, we continue to focus our efforts on expanding our operations beyond Nigeria, aligning our manpower requirements and organisational development to support our ambitious business goals. In 2016, our main human resource activities were focused upon the following areas: • Recruitment • Training & development • Organisational development • Reorganisation of corporate HR organisation Recruitment Most of the recruitment efforts this year were channelled towards: • Filling key management positions across the Group • Engagement of both local employees and ex-patriot employees to replace the Sinoma contractors in the first phase of the hand-over exercise in operations including Nigeria, Zambia, and Senegal 30 Annual Report 2016 productivity and • Recruitment of truck drivers for operations in Ghana • Recruitment exercise for coal operations in the Obajana and Ibese plants • Recruitment for new operations in Congo and Sierra Leone These gave rise to a 14% increase in the Group permanent and contract headcount Country Nigeria Cameroon 2016 14,242 205 2015 12,746 133 Congo 54 6 Ethiopia 524 Ghana 233 Senegal Sierra Leone South Africa 307 278 180 144 29 4 389 Tanzania 159 Zambia Total 385 193 183 156 16,272 14,278 Training and development Dangote Cement is constantly striving to improve the skills of its staff by providing training opportunities through the Dangote Academy, our training department and other training institutions within and outside of Nigeria. We recorded a huge success in our training and development programmes for this period. Efforts continued in the development and roll-out of robust technical training programmes with modules specific to the cement operations in Nigeria, to ensure that existing and new employees receive the requisite training and skills set for their roles. These training programmes have also included technicians from plants across Africa, many of whom have undergone a number of training courses in Nigeria during the year. In addition, we provided SAP training across the Group. We are also working in conjunction with the Dangote Academy to deploy a Foundation Skills Programme across our African operations. The areas of focus for this training programme are performance management, supervisory skills development and IT skills development. ׉ 7cassandra://8Hov2Bc6Mrd6aJmKQJBiYRixXEAWJMSFP96FJb8zKEQ`̵X ;׉EAbout Us OUR PEOPLE Organisational development In 2016 we continued to roll out the business transformation initiative begun in 2015, which saw the HR team embarking on a series of organisational development programmes to ensure the achievement of this initiative. Most of our HR efforts in this area were focused on: • Reviewing HR polices and processes • Reviewing and updating procedural forms • Reviewing and updating the staff handbook for all operations • Reviewing the organisational structure • Staff data capturing and database clean-up exercise • Reorganisation of the corporate HR organisation All these efforts are geared towards improving our operational excellence and ensuring that Dangote Cement remains the market leader in the industry. Compensation and benefits To ensure that our employees remain committed and highly motivated to perform, we continuously review their employment conditions and compensation in line with industry standards. We regularly benchmark against other companies of similar size. Career development and succession planning We value our human assets and are committed to the continuous development of our people for better performance and improved efficiency. We have embarked on a series of programmes that will ensure that our talent pool is adequately developed and retained and also ensure that we attract the best calibre of people. The HR team is working on the following: • Development of a skills assessment and career planning framework and individual gap analysis at all managerial levels • Identification of key positions and review of job descriptions • Development programmes (in adherence to DIL’s Foundational Training ongoing Program for 2015) are Annual Report 2016 31 ׉ 7cassandra://cOp9_8u1yavVrF8dfv_Y5ON7d9sv-hroWxNbCMGhJjg2`̵X ;X ;{בCט{u׉׉ 7cassandra://BgkkHUPRaso-ur9ggfGFHpN0Z1Y1j0Dm08XCgAxpqCs;` ׉ 7cassandra://wlNqaOEYpt5xOliGyGQL_TgWokeFCvT400is8EEDE7MGu`S׉ 7cassandra://NYGkPaOt7xshkQsfbAo24hXVDkSnBtsbxQ__ZhQ0T8o`̵׉ 7cassandra://naQoatJPifX2-QHh0WF1vgH2GUwlg9am4uuM1ywLuRw ͠X ;ט{u׉׉ 7cassandra://LmxL8EWaH9vEqhV0662Nc1nL3ZlRTjEyMx4gBUdVJsI[A` ׉ 7cassandra://w1_nGCfuqK0g7g0M8-ybkCWIs8IvOJVb1Ru8tCw76hk<`S׉ 7cassandra://0eti0qwsBhwHRd6lc5rxG7LscdBxujJGKvRXvPup5Rs`̵׉ 7cassandra://m1SumDanl9hzE9ek_-WXB_xeZ9GyztEeoqUs_Z4uEsYV͠X ;׉E STAFF DEVELOPMENT The Academy opened its first campus in Oshogbo in 2011, from which more than 550 students have graduated and gained employment within the Group. The Oshogbo campus can train 80 students at a time and will expand this number to 100 in the near future. A second campus has been opened at Obajana Cement Plant in Kogi State providing classrooms and workshops as well as accommodation for more than 400 students. The Obajana campus will be the Academy’s flagship Centre of learning in the coming years and will provide training for staff from Dangote Cement factories across Africa. It will be equipped with classrooms, high-tech workshops and machine simulators to train students in the use of key manufacturing systems. Staff learning new skills at Dangote Academy Dangote Academy The Dangote Academy was established in 2010 to provide training in technical and management skills for employees and people wishing to join the Dangote Group of companies. It was created in recognition of the fact that we cannot rely on Universities and Colleges to provide the very specialised technical and managerial training required to run major industrial factories such as ours, particularly in the large numbers of such people that we will need. Therefore, the Academy’s aims are as follows: • To be the umbrella organisation for all talent development and learning initiatives in the Group • To provide facility and platform for technical skills acquisition benchmarked to world-class standards • To attract and develop high-quality talent from secondary and tertiary institutions through a structured process • To align our skills development to the rapid changes in technologies by building long-term relationships with OEMs and institutions of learning 32 Annual Report 2016 The Academy works with industrial partners such as Haver & Boecker, FLSmidth, Loesche, Siemens and other OEMs to provide high-quality training in cement production and maintenance. It is collaborating with a German consortium to establish the German model of Dual Vocational Education System at Dangote Academy. Key initiatives include the Graduate Engineers Training Scheme (GETS), the Vocational Training Scheme (VTS) and the Junior Technician Scheme (JTS). Graduate Engineers Training Scheme (GETS) The GETS enables young engineers to pursue a career in Dangote Group. The scheme prepares fresh engineering graduates with the necessary technical and supervisory skills to become team leaders, thus meeting our middle-level manpower requirements. Operating in four phases, GETS begins with basic engineering theory workshop skills, progressing to IT and personal skills, plant skills and more advanced training in management and leadership. Graduates from this scheme will go on to become highly skilled plant engineers in Nigeria and Pan-Africa. Vocational Training Scheme (VTS) The VTS offers training for students in basic trades such as welding and fabrication, fitting and mechanical maintenance, heavy-duty automobile maintenance, ׉ 7cassandra://NYGkPaOt7xshkQsfbAo24hXVDkSnBtsbxQ__ZhQ0T8o`̵X ;׉EAbout Us STAFF DEVELOPMENT instrumentation, automation, electrical maintenance and process operation. Five streams each of GETS and VTS trainees, in batches of about 50 students, have been trained since 2010. About 90% of those who graduated have since found employment with Dangote Cement. Junior Technician Scheme (JTS) The JTS is the latest addition to the Academy’s learning initiatives and was conceived as a supporting scheme to the Vocational Training Scheme. The intakes usually come from various Technical Colleges in Nigeria. The 18-month scheme has graduated its first and second batches of JTS Trainees, totalling 143. They were trained in areas such as workshop skills, welding and fabrication, fitting and mechanical maintenance, heavy earth-moving machine maintenance, electrical and instrumentation skills, all of which are vital to the continuing good maintenance of our plants. In addition, they were exposed to intensive ‘‘on-the-job’’ training at our various plants at Obajana and Ibese including workshop practice at Oshogbo Plant. The second batch of Junior Technician Scheme trainees completed their 18-month training programme at the Academy in April, 2016. So far, about 40 of them have been offered full time jobs in the Group, while others are at various stages of the recruitment process. Management development and foundational skills training We have inaugurated a Management Development Centre at our Ikeja campus. The focus of this centre is to equip existing staff with basic skills and to sharpen their management and leadership skills to become more productive in their current roles, preparing them for future leadership positions in the Group. This foundational skills training is being delivered by Dangote Academy with support from external vendors who have been certified for their competencies through a very rigorous selection process. Each of the programmes delivered by them is monitored for quality and continuous improvement. The content of these programmes has been designed to keep in mind the roles and responsibilities, level of participants’ experience and the skills gaps that have been identified. By the end of 2016, the Dangote Academy had delivered 202 programmes covering approximately 35 businessrelevant themes critical to the organisation. Since the creation of the Academy, approximately 7,000 staff have been trained in various function-specific and foundational skills programmes. In addition to the foundational skills programmes started in 2015, the Academy introduced functionspecific programmes in 2016 to support various business areas, based on needs analysis and the competency development gaps identified within them. We will expand the scope and operation of these in 2017. Furthermore, we will extend the foundational skills training across Africa to cater to the needs of our staff working at our various operations in various countries in the continent. We propose to cover Senegal, Cameroon, Ethiopia, Tanzania and Zambia during the coming year. We encourage staff to participate in continuing educational initiatives that are designed to improve their overall levels of competence in business. Future of the Dangote Academy As our Group expands, the Academy will expand in both geography and scope with the establishment of regional satellite academies to support the Pan-African businesses. The operations of these academies will remain centrally guided, for consistency and quality, but will be executed locally. We have ambitious plans to develop the Dangote Academy beyond its technical training roots and transform it into a Technology & Management Institute. We hope it will ultimately evolve into a University of Technology & Management. Annual Report 2016 33 ׉ 7cassandra://0eti0qwsBhwHRd6lc5rxG7LscdBxujJGKvRXvPup5Rs`̵X ;X ;{בCט{u׉׉ 7cassandra://SZZg5uEM8jraXzxC8sguvVnHrL7724oQcX0KftUMMqsZ` ׉ 7cassandra://Vv45RFjAXmQkaUteW8PeS3HKXJ8YCF4tUVTuEuAFtm4H`S׉ 7cassandra://SPTfjlunBkzMOlrJtulYfLBCi0gqIR3rCPe3qQLSHLgR`̵׉ 7cassandra://Fz4D6rkVhVdaMDoJLIjQzVxusFQbxBiJukRbn-ScGl4ͭ4d͠X ;ט{u׉׉ 7cassandra://h4DnXVQizDNbowLBokX7-ze3hO9HZ7idoDGGQlCA4RI ` ׉ 7cassandra://7BZK4nvRiNqJ5gg464FCl9qMLFS07M8T1taaaVPzU3cB`S׉ 7cassandra://AVh_i65cwu9yvjR6J2GhIKDKuSnQgjUeYF_-OfDLB_A`̵׉ 7cassandra://B5R21pe1nNmzrXjLI2KShowW5Gs4JL3tlt1WrSlD0PgW͠X ;׉E OUR APPROACH TO RISK MANAGEMENT in order to pursue our corporate strategy, because without embracing risk we can never hope to become a more successful company. Consequently, our approach is to retain risks where doing so contributes to value creation, but ensure the Group’s ability to withstand the impact of any adverse outcome. Therefore, we must have the necessary capabilities, expertise, processes and controls to manage all risks appropriately. Risks come in many forms: risks to capital we invest, risks of project failure, risks we might not perform well enough in new markets, risks from our supply chain, physical risks to our assets and our staff and risks to the good reputation we have worked so hard to build. Dr Adenike Fajemirokun Group Chief Risk Officer When things go well, the risks we have embraced will reap rewards that will enhance the value and the standing of the company. But when things go wrong, we very quickly learn that risks have consequences for our staff, for our assets, our business, our reputation, our valuation and for you, our shareholders. We must understand the myriad forms of risk we take and retain only those that are consistent with our aims. Risk is an intrinsic part of doing any kind of business anywhere in the world. As an entrepreneurial company it is natural and indeed essential that we take risks 34 Annual Report 2016 This is why we take risk management so seriously at Dangote Cement. We must understand the myriad forms of risks we take and retain only those risks consistent with our risk appetite, so we can fulfil our long-term commitments to our customers and shareholders. Back in 2014, we commenced the implementation of the Group Enterprise Risk Management Framework in Nigeria, using a holistic view of risk management that takes into account the diversity of risks we face, the relationships between them and the possible consequences, both individual and cascading, should any of these risks materialise. The following year, we broadened this approach to include all of our PanAfrican subsidiaries. What we have now is an Enterprise Risk Management Framework, governed by our Board and driven by a specialist team that takes a formalised approach to risk management across all our operations, using well-established methodologies and tools to identify, analyse and mitigate risks. Our appetite for risk is clearly and formally laid out and at all levels of decision ׉ 7cassandra://SPTfjlunBkzMOlrJtulYfLBCi0gqIR3rCPe3qQLSHLgR`̵X ;׉EAbout Us OUR APPROACH TO RISK MANAGEMENT making across the business, we consider the potential impacts that diverse risks might have on our operations, our culture of safety, our finances, our reputation and ultimately our valuation. An effective structure has been established to support the continuity of business in Dangote Cement in this global era of increased market volatility, unexpected disruptions to operations and risks that have the potential to perturb every area of the Group’s business. As an entrepreneurial company, we appreciate the importance of identifying and understanding the numerous types of risks to which we are exposed. This has enabled us to develop robust strategies to manage these risk exposures to levels within our risk appetite, but without losing sight of the intrinsic opportunities inherent in risks we face in pursuit of our strategic goals. Hence our perception of risk is not to avoid it but to embrace, understand and manage it in order to become a more successful company. The 2016 financial year was particularly daunting for us as a company as the Nigerian and other African economies slowed down. Depressed oil prices, pipeline disruptions and the scarcity of foreign exchange (FX) led to a contraction in Nigeria’s GDP. Many Sub-Saharan African Countries, including the ones in which Dangote Cement has operations, have been hit by multiple shocks including a sharp decline in commodity prices, tighter financing conditions and a severe drought in southern and eastern Africa. Despite these challenges, Dangote Cement has utilised sound risk management strategies to guide and safeguard its investments across Africa. The scarcity of FX was a key concern for the Group, as it posed a threat to its operations as a result of import-dependent resources. However, our analytical and reporting processes had envisaged many of the potential threats to our business operations and these were managed proactively through sound risk management solutions including currency hedging strategies. The resurgence of attacks on gas pipelines by militants in the South-South Region of Nigeria was another major challenge faced by the Group. These attacks disrupted gas supplies to our cement plants in Nigeria, spurring the need for alternative fuel. This serious risk to the business had been proactively managed since 2014 as it was considered a plausible scenario, allowing us the opportunity to put in place a strategy to guarantee the fuel security of our Nigerian cement plants ahead of time, giving us a considerable competitive advantage. Because of this, we have aggressively pursued a strategy to diversify energy sources through the mining and use of coal to power our cement plants in Nigeria. The disruption to gas pipelines in 2016, along with the devaluation of the Naira, both led to an increase in the cost of gas and this inevitably led to an increase in production costs. Although the diversification of our fuel sources was necessary to mitigate the risk posed by unsteady supplies of gas, it has also had the effect of lowering costs by elimination of LPFO as a fuel. Risk governance At Dangote Cement, risk management is conducted at the highest level. Our Board’s Audit, Compliance and Risk Management Committee (BACRMC), chaired by Ernest Ebi, takes overall responsibility for managing risk and sets out our overall risk management objectives at Board level. These are implemented at strategic and operational levels by a team headed by the Group Chief Risk Officer. Our risk governance structure is established to entrench a sound risk management culture in the organisation. This structure enables a thorough oversight of and responsibility for the effective management of risk across the Group. The Board of Directors, through the Board Audit, Compliance and Risk Management Committee is responsible for defining our risk profile and ensuring effective risk management. The Committee is responsible for the formulation and implementation of the Group’s risk policies, organisation and governance of risk management, oversight of the execution of risk management including identification, analysis and risk mitigation, within the scope of the risk appetite approved by the Board. Annual Report 2016 35 ׉ 7cassandra://AVh_i65cwu9yvjR6J2GhIKDKuSnQgjUeYF_-OfDLB_A`̵X ;X ;{בCט{u׉׉ 7cassandra://RV4yDTmPQMJx6s4q2eDaAYeMAOtkvrfqhrPX13Oacuw>` ׉ 7cassandra://6jRxIgf84XOYWjkwIeafsoufzVTBmFV-f6M9HInBBC0A `S׉ 7cassandra://AlS3V9bc25yo3lPQS3FwMf2cvbmmcW29QnU8F-m1lJAY`̵׉ 7cassandra://NGA9aWdqejZKdzZBTLk1VRYeb8rv651EkTm2kV5wxJs͢?:"͠X ;ט{u׉׉ 7cassandra://Q1-Ext3HwJzH1yfhzTydcCmroHrcVbL3oPhvZ7kLq2U` ׉ 7cassandra://X0h4Eqt4nJhpkfSfvvnShc3QCxdW-Fg_QxbENiKIBCA@`S׉ 7cassandra://Vz4QRBqrWWIXjSaEAXm60uDPCQXJS1Z4YFKy-6ZFay4`̵׉ 7cassandra://DvaiO4lqXCI3sZLBsqrg3vplzThcK_pYbh6Lndv18YM\͠X <׉E /OUR APPROACH TO RISK MANAGEMENT Dangote Cement Board Audit, Compliance and Risk Management Committee Overall risk supervision RISK REPORTING, ESCALATION AND TREATMENT Group Chief Risk Officer • Identification, analysis and mitigation of risk • Development of risk policies, framework and standards • Organisation of day to day risk management Risk Management Function Specialised Risk Sub-Committees Ad-hoc committees set up to tackle specific risk issues Regional Risk Management Nigeria Regional Risk Management Pan-Africa • Approves risk management framework and applicable policies • Approves methodologies for the management strategy risk • Approves the DCP risk management strategy and risk appetite • Approves critical risk acceptance • Supervises and monitors DCP risk appetite RISK STRATEGY, APPETITE SETTING AND DECISION MAKING The Committee meets on a quarterly basis and may occasionally be supported by specialised risk subcommittees. Its Chairman reports to the Board on any significant risk-related matters that might affect the operation, profitability or reputation of the business. Our appetite for risk The BACRMC operates within the scope of a clearly defined appetite for risk across the group. This is articulated through “Risk Appetite Statements” that are high-level principles governing the maximum level of risk that we are prepared to accept in order to achieve our goals. They have been defined and approved by the Board to ensure that risk is proactively managed at a desired level across the organisation. The Committee regularly reviews our Risk Appetite Statements to ensure consistency with our strategy, business environment and stakeholder requirements. They enable us to pursue our corporate strategy in a way that is mindful of our appetite for different types of risk, drive us to set clear thresholds of risk tolerance and remind us of the constant need to monitor all forms of risk as we conduct our daily business. These five simple statements can be applied across all aspects of the business and cover all the major risk categories that we might face. Using Dangote Cement’s Risk Appetite Statements, tolerance levels, thresholds and targets are set at different trigger levels, with clearly defined escalation requirements that enable appropriate actions to be considered and implemented as required to manage the identified risks appropriately. Dangote Cement’s Risk Appetite Statements are given below: Profitability Solvency Reputation Health & Safety Environmental Sustainability 36 Annual Report 2016 Dangote Cement should always have the ability, but not be required, to pay a dividend even under a severe downturn in the economy or in key markets Dangote Cement will manage its financial resources such that it can withstand severe financial stress Dangote Cement will maintain a strong reputation for integrity, openness and assisting the communities in which it operates Dangote Cement aims to have a world class approach to health and safety Dangote Cement will ensure that the adverse impact of its operations is minimal on the environment ׉ 7cassandra://AlS3V9bc25yo3lPQS3FwMf2cvbmmcW29QnU8F-m1lJAY`̵X <׉EAbout Us OUR APPROACH TO RISK MANAGEMENT Reading these Risk Appetite Statements, it is immediately clear how they are aligned with the core values of our Company, as expressed in the Mission Statements we set out on page 39 and again below. Our mission is to: 1. Deliver strong returns to our shareholders by selling high-quality products at affordable prices backed by excellent customer service 2. Help Nigeria and other African countries towards self-reliance and self-sufficiency in the production of the world’s most basic commodity by establishing efficient production facilities in strategic locations close to key growth markets 3. Provide economic benefits to local communities by way of direct and indirect employment in all countries in which we operate 4. Lead the way in areas such as governance, sustainability and environmental conservation and to set a good example for other countries to follow. Building a culture of risk management Mindful of our corporate mission and the Risk Appetite Statements set out above, the Board Audit, Compliance and Risk Management Committee’s policies are implemented through the direction of our dedicated Risk Management team. However, we take the view that risk management is the concern of everyone at Dangote Cement, so that people at all levels become involved in and responsible for the identification and analysis of risk and play a part in its mitigation. Our risk management culture is therefore guided by the following principles: • All business risks pose a threat to shareholder value if not managed properly • In any business decision, we consider the balance of risks and rewards for our business and its value • We have a clearly defined appetite for risk that governs the types and extents of business risks we are prepared to face • We must continuously monitor and manage the risks that challenge us • We are all responsible for the management of risk, from our Chairman, through our management teams to our colleagues on the factory floor In practical terms, when a risk is identified we assign an ‘owner’ who becomes responsible for its monitoring and control. In this way, our risk management strategy cascades from the Board through the Risk Management team to responsible stakeholders at the departmental, country or Group levels. This ensures full engagement across all business activities at the strategic, tactical and operational levels of the organisation. Risk management is therefore a responsibility that is shared between operational staff and management at plant level, strategic management at country and regional level, our senior executives, our specialist Risk Management department and our Board. Through this Group-wide collaboration we aim to ensure that: • We have an effective risk-management platform to support our growth strategy and guide our daily operations • All business activities and plans are aligned with the Group’s risk appetite • Risk awareness guides and informs decision-making across the business • Risk profiles are defined at Group, regional, country and departmental levels • Material risks are identified or anticipated before they become a problem • No risk becomes realised in a way that harms our staff, our assets, our environment, our financial strength, our reputation or our value for shareholders. The risk management processes At Dangote Cement we have a comprehensive view of all major risks facing the Company. We understand that by their very nature, risks are always evolving, so we have developed a risk management framework that is both robust and adaptable. Our risk management framework consists of processes that facilitate the identification, measurement, evaluation, acceptance and management of risks. Our risk management approach is disciplined and methodical to ensure value addition and value protection for the Group. The process ensures the appropriate ownership of risk and accountability of all stakeholders in the risk management value chain. Annual Report 2016 37 ׉ 7cassandra://Vz4QRBqrWWIXjSaEAXm60uDPCQXJS1Z4YFKy-6ZFay4`̵X <X <{בCט{u׉׉ 7cassandra://XUjkhpRkGrWxudMK5aIM1kHTqjDqCmXmfTtRSKoMyrszl` ׉ 7cassandra://jMJaXPtBJyMNzd_rhvdEsCgN1ZSsOCRsi3McmBWHuyoH-`S׉ 7cassandra://F7bOPPFzRlYdRVJnJEUIURWudGtaTvb6RU_WvVolsf8k`̵׉ 7cassandra://hcGDXSBmJh-Y0W6G8P7Mt-hq2CHCgBFWXcpOQQe6bA0z^͠X <ט{u׉׉ 7cassandra://Aykkp9xke_prWejqDB-3tIXkbt_zakSyASmyVrTSeYQ` ׉ 7cassandra://a66gU5JAD9mv2IDt0E97nVfMy5cpz4gtUMC1Dhd_mG4=`S׉ 7cassandra://CSezkGlemJZqs65f3zRypltvEO_7QdfnuzxaYP2flyA`̵׉ 7cassandra://TCmrvLezUlV7wZGOy5eMcoGgIVnVzaSnoyuiXnRd1IYhz8͠X <׉E OUR APPROACH TO RISK MANAGEMENT It also ensures that we collaborate and share our knowledge and best practices across the group. Risk identification and assessment Procedures for identifying risks are applied at department, country, regional and Group levels. Qualitative and quantitative tools deployed to manage this process effectively across the organisation include the conduct of Risk and Control Self Assessments, Key Risk Indicator Monitoring and Loss Incident Reporting. Processes for risk identification and assessment are conducted on a regular basis and supplemented with special risk reports when unexpectedly high risks are envisaged or actually become real. Risk measurement and prioritisation This requires that the consequences of potential risks or actual risk incidents are fully understood and quantified. Dangote Cement’s overall risk rating is based on the potential for damage from any specific risk, multiplied by its probability of occurrence. These consequences can be injury to staff, destruction of assets, financial losses or damage to our reputation. Ultimately, all will have some consequences for shareholder value. Risk control and reporting After risks have been identified and their potential impact quantified, mitigation strategies are recommended, implemented, monitored and reported to the Executive Committee on a monthly basis and to the Board on a quarterly basis. Where necessary, special risk reports are sent to relevant stakeholders on a need-to-know basis. The Board Audit and Risk Management Committee reviews risk reports and approves the implementation of recommended risk control measures. Risk monitoring The Risk Management team is responsible for coordinating all the risk management processes implemented across the Group and ensures that risk controls are duly implemented. Where required risk controls remain outstanding, the Risk Management team ensures timely escalation to relevant approving authorities for the required budgetary approvals or control modification. The risk monitoring process leads 38 Annual Report 2016 to the identification and assessment of new risks that are then analysed using the process flow described above. Principal risks facing Dangote Cement Risk Management As a multi-national cement manufacturing company we face diverse and extensive risks, from long-term economic conditions across an entire region to the risk of alienating a customer because of poor service. The risk types outlined below are what the Board considers to be the most significant risks facing Dangote Cement and its ability to fulfil its long-term missions through the pursuit of its corporate strategy. For each category of risk, we formulate and deploy mitigation strategies to ensure the minimum level of potential disruption. We also develop Key Risk Indicators which provide useful insights and timely leading-indications of evolving risk events developing internally within the operations of our business or emerging from external events such as macroeconomic shifts. Risk assessments and overall risk position To determine our overall risk position, we consider the potential impact of current risks materialising. This includes cross-relational impacts across risk types, Implement Identify Risk Assess & Analyse Plan Action Measure Control & Monitor ׉ 7cassandra://F7bOPPFzRlYdRVJnJEUIURWudGtaTvb6RU_WvVolsf8k`̵X <׉E About Us OUR APPROACH TO RISK MANAGEMENT Risk Type Business & Strategy Risk Description Cost growth from increased energy cost; pressure of competition and impact on market share; oversupplied market; price wars; concentration risk; reputational risk; governance and risk oversight; environmental sustainability. Operational risk Operational inefficiencies; human resources mismanagement; information technology issues; litigations against the Group; compliance risk; reporting risk; health & safety malpractices; quality control risk; technical failures; theft and fraud. Risk Mitigation Investment in energy infrastructures to guarantee reduced energy cost; close monitoring of strategic initiatives and milestone achievements; formulation and review of strategy. Reporting and escalation of key risks identified for effective and efficient treatment of identified risks. Key Risk Indicator Energy mix ratio; concentration limits, EBITDA margin targets, dust and gas emission compared to limit; ratio cement production variance; production cost targets; and price optimisation targets. LTIFR trends; overall equipment efficiency targets; percentage of trucks delivering within turnaround time; no. of unreconciled items; no. of unresolved customer complaints, no. of pending litigations; no. of key roles without back-ups; cumulative hours of SAP down time and no. of outstanding HSE audits. Financial risk Insurance risk; credit risk; tax risk; market risk including interest rate risk and foreign exchange risk; liquidity and funding risk. Business continuity Major disruptions from social sabotage, unrests, political crisis, terrorism; floods; epidemics; geological damage such as earthquakes, landslides. Risk analytics and modeling Risk from inappropriate estimation of financial losses and translation of impact of non-financial risks. Reporting of breaches to approved limits, unauthorised transactions, long-outstanding claims. Concentration limits; percentage of past-due to total exposure; percentage of FX requirements available; no. of outstanding claims; loss ratio and mark-to-market profit/loss. Effective business continuity management and contingency planning. Percentage of trucks available to total no. of trucks; no. of unplanned critical equipment stoppages and actual recovery time compared to recovery time objective. Extensive portfolio reporting mechanisms highlighting correlations and combined views of key risks. Scenario analysis. 1, 2, 4 Mission Statement 1, 2, 3, 4 1, 4 1 1 Principal risk categorisation and management thereof, with relationship to corporate mission statements which we then aggregate for proper risk analysis and prioritisation. An example of this is reputational risk which has a number of dependencies should other risks materialise. Current risk profile We regularly perform comprehensive risk assessments across our businesses and building projects. The outcome of each risk assessment determines the number of risk assessments to be carried out in the year at each site. In 2016, risk assessments were conducted at all operational plants to ensure a comprehensive risk profile could be drawn up. Dangote Cement’s risk profile is illustrated in the chart. Exogenous risk factors, such as currency exposure, are the largest element of the risk profile at 33%. Operational risk Current risks 10% 12% 33% 17% 28% Exogenous factors Operational risk Financial risk Industry /competitive risk Strategic risk accounts for 28%, followed by Annual Report 2016 39 ׉ 7cassandra://CSezkGlemJZqs65f3zRypltvEO_7QdfnuzxaYP2flyA`̵X <X <{בCט{u׉׉ 7cassandra://PC2fo2CAucJGmiPs2JDYMMYhwP6RZnAufnK7q8AUBUo` ׉ 7cassandra://Uc88q212y05Q9uhBtDV85WO5X5C20tko80Tq2lFft2Y;`S׉ 7cassandra://yiyQq56uA3ILXLkkfZu5DL8VaC3OX1sSUf9NiUx-2J4`̵׉ 7cassandra://_djnOi1DVLC1V0QKvJDZLJwt5doJ4evRm5Q6cLDQhoI͓8>͠X <ט{u׉׉ 7cassandra://2HKJA3seKgbKYLsUReX01UwuI6UNuSUgpKtHek7PMxYR` ׉ 7cassandra://xLlNK2AQLVJmMDj_yNX2l20R2dYSxLKxIMOJEH0KMgUC`S׉ 7cassandra://OcamSR4u83BdjF5guPwrN5tABZhS0DIxhMcoPPUiNgI`̵׉ 7cassandra://5Ib6JlHTTTd9JnDDvt5viwrNfmo7PnYX9HLL1pfcJMo͙͠X <׉E COUR APPROACH TO RISK MANAGEMENT Risk quantification and analysis – summary of risks 35 30 25 20 15 10 5 0 Current financial risk, which accounts for 17%. Other risks, strategic risk and competitive and industry risks account for the balance of the Group’s risk profile. In our risk management process we try to quantify the potential losses should key risks materialise. For a wide variety of risks, we multiply the likelihood of the risk actually happening against the potential financial losses it might cause. Our ‘expected loss’ is the sum of all these factors put together. Furthermore, we conduct this risk-wide analysis in the face of four different scenarios of stress. Considering that these expected losses are scenariobased and represent potential losses related to our key risk exposures, we adopt processes to ensure these risks are promptly identified, properly mitigated and closely monitored on an ongoing basis, within acceptable limits. The approaches we adopt for maintaining an optimal risk environment on an ongoing and forwardlooking basis are: • Strategic planning that aligns risk strategy and appetite with commercial objectives • Continuous monitoring of approved risk targets set by the Board and Executive Management • Timely redress of threats by ensuring action plans for proper risk mitigation are closed out • Prompt reporting of key risks to management • Continuous implementation of all elements of the risk management framework, which also includes specific stress tests where applicable to underpin our monitoring of processes 3 yrs (improved controls) Outlook Economic growth has fallen in Africa because of falling oil prices and reduced demand for minerals. Governments have streamlined budgets with most, especially in the developing countries of Africa, being focused on capital projects with greater long-term benefits for their respective countries. Dangote Cement’s outlook is thus aligned with the focus of governments on spurring economic revival and growth through investments in infrastructure and building. This invariably presents an opportunity for the Company’s entrepreneurial vision for international growth, sustainability and the creation of value for shareholders. These drivers form the basis of our risk management practices, which are custom-made across the business. Our Risk Management team continues to ensure that the required framework for holistic, effective and efficient risk management is deployed across the organisation. In so doing, we will continue to ensure that financial and non-financial threats to our corporate goals are eliminated or minimised to the best of our efforts. Dr Adenike Fajemirokun, Group Chief Risk Officer 40 Annual Report 2016 Expected loss ₦B FX risk Operating efficiency IT risk Technical failure Competition / market Share Reputational risk Theft and fraud Health & Safety HR Liquidity (funding) risk Political / country risk Market (price) risk Investor perception Governance and risk oversight Terrorism Community relations/unrest Credit risk Overcapacity Legal risk Quality control Regulatory risk Reporting risk ׉ 7cassandra://yiyQq56uA3ILXLkkfZu5DL8VaC3OX1sSUf9NiUx-2J4`̵X < ׉E About Us OUR APPROACH TO SUSTAINABILITY With their support and guidance, we will be empowering our communities and promoting sustainable growth and well-being for all. The world expects every business to not only manage its own sustainability issues, but also help society manage its wider issues. The social and environmental challenges facing the world are more critical than ever. The newly adopted United Nations Sustainable Development Goals and the Paris Agreement on Climate (COP21) create new frameworks of action for all, including regulators, companies and citizens. Massimo Bettanin Head of Sustainability The Cement industry has a large ecological footprint because of its significant use of natural resources such as limestone and fuel. The industry is second only to power generation in the production of CO2. Whilst the cement industry plays a significant role in terms of economic and social relevance, largely by its inherent nature to build and improve infrastructure, progressive cement companies are recognising that to remain competitive in the future, they must combine sound financial performance with a commitment to social responsibility, environmental stewardship, and economic responsibility. These three dimensions are referred to as the “triple bottom line” of Sustainable Development (SD). As the global population rises and urban infrastructure expands, building sustainable cities is both a challenge and a priority. As the leading cement producer in Africa, we have the power to make a real impact through innovative services, interventions and solutions. To do this, every one of us at Dangote Cement is committed to making it a priority to share our sustainability journey, goals, programmes and initiatives with all stakeholders and employees, including our Board of Directors. Our approach Our approach to sustainability issues is informed by an extensive process of both internal and external consultation and a deep analysis of the major global societal challenges where we can have a significant contribution. Anchored on three main objectives under Occupational Health and Safety, Social Investment, and Environmental Care, (HSSE), we are positioned to implement policies to manage our approach to these important activities of our businesses. Sustainability is regarded as a strategic priority for achieving our longterm business objectives. Although we have already achieved some goals with our HSSE programme, we are constantly working to enhance the HSSE performance of our activities to attain a comparative edge against other international conglomerates of our size. Dangote Cement is committed to adopting the International Finance Corporation’s Performance Standards on Environmental and Social Sustainability, which were published in 2012. The Performance Standards define roles and responsibilities for managing projects and requirements for IFC support. We are embracing these principles and are convinced that a focus on sustainability will support our business strategy. We aim to lead on sustainability issues and set new standards as we help transform the way our industry works and encourage Africa’s building and construction sector to play its part in addressing our planet’s biggest issues. Annual Report 2016 41 ׉ 7cassandra://OcamSR4u83BdjF5guPwrN5tABZhS0DIxhMcoPPUiNgI`̵X < X < {בCט{u׉׉ 7cassandra://XIEGq8Qp91ADqhXk064EXW0-LoMeOv1nQinhh8PmOPE` ׉ 7cassandra://E53DV0cb5ZS1GfXXflwIk7Va8t_v2pjIjy_IntK3-4w@#`S׉ 7cassandra://Ecox64rQRI9mX0MGXHXFdv_AN1fGq5Vc3rKjcVuLZ1wd`̵׉ 7cassandra://aLxpBcXLSRsJSeuwEjuTVWCfu2rUImuf2fVVYE1rmLks%͠X < ט{u׉׉ 7cassandra://AzldMffFqLREtNoGA4ZmCb9U_0RFTOMrbXnXAM9uDGwea` ׉ 7cassandra://i8O8jbYBkwUJu1W9zVq-MYIRz3HLcQ5hIaWqgA0Nz2gF`S׉ 7cassandra://sudsi_0XcVpJxFrVckKg2gPytP1aElMGCyTelNzgtoU+`̵׉ 7cassandra://tMdXBYhHc5YBSHO3ze5pl_9yTxvIISlIPSc87YrMSrE_ ͠X < ׉EyOUR APPROACH TO SUSTAINABILITY Our commitment to providing the best place for our employees to work and improving the quality of life of the people in the communities in which we operate is being achieved by creating value for everyone. By everyone, we mean not only our employees and subcontractors, but also all the stakeholders affected by what we do, from shareholders to customers, governments and the communities that are close to our operating locations. We support education, health and empowerment in host communities and sponsor sports and cultural development initiatives in our communities and elsewhere. We are committed to aligning our sustainability framework ‘in accordance’ with the comprehensive option of the latest Global Reporting Initiative’s Global Standards premised on (GRI) G4 guidelines at the global front and the SEC Code of Corporate Governance in Nigeria. As the largest cement producer in Africa, we are committed to disclosing material information against all disclosures required by both local and international regulations that relate to our business activities. To keep our sustainability objectives on track, we will also set targets for our core KPIs that will be strategically aligned to our sustainability approach and linked to the material issues identified. Setting new ambitions for sustainable development We are responsible for applying our abilities, products and services to solve challenges. We constantly strive to minimise the environmental impact of all our operations, from mining to cement production and distribution. In line with international practices, we have identified and implemented several measures to ensure a sustainable mode of operations. We realise that we play an important role in the local economy and consciously strive to support local businesses to service our local operations, which in turn improves the lives and prospects of the local communities in which we operate. 42 Annual Report 2016 Helping the Federal Government to achieve its Sustainability Development Goals (SDGs) is not only the responsible thing to do, it is also strategically relevant from risk and growth standpoints. The SDGs foster new business opportunities and build markets and relationships around the world, while improving our environment and society’s quality of life. Our social initiatives aim to work hand in hand with the local communities in regions where we operate. By building a strong workforce through employment of local people and contractors, the empowerment of youth, the provision of educational help, provision of high quality infrastructure, driving improvements in local healthcare and improvements in community welfare, we will contribute to the SDGs and reinforce our commitment to building a better future. We are also committed to including details of how our initiatives and activities contribute to the achievement of the Global SDGs. What we do: Health and Safety Health and safety management is a key priority for Dangote Cement. As a result, we are committed to the implementation and maintenance of an Occupational Health & Safety Management System (OHSMS) to ensure the prevention of occupational accidents or ill health that may potentially affect anyone who works at or visits our places of business throughout Africa. A Technical & Operations Committee was created by the Board in 2014 and was charged with the responsibility of reviewing safety, health and environmental performance and improvement plans. We also have a strong commitment to the continuous improvement of the way we manage our work places and observe compliance with legal and regulatory requirements that govern them. We aim to provide a conducive environment for all stakeholders in the manufacturing industry. Some of our efforts are confirmed with the packaging and sales of our cement product which have the Occupational Health and Safety Assessment series BS: OHSAS 18001:2007 certification. ׉ 7cassandra://Ecox64rQRI9mX0MGXHXFdv_AN1fGq5Vc3rKjcVuLZ1wd`̵X < ׉E About Us OUR APPROACH TO SUSTAINABILITY Our Health and Safety personnel conduct regular health monitoring of our staff especially those that work in the plants to certify that they are not negatively affected by company activities. These medical assessments include chest x-rays and hearing tests. We are determined to create an embedded safety culture across all our business operations with the objective of minimising the risk of accidents and achieving zero fatalities. To check that we are meeting our benchmarks, we carry out internal health and safety audits on lost time incidents, fatalities and medically treated cases. External health and safety audits are also carried out regularly by industry regulators as well as certification bodies, at our invitation. Emphasis on employee safety is key. We have systems in place to ensure that all accidents are recorded and that all serious accidents are fully investigated. This data is then subject to close scrutiny by senior management and presented monthly to the Executive Committee and the Board of Directors to ensure that adequate health and safety measures are taken across the business. All staff at the plants are free to raise their concerns with senior management regarding OHSMS. There are medical facilities and medically trained staff on duty at all operational sites with ambulances available for emergency evacuation to local or national hospitals. All medical staff undergo regular training and testing. Commissioning of new concrete road in Ogun State A comprehensive and ongoing safety training programme is conducted by dedicated staff and supplemented by external contractors. We work closely with our contractors and exchange knowledge to ensure that our procedures are aligned. Dangote Cement operates in accordance with each country’s OHSMS legislation and our OHSMS policy is reviewed every five years for continuing suitability, thereby providing the basis for setting and reviewing Occupational Health & Safety objectives and targets. In order to develop a positive health and safety culture throughout Dangote Cement, we are committed to complying with national and international rules and guidelines concerning health & safety. Environment Dangote Cement believes that sound environmental management, together with a proactive approach to addressing the challenges and opportunities of climate change, is fundamental to making its business better. We are committed to the highest standards of environmental performance and recognise the part it can play in improving the sustainability of the environment. We are committed to the implementation and maintenance of the National Industrial Standards ISO 14001:2004 Environmental Management System (EMS), which ensures a systematic approach to environmental management within the defined scope of our operations. We are committed to complying with relevant legal requirements with a view to providing a sustainable environment for manufacturing, packaging and sales of cement. By this, we aspire to the continuous improvement of our operations. We conduct environmental baseline studies before building our plants and also carry out periodic environmental monitoring of air emission and air quality with particular attention to dust, waste water discharge, and noise emissions. We ensure that all our plants are issued EIA/ESIA permits as required by the local legislation and the International Finance Corporation (IFC). Annual Report 2016 43 ׉ 7cassandra://sudsi_0XcVpJxFrVckKg2gPytP1aElMGCyTelNzgtoU+`̵X <X < {בCט{u׉׉ 7cassandra://0tzg3fulLnYooEqNY0d12rmpIyt_8LiGnNQa6irwSi0x` ׉ 7cassandra://dL0zDvNZPfrZQWiAXxQAGlc3tjgaBmFpwp9ZfXzhy38F`S׉ 7cassandra://ur9RmR56KnOg6MGjhYQLRyygvP7Dn5BbzInYEOuogMM`̵׉ 7cassandra://rlMk4d8hW_S0Aq03blBNRvFfmw02m0Jq3h3oflTO8Isq ͠X <ט{u׉׉ 7cassandra://XaNQu_HyyGv0lBKefl4Fe44Q141trA8oU_9lNlcuSUMf` ׉ 7cassandra://9_l1zeM1OQsWCv6f9cw3NaTYUNxyfaPMu01i0K5A7YQQs`S׉ 7cassandra://qnKPktfHQ4_6Xc7sWZRF-UviKJwqRhk5EMk4xw-9mAo`̵׉ 7cassandra://qvtIbsTmY0Had-ITRvksTXV1aRfrc3pIEdOdq79Choo ͠X <׉E OUR APPROACH TO SUSTAINABILITY This environmental policy, which is sustained by all concerned through proper communication and awareness, is documented, implemented, maintained and endorsed by the Plant Directors and circulated to employees, suppliers and other stakeholders. The Environmental Policy is reviewed every three years for continued suitability, thereby providing the basis for setting and reviewing environmental objectives and targets. Dangote Cement constantly strives to minimise the environmental impact in all its operations, from mining to cement production and distribution. In line with international practices, we have identified and implemented several measures to ensure sustainable objectives and goals. Some of these include: • Investments in state-of-the-art bag filters and electrostatic precipitators at all plants to ensure minimal dust emissions, making Dangote Cement one of the industry’s greenest cement companies not only in Nigeria but across Africa. Regular monitoring with action plans put in place to reduce emissions in accordance with national and international statutory control guidelines. • Use of different fuel options to minimise emissions of greenhouse gases and other pollutants. Most of the captive power we consume at plants in Nigeria is generated using natural gas with options to use other fuel as backup. • Completely covered raw material and process conveyors ensure dust-free manufacturing. Similarly completely covered conveyor belts taking limestone from the mines into the plant minimise vehicle movement and are standard at our plants. • Impounded rain water around plant areas is used for cooling purposes and is completely re-circulated while wastewater is efficiently treated for further use or safe disposal. • Our reclamation strategy keeps the topsoil removed while mining for limestone. The reserved top soil is used to refill the mined lots with trees and grasses planted. We strive to restore the land used for mining purposes to its original state so that it may be used for agricultural purposes. 44 Annual Report 2016 Social investment Social investment is a key priority and Group-wide investments seek to: • Broaden opportunities for economic empowerment of host communities through support of local entrepreneurial initiatives including micro, small and medium enterprise development programmes that promote access to finance, business development services and access to markets • Improve health by building hospitals/health care centers, strengthening the quality of medical services, tackling malnutrition and improving access to safe water and sanitation • Promote quality education by building classrooms, providing books and equipping science laboratories, by improving access to high standards of basic education, through support for enhanced training of teachers and by improvements in the curriculum, by improvements in the availability of quality vocational and technical education in Nigeria to increase employment opportunities as they align with labour market demands, and by awarding scholarship to qualified individuals We realise that we play an important role in the local economy and consciously strive to support local businesses to service our local operations which in turn improves the lives and prospects of the local community. We prioritise relationships with all our stakeholders including our host communities and work with the community leaders to adequately address any Commissioning of the Solidarity Bridge for our local community in Senegal ׉ 7cassandra://ur9RmR56KnOg6MGjhYQLRyygvP7Dn5BbzInYEOuogMM`̵X <׉E4About Us OUR APPROACH TO SUSTAINABILITY concerns, ensuring that they are actively involved in any community development plans sponsored by the Company. Dangote Cement’s alignment with reporting standards Dangote Cement is committed to adopting the highest levels of both domestic and international best practice in implementing its sustainability objectives. We hold ourselves accountable by the highest standards as we intensify our commitment to adopting the International Finance Corporation’s Performance Standards on Environmental and Social Sustainability. Consequently, to further improve our sustainability strategy initiatives, we aim to align with both domestic and international organisations that advocate sustainable development including: • The Rulebook of the Nigerian Stock Exchange: Sustainability Disclosure Guidelines • Global Reporting Initiative: Global Standards/G4 Sustainability Reporting Guidelines • Cement Sustainability Initiative: Key Sustainability Issues The Rulebook of The Nigerian Stock Exchange, which was published in 2015 (the “Rulebook”) is a compilation of all the Rules, Regulations and Guidelines (“Rules”) of The Exchange in one document. The document is binding on Dealing Members in their relationship with The Exchange, as between themselves as Dealing Members, and as relates to the business which they conduct as Dealing Members of The Exchange with the general public. The Exchange has proposed additions to the Rulebook by introducing an aspect that focuses on Sustainability Disclosure Guidelines. The proposed guidelines aim to draw the attention of Issuers listed on the Exchange to important governance, economic, social and environmental issues and address the values to be gained from doing business in a sustainable manner. The guidelines provide a step by step approach on integrating sustainability and detail the indicators that should be considered when providing annual disclosures to The Exchange. Our Chairman, Aliko Dangote, with children at a camp for internally displaced people in Borno State Annual Report 2016 45 ׉ 7cassandra://qnKPktfHQ4_6Xc7sWZRF-UviKJwqRhk5EMk4xw-9mAo`̵X <X <{בCט{u׉׉ 7cassandra://0UOv_eJiqp-eoOTpcS2FqG-ozKPgTsEQ_-uP-eAeYOc` ׉ 7cassandra://x6CPygGL8-88Xge--JzQTujCFFG5i6_1wd3IYZyEOeE;`S׉ 7cassandra://bRa5j_-jm7G9oU8IPJ15LmDVmAhlylRRyJF0epXcosc`̵׉ 7cassandra://4ywD3c25Thwe67fdIIh1yk1MTlr5oPcbn2sDoudLJxkh82͠X <ט{u׉׉ 7cassandra://I-mwAHfym10yuoSi7AZfEDrFp9HaI-h0RRXUgJ1Wi-MN` ׉ 7cassandra://qb3W4DtS654FPZwk0vVIqTyehTVQqoH3x2A5PL_Q0Lk6s`S׉ 7cassandra://GIOIlc02sRBchCkTwnYVYgOXiOVI9htrEnhB2CF5SzEe`̵׉ 7cassandra://XBwVZiUzvoCbKaXe-KdmFtqYsxUQOObzlU6-wv4Dtg0K<͠X <׉EpThe proposed guidelines are aligned with some of the Sustainable Development Goals (SDG) of the United Nations (UN). Essentially, the guidelines aim to drive sustainability disclosure through the following nine globally accepted principles and standards, as follows: Governance • Principle 1: Businesses should conduct and govern themselves with ethics, transparency and accountability. • Principle 2: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner. Economic • Principle 3: Businesses should provide products and services that are safe and contribute to sustainability throughout their life cycle. • Principle 4: Businesses should engage with and provide value to their customers and consumers in a responsible manner. Social • Principle 5: Businesses should promote the wellbeing of all employees. • Principle 6: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalised. • Principle 7: Businesses should respect and promote human rights. • Principle 8: Businesses should support inclusive growth and equitable development. Environment • Principle 9: Business should respect, protect, and make efforts to restore the environment. Dangote Cement intends to demonstrate its commitment to improving its sustainability performance, compliance and reporting across the triple bottom line by adopting and embedding these principles from the NSE’s Rulebook into its business operations and activities and also into its governance. A separate but related set of reporting standards is being promoted by the Global Reporting Initiative (GRI), which is a leading organisation in the sustainability field. GRI promotes the use of sustainability reporting as a way for organisations to become more sustainable and 46 Annual Report 2016 contribute to the sustainable development of society. GRI has pioneered sustainability reporting since the late 1990s, transforming it from a niche practice into one now adopted by a growing majority of organisations. The GRI reporting framework is the most trusted and widely used in the world. In November 2015, the GRI Board formally established the Global Sustainability Standards Board (GSSB) to transition GRI’s Sustainability Reporting Guidelines into a set of global Standards. By creating the GSSB to oversee this crucial work, they are able to demonstrate that GRI Standards are developed and maintained in an objective and independent manner. This aim was to restructure content from the G4 Guidelines and Implementation Manual into a set of modular, interrelated GRI Sustainability Reporting Standards. GRI Sustainability reporting standards were launched in October 2016 to further help businesses, governments and other organisations to understand and communicate the impact of business on critical sustainability issues. All elements of the reporting framework are created and improved using a consensus-seeking approach, and considering the widest possible range of stakeholder interests. This includes business, civil society, labour, accounting, investors, academics, governments and sustainability reporting practitioners. GRI Standards are aligned with international instruments including the UN Guiding Principles on Business and Human Rights, the ILO Conventions, the UN Global Compact 10 Principles, the OECD Guidelines for Multinational Enterprises, among many others. Additionally, guidance is provided on how GRI Standards link to many of the common national and international frameworks, helping organisations to streamline their reporting processes for optimum efficiency. In order to enhance our sustainability reporting and comply with internationally agreed disclosures and metrics, Dangote Cement is committed to using the Global Reporting Initiative (GRI) framework to prepare its Sustainable Development Reports. ׉ 7cassandra://bRa5j_-jm7G9oU8IPJ15LmDVmAhlylRRyJF0epXcosc`̵X <׉EAbout Us OUR APPROACH TO SUSTAINABILITY Aspects Category Economic • Economic performance • Market presence • Indirect economic impacts • Procurement practices Environmental • Materials • Energy • Water • Biodiversity • Emissions • Effluents and waste • Products and services • Compliance • Transport • Supplier environmental assessment • Environmental grievance mechanisms Category Sub–categories Aspects Economic Labor practices and decent work • Employment • Staff/management relations • Occupational health and safety • Training and education • Diversity and equal opportunity • Equal remuneration for women and men • Supplier assessment for labour practices • Labour practices grievance mechanisms Human rights • Investment • Non-discrimination • Freedom of association and collective bargaining • Child labour • Forced or compulsory labour • Security practices • Indigenous rights • Assessment • Supplier human rights assessment • Human rights grievance mechanisms SPECIFIC STANDARD DISCLOSURES FOR THE CONSTRUCTION AND REAL ESTATE SECTOR ECONOMIC ENVIRONMENT • Economic performance • Market presence • Indirect economic impacts • Materials • Energy • Water • Biodiversity • Emissions • Effluents and waste • Products and services • Transport • Land degradation, contamination and remediation Annual Report 2016 47 Environmental Society • Local communities • Anti-corruption • Public policy • Anti-competitive behavior • Compliance • Supplier assessment for impact on society • Grievance mechanisms for impacts on society Product responsibility • Customer health and safety • Product and service labeling • Marketing communications • Customer privacy • Compliance ׉ 7cassandra://GIOIlc02sRBchCkTwnYVYgOXiOVI9htrEnhB2CF5SzEe`̵X <X <{בCט{u׉׉ 7cassandra://YmGJAdWrukw_FhEzRO_pxZlGv1psGmLl7tH0ocFd77A` ׉ 7cassandra://zzk55x-Tc55Zd_4nvQXZdAiW_bJGGp6CpJgymt_c-1w5`S׉ 7cassandra://-Qjg0OxygNAwlnoEyIK-y2bkIaNkKxW2FBEpweLvuaYt`̵׉ 7cassandra://bbcUtEXZXzREE9c3kSuHuBaILu790S6oxU6vj1XAys0h[͠X <ט{u׉׉ 7cassandra://53_aQRBdd0OLT4tSeD8JL6-KMtqu1a788PI08YuJaOo8` ׉ 7cassandra://OljAzukmsl4Zgkcbm_zZy61wdNNO0ixoIIa9YJ4OGBo?_`S׉ 7cassandra://_0G0Mf0jeQgKte4h0RHnLFp-z8cZmVe9HqUwJRXC2FE"`̵׉ 7cassandra://4v65ler70OkrFuYxYCXPTIacemEISeIRlVIJTazAISEgm͠X <׉E qOUR APPROACH TO SUSTAINABILITY SOCIAL LABOUR PRACTICES AND DECENT WORK • Employment • Occupational health and safety • Training and education • Diversity and equal opportunity • Equal remuneration for women and men HUMAN RIGHTS • Non-discrimination • Child labour • Forced or compulsory labour • Security practices • Supplier human rights assessment SOCIETY • Local communities • Anti-corruption • Public policy • Anti-competitive behavior PRODUCT RESPONSIBILITY • Customer health and safety • Product and service labeling Cement Sustainability Initiative The Cement Sustainability Initiative (CSI) demonstrates the cement sector’s commitment to sustainable development. The CSI was set up to examine issues surrounding sustainable development in the cement sector and to develop and promote best practice across the industry in a number of areas. The purpose of the Initiative is to explore what sustainable development means for the cement industry, identify actions and facilitate steps cement companies can take, individually and as a group, to accelerate progress toward sustainable development. It provides a framework for other cement companies to become involved and creates the content and context for further stakeholder engagement. In their Agenda for Action, the CSI member companies defined a work programme to proactively and systematically tackle the environmental and social impacts of cement manufacturing. They have since developed guidelines for good practice across all addressed issues and defined key performance indicators (KPIs) and measurable targets to track progress. 48 Annual Report 2016 Companies report publicly on their performance with regards to the commitments taken in the CSI, as outlined in the CSI Charter. The key issues are highlighted below: • Employee health and safety • CO2 and climate protection • Responsible use of fuels and raw materials • Emissions monitoring and reduction • Biodiversity/local impacts on land and communities • Water impact management • Sustainability with concrete Dangote Cement seeks to make considerable progress in terms of sustainability. In order to accelerate our progress towards sustainability, we have set ourselves ambitious goals which will be implemented into actions in accordance with our corporate philosophy. We are therefore committed to build a framework on sustainability as well as set individual performance targets and report publicly on progress in our operations using the CSI guidelines. Currently, the CSI is included as part of our work programme on water, biodiversity and land stewardship, as well as supply chain management. ׉ 7cassandra://-Qjg0OxygNAwlnoEyIK-y2bkIaNkKxW2FBEpweLvuaYt`̵X <׉E +About Us OUR APPROACH TO SUSTAINABILITY Developing Sustainability Policies In a bid to set ourselves apart in terms of sustainability and as a way of complying with applicable laws, standards and requirements. We are in the process of adding new sustainability policies to existing ones that will be applicable and implemented across the Group. These policies will set the tone for sustainability and further reiterate our commitment towards staff, investors, customers and other stakeholders. Some of these HSSE policies and standards include: • HIV/AIDS policy; • Alcohol policy; • HSSE Risk Management Standards • Incident Reporting & Investigation Policy; • Safety Management Standard; • Environmental Social Impact Assessment (ESIA); • Environmental Management Standard; • Stakeholder Engagement Standard; and • Community Investment Standard. Baseline audits are preliminary assessments to develop a reference point. We are committed to ensuring that we carry out a baseline audit to assess our performance in relation to defined sustainability parameters in order to determine and prioritise which initiatives we should 2016 • Benchmarking - Lafarge, Cemex, PPC, ACC • Pilot selection of KPIs to monitor and report (Fatalities, FFR, LTIs, LTIR, Dust, GHG, Water) • Monitoring of reporting framework developed • Preliminary identification of applicable reporting standards • Reporting Guidelines in line with CSI standards developed and communicated to all sites • Management review of pilot results started • Basic/foundation training of relevant staff pursue to better integrate sustainability parameters into our core systems and procedures. This method will serve as a basis for comparison in future audits. Developing and testing key performance indicators A set of key performance indicators have been identified and monitored and targets will be set around key issues of sustainability that are material to our businesses. This will serve as our commitment to report and manage impact. Our Sustainability Reporting Roadmap Dangote Cement proposes a 3-year road map for the development and implementation of a robust Sustainability Reporting process and methodology. This roadmap shows the steps Dangote Cement has initiated towards a robust systems with regards to sustainability. Massimo Bettanin Head of Sustainability 2017 • Management review of pilot results and CAs to improve reporting reliability and consistency to be completed • Review of CSI full set of KPIs and FRC Reporting Standard requirements • Development (if needed) of procedure/criteria for Materiality assessment • Identification of key stakeholder and understanding of their expectations • Identification of KPIs to report based on CSI/FRC review and stakeholder expectations • Intermediate & professional training of relevant staff 2018 • Roll out of the monitoring and reporting system across the whole business to include depots and transport • Definition of baseline • • Internal data assurance Identification and set up of targets for improvement taking into account stakeholders’ expectation and business need/resources • Management review of monitoring/reporting content (i.e. materiality, stakeholder inclusiveness, completeness) and quality (i.e. comparability, accuracy, clarity, reliability, etc.) Annual Report 2016 49 ׉ 7cassandra://_0G0Mf0jeQgKte4h0RHnLFp-z8cZmVe9HqUwJRXC2FE"`̵X <X <{בCט{u׉׉ 7cassandra://31W4TuPWORkpDAHCQXryvjok1SknvqZ3CzWctK3fxG8G` ׉ 7cassandra://rbiaaMJdY5AG_pOa7V5WKpNno1UqNUykifRg0j9d5vAR`S׉ 7cassandra://QdEsBXiEOD9g3UON2VBWIO5nIch-SLaVemsQEVvaZ7I `̵׉ 7cassandra://8qH6hlafmRNOUljmi0H_iP__EeeBJqUd2U5xp_eGnZEX8F͠X <ט{u׉׉ 7cassandra://ZESun2LNiyQ-NcmEXwmKvNzGw4qB3itPTM9M4oIeG_0y` ׉ 7cassandra://JhpdMib7rPXGPNLr0vhqyFR9Nylh8dBuSTVhCdkFwhEeK`S׉ 7cassandra://yqGCeLSQS5KFkChxOuBLDWDLuxifLicS-qkbfLH9Xzg$`̵׉ 7cassandra://WwlP-_GllNzhe8T9ao8yFiWOZSjx0-uqWRjjyio4bo0N͠X <׉EOperational Review Interview with the Chief Executive Officer Review of the Business in 2016 Group Chief Financial Officer’s Review Our Plans for the Future 52 56 64 68 50 Annual Report 2016 ׉ 7cassandra://QdEsBXiEOD9g3UON2VBWIO5nIch-SLaVemsQEVvaZ7I `̵X <׉EAnnual Report 2016 51 ׉ 7cassandra://yqGCeLSQS5KFkChxOuBLDWDLuxifLicS-qkbfLH9Xzg$`̵X <X <{בCט{u׉׉ 7cassandra://c9sHLdsBQCyh6UrMnl3eXYcFitKnC1YbQMztS-Cy0ZY` ׉ 7cassandra://bMP9eft1966XYpKxM9gYUmC5lzaKLtgnfZ6PZyhjweMJ`S׉ 7cassandra://aCpS5kTAv5ZgQuYDkMIRZ0cQM3G7oAK3dpf5uQpSY68`̵׉ 7cassandra://6xOSx1rkuVeSh_oWscV_NuJ5Anoo8Iy29Lu-78RqwQI8͠X <ט{u׉׉ 7cassandra://vn436DKqvlWnznmMPDk-ik3t4DN2oOMyJgHKp9eEfW07` ׉ 7cassandra://M7oVJXAOaOR8MfhjRm0lyLNsQ5jOKdubdn8mLQWWX5cF`S׉ 7cassandra://Qib90JbPblqDyGeWhBrO2LCRWohUKLQv86fGvUVQ6ag`̵׉ 7cassandra://tL5dZxnr-wq65YIXQ-E49Px9IsjL4zv3Vy_euaH2r64\*82͠X < ׉E INTERVIEW WITH THE GROUP CHIEF EXECUTIVE OFFICER We increased overall Group sales volumes by 25.0% to almost 23.6Mt and that was in line with what we had been forecasting at the beginning of the year. As a result of this volume growth we increased Group revenues by a very healthy 25.1% to ₦615.1B. EBITDA fell slightly to ₦257.2B because of lower pricing for much of the year and the increase in fuel costs associated with the disruptions to our gas supply. However, the final quarter was very strong and EBITDA rose sharply compared to the quarter before, because of the price adjustment in September and a better fuel mix. In fact, in financial terms it was our strongest ever quarter, so that gives a sense of how 2017 could evolve. Onne van der Weijde Group Chief Executive Officer The highlight was the strong volume growth in Nigeria, where we increased local sales volumes by 11.1%, and began exports in volumes that turned Nigeria into a net exporter. We also delivered good growth in our Pan-African operations, increasing sales by 54.0% to more than 8.6Mt. We delivered strong growth across Africa in what was not an easy year for some of its economies, increasing sales volume by 25%. Last year you said the aim for 2016 was to achieve good growth across Africa; did you achieve that? Yes, I think we delivered strong growth across Africa in what was not an easy year for some of its economies. 52 Annual Report 2016 What were the main pressures facing Dangote Cement in 2016? In previous years I think we had to focus on managing our own growth and delivering our expansion timetable on schedule, and these were very much internal factors. We were achieving success by opening modern and competitive plants in countries that, by and large, were experiencing good growth and relative stability. Compared with 2015, I think it is fair to say the economy deteriorated much further for us in 2016. We faced the devaluation of the Naira in June, the shortage of foreign currency in Nigeria and attacks on pipelines in the South of Nigeria that disrupted our gas supplies and forced us to use expensive LPFO to fuel our kilns. Other countries across Africa were also experiencing economic downturns and pressures on their currencies, notably Zambia and South Africa, where we had opened plants only in the past couple of years. In Ethiopia there were political tensions and civil unrest that disrupted our production and distribution. All of these pressures were external factors that we couldn’t control. ׉ 7cassandra://aCpS5kTAv5ZgQuYDkMIRZ0cQM3G7oAK3dpf5uQpSY68`̵X `̵׉ 7cassandra://8X0e9gRjdMjqG9t8Bca1QW6IX-FRw74P1eMC7MPJB4Qu]|͠X <'ט{u׉׉ 7cassandra://1btJewvNsc9ofI0OUc2gKwbobE1XCv9oPqoxmWxVslw` ׉ 7cassandra://CwzUVXaVGCcj_A6o5Ads9antPKScziq2S-ZG9MHYiK0?`S׉ 7cassandra://9V5psEVttrqewlPPAJM2uYDQ5h5Is7cW971sKx6wqXQ`̵׉ 7cassandra://zdmMSmgVC6zBI9ZIkdl-tmiwixiWf-yh9y_z2osMD3wW͠X <(׉EREVIEW OF THE BUSINESS IN 2016 Nigerian operations After more than a decade of strong GDP growth, Nigeria’s economy fell into recession in 2016, with the World Bank estimating that GDP contracted by 1.7%. Falling oil prices reduced government revenues at national and state levels, resulting in delays to salary payments, delays to contractor payments and a reduction in infrastructure investment. The associated devaluation of the Naira and the limited liquidity of currency markets created additional pressures for consumers who experienced falling disposable income and inflation higher than 18% in the final months of the year, reaching 18.55% in December. In addition, a resurgence of militancy in the south of Nigeria led to oil and gas shortages as pipelines were attacked, resulting in shortages of power and fuel. Against these significant challenges, Nigeria’s market for cement proved itself to be remarkably robust in 2016 and we estimate that total market sales rose by 5.7% to 22.7Mt in 2016, from 21.5Mt the year before. Market growth was very strong in the first four months of 2016 following the price reduction we introduced in September 2015. In fact, we achieved 11 months of growth after that reduction, with the majority of cement being sold through retail outlets and distributors for small-scale building. Dangote Cement was the leading supplier in Nigeria, with volumes rising by 11.1% from 13.3Mt in 2015 to nearly 14.8Mt in 2016, almost double the market growth rate. Including exports, total sales from Nigerian plants were 15.1Mt, or a 13.8% increase. Backed by strong marketing efforts, better logistics and increasing brand recognition through retail and distributor promotions, we increased our market share from 62% in 2015 to 65% in 2016, despite the recent entry of a new competitor in Edo State. We estimate that our nextlargest competitor has a 24% share. Across Nigeria, we sold 22% of our cement into Lagos and Ogun, with a further 15% being sold elsewhere in the South West. The South South region accounted for 17% of sales volumes and the South East took 14%. The North regions, including Abuja, took 29% of sales. 56 Annual Report 2016 Our large plants at Obajana and Ibese accounted for almost all of our Nigerian sales, with Obajana selling 7.6Mt, slightly less than in 2015 because of the poor fuel supply, and Ibese increasing sales by 37.3% to 6.9Mt. Our 4.0Mta plant in Gboko, which remained mothballed for much of the year, sold 0.6Mt. The plant, which has no gas supply, has now been equipped with coal milling facilities enabling its kilns to run on coal instead of the more expensive LPFO. This will increase profitability at the plant when operations restart and the plant’s reopening will enable us to improve distribution in the North East and South East regions of Nigeria. All our plants are supported by their own fleets of trucks, controlled by a modern fleet management system. We have nearly 2,000 cement delivery trucks at Obajana and 1,500 at Ibese. Although we achieved volume growth in each of the first three quarters of 2016, fourth-quarter sales were lower than in 2015, following the N600/bag price increase we took in early September, as well as the fact that some competitors delayed price increases to make temporary gains in market share. The price increase and an improved fuel mix doubled fourthquarter EBITDA per tonne in Nigeria, compared to the third quarter of 2016. We improved our marketing across Nigeria in 2016 with strong promotional activities such as the Mega Millions Dash helping to build very strong brand awareness and a preference for Total Nigeria cement market sales 2015/6 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May 2016 Jun Jul Aug Sep Oct Nov Dec 2015 ׉ 7cassandra://kp2XcLVTDS7AvPebFPUBllZEaJKETHj4Mt64yZOlWog>`̵X <)׉EOperational Review REVIEW OF THE BUSINESS IN 2016 Dangote Cement amongst retailers and buyers. We continued our efforts to activate new, highly visible retail outlets in key markets, supporting them with colourfully branded tarpaulins, tables, chairs and parasols, all of which proved extremely popular with sellers. In addition, we provided large, branded storage containers for a number of vendors and worked with them to improve awareness of the product. The average value of this material to retailers was about ₦100,000 per site. Our cement is now sold through more than 15,000 outlets across Nigeria and this is by far the largest retail activation campaign ever undertaken by any cement company in Nigeria. At distributor level, we gave a total of 120 trucks to more than 100 of our largest partners as an incentive to help them improve the distribution of our cement to their customers. We will continue our strong marketing efforts in 2017 with new and very innovative promotions to increase retailer loyalty, such as giving away a daily prize of a heavily branded 20ft container loaded with 600 bags of cement over a 60-day campaign. This daily prize is worth about ₦2m to the retailer and provides a highly visible presence at the point of sale. We believe that imports of cement into Nigeria fell significantly in 2016, made deeply uneconomic because of the lower pricing regime for most of the year, as well as the fact that bulk cement could only be purchased at the much more expensive unofficial exchange rate. During 2016 we exported 0.2Mt of cement from Nigeria to Ghana, using a dedicated fleet of 1,000 trucks. We will increase exports of cement to Ghana in 2017 and as both countries are in the ECOWAS trading zone, these exports are not subject to duties on arrival in Ghana, nor are profits on them taxed in Nigeria. We hope to supply all of our needs in Ghana from Nigeria. In addition, we sold cement into other markets including Togo and Niger, both of which are in the ECOWAS duty-free zone. With our formal exports exceeding imports, we have transformed Nigeria, once one of the world’s biggest importers of cement, into a net exporter. In addition, we believe that large quantities of cement sold into markets near the Nigerian border were informally exported by customers. We will substantially increase export sales from Nigeria in 2017. Gas supply was a significant problem during 2016 as attacks on gas pipelines in the south of Nigeria forced us to use the back-up fuels of LPFO and coal. While some of our Nigerian lines were able to use coal as a back-up fuel in the first eight months of the year, the high demand for cement obliged us to produce on lines that could only use LPFO as a back-up when gas pressures dropped. Our use of LPFO was especially high in the period from May to July, averaging 62% at Obajana and 30% at Ibese. This was before we had completed the conversion of all lines to be able to use coal, in September. During 2016, we imported more than 0.4Mt of coal from South Africa to support our operations, and purchased an additional 0.1Mt of coal from thirdparty mines in Nigeria. In the first half of 2017 we will begin sourcing coal from mines in Kogi State, operated by our parent company, Dangote Industries. Locally-mined coal will be cheaper than imported coal and even cheaper than gas at the Obajana plant. Use of Nigerian coal, priced and paid for in Naira, will reduce our need for foreign currency. The impact of the sub-optimal fuel mix was exacerbated by the devaluation of the Naira in June and the associated shortage of US Dollars required to pay for coal and LPFO imports. Additionally, though sourced in Nigeria, our gas supply is priced in US Dollars, but paid in Naira. We estimate that the sub-optimal fuel mix increased costs by ₦13B in 2016. Pan-African operations Pan-African operations include factories or import facilities in Cameroon, Ethiopia, Ghana, Senegal, South Africa, Tanzania, Zambia and forthcoming operations in Congo and Sierra Leone. Annual Report 2016 57 ׉ 7cassandra://9V5psEVttrqewlPPAJM2uYDQ5h5Is7cW971sKx6wqXQ`̵X <*X <){בCט{u׉׉ 7cassandra://oMKe2ymB72-U4e7lN3CtKIfr-mhiJYjER-jCNPFnhXs%` ׉ 7cassandra://yWqWV7dnVGvHI-zsSFPG3mfIGup6qleR45nZU72HrnEI`S׉ 7cassandra://LHou1iOo11YBm5fYIY4x-EIOeOI_5OGDqdsC3kUFF-4`̵׉ 7cassandra://h35D6bXV8jLex7FTBrQznocR59Z9fDa4bW-u7PL2Xbwv9͠X <+ט{u׉׉ 7cassandra://fmhytAPT5Kl1T9Cf_OkSZBBlHv8x8vDNIf3JQYdJ3-sy` ׉ 7cassandra://95RXtAgM5f7-VqDHpKjGn36kNR_1qHKSB3-jjXXHBdo@j`S׉ 7cassandra://xuNzNXYWieRmwFZ96CwJeHflhfffw7F_X8cRep79Cq8`̵׉ 7cassandra://iBT1bTWvVXcZ0I8fN6cJqhmE0-BsVADORIWNX3calN4ZB͠X <,׉E "REVIEW OF THE BUSINESS IN 2016 Pan-African operations achieved sales of 8.6Mt in 2016, an increase of 54.0% on the 5.6Mt sold in 2015. The increase is attributable to higher sales across established factories and the maiden contribution of Tanzania, which opened in the first quarter of 2016. Financial performance for 2016 did not include Sierra Leone or Congo, which are expected to begin sales in the first quarter of 2017. Cameroon Cameroon is expected to have increased GDP by 5.6% in 2016, with slightly higher growth forecast for 2017, according to estimates published by the World Bank in January 2017. Inflation has been falling since May 2015, reaching 1.1% for the first nine months of 2016. Key drivers for cement demand are infrastructure projects focused upon port development, power generation, new roads and dams. The country has begun to enforce a ban on imported bulk or bagged cement, introduced at the start of 2016, presenting an opportunity for our 1.5Mta grinding plant to gain market share quickly by selling cement made in Cameroon from imported clinker. During 2016 we sold nearly 1.1Mt of cement, a 90% increase on the 0.6Mt sold in 2015 despite maintenance in June and heavy rains from July to October. With total market sales at about 2.5Mt in 2016, this gave us a market share of 43%. Cement pricing was about $103 on average, after rebates and discounts. Pan-African operations: sales volumes by country (‘000 tonnes) 600 700 800 100 200 300 400 500 0 Jan-16 Feb-16 South Africa Mar-16 Apr-16 Senegal May-16 Ethiopia Jun-16 Zambia Jul-16 Aug-16 Cameroon Sep-16 Ghana Oct-16 Tanzania Nov-16 Dec-16 A significant development for our factory was the opening of its dedicated unloading jetty in August. Previously, we unloaded clinker and gypsum in the Port of Doula and conveyed it to the factory by truck, which obviously increased its cost. Additionally, building our own dedicated jetty eliminated the need to queue ships or compete for space in the port. This also helped to reduce the cost of importation slightly. Clinker can now be offloaded from the ship directly onto conveyor belts that take it to the clinker silo. As with 2015, we experienced problems with the quality of imported clinker, obliging us to use more for each tonne of cement we ground at the plant. We used approximately 0.85Mt of clinker to produce 1.1Mt of cement, at a clinker-cement ratio of 1.23. Our plan is to make more use of higher-quality clinker imported from our plants in Nigeria, once export facilities have been put in place there. We have a fleet of more than 200 trucks for cement distribution in Cameroon, but these handle only 20% of dispatches from the factory. The remaining 80% of cement sold is collected by customers. Congo The Republic of Congo is expected to show a slight increase in GDP over the past year, rising from 2.6% in 2015 to 4.6% in 2016, according to World Bank estimates published in January 2017. Inflation rose sharply during the year, starting at about 2% and ending 2016 at more than 6%, according to Trading Economics. 58 Annual Report 2016 ‘000 tonnes ׉ 7cassandra://LHou1iOo11YBm5fYIY4x-EIOeOI_5OGDqdsC3kUFF-4`̵X <-׉EOperational Review REVIEW OF THE BUSINESS IN 2016 Global Cement Report 11 estimated consumption in 2016 would be about 2.4Mt, for a population of about 4.5 million, driven by strong building activity across the residential, commercial and infrastructure sectors. Before our entry, the country had limited production capacity, from sub-scale plants, and most demand was satisfied by imported cement. Our forthcoming 1.5Mta plant at Mfila will be by far the largest and most modern production facility in the country. It began clinker production late in February 2017 and therefore made no contribution to the business in 2016. However, we are confident that the plant will quickly achieve good sales in 2017, given our ability to produce and distribute high-quality cement across the country and even into the neighbouring Democratic Republic of Congo, which has good potential for export sales. Ethiopia Ethiopia’s economy has been one of the top performers in Africa and even after some slowing, the country is expected to have achieved 8% growth in 2016, according to the World Bank. Higher growth is forecast for 2017 and 2018. Inflation fell during the year, according to Trading Economics, starting at about 10% in January and falling to 6.7% by the end of the year. Our 2.5Mt cement plant in Mugher opened in May 2015 and quickly achieved a strong presence in the market, being just 90km from the capital, Addis Ababa, with good road links in between. Cement sales of nearly 2.0Mt in 2016 were well ahead of the 1.0Mt sold during seven months of operation in 2015, despite significant disruption to sales caused by drought, civil unrest and attacks on foreign-owned factories. We estimate that we achieved market share of 24% in 2016, despite the entry in the final quarter of a new manufacturer with a 1.4Mta plant not far from our own. Our plant benefits from being able to take electrical power from Ethiopia’s well-developed grid, which reduces the need for imported fuel and thereby helps to reduce costs. The large size of our plant is another competitive advantage in a market that is supplied by numerous sub-scale plants using inefficient legacy kiln technologies. In addition, we have nearly 400 trucks for distribution of cement into key markets such as Addis Ababa. Cement prices fluctuated during the year, averaging $80 and ending the year at $82. With low per-capita consumption of around 60kg65kg, good economic growth and a large population, we believe Ethiopia will continue to be a key market, especially if the government can deliver its ambitious plans for development, with major projects including the Renaissance Dam, which begins operation in 2017. Furthermore, we believe there is some potential to export cement from Ethiopia to countries such as Somalia and South Sudan, despite the distances involved. We have also experienced some interest from cement importers in Kenya. Ghana Ghana’s economy remains under pressure from high inflation and lower prices for key exports such as oil, gold and cocoa. GDP growth was expected to have been about 3.6% in 2016, per World Bank estimates. Ghana’s currency, the Cedi, devalued slightly during 2016, experiencing a slight fall across the year against the US Dollar. The trend is likely to continue in 2017 if cocoa prices decline as the market goes into surplus, though increases in gold and oil prices would help to support the local currency. We sold 1.1Mt of cement in Ghana, up 73.9% on 2015. In doing so, we increased our market share from an estimated 19% at the start of 2016, to 23% in December. We sell higher-quality 42.5R (rapid-setting) against 32.5R and 42.5N (normal-setting) products available from competitors, but price competition remains a factor and selling prices averaged $115 during the year, ending 2016 at $92. From July, having taken delivery of a fleet of 1,000 trucks dedicated to Ghanaian operations, we began to replace Far Eastern imports with cement from Nigeria. We imported 0.2Mt from Nigeria and our enhanced distribution capabilities enabled much of Annual Report 2016 59 ׉ 7cassandra://xuNzNXYWieRmwFZ96CwJeHflhfffw7F_X8cRep79Cq8`̵X <.X <-{בCט{u׉׉ 7cassandra://Wtqj_oQYvaKkwz7gpYa6r-2wXfBwwMVzlGsMiJWblAkhy` ׉ 7cassandra://K0D_3ZTQz3ZelOuEH_YVBa1_X5dx5eJyEEQMB0w_E_s>`S׉ 7cassandra://SvFFRCKs8FV7OVIhmRBR7Uq9HVGjRD8S0qAHtWzqSO8`̵׉ 7cassandra://YYl_jOlVppePQMWnkVYerz1-gYDG8eeh-SfbKLRVU2Uv͠X 8͠X<׉EAUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT All of our members have significant commercial experience of accounting, risk and corporate financial management, governance and compliance. This surpasses the requirement in Section 30.2 of the SEC Code and the UK Code (provision C.3.1) which requires that at least one member of the committee should have recent and relevant financial experience. The Board has satisfied itself that the current members of the Audit, Compliance and Risk Management Committee are competent in financial, risk and compliance matters and have recent and relevant experience. Ernest Ebi MFR Chairman of the Audit, Compliance and Risk Management Committee The Committee consists of experts in accounting, finance, risk management and corporate governance. The Board’s Audit, Compliance and Risk Management Committee comprises four Non-Executive Directors and four Independent Non-Executive Directors. As an Independent Non-Executive Director, I serve as the Chairman of the Committee. 98 Annual Report 2016 Roles and responsibilities The Committee has oversight over the Audit, Compliance and Risk Management functions and receives separate reports and updates from each of these functions. The roles and responsibilities of the Audit, Compliance and Risk Management Committee are set out in its charter, which is reviewed periodically by the Committee taking into account relevant legislation and recommended best practice. The Committee’s main responsibilities include: • Oversight of the activities of the Group Internal Audit function including the appointment and evaluation of the Group Head, approval of the Internal Audit Plan, review of Internal Audit reports and safeguarding the independence of the Internal Audit function • Review the scope, nature and effectiveness of the Internal Audit function and recommend proposed changes to the Board • Review and ensure that proper liaison and cooperation exists between statutory auditors and the Group Internal Audit function • Recommend to the Board for approval, the Company’s risk appetite and risk limits as well as changes to the Company’s appetite for risk • Approve the Company’s risk framework and policies, including the organisation and governance of risk management ׉ 7cassandra://ADFbMdZWRqYXGWEZXzRDVh9oyMCvSG-8X-UJzogDXtIJ`̵X<׉E Corporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT • Oversee the execution of risk management including identification, analysis and risk mitigation, within the scope of the risk appetite (approved by the Board) • Review with the Company’s Legal Counsel, any legal matter that could have significant impact on the Company’s financial statements and operations • Oversee the Company’s compliance program and adherence to the Code of Business Ethics • Establish a whistle blowing mechanism and monitor implementation Meetings The Committee met four times in 2016. Some members of our Senior and Executive Management teams were invited to meetings to provide information and updates on agreed tasks and directives given by the Committee from previous meetings. These include the Group CEO, Group CFO, Head of Internal Audit, Group Chief Risk Officer, the Chief Legal Officer, Company Secretary, Deputy Company Secretary and Compliance Manager. will describe the functions and activities of the Risk Management, Compliance and Audit Functions respectively. I Meeting attendance Director Ernest Ebi (Chairman) Olakunle Alake Sani Dangote Devakumar Edwin Emmanuel Ikazoboh Fidelis Madavo Olusegun Olusanya Dorothy Ufot Committee activities during 2016 Key matter considered Resourcing of key functions 22/02/16 12/04/16        n/a Committee actions • Approved the appointment of the Group Head of Internal Audit and the Deputy Head, Risk Management • The Committee commissioned the recruitment of Risk Managers for plants in Cameroon, Ethiopia, Senegal and Zambia and the recruitment of HSE Directors for the plants. • The Committee also approved the appointment of a Compliance Manager to facilitate the establishment of a Compliance function. Foreign exchange gap issues • The Committee invited the Executive Management team to develop an export strategy capable of generating significant foreign exchange in order to fund essential imports such as spares and workshop tools. Disciplinary Committee • The Committee constituted a Disciplinary Committee to handle staff related matters in a fair and transparent process, to ensure that applicable laws are followed and avoid any infringement of rights or future sanctions. Regulatory compliance Compliance Transport management strategy • The Committee instructed the Executive Management team to ensure compliance with the post-listing requirements of the Nigerian Stock Exchange. • The Committee reviewed and approved a compliance appraisal plan for 2016. • The Committee is reviewing the medium and long term strategy on optimising management of the transport function. Annual Report 2016 99      n/a 20/07/16    -   n/a 20/10/16       - -    ׉ 7cassandra://ZM-OPFT28tlhFdlKkfcr5V_EzHHLGrZu8AatnFwYFqM`̵X<X<{בCט{u׉׉ 7cassandra://okRbgZbqYckZg9z2BIJlaOHh5G9d81AW2ijmgAIbRkAv` ׉ 7cassandra://e0hHi-kU_eMQwqqMcPhfHcRWu2s74NhiCyW87TLusnU:2`S׉ 7cassandra://0dO-VldPKmUo3ouODWeMRza0-ZbzsMdFq8lC3KQoNWo`̵׉ 7cassandra://gi9n-LI0uZv2y4OGeq57ZwYVpfRxB0dzuVBdOWd1Z4ks8J͠X<ט{u׉׉ 7cassandra://iDkcLqcAzrMBapbrwczYtY2Fvd1NZpo-D9Ia_SUCAYg` ׉ 7cassandra://gj7VKtkaEd4HIy2nSYczMunsFfxJoQKX7EyUjVqujFo:`S׉ 7cassandra://1BrJ2T61b_-Ak96KmUj0gvNPAqn63W2WXjvYYrWZ1gMu`̵׉ 7cassandra://f_xvAImx8hp2xzlHn1V9hPWNg9qh-OFo8y16HHeG2Awt́Z͠X<׉E AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT Committee activities during 2016 Key matter considered Health, Safety and Environment (HSE) Anti-Fraud Committee/ Disciplinary Committee • The 2016 Audit Plan Execution Update • The recruitment of 5 Auditors for effective coverage • SAPGRC Implementation Internal Audit activities update • Whistle blowing • Special and advisory assignments • KPIs and balanced scorecard • EXCO action points • Major operating review • Operating risks and audit focus • Control environment update • Whistle blowing • External Audit recommendations • Appointment of Deputy Head, Internal Audit • Reviewed report on impact of significant progress in overall control environment. • Await representation on appointment of Deputy Head, Internal Audit. Committee actions • The Committee ensured that HSE functions are established for all plants, and developed appropriate policies and measures to reduce health, safety and environmental risks at all of its plants throughout Africa. • The Anti-Fraud Committee’s report should be included as part of Internal Audit presentation at all BARMC meetings and the Group Chief Risk Officer should be included as a member of AFC. • The formation of the Disciplinary Committee was approved with the Group General Counsel as the Chairman. • The progress on audit plan execution was noted and the deployment of SAPGRC was approved. • Meeting noted that the improvement in the Control Environment and that audit plan was on course to completion. • The conclusions from ongoing investigations should be submitted when ready. Risk management Introduction The Risk Management function of Dangote Cement supports the Board of Directors, the Executive Committee and Management of all subsidiaries in the Group in identifying, analyzing and controlling the Company’s overall risk exposure. Risks identified are managed systematically to ensure all prevalent and emerging risks to which the Company is exposed are managed properly. A holistic and fit-for-purpose methodology is adopted to ensure all types of risks emanating from the Company’s strategic, internal and external activities are captured. For proper analysis, risk incidents are mainly grouped under Business & Strategic Risk, Operational Risk, Financial Risk, Market Risk, Liquidity Risk, Business Continuity Risk and Reputational Risk. 100 Annual Report 2016 The Group defines risks as events that portend any consequence of uncertainty in the attainment of its business objectives which can result in an opportunity or a threat. The outlook for effective risk management involves proper analysis of the Group’s business activities to identify short, medium and long-term risks. Identified risks are then assessed, measured and controlled with close monitoring of the implementation of recommended controls by the Group’s Risk Management Department. Insurance solutions are instituted as a key method of risk treatment. The risk landscape of Dangote Cement Plc is derived through thorough risk assessments and deployment of other risk identification tools that cover all strategic, internal and external business activities of the Group. These risk management tools are utilised ׉ 7cassandra://0dO-VldPKmUo3ouODWeMRza0-ZbzsMdFq8lC3KQoNWo`̵X<׉EzCorporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT in all subsidiaries of the Group and at all levels in the organisation. All mitigating actions implemented are duly approved by relevant business owners and approving authorities. Risk profile in 2016 Financial risks - Insurance risk In 2015, the Group achieved competitive insurance pricing for local and international policies. In 2016, we leveraged on competition in the insurance market, economic downturns, a positive property insurance market and the good disposition for Dangote Cement’s business. A holistic approach was adopted in managing the Group’s insurance portfolio, which resulted in Groupwide consolidation of our insurance requirements with a preferred broker. This has resulted in economies of scale in premiums paid, broadened the scope and scale The Insurance Compliance Status is as captured below: of coverage, and ease of administration for compliance with the minimum insurance requirements of the host country and Group insurance policies. Major achievements in 2016 include: • 10% premium savings in 2016 with a cumulative total of 33% in two years on local policies • 20% rate savings was achieved in 2016 on Property Damage / Business Interruption (PDBI) for DCP Obajana and DCP Ibese • Reduction of Deductibles on Property Damage at Obajana and Ibese Plants by 150% in 2016 • Cumulative premium savings of 58% on foreign policies and 18.25% reduction in premiums on the Pan-African PDBI for plants in South Africa, Cameroon, Tanzania and Ethiopia, as a result of improvements in the risk profile. 1. South Africa 9. Ethiopia 2. Zambia 3. Congo 4. Cameroon 5. Nigeria 6. Ghana 7. Ivory Coast 8. Liberia 10. Kenya 11. Senegal 12. Sierra Leone 13. Niger 14. Tanzania 15. Mali 16. Zimbabwe Meets minimum requirement Meets 50% of the minimum requirement Not applicable at present Annual Report 2016 101 ׉ 7cassandra://1BrJ2T61b_-Ak96KmUj0gvNPAqn63W2WXjvYYrWZ1gMu`̵X<X<{בCט{u׉׉ 7cassandra://i9tLE4dgiEBWMvsTmsdRBTT2Rfwd7oWyrNdSGjolWXE` ׉ 7cassandra://SOXxUEJacepXmcriWvgjLqX2_uFNL2OswOFuD0XdpgY@`S׉ 7cassandra://hwpHB3Vl5txXz5L1oR7vcBZteC6wbY_OnNFza93lAw8`̵׉ 7cassandra://SKMJKU6r973jCbG13LmlbWIgluKZ1lktmldm8HtVHkIy͠X<ט{u׉׉ 7cassandra://7lnf1Klm0w6lB7QkRITQWUhRszTHQMS2wHA0I5r7gb8` ׉ 7cassandra://nn0DeAVX8UPfjNOPZ5M07LkMex3gTs9Ty4jduPOE3BQC`S׉ 7cassandra://oBoSrNxQ7aNXx1CG0iyGmkBI-lvZfZ4vvDaDYhKHzlk`̵׉ 7cassandra://OyEz3CsJ_FRslzIRMFhAlEcLywDQ4t5jyC3MVxOXr4A`͠X<׉EAUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT • Conduct of Health Awareness and Lifestyle Seminars with free medical tests done for all staff in the Head Office and Plants • Successful completion of Engineering Risk Surveys at Obajana, Ibese, Ghana, Cameroon, Tanzania, Zambia, Ethiopia, Congo and Sierra Leone Plants • Design of a Pan-African International Terrorism Programme Credit risk Credit risk exposures are monitored at Plant, Country and Group levels on an on-going basis to ensure that non-performing credits are identified promptly and escalated to relevant authorities for prompt regularisation. Past-due accounts and other credit risk related infractions are reported to management and the Board with remedial actions proposed for approval; approved recommendations are tracked for proper implementation and timely closeout. The Group’s credit policy was revised to address identified gaps in policy requirements and general credit administration practices across the Group. The following actions were implemented: • Centralisation of all credit control functions in a bid to minimise fraud which resulted in: - Withdrawal of rights from all plant personnel to review credit checks and unblock accounts - Withdrawal of rights to create credit limits on any customer account • Training of members of staff on the Credit Risk Policy across Pan-African locations • Registration with two Credit Bureaus has been established to facilitate the rating system being deployed for customers transacting business with the Group • Review and engagement of Pan-African banks whose bank guarantees would only be accepted from customers in alignment with the Group’s Credit Risk Policy • Expansion of credit risk management scope to include all credit exposures across the Group; this led to a year-on-year increase of 403.5% in the credit risk portfolio reported 102 Annual Report 2016 The credit risk exposure of the Group was adjudged a Medium Risk as the past-due obligations comprised 35% of total exposure. Efforts to ensure prompt regularisation of past-due exposures are ongoing. No major credit risk threat is envisaged, as about 25% of past-due obligations are contractor credits, which would be deducted from payments due, and 9% are inter-company credits that would be resolved internally. Market risk Dangote Cement is exposed to market risk emanating from volatilities in interest rate, foreign exchange and commodity prices across its various jurisdictions of operations. To reduce the adverse impact of these fluctuations in its various business climes, the Company utilises a variety of financial risk mitigation strategies to ensure its earnings and cash flows are assured in line with the Group’s risk appetite. Foreign exchange risk During the period under review, the business was exposed to significant shortages of foreign exchange. In Nigeria, the country experienced a fall in oil production, its major foreign exchange earner. The Central Bank of Nigeria also introduced a flexible foreign exchange policy allowing the exchange rate to float in the Nigerian Interbank Market. This resulted in the Naira falling 58% from N199/US$ in June 2016 to N304/US$ at the end of the year. Beyond Nigeria, some of our Pan-African operations, notably in Ethiopia, South Africa and Zambia, were also exposed to foreign exchange risk. Payment of foreign vendors for supply of spare parts and raw materials, provision of operations and maintenance services alongside expatriate salary payment and our African expansion projects were affected. To effectively manage the Group’s exposure to this risk, close liaison on a continuous basis with the Treasury function was maintained throughout the year for prompt and effective decision-making. A few of the risk mitigation strategies deployed include ramping up export sales to earn foreign exchange, putting a hold on the Group’s African expansion projects, refinancing of inter-company loans, financing purchase of assets ׉ 7cassandra://hwpHB3Vl5txXz5L1oR7vcBZteC6wbY_OnNFza93lAw8`̵X<׉ECorporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT through utilisation of supplier credit, and use of appropriate hedges for forecasted foreign exchange based transactions. The Risk Management team worked with Executive Management to carry out a review of budgets to reflect volatile changes in the foreign exchange market so as to avoid disruption of the Group’s business operations. Scenario analyses were carried out to reflect the impact of plausible situations of further currency devaluations across all operating territories. In addition, the Board approved the necessary infrastructure support to boost our export business and thereby generate foreign currency income for the Group. All of these initiatives helped the Group to proactively manage its foreign exchange risk. Commodity risk In the course of 2016, Dangote Cement Plc was exposed to commodity risks resulting from price fluctuations in gas, LPFO, coal and indirectly in its sea freighting dealings. Appropriate instruments and actions, such as use of swap options and adequate insurance coverage, were employed in hedging exposure to this risk. Non-financial risks Business risk A key business risk to which Dangote Cement was exposed in Nigeria in 2016 was energy sourcing and cost. It posed a major threat to the Group’s business operations and profit margins were significantly impacted due to increased energy cost resulting from production lines switching to use of Low Pour Fuel Oil (LPFO) because of gas supply shortage caused by unrest in the Niger Delta. LPFO is significantly more expensive to use in kilns than gas or coal. The use of LPFO increased the cost of production by an average of 11% in the first and second quarters of the year; EBITDA margins consequently shrank by 8% for the same period. Typically, the cost of energy to total production costs ranges between 30% and 40% of operational costs; however, it averaged 51% at DCP Nigeria, with kiln fuel and power cost comprising 37% and 14% respectively. To address this huge variation, a more focused and strategic approach was adopted to In tandem with our efforts, our parent company Dangote Industries began preparations to mine coal in Kogi State in 2017. Using coal mined within the Group enables Dangote Cement to improve fuel security by controlling our own fuel supplies, reduce operating costs as a result of using cheaper, own-mined coal, and significantly reduce our need for foreign exchange to buy fuel in international markets. It is estimated that DCP will make 15% to 20% savings on cost of coal per tonne of cement by using own-mined coal. Furthermore, by using coal in our kilns, we ensure better gas supplies for our electrical generators at Obajana and Ibese, thus reducing the need to use expensive diesel as a back-up fuel for power generation at these plants. Operational risk Operational risk is regarded as any activity that would expose the organisation to the risk of loss resulting from failed or inadequate people, process, systems and issues stemming from external events that are not directly under the control of Dangote Cement Plc. It is further considered as the potential for incurring losses in relation to employees, project management, contractual specifications and documentation, technology, infrastructure failure and disasters, external influences and customer relationships. During the year under review the key risks identified and managed under this risk category were people risks, operational inefficiencies, logistics and transportation risk, IT risks, and health & safety risks. Risk assessments were carried out organisation-wide Annual Report 2016 103 ensure energy efficiency and improve profitability. As a result, the Company switched to the use of coal at Obajana, Ibese and Gboko, following a decision taken more than two years ago to diversify fuel supplies so as to ensure fuel security and improve margins. Significant investments have been made in building facilities to provide sufficient coal to fully fuel all kilns across our three Nigerian plants. By using imported coal, we were able to reduce dependence on what proved to be highly unreliable supplies of gas during the year, as well as mitigate the need to use expensive LPFO. ׉ 7cassandra://oBoSrNxQ7aNXx1CG0iyGmkBI-lvZfZ4vvDaDYhKHzlk`̵X<X<{בCט{u׉׉ 7cassandra://73IhR5MAeEmHjxF55brXtiNm3O2jI14dgDvh704GTpQ` ׉ 7cassandra://Sz1Ko0HMN2_yBaF7MU5tcxQGvSQCtyZpyJnvPyoXEiE>0`S׉ 7cassandra://HHIQdho4YRvbrFn4etrC_MfZcqe_SXTp44sPu7VJSy4`̵׉ 7cassandra://dpRjIF4Aa3EnOanlGytngNBAyRRGtr9dScVkUqtpQXon8Z͠X<ט{u׉׉ 7cassandra://gQLJ7MBu8tKmy90VKUCY6phwlyT5LLXtmtgqL2zD2xc|o` ׉ 7cassandra://E5xbp9ywMMTg62NG-0XUiBbM2E_4uVYtIdiVtXPkuKI=0`S׉ 7cassandra://tlHk2Wa9uiTyPDeEoeMQv6mFXS_-HPXpbjdElXfzID8`̵׉ 7cassandra://TP3XN26lvJ429C6FfDSaQwgFuKELgtfdHLfSrWqQFj8W@8J͠X<׉E AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT Likelihood of risk event Almost certain Likely Possible Unlikely Rare Catastrophic Financial risk Reputational risk >25% of gross income Negative publicity lasting more than six months; high customer defections; irreparable shareprice decline; major investor divestments. Major 15%-25% of gross income Negative publicity lasting more than three months; some customer defections; large decline in share price; instances of investor divestments. with remedial action plans agreed and implementation of controls closely monitored to ensure that operational risk exposures do not exceed the organisation’s risk appetite and are managed within tolerable levels. The assessment process takes into consideration the probability of occurrence (see table) and the impact of risks identified. The potential impact is adjudged from a financial and non-financial loss perspective as shown in the tables. This risk measurement approach is used when evaluating the inherent and residual risk rating of each risk identified. Controls agreed for risk mitigation are required to ensure that the residual risk rating of identified risks fall within the risk appetite of Dangote Cement Plc. From the risk assessments conducted during the year, the Group’s exposure to operational risks was adjudged a Medium Risk, as the implementation of remedial actions required to effectively manage some inefficiencies with fleet management, information technology, logistics, spare parts and raw materials procurement are still on-going. These initiatives will improve operations and reduce risks in 2017. 104 Annual Report 2016 Frequency of occurrence Occurs once a month Occurs once every 3-6 months Occurs at least once a year Occurs every two years Occurs every three years Quantifying the level of impact Moderate 5%-15% of gross income Negative publicity lasting a month; some customer defections; moderate decline in share price; few or no investor divestments. Minor 1%-5% of gross income Little or no negative publicity; no loss of customers; little or no effect on share price or investor appetite. Insignificant <1% of gross income No impact on reputation, share price or customers. Key Risk Indicator (KRI) monitoring is also deployed in managing the Group’s exposure to operational risks. As detailed on the next page, KRIs are quantitative parameters defined to provide trends which serve as useful insights and timely leading signals of prevalent and emerging operational risk exposures as it relates to the business activities of the Group. Thresholds for monitoring acceptable risk levels are agreed with Management and the Board Audit, Compliance and Risk Management Committee for timely risk identification. This year, the Group enhanced KRI monitoring with the introduction of strategic KRIs derived from the strategic initiatives considered as critical to the achievement of set business objectives for 2016. Identified risk trends and mitigation action are reviewed by Executive Management on a monthly basis and by the Board Audit Risk and Compliance Committee on a quarterly basis to ensure identified operational risk exposures are controlled within DCP’s risk appetite. Opportunity areas In managing the Group’s risk exposures, new business opportunities are identified in some cases. ׉ 7cassandra://HHIQdho4YRvbrFn4etrC_MfZcqe_SXTp44sPu7VJSy4`̵X<׉E 1Corporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT These are identified at all levels within the organisation and absorbed into DCP’s strategic plan for execution with close monitoring until fruition. The opportunities identified in 2016 were stemmed from mitigation strategies considered and employed in managing foreign exchange and business risk exposures. Export trades The volatilities experienced in local economies such as Nigeria and Ethiopia resulted in scarcity of currency and the associated challenges of sourcing of spare parts and raw materials. To meet its foreign currency based needs, an aggressive move to build the necessary infrastructure for increased export sales was embarked on. Key export trades by DCP Nigeria are to Niger, Togo and Ghana whilst DCP Zambia exports to the Democratic Republic of Congo, Malawi, Burundi and Zimbabwe. This generates more foreign currency based income for the organisation required for meeting its international procurements and invisible payments. Coal mining Options explored for effective management of energy and power costs in DCP Nigeria opened up the idea of using coal to power kilns instead of Gas and LPFO. Gas supply was erratic and even with coal facilities operational on some lines, Ibese and Obajana had to resort to use of imported LPFO. Furthermore, the devaluation of the Naira resulted in increased production costs, which adversely impacted EBITDA. Although we were able to use coal in 2016, it was mostly imported and therefore subject to foreign currency exposure. A decision was made at parent company level to develop coal mines in Nigeria to improve fuel security, improve margins and reduce Dangote Cement’s foreign currency requirement by sourcing coal locally in Nairadenominated transactions. This opportunity will be pursued in any other of the Group’s countries of operation if local coal deposits can be mined to reduce costs at the plant. Truck Officers’ Scheme The need to improve efficiency levels in the Group’s transport management led to the introduction of a Truck Officers’ Scheme, which assigned a maximum of five trucks to a “Truck Officer” who will be responsible for supervising the drivers of these trucks and ensuring improved turn-around time to meet performance benchmarks. This new scheme has greatly improved transport management in DCP Nigeria, where the pilot scheme is running. Summary of Key Risk Indicators tracked at Dangote Cement Risk type People risk Process risk System risk External risk events Scope of KRIs Recruitment process; attrition rate; career management; employee productivity; succession planning; staff grievance management; annual leave management; age and gender profiling; internal fraud; staff injury, illness and death. Transport/logistics; HSE; budget and financial management; procurement and supply chain management; strategic milestone monitoring; production and control; quality control; sales and marketing; physical security; infrastructure and equipment manufacture. SAP issues; IT general control lapses; System availability issues; network maintenance issues; disaster recovery issues; equipment failures. Vendor and supplier management; contractor management; regulatory sanctions; customer complaints management; negative public perception. Number of KRIs 30 103 46 15 Annual Report 2016 105 ׉ 7cassandra://tlHk2Wa9uiTyPDeEoeMQv6mFXS_-HPXpbjdElXfzID8`̵X<X<{בCט{u׉׉ 7cassandra://WIRh6jsnMwKrxQdUEizo8igF8BjFZ30ZVlons0UcIPY` ׉ 7cassandra://BkXQtIwezXkbkuVYtUdLZODs6sHXrGmVOtgBq8QSNEoA`S׉ 7cassandra://Kv6Wrl2RSNXNQxWQSZwyQr3D2dKXr1MbevF1tZ-TTHgR`̵׉ 7cassandra://x8JA3wAeWu9JeLyREozCPHJKgNw1kH0xzhOaAQn0Sqsp͠X<ט{u׉׉ 7cassandra://1Lu-0Nu01CQtiDGYZrDrmYScaNfVhWx60FSCe8p2NL4r` ׉ 7cassandra://5v-DfG1IhbSZJ1os39eTL8DI0_iq0YeMEecB94QaGrUAM`S׉ 7cassandra://rzV2PgkuU3Bb1wsY_l3LHpRK3XyD3DeX1LxPdhcI9Kk'`̵׉ 7cassandra://j-UObYPasmSmaCAuevCVXsA5sejVwPLMW8gFSkXB948T͠X<׉E,AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT Overall risk landscape For effective management of the Group’s risk exposures, the overall risk position is determined by evaluating likely impact of current and emerging risks materialising with consideration for risk correlations. For instance, a delinquent credit is usually the outcome of process failures which are tracked and monitored using operational risk management tools. The precursor of any risk event crystallising is usually due to the ripple effect of poor management of other risk factors. This is why the Group adopted an effective risk management process that is holistic and takes into consideration all interdependencies that might lead to other risks materialising. Comprehensive risk assessments of all operations across the Group are conducted and the outcomes of these risk assessments are reported to all stakeholders including Heads of Departments, Heads of Business Units or Subsidiaries, Country and Group Executive Committees and the Board Audit, Compliance & Risk Management Committee to ensure remedial actions required are communicated and duly implemented. The Group’s current risk profile is as indicated in the chart below. Exogenous factors constitute 33% and the highest proportion of the Group’s risk exposure because of the huge impact of foreign exchange fluctuations in most jurisdictions of operations and attendant sovereign risk factors on its business activities. Operational risk accounts for 28% of the Group’s current risk profile. This is closely followed by financial risk accounting for 17%, industrial/competitive risk accounting for 12% and strategic risk 10%. For proper monitoring of its risk exposures, the Group estimates ‘Expected Losses’ for all key risks identified (see chart below). Expected Losses are derived from the product of the probabilities of events occurring and the impact thereof using four severely stressed scenarios. These Expected Losses are scenario-based and capture the likely impact of current and anticipated risk trends on the Group’s business objectives in order to ensure that identified risks are properly managed and mitigated within acceptable limits derived from the Group’s risk appetite. 106 Annual Report 2016 This methodology is employed to maintain an optimal risk environment on an ongoing and forward looking basis. Outlook for risk management Dangote Cement will continue with its intentional and entrepreneurial vision for growth, sustainability and value creation. Its risk management strategy will be defined to be fit-for-purpose and realistic to its business model. As a result, all risk management tools and methodologies deployed will ensure appropriateness for holistic, effective and efficient risk management organisation-wide. This approach will ensure that all financial and non-financial threats to the achievement of its strategic intent and business objectives are eliminated or minimised on an ongoing basis. As was done in 2016, increasingly sophisticated and granular methods will be applied in managing DCP’s risk exposures organisation-wide as it grows and expands its business scope. Compliance The Board monitors the Company’s compliance with applicable laws and non-binding rules and standards. The responsibility for this has been delegated to the committee. Dangote Cement recognises that every Company is one bad decision or one ‘bad employee’ away from potential lawsuits and penalties, which brings to the fore the vulnerability of businesses. Corporate compliance, or more accurately the risk of non-compliance, has become a major concern over the past decade, especially for global companies such as ours with operations in many different countries and jurisdictions. When a practice commonly accepted in one country could be a serious criminal or civil offence in another, it is essential that this is understood and managed. The Compliance function is crucial for the timely detection and prediction of compliance violations as well as for the provision of reactive and proactive countermeasures on compliance violations. In recent ׉ 7cassandra://Kv6Wrl2RSNXNQxWQSZwyQr3D2dKXr1MbevF1tZ-TTHgR`̵X<׉E{Corporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT years, monitoring the compliance of business processes with relevant regulations, processes, and rules has become a major focus. The Compliance function will monitor to identify possible violations and predict future violations in a way that will prevent sanctions being imposed on the Group. The Company recognises that effective compliance management is vital for sustainable profitable growth. It is a very important contributor to the protection of the Group’s integrity and reputation, and helps build trust. You will recall that in 2015, following the listing of the Company on the Premium Board of the Nigerian Stock Exchange, we made a decision to ensure that our corporate governance practices were sustained and strengthened, and this led to the engagement of the Compliance Manager, whose primary function is to oversee statutory and governance compliance in every facet of the company’s operations, both in Nigeria and the other countries in which we operate. In pursuance of the Board’s resolve, the Committee was renamed the “Audit, Compliance and Risk Management Committee” with the added responsibility of overseeing the Compliance function across companies in the Group. The Committee includes ‘Compliance Update’ as a standing agenda item during its meeting and receives periodic updates on the level of compliance with all applicable regulatory requirements and possible impacts on the compliance risk profile of the Company. The Committee also reviews reports received from the regulators and evaluates the nature and effectiveness of action plans implemented to address identified regulatory compliance issues. The Compliance function is guided by the Compliance Charter, which amongst others seeks to establish and implement compliance management practices that contribute to sound and responsible business practices and integrity of the products and services delivered. This principle is incorporated into the day-to-day operations of the Group’s businesses in all our operating countries. Compliance objectives / functions The objectives and functions of the Compliance function are as follows: a) Embed and encourage compliance with laws, regulations, business principles, rules of conduct, and establish good business practices in every aspect of the organisation (e.g. governance, strategy, people, processes, policies, culture, communication) b) Establish and maintain effective compliance and control systems, including compliance risk assessment, mitigation, monitoring, and reporting c) Provide timely advice to the Group organisation on relevant changes in the compliance environment d) Promote integrity of the Group, its businesses and its employees e) Report on compliance matters that warrant the attention of the subsidiary Company Management Board. Such reports must include as a minimum exceeded compliance risk tolerance levels and unacceptable business practices f) Monitor progress of compliance risk mitigating actions and other compliance risk management issues until they are resolved g) Submit an annual Compliance Appraisal Plan (CAP) to the Board Audit, Compliance & Risk Management Committee for review and approval and periodically update the CAP as necessary h) Work with the process owners to document an Annual Monitoring Plan i) Create a process including tools for tracking and managing actions j) Create a process including tools for the recording, reporting and managing of compliance issues and incidents k) Incorporate lessons learned into the components and activities of the Compliance Program and annual plan l) Ensure resolution of, or escalation to the Subsidiary Management Board, Executive Management Team and the BACRMC on unaddressed or overdue items m) Institute internal arrangements to ensure that all statutory and governance duties are adequately discharged in a timely manner Annual Report 2016 107 ׉ 7cassandra://rzV2PgkuU3Bb1wsY_l3LHpRK3XyD3DeX1LxPdhcI9Kk'`̵X<X<{בCט{u׉׉ 7cassandra://Oa79_Zc_LTriaMzxOLMKQPS_8PFVSN6Wu-zkdfQQJDom` ׉ 7cassandra://ku8JeTOGtCYZKMPgAE0RP5hS8ed01YTZ40rUfp9V7cI>y`S׉ 7cassandra://3NSf5OxuBBA6ESNNq_YIHki13Ai449hL86950wEbygE@`̵׉ 7cassandra://1AsE3zxL6au2-NQ-FJhEs9Hmk3i6k37kcgMNK8bspu8rv͠X<ט{u׉׉ 7cassandra://ZHMQ6aAY25EmHhnfGSHFs-5J9Wx68kvAUlPIFFpqcB8` ׉ 7cassandra://3GSMkoVyYQ5F9lYSWH5oA0bqasiKz2sw0pYQY9_ltu8Rk`S׉ 7cassandra://MYAjTKvd0OvZsX3G1lVujMYcL6Je1MMJ6s-SzozemeI`̵׉ 7cassandra://P4YIfdYBy1gQif7WWKGAb6GpLcEa8VaakqyL73XquzI̢ ͠X<׉EAUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT n) Coordinate the provision of information to regulatory organisations, ensuring such information is timely, appropriate and present an effective image of the company o) Ensure compliance with all corporate governance requirements and rules of appropriate regulatory authorities, particularly the SEC, NSE and CAMA p) Ensure development, review, dissemination and communication of all governance policies and processes required by the regulators Compliance appraisal The Compliance function is executed through periodic appraisals that consist of one or all of the following methods: • Scheduled visits to the operating plants • Liaison with regulators, agencies and other consultants • Follow-up correspondence by email and telephone • Constant engagement with the local compliance teams, the Subsidiary Management Board and other process owners During these appraisals, one-on-one meetings are held with the management of the subsidiary companies or the operating plants with a view to understanding their operational challenges and proffering solutions. Policy formulation: Policy formulation, review and implementation is an integral part of the Compliance function. As a manufacturing and production company, Dangote Cement is regulated by various laws and regulations. An important way to ensure compliance with these laws is through the formulation of policies that set guidelines on how the Company and its members are to act in any given situation. As at 27th February 2017, Dangote Cement has 18 Board and Governance policies. Additionally, we have several internal policies and charters that regulate all facets of the Company’s activities, ranging from production, sales, finance, human resources, communications, internal controls, corporate social responsibility functions etc. Details of the Board and Governance policies can be found on pages 80 to 82. 108 Annual Report 2016 Internal Audit The Internal Audit function is responsible for providing assurance to management, the Committee, and the Board on the adequacy and effectiveness of risk management, governance and internal control systems in the Company. The Board has documented the authority, scope, accountability and responsibility of the Internal Audit function in the Internal Audit Charter. The Charter provides guidance to the Internal Audit function and its provisions are adhered to strictly by both the Board Audit and Risk Management Committee and the Internal Audit function. The function operates independently of management and has full access to all functions, records, property and personnel in the Group. Dangote Cement’s Internal Audit function consists of the Group Internal Audit team, led by the Group Head of Internal Audit, and regional/country audit functions that operate in each of the Company’s principal areas of business throughout its operations across Africa. As seen in the organogram, the Group Internal Audit function is structured along two regions overseeing various countries as follows: I. Nigeria, comprising the three plants located at Obajana, Ibese and Gboko. II. Pan-Africa, comprising Cameroon, Congo, Ethiopia, Ghana, Senegal, Sierra Leone, South Africa, Tanzania and Zambia. The regional and country functions are centrally directed by the Group Internal Audit team. The country Internal Audit functions are jointly accountable to local senior management and regional heads of internal audit. They also have direct access and accountability to local audit committees and the Group Head of Internal Audit. The Internal Audit function’s approach to its activities is centred on the Company’s Enterprise Risk Management (ERM) Framework and a risk-based audit approach, both of which strengthen and complement how we ׉ 7cassandra://3NSf5OxuBBA6ESNNq_YIHki13Ai449hL86950wEbygE@`̵X<׉EgCorporate Governance AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT undertake risk management at Dangote Cement. This approach provides assurance that the processes that manage risks to a level considered acceptable by the Board, are working effectively and efficiently, whilst focusing on key processes and controls. The Group Internal Audit function uses a standardised Group-wide internal audit methodology, which is in compliance with the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors. It operates a formal quality assurance and effectiveness programme. Following a risk-based approach, the Internal Audit presents the annual internal audit plan for the consideration, review and approval of the Committee. The internal audit plan sets out the scope of work to be performed over a period and also defines the approximate resources necessary to accomplish the scope of the internal audit activities. Internal Audit reviews, based on the approved plan for the year, generally include provision of assurance over financial, operational, IT and transformation programme activities, which are performed by teams of qualified and experienced employees, as well as third parties appointed to assist from time to time. The Group Head of Internal Audit, who reports to the Board Audit, Compliance and Risk Management Committee and administratively to the Group CEO, has direct right of access to, and regular meetings with me and prepares formal summary reports on the consolidated activities and key findings of the Group’s Internal Audit team. Annual Report 2016 109 ׉ 7cassandra://MYAjTKvd0OvZsX3G1lVujMYcL6Je1MMJ6s-SzozemeI`̵X<X<{בCט{u׉׉ 7cassandra://71sfzPkvBZLjST-lYzNrgOFm5bx2biEsEVUOPzuetAor` ׉ 7cassandra://3WDCxNi76c6F6Cqyzx6fvAt6nnO1mHJ3hohpbRscvgY6'`S׉ 7cassandra://3GJV_ydJhfi7mX-RIMfsbZ7TnhszMk7Pht9NDWZ8Qy4`̵׉ 7cassandra://FVLamvXebrULirzDKDLva8nPWq5_o1mYPVrMlxhtrCA͠X<ט{u׉׉ 7cassandra://CbD6azrRV6VsrJepmNB2xYrID7jWepeMdl2SGW0Po34` ׉ 7cassandra://mia8wHQoLj5b4nkRVqUlriH9zZz3EPv0akXZdsxNAQkE`S׉ 7cassandra://7WI_F1WG4OydLaaTEOliWwc9w5TFNfVdV09YT4VaVC0`̵׉ 7cassandra://Ab-UhKmggJeFYVhnmxu32hN-g1u6DYEZ6LaDQbB9ooM͟d͠X<׉E AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT The regional and country functions are centrally directed by the Group Internal Audit team. The country Internal Audit functions are jointly accountable to local senior management and regional heads of internal audit function for each committee meeting. They also have direct access and accountability to local audit committees and the Group Head of Internal Audit. The Committee also has unrestricted access to all Internal Audit reports, should it wish to review them. The Committee monitors and reviews the effectiveness of the Group Internal Audit function on an ongoing basis, consistent with the UK Code (provision C.3.2). Internal Audit will undergo an external quality assurance review during 2016 in line with Section 31.14 of the SEC Code. Disciplinary Committee In addition to the Anti–Fraud Committee, the Disciplinary Committee was formed during 2016. The Committee is made up of the following members: • Head, Human Asset Management Department • Company Secretary/Head of Contracts • Group Head of Internal Audit • Senior Officer from the department of the staff member facing disciplinary action With the formation of this committee, the Anti-Fraud Committee will focus on fraud-related cases while the Disciplinary Committee will focus on non-fraud cases. Whistle-blowing mechanism All employees and stakeholders have the opportunity to make confidential disclosures about suspected impropriety or wrongdoing. The Anti-Fraud Committee, the Group Legal Counsel, in consultation with the Group Head Internal Audit as appropriate, decide on the method and level of investigation. The Committee reviews the Group’s whistleblowing arrangements each year to assess whether they remain effective, is notified of all material disclosures made and receives reports on the results of investigations and actions taken. The Internal Audit function performs necessary 110 Annual Report 2016 investigations on relevant items, recommendations for recommends sanctions in line with Dangote Cement’s Sanction Grid and provides strengthening anti-fraud controls. The Committee can request further information, conduct its own inquiries or order additional action where necessary. During 2016, of the whistles blown and fraud cases investigated, 68% of these cases have been closed and 32% are still under investigation. The Audit, Compliance and Risk Management Committee has satisfied itself that proper and satisfactory internal controls remain in place to identify and contain business risks, and that the Company’s business, and that of its subsidiaries, is being conducted in a proper and economically sound manner. I am confident that the Committee, supported by senior management, has carried out its duties effectively and to a high standard in 2016. In 2017, we will continue to enhance our processes in line with best practices. Ernest Ebi MFR Chairman of the Audit, Compliance and Risk Management Committee 27th February, 2017 ׉ 7cassandra://3GJV_ydJhfi7mX-RIMfsbZ7TnhszMk7Pht9NDWZ8Qy4`̵X<׉E Corporate Governance FINANCE & GENERAL PURPOSE COMMITTEE REPORT and decisions of the Committee and also provide an overview of the Committee’s activities and significant issues deliberated on in the year under review. The Board of Directors delegates financial matters to the Committee which has oversight over financial reporting and internal controls management, treasury, investment management, financial risk management, capital structure, corporate finance strategy and activities and mergers and acquisitions. Olusegun Olusanya Chairman of the Finance and General Purpose Committee The Committee reviews how the Company is progressing towards achieving its strategic goals. As Chairman of the Finance and General Purposes Committee, I am pleased to present the Committee’s report for the year ended 31st December, 2016. Over the following pages I will share the deliberations The Committee receives its insight into the challenges and goals of the Company from the financial and business targets set by the Board. It reviews how the Company is progressing towards achieving those targets, receiving regular updates from Executive and senior management staff on operational and financial issues across the Group. These reports give the Committee an understanding of the risk factors as well as the assurance and processes to mitigate them. Membership, qualification and meetings. The Committee has eight members, with five NonExecutive Directors and three Independent NonExecutive Directors. Biographical member of the Committee, details of each including relevant qualifications and experience, are set out on pages 86 to 89 of this report. As part of the annual review of the effectiveness of the Committee, the Board has considered the qualifications, expertise and experience of members and is satisfied that the Committee members bring a wide range and depth of financial, accounting practices, risk management and commercial experience across various industries, and that discharge their duties. Some members of Senior and Executive Management are invited to be in attendance at meetings in order to provide required information and provide updates on agreed tasks and directives given by the Committee from previous meetings. As Chairman of the Committee, I regularly hold private one-on-one meetings with the Group Chief Finance Officer, other senior management, and with the lead Audit Partner Annual Report 2016 111 they will effectively ׉ 7cassandra://7WI_F1WG4OydLaaTEOliWwc9w5TFNfVdV09YT4VaVC0`̵X<X<{בCט{u׉׉ 7cassandra://vQIMvU5Zwgovq4mQBuzCx3S4CHQ378OMDd85KVemCKc` ׉ 7cassandra://13SUg8MeDXY_JG_-9jTNX-howLjonupaBgAZccCHxoU9f`S׉ 7cassandra://lu_umdb0ej6YL9Qur92MGrqMDbgM8O9FAb7zVWZJ8as`̵׉ 7cassandra://73Y2xe1E2W542MkRsD1V_kTkInnyX6TCvMYRmgpjXlQn8b͠X<ט{u׉׉ 7cassandra://k7vnmjcrBjsBcJrMbYuP_ThnOiCsVAjCbX4-_9X6BPQ` ׉ 7cassandra://Z2t3c3CxPnpcHu03LV7ZqYJZOPhEtg2IX4S3BQn4ny89T`S׉ 7cassandra://9NAo7wpR2KjNv_DGECq0rqdpE5c0yIQ1F1E1aCPUQco`̵׉ 7cassandra://1bpL-bsMK5j4hqplsh_7vpnhyqf_CMXXlG6aMNKzcow[8^͠X<׉E 0FINANCE & GENERAL PURPOSE COMMITTEE REPORT prior to the meetings to better understand issues and any areas of concern, and to allow sufficient time for meaningful discussion at the meeting. Roles and responsibilities The Committee’s main roles and responsibilities are to assist the Board in fulfilling its oversight responsibilities regarding the following: • To advise the Board on matters pertaining to the Company’s capital structure and the corporate finance strategy of the Company, including the issuance of equity and debt securities, general financing plans, debt ratings, share repurchase philosophy and strategy, share redemption and purchasing activities, and the Company’s dividend policy • To review, in consultation with the independent auditors, the integrity of the Company’s internal and external financial reporting processes and controls • To review and recommend to the Board on matters pertaining to Group treasury operations, investment strategies, banking and cash management arrangements and financial risk management • To review thoroughly and make recommendations to the Board on matters pertaining to major investments, mergers, acquisitions, divestitures, joint ventures or similar transactions and the policies and processes of the Company related thereto Members and meeting attendance Director Olusegun Olusanya (Chairman) Olakunle Alake Sani Dangote Ernest Ebi Devakumar Edwin Emmanuel Ikazoboh Fidelis Madavo Douraid Zaghouani Financial reporting matters The Committee reviewed the financial reports submitted by management during its meetings and assessed whether suitable accounting policies and standards were adopted and whether the management team made the appropriate estimates and judgments related to the Group’s performance. The Committee also reviewed the Group’s quarterly financial results, relevant disclosures, external auditors’ reports, financial disclosures in the Annual Report and reports by external auditors that highlighted any issues arising from the audit. The specific areas of audit and accounting matters reviewed by the Committee include: • Critical accounting judgements and estimates that affect the reported amount of assets, liabilities, revenue and expenses • Appropriateness and consistency of application of accounting policies and their compliance with accounting standards • Impairment testing of tangible and intangible assets • Risks and associated controls over the financial reporting process • Adequacy and clarity of reporting disclosures and compliance with applicable financial and reporting standards 27/01/16 29/02/16 20/04/16   -   - -        -      -  -  26/07/16 25/10/16 09/12/16       -            -  -    112 Annual Report 2016 ׉ 7cassandra://lu_umdb0ej6YL9Qur92MGrqMDbgM8O9FAb7zVWZJ8as`̵X<׉E Corporate Governance FINANCE & GENERAL PURPOSE COMMITTEE REPORT Key matter considered Committee actions Committee activities during 2016 Review of financial statements • Reviewed and recommended to the Board for approval, the 2015 audited financial statements. • Reviewed and recommended to the Board for approval, quarterly 2016 unaudited financial statements. • Recommended and authorised submission of the financial statements to the relevant regulatory bodies. • Discussed the performance of the Group in comparison with the approved budget. Capital structure and financing • Recommended the development of a robust policy to guide process of granting loans to subsidiary companies. • Considered the reports on the status of loan facilities granted to subsidiaries and made recommendation to the Board on next steps. • Reviewed and recommended to the Board the approval of loan facilities for subsidiaries. • Reviewed the total debt (inter-company loans and external borrowing) of Dangote Cement’s subsidiaries. • Deliberated on the effect of regulatory changes on the working capital management of subsidiaries across Africa. • Reviewed payment of inter-company loans and the current loan portfolio of the Company. External audit • Considered the Auditor’s report and management letter including outstanding issues, judgements and estimates, significant audit risks and risk management and internal controls systems. • Reviewed the letter of representation presented by the Group Chief Financial Officer and recommended the letter to the Board for approval. Dividend payment Budget • Discussed the different scenarios for dividend payout and decided on the amount of the dividend to recommend to the Board with respect to the 2015 financial year. • Reviewed the annual Budget for recommendation to the Board for approval. Key indices included sales target that showed a volume increase above 2015, achievable through market penetration and increased sales volumes by exports into Pan-African countries; finance and cash costs. Budget monitoring Expenditure on Corporate Social Responsibility Cost reduction measures • Reviewed the quarterly and full-year performance of the Group against the approved Budget. • Ensured the performance of the Company was within Budget and properly challenged Management on Budget performance at every meeting. • In furtherance of the mandate given to management to develop a Corporate Social Responsibility Policy and Plan, the Committee reviewed the CSR initiatives of the Group in 2016 aimed at enriching the host communities where the company has operations across Africa, with a view to increasing awareness and achieving model corporate citizenship. • Having regard to the state of the Nigerian economy, the Committee adopted direct sourcing of materials and deployment of self-owned trucks in exports as initiatives towards cost reduction and maintaining profitability. Annual Report 2016 113 ׉ 7cassandra://9NAo7wpR2KjNv_DGECq0rqdpE5c0yIQ1F1E1aCPUQco`̵X<X<{בCט{u׉׉ 7cassandra://6pDg_Byokmli-fIezXOlWR4C-Bja-f92I1QFeCi6QQcL` ׉ 7cassandra://UGtIo57lpEaksDIRmUuFdxQPf6ortJw-uHQR_1M-OAMB,`S׉ 7cassandra://tQ9JaOAt02WLDfJEAFjTSthiH0oAQW5eih5iTZ_BexkM`̵׉ 7cassandra://YiPXAo-N-lzf-tClreVL2VEJqU6vz5tJRKC12w_QDas͂p8V͠X<ט{u׉׉ 7cassandra://uMrT_7PVCJsZjuvw0NtcTLKf20d3sW4h7NN9I-DDBqI` ׉ 7cassandra://DRpT0qQ0Ih1vDvTCT2PJ4k2GNHhaFfSlna-IMVUXuEMD`S׉ 7cassandra://OIh5V4SyM2tXyn6kDDIWx0c1bzf1YgjCJaCNAgrbA5A6`̵׉ 7cassandra://NWZlrHvaddEG2r4rbEsqvN8bgc77UcPZhc8S8EKg1bE͢'d͠X<׉EpFINANCE & GENERAL PURPOSE COMMITTEE REPORT Key matter considered Committee actions Committee activities during 2016 Credit ratings • Upon the recommendation of the Committee, the Company was rated by Moody’s and Standard and Poor’s and received the highest standalone ratings achieved by a Nigerian company. The rating is a reflection of the inherent strength of the business as well as the rating agencies’ belief in the Company’s strategy, robust governance and conservative financial policies. Regulatory compliance • Monitored and responded to changes in regulatory environment. In that regard, they established appropriate structures, education and training and communication and measurement of key performance indicators relevant to compliance; detecting potential breaches and taking appropriate actions to ensure non-occurrence. • Provided updates on international compliance, and noted key risks and mitigating actions, and the continued support from Head Office to the subsidiaries SAP ERP Risk management Investments • Authorised the roll-out of SAP ERP, an Enterprise Resource Planning system, which incorporates the key business functions of an organisation. This has been successfully deployed to subsidiaries across Africa. • Reviewed and satisfied itself that the various structures, polices and programs established and implemented in the company were sufficient to manage and mitigate financial risk in the Company’s business. • Reviewed and made recommendation to the Board on matters pertaining to major investments, acquisitions, divestitures, joint ventures or similar transactions, and encouraged management to develop policies to guide such transactions. Other key matters considered Significant issues in relation to the financial statements considered by the Committee during the year include: • Pricing strategy and impact on revenue and profits • Tax impact and tax exemption status of entities within the Group, and total tax liability of the Group • Consideration of the increase in non-current assets and the appropriateness of the capitalisation of significant expenditures • Review of the carrying amount of Group assets including any potential impairment loss to be recognised during the year • Review of receivables for impairment and revalidation of the Group’s “cash and carry” sales model (except for a few credit customers who are backed with bank guarantees), which has historically minimised losses on receivables • Review of the currency hedging strategies, FX exposures and management-proposed actions to mitigate FX exposures and their impacts on the Company’s finances • Review the effect of inflation on the activities of the company and deliberate future economic outlook. 114 Annual Report 2016 In addition, the Committee assessed cash flow projections and compared these with cash balances and committed facilities available to enable them to recommend that it was appropriate to adopt the Going Concern basis for the preparation of the financial statements. The Committee also deliberated and recommended focus and financial strategy to the Board, identified the current national threat and satisfied itself of the Company’s level of preparedness and areas for improvement for 2017. I am satisfied that the Committee, working closely with senior management and the external auditors, has carried out its duties effectively and to a high standard in 2016. Going forward, we will also focus on the effectiveness of the finance function including ensuring adequate protection of the company’s financial assets. Olusegun Olusanya Chairman of the Finance & General Purpose Committee 27th February, 2017 ׉ 7cassandra://tQ9JaOAt02WLDfJEAFjTSthiH0oAQW5eih5iTZ_BexkM`̵X<׉E 2Corporate Governance TECHNICAL & OPERATIONS COMMITTEE REPORT Composition The Committee is composed of seven members of whom six are Non-Executive Directors and one is an Independent Non-Executive Director. Biographical details of each member of the Committee, including relevant qualifications and experience are set out in pages 86 to 89 of this report. The Company Secretary is the Secretary to the Committee. The Board has assured itself that the members of the Committee have the requisite knowledge, skill and experience to effectively discharge their duties. Fidelis Madavo Chairman of the Technical and Operations Committee The Technical & Operations Committee has an independent role assessing project viability and other technical and operational matters. The Technical and Operations Committee has an independent role with accountability to the Board. It does not assume the functions of management, which remain the responsibility of the Executive Director, Officers and other members of senior management. The Group Chief Executive Officer and other members of executive management are often in attendance to provide necessary information and support to the Committee, and give status updates on decisions from previous meetings. Responsibilities The Committee assists the Board in fulfilling its oversight responsibilities regarding the following: • Review project feasibility to determine and consider viability of planned expansion projects in Nigeria and elsewhere • Review the technical scope of plant projects including risk assessment and the quality management plan and make recommendations to the Board as to needs or issues arising • Review the status of projects according to agreed scope, schedule, project milestones and KPIs, and where there are delays or variations, probe management to understand root causes and mitigate against such in the future • Review safety, health and environmental performance and improvement plans • Review operational, staffing and commissioning readiness plans including projects not under the Group’s direct control • Monitor the production budget, standards, raw material supplies, energy and key performance indicators per plant • Review asset/plant care policy and performance (preventative/breakdown, unit and plant reliability/ availability and costs) Annual Report 2016 115 ׉ 7cassandra://OIh5V4SyM2tXyn6kDDIWx0c1bzf1YgjCJaCNAgrbA5A6`̵X<ÁX<{בCט{u׉׉ 7cassandra://n0PV9dIHXdnPT6ArNXpvYsYPccIiHE_OiId6JaQRl_w@` ׉ 7cassandra://NLOM3vi9s1yH_B35OfnLU49QOlYbZZTSMG8Sr_nsv-07V`S׉ 7cassandra://bXb7rBActS3UBXxAt4TEbiE5H0gZLljPC2e9J2_aECAd`̵׉ 7cassandra://VEvCqGsA5S5qvQv4bMINFqfAXzZWPT7FLyt0u48Y3ecq8n͠X<ט{u׉׉ 7cassandra://Euswl-S-A0vsVqOE7kQ7Ma3HYXnvYqhIwT_RBGjCXI0` ׉ 7cassandra://uFD5OuollJ9huYqlcUmCozWewkiVksNVbeF4wqhTFak3`S׉ 7cassandra://8xdXPnAR8bjxl0sKBxLTmAa8XCabgVknGqREq4RE1sw`̵׉ 7cassandra://TcombiH_nR298OGrM-P_uGSc7jWOrHx7-ENzQnD-mOE`8J͠X<׉E TECHNICAL & OPERATIONS COMMITTEE REPORT • Ensure effective technical, research and development programs to enable continuing innovation and improvement across the Group • Oversee the development and implementation of Corporate Social Responsibility and community programs in plant and business locations where we operate in Nigeria and throughout the rest of Africa Members and meeting attendance Director Fidelis Madavo (Chairman) Olakunle Alake Abdu Dantata Ernest Ebi Devakumar Edwin Joseph Makoju Douraid Zaghouani Committee activities during 2016 Key matter considered Operational performance review Committee actions Quarterly reports on the operational performance of the plants were presented to the Committee for consideration. The reports covered the following: • Plant production volumes and key performance indicators per plant every quarter. • Rate of dispatch of products from plants to customers and depots. • Fuel and gas usage at the plants including operational efficiencies. • Progress update on the Coal Mill Project. • Operational cost and variance analysis report. • Production and sales demand. • Organisational restructuring at major plants. • Proposal on cost control mechanisms presented by management. • Update on technical research and development, including recruitment of key staff. Transport strategy The Committee received and considered reports related to transport management and efficiency. The reports included information on: • Measures to contain and reduce accident rates. • Effective surveillance and monitoring of the truck fleet. • Incentive measures for good drivers. • Provision of adequate truck park facilities. • Safety policies for transport across the Group. Projects review Reports on existing projects, both greenfield and brownfield, were considered by the Committee. The reports included information on: • Construction status of projects and production dates. • Commissioning status and plan. • CAPEX reports on projects. • Project issues and resolution. 116 Annual Report 2016 22/02/16 The reports of the Committee are presented to the Board after each Committee meeting, providing the Board with summaries of discussions and its recommendations for the consideration of the Board. In the financial year ended 31st December 2016, the Committee held four meetings. The meeting dates as well as attendance record is shown on the table below. 12/04/16 26/07/16 -            25/10/16  - -              ׉ 7cassandra://bXb7rBActS3UBXxAt4TEbiE5H0gZLljPC2e9J2_aECAd`̵X<׉E nCorporate Governance TECHNICAL & OPERATIONS COMMITTEE REPORT Committee activities during 2016 Key matter considered Projects review Committee actions • Key project decisions for the Committee’s resolution. • Contract arrangements and review. • Business case for remodeling, reconstruction or renovation. • Lease arrangement and agreements. • Business registration status. • Status of mining license arrangements. • Limestone exploration reports. Health, safety and environmental (HSE) matters. HSE reports were monitored and compared for all plants within the Group including those of pan-African operations. The activities of the Committee in this regard included the following: • Establishment of safety performance indicators for the plants. • Review of incident reports, including details of causes, intervention activities, impact on production and remedial actions. • Review of incident frequency reports and impact on operations. • Received information on safety initiatives during the period, including summary on safety inductions/ training, safety committee meetings, HSE department activities. • Safety performance report for operating plants. • Instructed management to adopt the following going forward: - Improve reporting protocols of fatal accidents; - - Benchmark HSE reports with industry. - Compare HSE reports across the Group. • Agreed HSE improvement actions: - Engagement of a HSE Director to enforce the Company’s policy of 0% rate of accidents at the plants and increase safety measures; - Launch and implementation of a 10-point Safety Improvement Plan at all plants. - Installation of more sophisticated and technologically advanced equipment. - Enhancement of security measures and enforcement of standard operating procedures. - Intensified safety trainings and workshops and increased safety awareness through simulations, drills, dialogues, signals and signboards. • Review and approval of safety manual. Focus for 2017 As the Company does not plan to open new plants in 2017 the Committee’s main role will be to ensure the following: • Operational efficiencies and plant optimisation initiatives are implemented across operations to achieve cost savings • Production targets across the Group are met • Health, Safety and Environment policies are enforced and monitored across the Group • Sustainability strategy and policies are implemented and monitored across the Group • Plans for new plants are fully considered Include historical data in health, safety and Environment reports. Fidelis Madavo Chairman of the Technical and Operations Committee 27th February, 2017 Annual Report 2016 117 ׉ 7cassandra://8xdXPnAR8bjxl0sKBxLTmAa8XCabgVknGqREq4RE1sw`̵X<ǁX<Ɓ{בCט{u׉׉ 7cassandra://FqTg8LZAo42rQoip5civN5eAoCJBVB4IxcpFaWNotAAm` ׉ 7cassandra://u0aF5dMJheRQK7OG3cbpc3U7H1A0ruiXxl5Q_vqBpHI?`S׉ 7cassandra://Q97UMz0q91LISv-CnvtbgBaIPIVLSpmG61Bv1NIno6U[`̵׉ 7cassandra://VzrTL4WVsHtZdhIPvDCgzmUdZcLHRFUQIeeJCYAMmvsͧ͠X<ט{u׉׉ 7cassandra://dCTcrsx-vx0s5dxl6rK7jFvILuKTBoJ9ksiCbUcM-oU^` ׉ 7cassandra://LiF_ZjjeSUVpeo5um2uHiEr9V9rtWUwIHcJp9Q5ltWY9v`S׉ 7cassandra://YG34CnQqrWB_wZt2bl4KcpbGalSukGXDbE_mdVST-3E`̵׉ 7cassandra://0GnMdmeP0fwrz7JxebFz_bBn6QMpnoSMB6yKDe6vAtIe@8V͠X<׉E NOMINATION COMMITTEE REPORT to help the effective functioning of the whole Board. The Committee conducts an extensive search for prospective candidates with appropriate skills and qualifications for specified directorship. In 2016, the Nominations committee had particular focus on gender diversity, following a Board review in 2015 that acknowledged the need for diversity in its composition and in particular, that there should be a strong representation of women. Aliko Dangote Chairman of the Nomination Committee It was in that regard that the Committee recommended the appointment of Dorothy Udeme Ufot (SAN), as an Independent Non-Executive Director of the Company, following a rigorous selection, interview and validation process. She became the first woman to serve on Dangote Cement’s Board and brings formidable legal skills, advocacy and business insights that will strongly enhance the Company’s governance. The Nomination Committee was established in 2014 to assist the Board in discharging its responsibilities in relation to the composition of, and matters relating to, the Board and Senior Executive team. Composition The Nomination Committee includes one NonExecutive Director and three Independent NonExecutive Directors. I serve as the Chairman of the Committee by virtue of my position as the Chairman of the Board. Members of the Committee have extensive board, management and leadership experience across a wide range of companies. Biographical details of each member of the Committee, including relevant qualification and experience are set out in pages 86 to 89 of this report. The Company secretary is also the Secretary to the Committee. The Board appointment process The Nomination and Establishment Committee leads the process for identifying and recommending the appointment of new Directors with a clear understanding of the attributes and values required 118 Annual Report 2016 Her selection was influenced by the fact that as one of Nigeria’s most experienced legal practitioners, with more than 26 years’ experience in commercial litigation and arbitration. She has a balance of skills, knowledge and experience that we regard as essential for membership of our Board. I am pleased to say her appointment represents a positive step forward in our goal to improve the diversity and functioning of our Board. Additionally, because she is appointed as an Independent NonExecutive Director of the Company, the Board through the Committee have taken steps to satisfy itself that she is independent in character and judgement, and there are no circumstances which are likely to affect, or appear to affect, her performance and judgement as a director. Meetings The Committee met three times in 2016. When required, the meetings of the Committee were attended by appropriate Senior Executives of the Company (such as the Group Chief Executive Officer, Group Chief Financial Officer, General Manager of Human Resources and Company Secretary), as well as external advisers upon invitation. ׉ 7cassandra://Q97UMz0q91LISv-CnvtbgBaIPIVLSpmG61Bv1NIno6U[`̵X<׉E Corporate Governance NOMINATION COMMITTEE REPORT Members and meeting attendance Director Aliko Dangote (Chairman) Ernest Ebi Emmanuel Ikazoboh Fidelis Madavo Olusegun Olusanya 29/02/16      19/04/16      26/10/16      Responsibilities The Committee has responsibility to ensure that: • The Board has the appropriate composition for it to execute its duties effectively • The establishment of a formal process for the selection and appointment of directors, including Identification of suitable members of the board • Performance of reference and background checks of candidates prior to nomination • The appointment of Directors is formalised through an agreement between the company and the director • A formal induction programme for new directors is developed and implemented and reviewed regularly in line with best practice • Ongoing training and development of directors take place • Formal succession plans for the board, chief executive officer and senior management appointments are in place • Inexperienced directors are developed through a mentorship programme and oversee the development and implementation of continuing professional development programmes for directors • Directors receive regular briefings on changes in risks, laws and the environment in which the Company operates • The performance of directors is evaluated and assessed appropriate steps taken directors who do not make an appropriate contribution • Ensure that formal succession plans for the board, chief Executive officer and senior management appointments are developed and implemented, and search for suitable replacements when necessary Annual Report 2016 119 to remove Aliko Dangote Chairman of the Nomination Committee 27th February, 2017 Reconstitution of Subsidiary Boards: The Committee also recommended the reconstitution of the Subsidiary Boards, in compliance with regulatory and governance changes in the countries where the subsidiaries are located. Going forward, the Committee is committed to further gender diversification with a stronger representation of women on the Board. Emergency succession planning is also an important area of discussion for the Committee, ensuring the business develops a framework with clearly identified individuals capable of covering key management roles on an interim basis. All these individuals then receive the necessary coaching to ensure they have the required skills to provide any critical support when needed. Development for directors and high performing individuals below Board level has been an essential area of focus. Coaching and mentoring is provided to develop and enhance specific skill sets, and the Committee believes the benefits of this approach are critical for developing our own talent for the future. ׉ 7cassandra://YG34CnQqrWB_wZt2bl4KcpbGalSukGXDbE_mdVST-3E`̵X<ˁX<ʁ{בCט{u׉׉ 7cassandra://xGZ-tI68SDoSVTexb4YSxQDjWXx3wHkNDhTQmpPavjA` ׉ 7cassandra://OhCZtQKdeweOKCWjEi6Bs4aKrsw2urj5auSKBfDXsWQ@`S׉ 7cassandra://0VswXsTv-ZeGKYZ_rWdBBtDs2RE4XMD6BQAY6JHbi6gN`̵׉ 7cassandra://v13KqWBMUVaCgIWaW4Lk18_AXZWBR311EIc7CnCwEHId͠X<ט{u׉׉ 7cassandra://K9xavUBKItZbpH618ZKs98mfEc1iB1-n6-PbTChXVyY` ׉ 7cassandra://2PnAUCIzvfPkwvExVpCAirIQYsVrCwJcABAiqOe82LE:`S׉ 7cassandra://qAgOOlo0HFIO89uOoQnx4Oks2IuoZfRVM8RwWBndIsk`̵׉ 7cassandra://0PudTNPis_kZ5V3WXO5myxQhcb2WsqenDiOEhWddmqAT8^͠X<׉E 4REMUNERATION REPORT I also explain how the remuneration policy is aligned with the short-term objectives and long-term strategy of Dangote Cement. The report is split into three main areas: the statement by the Chairman of the Remuneration and Governance Committee, the Remuneration Policy Report and the Annual Report on Remuneration. The Board has established a remuneration framework for Executive and Non-Executive Directors, which takes cognizance of the relevant Codes of Corporate Governance in Nigeria as well as leading governance practices with a view to ensuring adherence to the highest standards of Corporate Governance. Emmanuel Ikazoboh Chairman of the Remuneration and Governance Committee The Remuneration Policy reflects our desire to sustain long-term value creation for shareholders, and aims to: • Attract and retain people with integrity, ability, skill and experience to deliver the Group’s strategy The Company’s Remuneration Policy reflects our desire to sustain long-term value creation for our shareholders. • Motivate Directors to pursue and promote balance between the short-term and long-term growth of the Group while maximising shareholders’ returns • Ensure that remuneration arrangements are equitable, transparent, well communicated and easily understood, aligned with the interest of shareholders and adequately disclosed • Align individual rewards with the Company’s performance, the interests of its shareholders, and a prudent approach to risk management • Promote compliance with global regulatory trends and governance requirements, with an emphasis on long-term sustainability Dangote Cement ensures that the performance goals of Directors are aligned to shareholder interest to ensure that Directors make prudent decisions in deploying the Group’s resources to generate sustainable growth. In this report I describe our remuneration practices and policies and disclose the remuneration paid to Directors in 2016 and the proposed remuneration arrangements for 2017. 120 Annual Report 2016 The performance-based incentive programs for the Executive Management are aligned to individual performance and the overall performance of the Company, and this drives a high-performance culture that rewards individual contributions and the achievement of business results that enhance shareholder value. ׉ 7cassandra://0VswXsTv-ZeGKYZ_rWdBBtDs2RE4XMD6BQAY6JHbi6gN`̵X<׉E Corporate Governance REMUNERATION REPORT There were no changes to the remuneration structure of the Non-Executive Directors during the year under review. Details of the remuneration paid to Directors in 2016 can be found on pages 127 to 128. Additionally, the Remuneration and Governance Committee, in accordance with good governance and in line with UK Code (provision D.1), developed an Executive Management Performance Incentive Policy, focused at Senior Executives to ensure that they are performance-based and align with the short-term and long-term success goals of the Company. The policy defines a transparent procedure for encouraging and stimulating enhanced performance in a way that will increase profitability and sustainability of the Company. It provides challenging but achievable goals to drive towards the vision and strategy of the Company, focuses on increased accountability through providing clarity around what is measured and how (weightings against performance categories), and emphasises the way that business should be conducted by incorporating executive leadership and corporate values into the performance management process. This is consistent with Section 5.3 of the SEC Code. Composition of the Committee The Remuneration and Governance Committee consists of four Non-Executive Directors and four Independent Non-Executive Directors. This composition is in compliance with Section 11.1 of the SEC Code and the UK Code (provision D.2.1). Membership and meetings Director Emmanuel Ikazoboh (Chairman) Sani Dangote Abdu Dantata Ernest Ebi Devakumar Edwin Joseph Makoju Olusegun Olusanya Dorothy Ufot In compliance with Section 14.3 of the SEC Code, only Non-Executive Directors are involved in decisions regarding the remuneration Executive Officer. The SEC Code requires the Remuneration Committee to consist only of Non-Executive Directors while the UK Code provides for at least two Independent Non-Executive Directors as members of a Remuneration Committee. I serve as the Chairman of the Committee by virtue of my position as an Independent NonExecutive Director. The Board has satisfied itself that members of the Committee have the requisite knowledge, skill and experience to function effectively. Biographical details of each member of the Committee, including relevant qualification and experience are set out in pages 86 to 89 of the Corporate Governance Report. The Company Secretary is also the Secretary to the Committee. The Group CEO, Group CFO, Group Chief Human Resources Officer and Company Secretary are regularly consulted and are in attendance at the Committee meetings when required to provide information. Roles and responsibilities The principal role of the Remuneration and Governance Committee, in relation to remuneration, is to assist the Board with the following: 22/02/16 12/04/16        n/a        20/07/16        20/10/16   -     n/a -  of the Group Chief Annual Report 2016 121 ׉ 7cassandra://qAgOOlo0HFIO89uOoQnx4Oks2IuoZfRVM8RwWBndIsk`̵X<сX<Ё{בCט{u׉׉ 7cassandra://XjD5wSTlnFbjZ5uEOo-Uq6gEdCv0VbrmYkGKi3YtF1kLX` ׉ 7cassandra://Swws8L9WTrLyew9uq9vlQZeAc7CcooGVR8wD8zr0D_w͠X= ט{u׉׉ 7cassandra://OuF5V-WvpxuETiUOWVf-PVzjXuyU6_ied553345mGfct` ׉ 7cassandra://6EOhSyPTk9dXSBY7IOt682CKWgzcbo61J6gWx24NUR07`S׉ 7cassandra://wpGTcqjwLJ_dGpkY9D4vvhmfeYKv_UPna1pDokS9uF0`̵׉ 7cassandra://xJ0U3TCWXDiNA0OvMgp-zNLPE5ROY2jAKXyvVgFGXcA;8B͠X=׉E COMPLIANCE WITH SEC DISCLOSURE REQUIREMENTS f. Information on the number and diversity of staff, training initiatives, employee development and the associated financial investment; • We believe in unity in diversity and accordingly we seek to employ and retain the best human resources irrespective of disability, gender, race, ethnic origin or religion. We strive to provide employees with an atmosphere that promotes their productivity and develops their potential. • In 2016, the Nomination Committee had particular focus on gender diversity, following a Board review in 2015 that acknowledged the need for diversity in its composition and in particular, the need for a stronger representation of women. • We will champion diversity in our sector and we want to promote equality and diversity at Dangote Cement. • Some of the company’s staff training initiatives embarked include: management and soft skills programmes, functional and non-technical skills, employee induction, IT skills, technical skills, health safety & environment amongst others. • In 2016 we continued to roll out the business transformation initiative begun in 2015. This had the HR team embarking on a series of organisational development programs to ensure the achievement of this initiative. • We have embarked on a series of programs that will ensure that our talent pool is adequately developed and retained and also ensure that we attract the best calibre of people. • The Dangote Academy was established in 2010 to provide training in technical and management skills for employees and people wishing to join the Dangote Group of companies. • Key initiatives include the Graduate Engineers Training Scheme (GETS), the Vocational Training Scheme (VTS) and the Junior Technician Scheme (JTS). This is listed in the Section on “Our People” in the Annual Report. g. Disclosure on the conditions and opportunities created for physically challenged persons or disadvantaged individuals; • There are no special conditions or opportunities created for physically challenged persons. However the company does not discriminate against physically challenged persons where they prove capable of carrying out the required tasks. • There are some physically changed persons currently in the employment of the company. 132 Annual Report 2016 ׉ 7cassandra://pmIjNoG55juedJ3wWY1HsjIDh0TOyFaIknPwiDsI-Xw e`̵X=׉ECorporate Governance COMPLIANCE WITH SEC DISCLOSURE REQUIREMENTS h. The nature and extent of Dangote Cement’s social investment policy; and • We regard the provision of social investment and charitable donations as an important part of our strategy to maintain good relationships with communities and other stakeholders in all of its operating locations across Africa. • Some of our initiatives are conducted directly by the Company and its staff, some in collaboration with third parties and other organisations, while others are managed by the Dangote Foundation, which is a non-commercial and charitable organisation that focuses on empowerment, education, health and disaster relief on behalf of all companies in the Dangote Group. i. Disclosure on Dangote Cement’s policies on corruption and related issues and the extent of the compliance with the policies and the Company’s Code of Ethics. • This has been reported above and in the Corporate Governance Report. Annual Report 2016 133 ׉ 7cassandra://wpGTcqjwLJ_dGpkY9D4vvhmfeYKv_UPna1pDokS9uF0`̵X=X={בCט{u׉׉ 7cassandra://x1Mrzo4T6554-LRcldqVhFhI_--0Dj5R701wSTVC64Eޗ` ׉ 7cassandra://nwAkKOmETg6kds1BCh02ZoWfPuM2hM_sQBAlUrlh1bgG`S׉ 7cassandra://WURkGkBK_M4zChOuI6llNRhhLR9w8amJgAG43rLRMqkz`̵׉ 7cassandra://GEpx3NMPdd_3jzwtKg1NcoOjSGafexgeteAq4StZaU88F͠X=ט{u׉׉ 7cassandra://SKrEQ6lJO2sS_uHYlqSmKK142UMWxgGQdyk1yJVG8fk,` ׉ 7cassandra://dlqfgd3QhngKZWpOfMmoHN7EWhCpAg0zuwJEMX7foQwU`S׉ 7cassandra://muoI--7HEIk2XQCYbN1zm2kfakEo4I1y9G7L6zbb0YM`̵׉ 7cassandra://7DAhSKyDNroRQmCiNuisrBu2NCb7ZOWQN3XBoiYn-pk%u8:͠X=׉EFinancials Report of the Statutory Audit Committee Report of the Independent Auditors to the Members of Dangote Cement Plc Directors’ Responsibilities for the Preparation & Approval of the Financial Statements Consolidated & Separate Statement of Profit or Loss Consolidated & Separate Statement of Comprehensive Income Consolidated & Separate Statement of Financial Position Consolidated & Separate Statement of Cash Flows Notes to the Consolidated & Separate Financial Statements Five Year Financial Summary (Group) Five Year Financial Summary (Company) Statement of Value Added 136 137 143 144 145 146 Consolidated Statement of Changes in Equity 147 Separate Statement of Changes in Equity 148 149 150 213 214 215 134 Annual Report 2016 ׉ 7cassandra://WURkGkBK_M4zChOuI6llNRhhLR9w8amJgAG43rLRMqkz`̵X=׉E"Financials Annual Report 2016 135 ׉ 7cassandra://muoI--7HEIk2XQCYbN1zm2kfakEo4I1y9G7L6zbb0YM`̵X=X={בCט{u׉׉ 7cassandra://2a5FnKqU-5yQ_RPAByFCOr-AEzvJWYenlqIrgy8-3CwQ` ׉ 7cassandra://nUPqVTqQ8Di-qCNfNhXmUSp4UPw1qQ_TsYxRYieFIz45`S׉ 7cassandra://cXhA9Vd6X3I-u2_JegQw0S7GSLtit5ffaWBmTG4geAI.`̵׉ 7cassandra://5f4sXCGrE7ageiaPzOI4kZEFL5vKf7hc3tNkyw6sEEks 82͠X=ט{u׉׉ 7cassandra://9YUqM7l6JKt7QcDhh9McK0GYeySN48Gzjy9vwEF4p4k= ` ׉ 7cassandra://aPSXJhfqzPK1GMDu_-wPte3YOwlQGVW38zO6kHyUIDw5u`S׉ 7cassandra://AlF1EMDHGv5TqDZ1A5v1J0sB36ISW0ixsEQIEGr1MtgS`̵׉ 7cassandra://P7ENn5MZlLzZLkW2TH5yHrfxJ5eePo3wF5B43UC7HXYK82͠X=׉EREPORT OF THE STATUTORY AUDIT COMMITTEE In accordance with Section 359 (6) of the Companies and Allied Matters Act, Cap C20 LFN 2004 and Section 30.4 of the SEC Code, the members of the Statutory Audit Committee of Dangote Cement Plc hereby report as follows: “We have exercised our statutory functions under Section 359 (6) of the Companies and Allied Matters Act, Cap C20 LFN 2004 and we acknowledge the cooperation of the Board, management and staff in the conduct of these responsibilities. After careful consideration of the report of the external auditors, we accepted the report that the financial statements give a true and fair view of the state of the Group’s financial affairs as at 31st December, 2016. We confirm that: I. The accounting and reporting policies of the Group are in accordance with legal and regulatory requirements as well as agreed ethical practices II. We reviewed the scope and planning of audit requirements and found them adequate III. We reviewed the findings on the management letter prepared by the external auditors and found management responses to the findings satisfactory IV. The accounting and internal controls system is constantly and effectively being monitored through an effective internal audit function V. We made recommendations to the Board on the re-appointment and remuneration of the external auditors and also reviewed the provision made in the Financial Statements for the remuneration of the external auditors; and VI. We considered that the external auditors are independent and qualified to perform their duties effectively. The Committee therefore recommends that the Audited Financial Statements for the year ended 31st December, 2016 and the External Auditors’ report thereon be presented for adoption at this Annual General Meeting.” Robert Ade-Odiachi Chairman, Statutory Audit Committee 27th February, 2017 Members of the Statutory Audit Committee: Robert Ade-Odiachi – Shareholder’s Representative Nicholas Nyamali – Shareholder’s Representative Sheriff Yussuf – Shareholder’s Representative Olakunle Alake – Non-Executive Director Olusegun Olusanya – Independent Non-Executive Director Emmanuel Ikazoboh – Independent Non-Executive Director 136 Annual Report 2016 ׉ 7cassandra://cXhA9Vd6X3I-u2_JegQw0S7GSLtit5ffaWBmTG4geAI.`̵X=׉E Financials INDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC Opinion We have audited the accompanying consolidated and separate financial statements of Dangote Cement Plc (“the Company”) and its subsidiaries (together referred to as “the Group”) which comprise the consolidated and separate statements of financial position as at 31 December 2016, the consolidated and separate statements of profit or loss, comprehensive income, changes in equity, cash flows for the year then ended, the notes to the consolidated and separate financial statements including a summary of significant accounting policies. In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Dangote Cement Plc as at 31 December 2016 and the consolidated and separate financial performance and statement of cash flows for the year then ended in accordance with the International Financial Reporting Standards, the Companies and Allied Matters Act Cap C20 LFN 2004 and the Financial Reporting Council of Nigeria Act, 2011. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the requirements of the Institute of Chartered Accountants of Nigeria Professional Code of Conduct and Guide for Accountants (ICAN Code) and other independence requirements applicable to performing audits of financial statements in Nigeria. We have fulfilled our other ethical responsibilities in accordance with the ICAN Code and in accordance with other ethical requirements applicable to performing audits in Nigeria. The ICAN Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current year. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. The key audit matters below relate to the audit of the separate financial statements. Annual Report 2016 137 ׉ 7cassandra://AlF1EMDHGv5TqDZ1A5v1J0sB36ISW0ixsEQIEGr1MtgS`̵X=X={בCט{u׉׉ 7cassandra://e8xYvfH0hX18RoMyYIPNryKkMRyDxgHgR-CH-3qaESU` ׉ 7cassandra://i8e-vLtKRIeaniXnkTyVgTH0TkFDl29RmUmOvvsMPO40`S׉ 7cassandra://pbcwspNjw5fuhcN4_1hRpD1JGHgdKc2XwTaPzSEHlCU`̵׉ 7cassandra://vclEX93sG9v0JTyPMkl2uMZdx9KD4K7mN2VhTu0Xj8sdu8:͠X=ט{u׉׉ 7cassandra://EiiA0ZBIN_puIvueHNV6hk8DsS5b9mhui4MWLMk7K3sm3` ׉ 7cassandra://ZBy-nSvnhNxAb35VEw9GUcFSVpCdpf-OVtVqLfEfJaE6!`S׉ 7cassandra://3c2yt-S-CaIJJmMTi9v3UvcZemihiuK2GH22VMzB3Zk.`̵׉ 7cassandra://eJK6kj4wdZ97KcaHMfE5eefU6qhoAztyB0NylcD9p8cY8>͠X=׉E tINDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC Key Audit Matter Financial Derivatives – FX Forwards(Company) In a bid to hedge against the effects of the volatility of the Nigerian Naira against the US dollar, the company entered into forex forward contracts with a local bank with the aim of obtaining foreign currency at a more stable and predictable rate in the future. The forward contracts involve making payments via the local bank, for US dollars at an agreed rate, on a future date, thus creating some predictability regarding the rates at which US dollars are obtained and its availability to transact the company’s business. As disclosed in note 4.1.2 to the financial statements, the company has assessed its capacity to obtain economic benefits arising from the forward contracts and determined it may not be able to realise the benefits of the forward contracts due to the scarcity of foreign currency in the market and has not recorded an asset with respect to the foreign currency forward contracts, hence, this is a key audit matter. Our audit procedures incorporated a combination of tests of the company’s controls relating to the recognition of the derivative asset and resultant income; and substantive procedures in respect of valuation of the payments made on the forward contracts. Our substantive procedures included the following: • Reviewing the forward contracts entered into with the local bank to obtain an understanding of the terms and conditions. • Reviewing company’s valuation of the contracts and the various parameters used in the valuation. • Challenging the assumptions in the valuation of the derivatives through engagement of experts. • Challenging the assumptions and inputs used by the company in carrying out the valuation of the forward contracts. • Verifying the accuracy of the asset and resultant income, based on the results of the valuation. We assessed the company’s decision not to recognise the asset (at fair value) related to forward contracts due to its inability to obtain economic benefits therefrom. We also assessed the adequacy of the company’s disclosures in relation to the judgement applied to these balances. We found the operation of the controls relating to the valuation of the forward contracts to be operating effectively. We found the disclosures made in the financial statements to be adequate and we consider reasonable, the company’s decision not to recognise the asset resulting from the foreign currency forward contracts, owing to the scarcity of foreign currency in the market. How the matter was addressed in the audit 138 Annual Report 2016 ׉ 7cassandra://pbcwspNjw5fuhcN4_1hRpD1JGHgdKc2XwTaPzSEHlCU`̵X=׉E Financials INDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC Key Audit Matter How the matter was addressed in the audit Assumption of tax holiday in determining tax liability (Company) In determining the tax liability for the year, the directors have assumed that the Ibese production lines 1 - 4 and the Obajana production lines 3&4, both in Nigeria, are eligible for tax holiday (Pioneer holiday). The Ibese production lines 1&2 and the Obajana production line 3 enjoyed pioneer holidays for three years which expired on 31 December 2014 and 31 December 2015 respectively and require an extension, while the Ibese production lines 3&4 and the Obajana production line 4 are expansion projects requiring Pioneer Status Incentive (PSI) approval with effect from 1 February 2015. This is on the premise that the production lines have met all the necessary requirements to be granted tax holidays. We involved a tax specialist to evaluate the recognition and measurement of the tax liability for the year. This included: • Assessing the requirements by the relevant regulations and government agencies that qualify businesses for pioneer holidays and verifying that the company has met all requirements to enable it obtain approval for the tax holiday. In the course of our assessment, we reviewed communications to the company from a relevant government agency which noted that the company’s application for the grant of PSI on the expansion projects will be considered when the current suspension on the PSI Scheme is lifted while the application for extension is currently being reviewed. As disclosed in note 4.1.3 to the financial statements, the directors have made a significant judgement in determining the tax liability for the year based on historical trends in obtaining pioneer status and the legal expert opinion. An additional tax charge of N64.4 billion (2015: N40.0 billion) would have been incurred by the company if this assumption was not made in determining the tax liability. This requires the directors’ judgement in estimating future taxable income and is accordingly a key audit matter. • Assessing the competence of company’s legal counsel that was appointed to provide an opinion on the legal status of the company’s pioneer status applications. • Reviewing the legal expert’s opinion on the legal status of the company’s pioneer status applications. • Reviewing the conditions required for granting of the pioneer status applications and confirming that the company met the prescribed conditions. Based on existing regulations, the legal expert’s opinion and communications received from the government agency, we do not have any reason to believe that these pioneer status applications will not be approved with effect from the production day as applied for. We concur with the directors’ assumptions in determining the tax liability for the year. We found the disclosures relating to the tax holiday status and assumptions to be appropriate. Annual Report 2016 139 ׉ 7cassandra://3c2yt-S-CaIJJmMTi9v3UvcZemihiuK2GH22VMzB3Zk.`̵X=X={בCט{u׉׉ 7cassandra://CaXNbFm1BwO_3p0MmGbiKDXQTM8AO0CaCQrvaxD1fUMa` ׉ 7cassandra://-XSHcQGmvZgIseZsvuVgGdNUY5QSv7yPsqsZyWq-gRo<`S׉ 7cassandra://mxcaYMyB4vfprjBZ8lreqSfy323l79qSL8G0kYrf_BI`̵׉ 7cassandra://53D-FLOn_WkDdddRTFEOsWZjJhwiIIMXAES2-WXz-lEk͠X=ט{u׉׉ 7cassandra://fH-b_l-zDSFHZ3Y2N3i29oVzyqhhDc4VXpsriV_zFfg` ׉ 7cassandra://xbPqwUyYZP8HSCyKFxN_aI16SV4-PrcVAoX3lnaQsC4F`S׉ 7cassandra://uLzpiSooehxUGRSoiI-tSo8ooesuaX5Z7qXGefeZ5qo`̵׉ 7cassandra://o4ZmXY1-ss42Uat9oioknwKDOxpw1jPEgMTRL-X3OoIZ͠X=׉E INDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC Key Audit Matter The company continues to expand its operations in Nigeria and Pan Africa which requires various significant procurements for equipment and spare parts. The procurements are made in the form of advance payments to vendors and/or deposits for imports. These advances are processed through the banks and the equipment and spare parts are shipped by the vendors, cleared at the seaport and transferred to the various locations. On receipt of the items into Stores or Project locations, the respective advances/ deposits are cleared into the appropriate accounts from the advances to vendor/deposit for imports accounts. The clearance of these items requires proper and regular monitoring of the shipments through to the final locations. The transactions are usually significant in nature which increases the risk of incorrectly classifying received items as advances/deposits for imports. We consider this a key audit matter due to the significant nature of the transactions and classification of items of property, plant and equipment or inventories as advances/deposits. How the matter was addressed in the audit Reconciliation of Deposit for imports and Advance to Vendors (Company) We evaluated the company’s schedule for the deposit accounts, analysed to indicate the status of payments made (fully delivered, partially delivered, no delivery and no purchase order reference). This included: • Verifying that the schedule provided is accurate and all undelivered deposits have been included therein. • Evaluating the categorisation of the deposits made as described above, by ensuring that items included within each category are properly represented and relate to such categorisation. • Reviewing supporting documentations, payment details and contracts for deposits and advance payments made to check that they represent valid deposits and advance payments. • For items that are fully and partially delivered, we reviewed documents evidencing their receipt and subsequent clearing from the deposit/advance accounts. We concur with the company’s classification of these payments for which delivery of goods are pending and that they represent payments made for goods that are yet to be delivered. Other Information The directors are responsible for the other information. The other information comprises the directors’ Report, Audit Committee’s Report and Company Secretary’s Report, which we obtained prior to the date of this auditors’ report. The other information does not include the consolidated and separate financial statements and our report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, if we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 140 Annual Report 2016 ׉ 7cassandra://mxcaYMyB4vfprjBZ8lreqSfy323l79qSL8G0kYrf_BI`̵X= ׉EFinancials INDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC Responsibilities of the Directors for the Consolidated and Separate Financial Statements The directors are responsible for the preparation of the consolidated and separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act CAP C20 LFN 2004, Financial Reporting Council Act, 2011 and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group’s and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ Responsibilities for the Audit of the Consolidated and Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists relating to events or conditions that may cast significant doubt on the Group and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the Group and Company’s financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible Annual Report 2016 141 ׉ 7cassandra://uLzpiSooehxUGRSoiI-tSo8ooesuaX5Z7qXGefeZ5qo`̵X=!X= {בCט{u׉׉ 7cassandra://w2clTRo6q0lB-E-JrIvCwJtic0b0E8f0d1fBsrqYhlIb` ׉ 7cassandra://J3JOedKBPUDbrPsxUuXSqPey3lJc1QuCLmjTHF0CVF8+`S׉ 7cassandra://uQmMztl_DDEU15ICTNMAK2eI5Tyks-BdZUZfRtQgjrc `̵׉ 7cassandra://xa5EWVhi1sIX6-0rgx-qmcyETadLvtBrFs0uf0DSTGkf͠X="ט{u׉׉ 7cassandra://eyClcFrcTOX_Mtvhcwl2oP4tFKo7G9DWHEdaezbFo6MBW` ׉ 7cassandra://lMAKNqDs3o8z2DnWwHQIEbHfP2CcRrqyUm7kU8hgcWs@`S׉ 7cassandra://VVVNXGU8ILngMlgZs-caHHNruyvaydH16rb60m4tekE`̵׉ 7cassandra://5e4Drvskijdkusf66hhDVGKUlYousLhof_IOH0drAIkL͠X=#׉EwINDEPENDENT JOINT AUDITORS’ REPORT TO THE SHAREHOLDERS OF DANGOTE CEMENT PLC for our audit opinion. We communicate with the audit committee and the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee and directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the audit committee and/or the directors, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the benefits derivable by the public from such communication. Report on Other Legal and Regulatory Requirements In accordance with the Sixth Schedule of the Companies and Allied Matters Act CAP C20 LFN 2004, we expressly state that: i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. ii) The Group and Company have kept proper books of account, so far as appears from our examination of those books. iii) The Group and Company’s financial position, statements of profit or loss and comprehensive income are in agreement with the books of account and returns. Abraham Udenani, FCA Tajudeen Oni, FCA FRC/2013/ICAN/00000000853 For: Akintola Williams Deloitte Chartered Accountants Lagos, Nigeria 27 February, 2017 FRC/2013/ICAN/00000000749 For: Ahmed Zakari & Co Chartered Accountants Lagos, Nigeria 27 February, 2017 142 Annual Report 2016 ׉ 7cassandra://uQmMztl_DDEU15ICTNMAK2eI5Tyks-BdZUZfRtQgjrc `̵X=$׉E :Financials STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The Directors of Dangote Cement Plc are responsible for the preparation of the Consolidated and Separate Financial Statements that present fairly the financial position of the Group and company as at 31st December, 2016, and the results of its operations, cash flows and changes in equity for the year then ended, in compliance with International Financial Reporting Standards (“IFRS”) and in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, No 6, 2011. In preparing the Financial Statements, the Directors are responsible for: • properly selecting and applying accounting policies; • presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • providing additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; and • making an assessment of the Group’s ability to continue as a going concern. The Directors are responsible for: • designing, implementing and maintaining an effective and sound system of internal controls throughout the Group and Company; • maintaining adequate accounting records that are sufficient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time, the financial position of the Group and Company, and which enable them to ensure that the Financial Statements of the Group and Company comply with IFRS; • maintaining statutory accounting records in compliance with the legislation of Nigeria and IFRS; • taking such steps as are reasonably available to them to safeguard the assets of the Group and Company; and • preventing and detecting fraud and other irregularities. The Consolidated and Separate Financial Statements of the Group and Company for the year ended 31st December, 2016 were approved by the Directors on 27th February, 2017. On behalf of the Directors of the Company Chairman Group Managing Director/CEO Annual Report 2016 143 ׉ 7cassandra://VVVNXGU8ILngMlgZs-caHHNruyvaydH16rb60m4tekE`̵X=%X=${בCט{u׉׉ 7cassandra://Qo9DLSLsQaxu7umjQFdMSLxKqKM1UNL2oOWMNXjPxzE7` ׉ 7cassandra://d7uJpKTrUqJas7NcsqMJOB2fZb2o2MfI4lqwGWBaCvc4`S׉ 7cassandra://X2g3qMFLn6IEL07oZSIdsfJvaaVGvTtMIrupcubztMkX`̵׉ 7cassandra://-Vp8re-Jj9HQ9ybk9onLSR-sMEBsgaiGCwL4bf7H6rEj0͠X=&ט{u׉׉ 7cassandra://T-s5rPnHPyL8a7aMbxSQ3A7YM6IVciuu8iiI0PgGfTc-` ׉ 7cassandra://Q3FrfTbjek83ZWy0E2sDdDdAnkgwcE1RoKNSIsyVcgs.`S׉ 7cassandra://WUF74gYxbRew-f7RTnrwqtzupG_62WmgSznZNDyJdEY`̵׉ 7cassandra://CEVdXGPDqAtchJwQnC2CTctSWmAuR5qp3ceFS6jAmkUX[ ͠X='׉ECONSOLIDATED AND SEPARATE STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Group Company Revenue Production cost of sales Gross profit Administrative expenses Selling and distribution expenses Other income Profit from operating activities Finance income** Finance costs** Profit before tax Income tax credit/(expense) Profit for the year Profit for the year attributable to: Owners of the Company Non-Controlling Interests Earnings per share, basic and diluted (Naira) 13 10 10 14 Notes Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 615,103 5 7 8 9 11 31-Dec-15 ₦’million 491,725 (323,816) 291,287 (36,669) (82,667) 10,542 182,493 43,817 (45,381) 180,929 5,695 186,624 193,302 (6,678) 186,624 11.34 (201,808) 289,917 (32,546) (53,500) 3,951 207,822 13,949 (33,477) 188,294 (6,971) 181,323 184,994 (3,671) 181,323 10.86 31-Dec-16 31-Dec-15 ₦’million ₦’million 426,129 (178,129) 248,000 (17,087) (51,949) 4,766 183,730 224,708 (34,042) 374,396 (6,191) 368,205 368,205 - 368,205 21.61 389,215 (130,418) 258,797 (23,924) (43,323) 2,148 193,698 54,348 (27,479) 220,567 (7,396) 213,171 213,171 - 213,171 12.51 ** Prior year amounts have been regrouped to align with current year presentation. This does not have any impact on the results (See Note 10). The accompanying notes on pages 150 to 212 and other national disclosures on pages 213 to 215 form an integral part of these consolidated and separate financial statements. 144 Annual Report 2016 ׉ 7cassandra://X2g3qMFLn6IEL07oZSIdsfJvaaVGvTtMIrupcubztMkX`̵X=(׉EFinancials CONSOLIDATED AND SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER, 2016 Profit for the year Other comprehensive income, net of income tax: Items that may be reclassified subsequently to profit or loss: Exchange differences on translating net investments in foreign operations Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plan Other comprehensive (loss)/income for the year, net of income tax Total comprehensive income for the year Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interests 28 31-Dec-15 ₦’million 181,323 31-Dec-16 ₦’million 368,205 Group Company Notes Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 186,624 31-Dec-15 ₦’million 213,171 100,701 - 100,701 287,325 (25,254) - (991) (26,245) 155,078 - - 368,205 - (991) (991) 212,180 294,632 (7,307) 287,325 165,474 (10,396) 155,078 368,205 - 368,205 212,180 - 212,180 The accompanying notes on pages 150 to 212 and other national disclosures on pages 213 to 215 form an integral part of these consolidated and separate financial statements. Annual Report 2016 145 ׉ 7cassandra://WUF74gYxbRew-f7RTnrwqtzupG_62WmgSznZNDyJdEY`̵X=)X=({בCט{u׉׉ 7cassandra://Z-pOVJhUAJIc27JrP_2Rjbxnpn-9rry-yeYyIq5GzU8` ׉ 7cassandra://dQ2Wgt_pelWw3698u16CuVKxqL5jWb-hqqxFBnNiHicP`S׉ 7cassandra://TZwMOlg-ox1JSQZ7l9s0bsUU2HaVWnwlHk2RZZU0ScQ`̵׉ 7cassandra://X2eYyGKGJe4XPOZ69LzjCko_ecB3rp8tvthXR5VxsyI͋X͠X=*ט{u׉׉ 7cassandra://WuKJQ0k1wCdqYemQ6_8z1yuwNzx3X1G6_RVeM7rA-AQTf` ׉ 7cassandra://xpAulFo3fxgSBI7HbbV1EYiiiJOnRFg6Rz6eD9zV1TU6`S׉ 7cassandra://g6bdBLWzBJRjdMVGPKcZZUL6wXhLcap2pZnusmgSCss`̵׉ 7cassandra://LL1S7bLOWevZu2phVY_ejY2IyjtcfOL68KTeOtnE9uQQn,͠X=+׉E CONSOLIDATED AND SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER, 2016 Notes Assets Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Investment in associate Deferred tax asset Total non-current assets Current assets Inventories Trade and other receivables Prepayments and other current assets Current income tax receivables Cash and bank balances Total current assets Total assets Liabilities Current liabilities Trade and other payables Current income tax payable Financial liabilities Other current liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Financial liabilities Long term provisions and other charges Retirement benefits obligation Deferred revenue Long term payables Total non-current liabilities Total liabilities Net assets Equity Share capital Share premium Capital contribution Currency translation reserve Employee benefit reserve Retained earnings Equity attributable to owners of the company Non-controlling interest Total equity Total equity and liabilities 21.1 21.1 21.4 21.3 21.5 19 20 18.2 14.2 31 15 16 17.2 17.3 14.3 Prepayments for property, plant & equipment 18.1 Other receivables 30 31-Dec-16 ₦’million 1,155,711 4,145 - 1,582 50,110 13,196 - 1,224,744 82,903 26,279 78,280 9 115,693 303,164 1,527,908 23 14.2 24 25.2 268,966 4,674 220,300 18,307 512,247 14.3 24 26 28 25.1 27 43,695 152,475 3,344 - 1,072 17,730 218,316 730,563 797,345 8,520 42,430 2,877 78,964 - 677,479 810,270 (12,925) 797,345 1,527,908 Group Company 31-Dec-15 31-Dec-16 ₦’million 917,212 2,610 - 1,582 14,465 9,094 - 944,963 53,118 11,544 60,526 - 40,792 165,980 1,110,943 127,597 1,289 47,275 24,537 200,698 24,504 208,329 3,283 3,992 975 24,442 265,525 466,223 644,720 8,520 42,430 2,877 (22,366) (1,007) 620,501 650,955 (6,235) 644,720 1,110,943 ₦’million 569,017 113 78,673 1,582 26,255 - 633,323 1,308,963 55,850 11,857 60,384 - 65,510 193,601 1,502,564 178,567 4,306 192,270 15,083 390,226 41,858 86,182 2,302 - 629 - 130,971 521,197 981,367 8,520 42,430 2,828 - - 927,589 981,367 - 981,367 1,502,564 31-Dec-15 ₦’million 577,017 385 26,075 1,582 10,913 - 395,917 1,011,889 38,369 4,252 52,003 - 17,962 112,586 1,124,475 79,584 1,305 37,169 22,528 140,586 23,998 181,384 619 3,992 975 24,442 235,410 375,996 748,479 8,520 42,430 2,828 - (1,007) 695,708 748,479 - 748,479 1,124,475 The accompanying notes on pages 150 to 212 and other national disclosures on pages 213 to 215 form an integral part of these consolidated and separate financial statements. Aliko Dangote,GCON Chairman, Board of Directors FRC/2013/IODN/00000001766 146 Annual Report 2016 Onne Van der Weijde GMD/CEO FRC/2016/IODN/00000014027 Brian Egan Group CFO FRC/2015/MULTI/00000011227 ׉ 7cassandra://TZwMOlg-ox1JSQZ7l9s0bsUU2HaVWnwlHk2RZZU0ScQ`̵X=,׉EFinancials Group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST DECEMBER, 2016 Employee Currency Attributable Share Share Retained capital premium earnings Balance as at 1st January, 2015 Profit for the year Other comprehensive income for the year, net of income tax Total comprehensive income for the year Dividends paid Balance as at 31st December, 2015 Profit for the year Other comprehensive income for the year, net of income tax Total comprehensive income for the year Dividends paid Contribution by non-controlling interest shareholders Transfer on amendment to the scheme Balance as at 31st December, 2016 8,520 42,430 537,750 184,994 - - benefit reserve translation Capital ₦’million ₦’million ₦’million ₦’million ₦’million ₦’million (16) - (3,837) - 2,877 - Nonto the owners Controlling Total reserve contribution of the parent Interests equity ₦’million ₦’million ₦’million 587,724 184,994 4,161 (3,671) 591,885 181,323 - - - (991) - - - 184,994 - (102,243) 8,520 42,430 620,501 - - 193,302 (991) - (18,529) (18,529) - - (19,520) (6,725) - - 165,474 (10,396) (102,243) (1,007) - (22,366) - 2,877 - 650,955 193,302 (26,245) 155,078 - (102,243) (6,235) (6,678) 644,720 186,624 - - - - 101,330 - 101,330 (629) - - - 193,302 - (136,324) - - 101,330 - - - 294,632 (136,324) (7,307) 100,701 287,325 - (136,324) - - - - - - - 1,007 - - - - - 1,007 617 - 617 1,007 8,520 42,430 677,479 - 78,964 2,877 810,270 (12,925) 797,345 Annual Report 2016 147 ׉ 7cassandra://g6bdBLWzBJRjdMVGPKcZZUL6wXhLcap2pZnusmgSCss`̵X=-X=,{בCט{u׉׉ 7cassandra://VEE9VyhAzCOEVO71R_Br1mEPGpheeRV9nEOEJkcdMiA` ׉ 7cassandra://Vfjm3wMJDh8kM2TdfsJhsOYX356oY4QELt0YR-AFTyM+`S׉ 7cassandra://M-2LCUHktV85sLg8kKz9vr0gBcOPhlFWqWKqN8exCo8`̵׉ 7cassandra://hBBnRMQKkZSr-JAP9EAxmJq8-en3KlD6o0xD7yjwj9Qb,͠X=.ט{u׉׉ 7cassandra://C3C9d81Rw6UEbuKI8TyynCH9McRbl2OHqqsQDFKpX2EF` ׉ 7cassandra://cbgNgBeRJof5X4VsnDCGhloEKsbEx4nQDvBIrUsCEEMGp`S׉ 7cassandra://C0S1j6PfNHcfG-mDV6SrfTTTWX0qVgxhxDt_rXV0x7YU`̵׉ 7cassandra://Niu8t9QV-90MeLIgCGYMnZLgdvic_9Dn7dxJQpe-tLobD͠X=/׉ESEPARATE STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST DECEMBER, 2016 Company Share capital Balance as at 1st January, 2015 Profit for the year Other comprehensive income for the year, net of income tax Total comprehensive income for the year Dividends paid Balance as at 31st December, 2015 Profit for the year Total comprehensive income for the year Dividends paid Transfer on amendment to the scheme Balance as at 31st December, 2016 Share 42,430 - Capital Retained premium contribution earnings ₦’million ₦’million ₦’million ₦’million 8,520 2,828 - - 584,780 213,171 Employee benefit reserve Total equity ₦’million ₦’million (16) 638,542 - 213,171 - - - 8,520 - - - - 8,520 - - - 42,430 - - - - 42,430 - - - 2,828 - - - - 2,828 - 213,171 (102,243) 695,708 368,205 368,205 (136,324) - 927,589 (991) (991) (1,007) - - (991) 212,180 - (102,243) 748,479 368,205 368,205 - (136,324) 1,007 - 1,007 981,367 148 Annual Report 2016 ׉ 7cassandra://M-2LCUHktV85sLg8kKz9vr0gBcOPhlFWqWKqN8exCo8`̵X=0׉E "Financials CONSOLIDATED AND SEPARATE STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31ST DECEMBER 2016 Notes Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million Group Company 31-Dec-15 31-Dec-16 Cash flows from operating activities Profit before tax Adjustments for: Depreciation & amortisation Write off and impairment of property, plant and equipment Reversal of impairment Interest expense Interest income Unrealised exchange (gain)/loss on borrowings and non-operating assets Amortisation of deferred revenue Other provisions Provisions for employee benefits Loss on disposal of property, plant and equipment Changes in working capital: Change in inventories Change in trade and other receivables Change in trade and other payables Change in prepayments and other current assets Change in other current liabilities Income tax paid Net cash generated from operating activities Cash flows from Investing activities Interest received Acquisition of intangible assets Increase in long term receivables from subsidiaries Acquisition of investment Acquisition of capital assets Acquisition of property, plant and equipment Reduction in non-current prepayment Suppliers’ credit obtained Net cash used in investing activities Cashflows from Financing activities Interest paid Non-controlling shareholders contribution Dividend paid Loans obtained Loans repaid Net cash used in financing activities Increase in cash and cash equivalents Effects of exchange rate changes on the balance of cash held in foreign currencies and other non monetary impact Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 31.1 15 16 14 15 & 16 10 10 180,929 74,750 471 (1,592) 45,172 (2,662) (50,394) 56 61 (2,985) 59 243,865 (29,785) (14,735) 99,016 (12,450) (6,189) 279,722 (1,128) 278,594 2,662 (745) - - (118,841) (136,168) (4,027) 21,354 (116,924) (39,029) 617 (136,324) 343,071 (262,240) (93,905) 67,765 3,791 37,845 109,401 ₦’million ₦’million 188,294 54,626 1,624 (1,582) 33,154 (1,699) 1,252 (478) (728) 931 1 275,395 (10,431) (1,741) 29,151 3,674 5,703 301,751 (2,234) 299,517 1,699 (298) - - (157,092) (251,931) 70,397 24,442 (155,691) (25,007) - (102,243) 125,912 (116,183) (117,521) 26,305 (4,863) 16,403 37,845 374,396 47,113 - (1,592) 33,833 (45,439) (189,482) (415) 1,683 (2,985) - 217,112 (17,481) (7,605) 56,630 (4.544) (7,376) 236,736 (672) 236,064 1,469 (28) (16,947) (1,102) (59,271) (62,895) - 3,624 (75,879) (26,747) - (136,324) 305,283 (254,849) (112,637) 47,548 - 17,962 65,510 31-Dec-15 ₦’million 220,567 43,713 1,624 (1,582) 27,156 (23,410) (31,836) (478) 324 931 - 237,009 (2,054) (1,320) 1,255 10,465 6,093 251,448 (2,213) 249,235 1,459 - (63,730) - (69,300) (95,515) 1,773 24,442 (131,571) (19,274) - (102,243) 121,648 (116,183) (116,052) 1,612 - 16,350 17,962 Annual Report 2016 149 ׉ 7cassandra://C0S1j6PfNHcfG-mDV6SrfTTTWX0qVgxhxDt_rXV0x7YU`̵X=1X=0{בCט{u׉׉ 7cassandra://RbyXEHNJIrMvChdqaPgLBoN0-JPyjdDqVsqM3_qRaTg` ׉ 7cassandra://HhgYRKNBD2JTiMgz5seDOiNQjZSyg7t0s49D-GeKIy8G`S׉ 7cassandra://uPeKjLDY0lH7ID1ADBZ9I2AbyWHaHPQlMd5c1iwkGJY`̵׉ 7cassandra://AheeU00CKqMHzi7nKtwlgpvUwT-G1i-NVt0_Eqey75It͠X=2ט{u׉׉ 7cassandra://s2ijiWssK75kmUgU53bTTpmdvWCcU8BYAvg3DnRQQ-oȰ` ׉ 7cassandra://Znxeq6GGswA3S5R9YyHmjdzjtoJH3ciKJprPJ5DheTED`S׉ 7cassandra://X6cr7H67IIO5TziolWgmyO2GuoURt_ouhaXBdO-ItBwK`̵׉ 7cassandra://aD9Js2A3pVTHQ0TmmuW2cQym_4qQL_W7yd4df3ZY37oX͠X=3׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 1. General Information Dangote Cement Plc (“the Company”) was incorporated in Nigeria as a public limited liability company on 4th November, 1992 and commenced operations in January 2007 under the name Obajana Cement Plc. The name was changed on 14th July 2010 to Dangote Cement Plc. Its parent company is Dangote Industries Limited (“DIL” or “the Parent Company”). Its ultimate controlling party is Aliko Dangote. The registered address of the Company is located at 1 Alfred Rewane Road, Ikoyi, Lagos, Nigeria. The principal activity of the Company and its subsidiaries (together referred to as “the Group”) is to operate plants for the preparation, manufacture and distribution of cement and related products. The Company’s production activities are currently undertaken at Obajana town in Kogi State, Gboko in Benue State and Ibese in Ogun State; all in Nigeria. Information in respect of the subsidiaries’ locations is disclosed in Note 17. The consolidated financial statements for the year ended 31st December, 2016 comprise the results and the financial position of the Company and its subsidiaries. The separate financial statements of the Company for the year ended 31st December, 2016 comprise those of the Company only. These consolidated and separate financial statements for the year ended 31st December, 2016 have been approved for issue by the Directors on 27th February, 2017 2. Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1.1 Statement of compliance The Group and Company’s full financial statements for the year ended 31st December 2016 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together “IFRS”) that are effective at 31st December 2016 and requirements of the Companies and Allied Matters Act (CAMA) 2004 of Nigeria and the Financial Reporting Council (FRC) Act of Nigeria. 2.1.2 Basis of measurement The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at revalued amounts or fair value, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Fair value Fair 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability that market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated and separate financial statements is determined on such a basis, except for leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. 2.2.1 Basis of consolidation The Group financial statements incorporate the financial statements of the Parent (Company) and entities controlled by the Company and its subsidiaries made up to 31st December, 2016. Control is achieved where the investor; 150 Annual Report 2016 ׉ 7cassandra://uPeKjLDY0lH7ID1ADBZ9I2AbyWHaHPQlMd5c1iwkGJY`̵X=4׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 (i) has power over the investee entity (ii) is exposed, or has rights, to variable returns from the investee entity as a result of its involvement, and (iii) can exercise some power over the investee to affect its returns. The Company reassesses whether or not it still controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Profit or loss and each component of other comprehensive income of subsidiaries are attributed to the owners’ of the Company and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance. In the Company’s separate financial statements, investments in subsidiaries are carried at cost less any impairment that has been recognised in profit or loss. 2.2.2 Transactions eliminated on consolidation All intra-group balances and any gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. 2.2.3 Interest in associates An associate is an entity over which the Group has significant influence. Significant influence is the power The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount, Any impairment Annual Report 2016 151 to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. ׉ 7cassandra://X6cr7H67IIO5TziolWgmyO2GuoURt_ouhaXBdO-ItBwK`̵X=5X=4{בCט{u׉׉ 7cassandra://ojQkooAU8LVexAyZaZGfzBEYwyo4M-LU9MLIIQRXDhs` ׉ 7cassandra://DZQc06ZeW9F7uutc0t0toMBrZyyaee8KJacKNC-LlYAF`S׉ 7cassandra://aNUMx68CFoI9OL_c2iILS5VtucUdV7PFuJ99h8UDmXE`̵׉ 7cassandra://9BO9TKf6QNX3W29vWYW9soXWrwk7v6F79fZ2rSemVeAs7͠X=7ט{u׉׉ 7cassandra://3AIAi-tDbzJeevaXigfb1wh1wVMCHtCupxuiAfj_EKM` ׉ 7cassandra://_nvsTlZsDPNwpVy2zoyc-Lgf9qXuvofpiwVkbEkEYegEo`S׉ 7cassandra://xMoqFyA6PK-diVApwQ7-ogZol9_c4KdBs7eM74WI2VYd`̵׉ 7cassandra://mvd36W6dSctF6-fMsfQZDLnoOQorJRAKQQTHK24ytvY^͠X=8׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 the related assets or liabilities. loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or when the investment is classified as held for sale. When the Group retains an interest in the former associate and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of 152 Annual Report 2016 When a group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group. In the separate financial statements for the parent company, investments in associates are recognised at cost less accumulated impairment. 2.3 Non-controlling interest Non-controlling interest is the equity in a subsidiary or entity controlled by the Company, not attributable, directly or indirectly, to the parent company and is presented separately in the consolidated statement of profit or loss and other comprehensive income and within equity in the consolidated statement of financial position. Total comprehensive income attributable to non-controlling interests is presented on the line “Noncontrolling interests” in the statement of financial position, even if it can create negative non-controlling interests. 2.4 Acquisition of entities under common control Business combinations arising from transfers of interests in entities that were under the control of the shareholder that controls the Group are accounted for prospectively as at the date that transfer of interest was effected. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The difference between the consideration paid and the net assets acquired is accounted for directly in equity. 2.4.1 Changes in the Group’s ownership interests in existing subsidiaries Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between ׉ 7cassandra://aNUMx68CFoI9OL_c2iILS5VtucUdV7PFuJ99h8UDmXE`̵X=9׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company. “When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, or when applicable, the cost on initial recognition of an investment in an associate or a joint venture. 2.5 Revenue Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, Value Added Tax and volume rebates. 2.5.1 Sale of goods Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied: • the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; • the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor sold; effective control over the goods • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the Group; and • the costs incurred or to be incurred in respect of the transaction can be measured reliably. Amount relating to shipping and handling, whether included as part of sales or billed separately is recorded as revenue and cost incurred for shipping and handling are classified under “Selling and distribution expenses” 2.5.2 Finance income comprises interest income on short-term deposits with banks, dividend income, changes in the fair value of financial assets at fair value through profit or loss and foreign exchange gains. Dividend income from investments is recognised in profit and loss when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Interest income on short-term deposits is recognised by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. 2.6 Borrowing costs Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss in the period in which they are incurred. However, borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of that asset. The capitalisation of borrowing costs commences from the date of incurring of expenditure relating to the qualifying asset and ceases when all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. The interest rate used to determine the amount of capitalized interest cost is the actual interest rate when there is a specific borrowing facility related to construction project or the Group’s average borrowing interest rate. Borrowing costs relating to the period after acquisition, construction or production are expensed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying Annual Report 2016 153 ׉ 7cassandra://xMoqFyA6PK-diVApwQ7-ogZol9_c4KdBs7eM74WI2VYd`̵X=:X=9{בCט{u׉׉ 7cassandra://v5igVfsHnZaf8mGOoV_9fWABxEdnVyVKcsaMee03B-4G` ׉ 7cassandra://LtsaK-ihyyjgA3SlfysJ8-B71y2-U2xVrCRrhDhr62YBK`S׉ 7cassandra://UUZPWyzigmwtC-InBu4yjxnUh-bE5zyi1KXoZ_6VDDE`̵׉ 7cassandra://rqvb-OxNVc4uhXVpjiEltLZYI3GkUYHobAQwrZ6qvCEs͠X=;ט{u׉׉ 7cassandra://-lwnIKBXl0jZmRv1LwyxWC2x8ozRVcsc_s0rL1DhwDM` ׉ 7cassandra://1bP01bgbCBEiNQeh3-nx7lExWnUpDbx3lND8TsbDucMB`S׉ 7cassandra://oyr7ELd9ZhGd51pP-o78ee6Wh9OQ72FWhRgbNf7Pils`̵׉ 7cassandra://bxW9sg15w43Z07HYZTXNEzqVxLSNd2MzvwPikT-R2C8X0͠X=<׉EZNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 currency borrowings; assets is deducted from the borrowing costs eligible for capitalisation. The borrowing costs capitalised may not exceed the actual interest incurred by the Group. 2.7 Foreign currency 2.7.1 Functional and presentation currency These consolidated and separate financial statements are presented in the Nigerian Naira (₦), which is the Company’s functional currency. All financial information presented in Naira has been rounded to the nearest million unless where otherwise stated. 2.7.2 Foreign currency transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for: . exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign Currency South African Rand to Naira Central Africa Franc to Naira Ethiopian Birr to Naira Zambian Kwacha to Naira Tanzanian Shilling to Naira Ghanaian Cedi to Naira United States dollar to Naira 154 Annual Report 2016 18.1383 0.4392 11.6926 25.5159 0.1185 . exchange differences on transactions entered into in order to hedge certain foreign currency risks; and . exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the subsidiaries. The schedule below shows the exchange rates presented in one unit of foreign currency to Naira for the significant currencies used in the group 2.7.3 Foreign operations In the Group’s consolidated financial statements, all assets and liabilities of Group entities with a functional currency other than the Naira are translated into Naira upon consolidation. On consolidation, assets and liabilities have been translated at the closing rate at the reporting date. Income and expenses have been translated into the Naira at the average rate over the reporting period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences are charged or credited to other comprehensive income and recognized in currency translation reserve in equity. On the partial or total disposal of a foreign entity with a loss of control, the related share in the cumulative translation differences recognised in equity is recognised in the consolidated 2016 22.8428 0.4929 13.4721 71.4286 304.2000 2015 Average rate Year End Rate Average rate Year End Rate 15.3977 30.6808 0.1392 66.2698 259.9772 0.3332 9.4307 23.5025 0.0968 52.5003 198.0433 12.8400 0.3299 9.2515 18.1074 0.0919 52.3560 199.0000 ׉ 7cassandra://UUZPWyzigmwtC-InBu4yjxnUh-bE5zyi1KXoZ_6VDDE`̵X==׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 statement of profit or loss. 2.8 Property, plant and equipment Items of property, plant and equipment are measured at cost or deemed cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the assets. Property, plant and machinery under construction are disclosed as capital work-in-progress. The cost of construction recognised includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, including borrowing costs on qualifying assets in accordance with the Group’s accounting policy and the estimated costs of dismantling and removing the items and restoring the site on which they are located if the Group has a legal or constructive obligation to do so. Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets commences when the assets are ready for their intended use. When parts of an item of property, plant and equipment have different useful lives and are individually significant in relation to the total cost of an item, they are accounted for as separate items (major components) of property, plant and equipment. The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefit embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The cost of day to day servicing of the property plant and equipment is recognised in profit or loss as incurred. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 2.8.1 Depreciation Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value (except for freehold land and assets under construction). Depreciation is recognized within “Cost of sales” and “Administrative and selling expenses,” depending on the utilization of the respective assets on a straightline basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term in which case the assets are depreciated over their useful life on the same basis as owned assets. Strategic spare parts with high value and held for commissioning of a new plant or for infrequent maintenance of plants are capitalised and depreciated over the shorter of their useful life and the remaining life of the plant from the date such strategic spare parts are capable of being used for their intended use. Major overhaul expenditure, including replacement spares and labour costs, is capitalised and amortised over the average expected life between major overhauls. All other replacement spares and other costs relating to maintenance of plant are charged to profit or loss on consumption or as incurred respectively. Life (years) Leasehold land improvement Buildings Plant and machinery Power plants Cement plants Motor vehicles Computer hardware Furniture and equipment Aircraft and related components Over the lease period 25 – 50 10 - 25 5 – 25 5 – 25 4 – 6 3 5 5 – 25 Annual Report 2016 155 ׉ 7cassandra://oyr7ELd9ZhGd51pP-o78ee6Wh9OQ72FWhRgbNf7Pils`̵X=>X=={בCט{u׉׉ 7cassandra://g8oloZ1H6dbABTRVxmxSBMvmAHM6gJB2EZc7dTaCLCM` ׉ 7cassandra://xjKiNZvawgC1nmSf4KzHUuoqqXok5LQbQrIEO6FdXrMB`S׉ 7cassandra://Re4SMxyuZ_YwoKNh6OyUYmMCdpZJS62ak21gkH7x4gg3`̵׉ 7cassandra://KTJVagk6lYWdt8LHnwtJeS2S9rRDHF_EoEC13DdikrUrw͠X=?ט{u׉׉ 7cassandra://hjMKJstQwXOA-Wetd_ioNqJGx3LylbIOkoBrfv1R6kQ` ׉ 7cassandra://1jvpK2_TfaKrdqZQfGBJVFkfXoAZZijqY6xSLqOTr8AC~`S׉ 7cassandra://vSI3AZTrV3tDpBA6ajZIEeBNCu5l5xOBuyFeKB-hJok*`̵׉ 7cassandra://SnpV81VQ-xbXI8FTEKnZAe4zkpB_gQ2FnzPGsxMltDM[͠X=@׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. 2.9 Intangible assets In accordance with criteria set out in IAS 38 – “Intangible assets”, intangible assets are recognised only if identifiable; controlled by the entity because of past events; it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. Intangible assets primarily include amortizable items such as software, mineral rights, as well as certain development costs that meet the IAS 38 criteria. Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortized using the straightline method over their useful lives ranging from two to seven years. 2.9.1 Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: · the technical feasibility of completing the intangible asset so that it will be available for use or sale; · · the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; · how the intangible asset will generate probable future economic benefits; · the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and · the ability to measure reliably the expenditure attributable to the intangible asset during its development. Amortization expense is recorded in “Cost of sales” and “Selling and distribution expenses” or administrative expenses, based on the function of the underlying assets. The estimated useful lives and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Exploration assets are carried at cost less any impairment losses. All costs, including overhead costs directly associated with the specific project are capitalised. The directors evaluate each project at each period end to determine if the carrying value should be written off. In determining whether expenditure meets the criteria to be capitalised, the directors use information from several sources, depending on the level of exploration. Purchased exploration and evaluation assets are recognised at the cost of acquisition or at the fair value if purchased as part of a business combination. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. 2.9.2 Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. 156 Annual Report 2016 ׉ 7cassandra://Re4SMxyuZ_YwoKNh6OyUYmMCdpZJS62ak21gkH7x4gg3`̵X=A׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 trade date. 2.10 Inventories Inventories are stated at the lower of cost and net realisable value, with appropriate provisions for old and slow moving items. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost is determined as follows: Raw materials Raw Materials which include purchase cost and other costs incurred to bring the materials to their location and condition are valued using a weighted average cost basis. Work in progress Cost of work in progress includes cost of raw material, labour, production and attributable overheads based on normal operating capacity. Work in progress is valued using a weighted average cost basis. Finished goods Cost is determined using the weighted average method and includes cost of material, labour, production and attributable overheads based on normal operating capacity. Spare parts and consumables Spare parts which are expected to be fully utilized in production within the next operating cycle and other consumables are valued at weighted average cost after making allowance for obsolete and damaged stocks. 2.11 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments are recognised in the consolidated and separate statements of financial position when a member of the Group or the Company becomes a party to the contractual obligations of the instrument. Regular way purchases or sales of financial assets, i.e. purchases or sales under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned, are accounted for at the Initially, financial instruments are recognized at their fair value. Transaction costs directly attributable to the acquisition or issue of financial instruments are recognized in determining the carrying amount except for financial instruments at fair value through profit or loss. For financial instruments classified as Fair Value Through Profit or Loss (FVTPL) transaction costs incurred are recognized in profit or loss. Subsequently, financial assets and liabilities are measured according to the category to which they are assigned. The Group does not make use of the option to designate financial assets or financial liabilities at fair value through profit or loss at inception (Fair Value Option). The Group does not have any financial assets classified as available for sale or held to maturity. 2.11.1 Financial assets Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), (if held for trading “HFT”)and ‘loans and receivables’ (which include amounts due from related parties). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. 2.11.2 Cash and cash equivalents The Group considers all highly liquid unrestricted investments with less than three months maturity from the date of acquisition to be cash equivalents. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. 2.11.3 Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Financial assets classified as loans and receivables are subsequently measured at amortized cost using the effective interest method less any impairment losses. Interest income is recognised by applying the effective Annual Report 2016 157 ׉ 7cassandra://vSI3AZTrV3tDpBA6ajZIEeBNCu5l5xOBuyFeKB-hJok*`̵X=BX=A{בCט{u׉׉ 7cassandra://CB2BR9CAARqJ75kY2deJiFg2u40KrzueOq-ZBGwaZbQݥ` ׉ 7cassandra://ehkTNKSKqaLqctW52qbuB7heMcUt6sDNvE7QyZF2VjsE`S׉ 7cassandra://XJP9NQTYvgxkaw9b2-C__tQ-HWjVBXkSW7GFmqW6hbQ`̵׉ 7cassandra://Wvz0szmJ_UDR4Oy5kecI1Su7D_JNCCI_KvPwYZC4angr͠X=Cט{u׉׉ 7cassandra://cfFJJeo0V2jP4-31XJbKdiByZGkdP1Szycz1WoHFyLg` ׉ 7cassandra://EpcBJYRxDANPGwcKaWdEPRJy1crHAExPDoNYuwSvw18F`S׉ 7cassandra://w4bCAdCcfpWAc8pNvOFP5ylc2UfsipP7-RE6ULk8kz4`̵׉ 7cassandra://m7fL6QF8BViwyixjV19isXL3hbQca75bXYgNoDXoiLwY͠X=D׉EJNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 interest rate, except for short-term receivables, where the effect of discounting is immaterial. 2.11.4 Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. 2.11.5 Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments issued by a member of the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. 2.11.6 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. 2.11.7 Financial liabilities Financial liabilities are classified as either FVTPL or ‘other financial liabilities’ (which include loans from banks and related parties and trade and other payables). The Group subsequently measures financial liabilities, except for derivative financial instruments, at amortised cost using the effective interest method. 2.11.8 Derivative financial instruments Derivative financial instruments, such as foreign currency exchange contracts and interest rate swap contracts, are initially measured at fair value, at the date 158 Annual Report 2016 the derivative contracts are entered into. Derivative financial instruments are classified as held for trading unless they are designated as hedging instruments, for which hedge accounting is applied. Changes in the fair value of derivative financial instruments are recognised at each reporting date either in profit or loss or, in the case of a cash flow hedge or net investment hedge, in other comprehensive income, net of tax. For hedging instruments, the timing of recognition in profit or loss depends on the nature of the hedge relationship. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL. 2.11.9 De-recognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 2.11.10 Offsetting Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 2.11.11 Effective interest method The effective interest method is a method of calculating the amortised cost of an interest bearing financial instrument and of allocating interest income and expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. ׉ 7cassandra://XJP9NQTYvgxkaw9b2-C__tQ-HWjVBXkSW7GFmqW6hbQ`̵X=E׉E Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 2.12 Impairment 2.12.1 Financial assets A financial asset, other than at FVTPL, is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events that occurred after the initial recognition of the financial assets have had a negative effect on the estimated future cash flows of that asset. For available-for-sale equity investments, a significant or prolonged decline in the fair value of an equity security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include: · significant · · · financial counterparty; or breach of contract, such as a default or delinquency in interest or principal payments; or it is becoming probable that the borrower will enter bankruptcy or financial re-organisation; or the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period by 90 days, as well as observable changes in national or local economic conditions that correlate with a default on receivables. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between the carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss of an available for sale financial asset is calculated by reference to its current fair value. The carrying amount of the financial asset is reduced by difficulty of the issuer the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. or “For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. 2.12.2 Non-financial assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount Annual Report 2016 159 ׉ 7cassandra://w4bCAdCcfpWAc8pNvOFP5ylc2UfsipP7-RE6ULk8kz4`̵X=FX=E{בCט{u׉׉ 7cassandra://9Qxu3hK81W2XLLVs3rvtzSsvNWXNfTOE6ZYmNvIvaKE` ׉ 7cassandra://BJsGO6hl0s40uUADRtKnL-cY45oz-hl0ENYqb8PM_iQE6`S׉ 7cassandra://vcDASLgwsA1iBYlpo9fCVl4xZ1bJrtqQdXQhxcOKTlw`̵׉ 7cassandra://1aC8QUcQj2jvPuJxvPIkp75AfMwkR9PqoZ3Y7gGm2aom͠X=Gט{u׉׉ 7cassandra://s4gHl31WpweSyCVDwwCkmL9Czkmq5Y1R60vtGFtrsEgZ` ׉ 7cassandra://4Q8dPnjVwE7xorcXjmMZ23vvWyjocPRCzI2jxq2RuGAE`S׉ 7cassandra://7BNnPBve2PR_o-PykWFeUy_Mi5s8u2K6-5JQtUZV8dQ`̵׉ 7cassandra://vhTdZ7ksqtlPNx83e9NVnAH8ASbQSjiLdfCSX628L-cZ͠X=H׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. A reversal of an impairment loss is recognised immediately in profit or loss. 2.13 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 2.13.1 Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because of items of income or expense that are taxable or deductible in future years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 2.13.2 Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Deferred tax is not recognized for the following temporary differences: (i) the initial recognition of goodwill, (ii) the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and (iii) differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is 160 Annual Report 2016 probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 2.13.3 Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 2.14 Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which ׉ 7cassandra://vcDASLgwsA1iBYlpo9fCVl4xZ1bJrtqQdXQhxcOKTlw`̵X=I׉E;Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates. The amount recognised as government grant is recognised in profit or loss over the period the related expenditure is incurred. 2.15 Employee benefits 2.15.1 Short term employee benefits Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided by the employee. 2.15.2 Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. 2.15.3 Defined benefit plans For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in employee benefit reserves and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows: • service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements); • net interest expense or income; and • remeasurement The Group presents current service costs in profit or loss in the line item employee benefits expense. Interest is accounted for as finance costs in profit or loss. 2.16 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Annual Report 2016 161 ׉ 7cassandra://7BNnPBve2PR_o-PykWFeUy_Mi5s8u2K6-5JQtUZV8dQ`̵X=JX=I{בCט{u׉׉ 7cassandra://HscdAIznKqLbyYotIXdQPMf1IgjnVr0jDv3-kzXI_Ic6` ׉ 7cassandra://3pWF86vJfVecSMFcuvzaaLoagG-YGWM2EAS4O3v_TXID8`S׉ 7cassandra://4bLG0rLooBKNYnKBewVIbEtioqGWMLRnEd3zdsHzmEgQ`̵׉ 7cassandra://aYA2fARiQh-Z5LjqKduaOKy4i7hwb1ypx1KHQevqxtQs͠X=Kט{u׉׉ 7cassandra://EYVWlQ4OO-IPeeD6tpNtZDX0AgJ3sY2_gYwsTExo0no#` ׉ 7cassandra://F3YTjpGuGatTkKHu9KAOESNrDU2Z2rcrHcxd5pSHLV8J`S׉ 7cassandra://Wm3fZMU-4DmxrNy_aATqiAz-zVMl-1CmElDpmzZLHbMW`̵׉ 7cassandra://CSsbJulSzHS0bqwUcGx-SWNqJHY8WY82sefPiDGakEQ`U͠X=L׉E;NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 2.16.1 Restoration costs Environmental expenditure related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible is charged to profit or loss. The Group recognizes its liability on a site-by-site basis when it can be reliably estimated. This liability includes the Group’s portion of the total costs and also a portion of other potentially responsible parties’ costs when it is probable that they will not be able to satisfy their respective shares of the clean-up obligation. Recoveries of reimbursements are recorded as assets when virtually certain. 2.17 Contingencies Contingent liabilities are not recognized in the consolidated statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote. A contingent asset is not recognised in the consolidated statement of financial position but disclosed when an inflow of economic benefits is probable. 2.18 Earnings per share The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of shares outstanding during the period. The weighted average number of ordinary shares outstanding during the period and for all periods presented is adjusted for the issue of bonus shares as if the bonus shares were outstanding at the beginning of earliest period presented. Diluted earnings per share are computed by dividing adjusted net income available to shareholders of the Company by the weighted average number of common shares outstanding during the year adjusted to include any dilutive potential common shares. Potential dilutive common shares result from stock options and convertible bonds issued by the Company on its own common shares. 2.19 Leases In accordance with IFRIC 4 – Determining whether an arrangement contains a lease, arrangements including 162 Annual Report 2016 transactions that convey a right to use the asset, or where fulfilment of the arrangement is dependent on the use of a specific asset, are analysed in order to assess whether such arrangements contain a lease and whether the prescriptions of IAS 17 – Lease Contracts have to be applied. Leases – as a lessee In accordance with IAS 17, the Group capitalizes assets financed through finance leases where the lease arrangement transfers to the Group substantially all of the rewards and risks of ownership. Lease arrangements are evaluated based upon the following criteria: · · the total future payments in relation to the fair value of the financed assets; · existence of transfer of ownership; · existence of a favourable purchase option; and · specificity of the leased asset. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding lease obligations, excluding finance charges, are included in current or long-term financial liabilities as applicable “Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see note 2.6). Contingent rentals are recognised as expenses in the periods in which they are incurred. All other leases are operating leases and they are not recognized on the Group’s statement of financial position. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more the lease term in relation to the assets’ useful lives; ׉ 7cassandra://4bLG0rLooBKNYnKBewVIbEtioqGWMLRnEd3zdsHzmEgQ`̵X=M׉EhFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 3. Application of new and revised International Financial Reporting Standards (IFRSs) 3.1 New and revised IFRSs/IFRICs effective for periods beginning on or after 1st January, 2016 In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1st January 2016. Amendments to IFRS 10. IFRS 12 and lAS 28 Investment Entities: Applying the Consolidation Exception The Group has applied these amendments for the first time in the current year. The amendments clarify that the exemption from preparing consolidated financial statements is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all its subsidiaries at fair value in accordance with IFRS 10. The amendments also clarify that the requirement for an investment entity to consolidate a subsidiary providing services related to the former’s investment activities applies only to subsidiaries that are not investment entities themselves. The application of these amendments has had no impact on the Group’s financial statements as the Group is not an investment entity and does not have any holding company, subsidiary, associate or joint venture that qualifies as an investment entity Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations The Group has applied these amendments for the first time in the current year. The amendments provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in IFRS 3 Business Combinations. Specifically, the amendments state that the relevant principles on accounting for business combinations in IFRS 3 and other standards should be applied. The same requirements should be applied to the formation of a joint operation if and only if an existing business is contributed to the joint operation by one of the parties that participate in the joint operation. A joint operator is also required to disclose the relevant information required by IFRS 3 and other standards for business combinations. The application of these amendments has had no impact on the Group’s financial statements as the Group did not have any such transactions in the current year. Amendments to IAS 1 Disclosure Initiative The Group has applied these amendments for the first time in the current year. The amendments clarify that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that disclosure is not material, and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However, the amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users of financial statements to understand the impact of particular transactions, events and conditions on the entity’s financial position and financial performance. In addition, the amendments clarify that an entity’s share of the other comprehensive income of associates and joint ventures accounted for using the equity method should be presented separately from those arising from the Group, and should be separated into the share of items that, in accordance with other IFRSs: (i) will not be reclassified subsequently to profit or loss; and Annual Report 2016 163 ׉ 7cassandra://Wm3fZMU-4DmxrNy_aATqiAz-zVMl-1CmElDpmzZLHbMW`̵X=NX=M{בCט{u׉׉ 7cassandra://JpWDQioHyjeGlA-OKIO0Cx7dB7J5AYBVp3RLOKzMhL8;` ׉ 7cassandra://PE5iC-LQDFpWaBtZGc0Ycn_RkP_HUaJ1qEgqDNpp-OoB|`S׉ 7cassandra://G5Sq4SVgsuBEzoga3W42SuqVWT5ReEtQOWXwovHRazo`̵׉ 7cassandra://FztVe2Y8yPWRZl7qaLmYX4tfU96FEVIduLGRHhj01wAr͠X=Oט{u׉׉ 7cassandra://ucyOuyNYu3Yb5sY0O78BrtCty9jHgEkmbOd1qGFD0JU)` ׉ 7cassandra://4yvrB4s15jylwXcVkazl5Ht_OoA0FUBv_8-3S8OP9mQC`S׉ 7cassandra://aPZKLWkdVPEqX-niSbipvQFi6-fe_FhgV28IGg9NvJw`̵׉ 7cassandra://5A86Mg4wYagtuCca-sQ7fvi-KV6j930D6YQs4D0WLZca͠X=P׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 (ii) will be reclassified subsequently to profit or loss when specific conditions are met. As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping of the notes. The application of these amendments has not resulted in any impact on the financial performance or financial position of the Group. Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation The Group has applied these amendments for the first time in the current year. The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted in the following two limited circumstances: a) when the intangible asset is expressed as a measure of revenue; or b) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated. As the Group already uses the straight line method for depreciation and amortisation for its property, plant and equipment, and intangible assets respectively, the application of these amendments has had no impact on the Group’s financial statements Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants The Group has applied these amendments for the first time in the current year. The amendments define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16, instead of IAS 41. The produce growing on bearer plants continues to be accounted for in accordance with IAS 41. The application of these amendments has had no 164 Annual Report 2016 impact on the Group’s financial statements as the Group is not engaged in agricultural activities. Annual Improvements to IFRSs 2012-2014 Cycle The Group has applied these amendments for the first time in the current year. The Annual Improvements to IFRSs 2012-2014 Cycle include a number of amendments to various IFRSs, which are summarised below. The amendments to IFRS 5 introduce specific guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments also clarify that such a change should be considered as a continuation of the original plan of disposal and hence requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments also clarify the guidance for when held-for- distribution accounting is discontinued. The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets. The amendments to IAS 19 clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high quality corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead. The application of these amendments has had no effect on the Group’s financial statements. ׉ 7cassandra://G5Sq4SVgsuBEzoga3W42SuqVWT5ReEtQOWXwovHRazo`̵X=Q׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 3. Application of new and revised International Financial Reporting Standards (IFRSs) 3.2 New and revised IFRSs in issue but not yet effective IFRS 9 IFRS 15 IFRS 16 Financial Instruments2 Revenue from Contracts with Customers2 Leases3 Amendments to IFRS 2 Amendments to IFRS 10 and IAS 28 Amendments IAS 7 Amendments to IAS 12 1 Classification and Measurement of Share-based Transactions2 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture4 Disclosure Initiative1 Recognition of Deferred Tax Assets for Unrealised Losses1 Effective for annual periods beginning on or after 1st January, 2017, with earlier application permitted. 2 Effective for annual periods beginning on or after 1st January ,2018, with earlier application permitted. 3 Effective for annual periods beginning on or after 1st January ,2019, with earlier application permitted. 4 Effective for annual periods beginning on or after a date to be determined. IFRS 9 Financial Instruments IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments. Key requirements of IFRS 9: • all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. • with regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss. • in relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as Annual Report 2016 165 ׉ 7cassandra://aPZKLWkdVPEqX-niSbipvQFi6-fe_FhgV28IGg9NvJw`̵X=RX=Q{בCט{u׉׉ 7cassandra://sWRqIozoYecoE07KgczD2dPOPjmpCNy8sDUNWuuUOzcV` ׉ 7cassandra://ffixnBcqZPfG3r1IGsDnNZoYfYT060Yn3o6jrrn8WtwF`S׉ 7cassandra://iNtwZz_8uuTZ_zVoXmkLOBEcMA-oNgfcJEfQ0xjEG-M`̵׉ 7cassandra://7KVqwHxBisHCMQFsh5pAkY44b1LAbgxqIKai74iLs-Au͠X=Sט{u׉׉ 7cassandra://c_y2o8U0IAa0UX9cgsVdq3gOui66YHPmMHCA8zYHsYE` ׉ 7cassandra://JRdw-wo4-FeGuo2wNj6hDRrIsW5zVEtUpx_5sf9ioQcI`S׉ 7cassandra://YaK47wQqeZQB6j51esT3D72tj6qHlNk_sQ6uN8NFwxs_`̵׉ 7cassandra://g3g3NTJWPQVaEsl-Czh72nVhSk2qiYLo_KU9tdGgbZY`͠X=T׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. • the new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s management activities have also been introduced. risk The directors of the Company anticipate that the application of IFRS 9 in the future may have a material impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until the Group undertakes a detailed review. IFRS 15 Revenue from Contracts with Customers In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 166 Annual Report 2016 Specifically, the Standard introduces a 5-step approach to revenue recognition: • Step 1: Identify the contract(s) with a customer • Step 2: Identify the performance obligations in the contract • Step 3: Determine the transaction price • Step 4: Allocate the transaction price to the performance obligations in the contract • Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. The directors of the Company do not anticipate that the application of IFRS 15 will have a material impact on the Group’s consolidated financial statements. IFRS 16 Leases IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations when it becomes effective. IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and is replaced by a model where a right-ot-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that ׉ 7cassandra://iNtwZz_8uuTZ_zVoXmkLOBEcMA-oNgfcJEfQ0xjEG-M`̵X=U׉E#Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under IAS 17 are presented as operating cash flows; whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion which will be presented as financing and operating cash flows respectively. In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by IFRS 16. As at 31 December, 2016, the Group has noncancellable operating lease commitments of ₦1.5 biliion. IAS 17 does not require the recognition of any right-of-use asset or liability for future payments for these leases; instead, certain information is disclosed as operating lease commitments in note 32. A preliminary assessment indicates that these arrangements will meet the definition of a lease under IFRS 16, and hence the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of IFRS 16. The new requirement to recognise a right-of-use asset and a related lease liability is expected to have a significant impact on the amounts recognised in the Group’s financial statements and the directors are currently assessing its potential impact. It is not practicable to provide a reasonable estimate of the financial effect until the directors complete the review. In contrast, for finance leases where the Group is a lessee, as the Group has already recognised an asset and a related finance lease liability for the lease arrangement, and in cases where the Group is a lessor (for both operating and finance leases), the directors of the Company do not anticipate that the application of IFRS 16 will have a significant impact on the amounts recognised in the Group’s financial statements. Amendments to IFRS 2 Classification and Measurement af Share-based Payment Transactions The amendments clarify the following: 1. In estimating the fair value of a cash-settled sharebased payment, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled sharebased payments. 2. Where tax law or regulation requires an entity to withhold a specified number of equity instruments equal to the monetary value of the employee’s tax obligation to meet the employee’s tax liability which is then remitted to the tax authority, i.e. the share-based payment arrangement has a ‘net settlement feature’, such an arrangement should be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as equity-settled had it not included the net settlement feature. 3. A modification of a share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as follows: i) the original liability is derecognised ; ii) the equity-settled share-based payment is recognised at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and iii) any difference between the carrying amount of the liability at the modification date and the amount recognised in equity should be recognised in profit or loss immediately. The amendments are effective for annual reporting periods beginning on or after 1 January 2018 with earlier application permitted. Specific transition provisions apply. The directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the Group’s financial statements as the Group does not have any cash-settled share-based payment arrangements or any withholding tax arrangements with tax authorities in relation to share-based payments. Amendments to’IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint venture Annual Report 2016 167 ׉ 7cassandra://YaK47wQqeZQB6j51esT3D72tj6qHlNk_sQ6uN8NFwxs_`̵X=VX=U{בCט{u׉׉ 7cassandra://qMvAzKBvfOc3uebDsCg66I4kCr7tLEQ8_1MiPgbO-c8` ׉ 7cassandra://hvSL_MVTqgC_uyoYLsHne_mLlDPbdMhh-a9u2dxgHjAH`S׉ 7cassandra://uJoqbaJavznzu8h-uytlZMUvD0pKvlcY911-QgRIR3c`̵׉ 7cassandra://NUxINwNvMUhW9VqDsoJvzoJKQXJaB4RqX1kJkCA-vTIs ͠X=Wט{u׉׉ 7cassandra://6coHbNDi8OUjynirnqDQkZUX6XbcS7m8oLBVoXlDDtk%o` ׉ 7cassandra://iZforRYA1dlyn9A1cegip2nM4cE67ftcFahkKy9qtWQK#`S׉ 7cassandra://4g8wQYzwrXq83DWLNoznO7Vtz1YUjKNyF_RLwGx_UUA`̵׉ 7cassandra://6qUOPnJzN_85zeY4AZUvv6Es9G3QQensNp77haKQsCIg ͠X=X׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. The effective date of the amendments has yet to be set by the IASB; however, earlier application of the amendments is permitted. The directors of the Company anticipate that the application of these amendments may have an impact on the Group’s consolidated financial statements in future periods should such transactions arise. Amendments to IAS 7 Disclosure Initiative The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments apply prospectively for annual periods beginning on or after 1 January 2017 with earlier application permitted. The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses The amendments clarify the following: 1. Decreases below cost in the carrying amount of a fixed-rate debt instrument measured at fair value for which the tax base remains at cost give rise to a deductible temporary difference, irrespective of 168 Annual Report 2016 whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use, or whether it is probable that the issuer will pay all the contractual cash flows; 2. When an entity assesses whether taxable profits will be available against which it can utilise a deductible temporary difference, and the tax law restricts the utilisation of losses to deduction against income of a specific type (e.g. capital losses can only be set off against capital gains), an entity assesses a deductible temporary difference in combination with other deductible temporary differences of that type, but separately from other types of deductible temporary differences; 3. The estimate of probable future taxable profit may include the recovery of some of an entity’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this; and 4. In evaluating whether sufficient future taxable profits are available, an entity should compare the deductible temporary differences with future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences. The amendments apply retrospectively for annual periods beginning on or after 1st January 2017 with earlier application permitted. The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s financial statements 4. Critical accounting judgements and key sources of estimation uncertainty The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The management of the Group revises its estimates and assumptions on a regular basis to ensure that they are relevant regarding the past experience and the current economic and political environment. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised ׉ 7cassandra://uJoqbaJavznzu8h-uytlZMUvD0pKvlcY911-QgRIR3c`̵X=Y׉EJFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 in the period in which the estimates are revised and in any future periods affected. The accounting for certain provisions, certain financial instruments and the disclosure of financial assets, contingent assets and liabilities at the date of the consolidated and separate financial statements is judgmental. The items, subject to judgment, are detailed in the corresponding notes to the consolidated and separate financial statements. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are discussed below: 4.1 Critical accounting judgements 4.1.1 Control over subsidiaries Note 17 describes that Dangote Quarries Zambia Limited is a subsidiary of the Group although the Group only holds a 49.9% ownership interest in Dangote Quarries Zambia Limited. Based on the arrangements between the Group and other investors, the Group has the power to appoint and remove the majority of the board of directors of Dangote Quarries Zambia Limited that has the power to direct the relevant activities of this entity. Therefore, the Directors of the Company concluded that the Group has the practical ability to direct the relevant activities of Dangote Quarries Zambia and hence the Group has control over the entity. 4.1.2 Recoverability of forward contracts The Directors of the Company have assessed whether or not the Group has the capability to obtain economic benefits arising from foward foreign currency contracts in existence as at 31st December, 2016. In making their judgement the directors considered if the Group has practical ability to enforce the realisation of benefits from the forward contracts. After assessment the Directors concluded that the Group may not be able to realise the benefits of the forward contracts given the scarcity of foreign currency in the market. The realisation of the benefits is on condition that the Group obtains foreign currency in the market which is scarce at the moment. The value of the contracts was estimated at ₦5.5 billion on 31st December, 2016. 4.1.3 Tax holiday The Directors of the company have assesseed whether the operations in the Ibese factory line 1 to 4 and Obajana Line 3 to 4 qualify for tax holiday under the existing regulations. After assessment, which included obtaining an opinion from legal experts, the Directors concluded that these production lines are entitled to tax holidays under the existing regulations. This is also supported by similar lines that have been officially granted tax holidays. The formal application to government authorities is now at an advanced stage and no indications so far that the holiday will not be formally granted to us. The tax charge for the year has been determined on the basis that the operations are entitled to a 5 years tax holiday period. If the lines were not entitled to tax holidays the additional tax charge would have amounted to ₦64 billion (2015: ₦40 billion) 4.2 Key sources of estimation uncertainty 4.2.1 Provision for restoration costs Directors of the Group exercises significant judgement in estimating provisions for restoration costs. Should these estimates vary, profit or loss and statement of financial position in the following years would be impacted. 4.2.2 Provisions for employee benefits The actuarial techniques used to assess the value of the defined benefit plans as at 31st December, 2015 involve financial assumptions (discount rate, rate of return on assets, medical costs trend rate) and demographic assumptions (salary increase rate, employee turnover rate, etc.). The Group uses the assistance of an external independent actuary in the assessment of these assumptions. For more details refer to note 28.2. 4.2.3 Estimated useful lives and residual values of property, plant and equipment The Group’s Directors determine the estimated useful lives and related depreciation charge for its items of property, plant and equipment on an annual basis. The Group has carried out a review of the residual values and useful lives of property, plant and equipment as at 31st December, 2016 and adjusted the remaining useful lives of some assets for the current or future periods. Annual Report 2016 169 ׉ 7cassandra://4g8wQYzwrXq83DWLNoznO7Vtz1YUjKNyF_RLwGx_UUA`̵X=ZX=Y{בCט{u׉׉ 7cassandra://3ku0p4l7GEf8EsGhpoLWjGq3f15GlGyK6ZYwbD782QI@T` ׉ 7cassandra://ivC55Jeq3-hOC0t2dtihsE9IWOgXFCMsmpIF6CmS-8o`S׉ 7cassandra://ZbFWlcuv-lIGJzQRkON1SEohrh6MnOiLcIlKGlWnys0)`̵׉ 7cassandra://fVqqjiFRGRJqkOu2bSfKfbbVisr0C9nxZ9ESLBAFemQU͠X=[ט{u׉׉ 7cassandra://JMv9lPOnGZ481oYaviYXVrE7FFXMZHJvF8EF0kUNf1kX` ׉ 7cassandra://SOj3oEG0hp2c-kJbPRQQE0OIkt-bEZ_6ncIlVqbYB4k7`S׉ 7cassandra://ADvcVQa_YSmyFL9O50rRIDfS-FupCrUz70AhJrBWgsQ`̵׉ 7cassandra://vuASDHQ2D-uZTRwDhCVCRcwtWfhgb6qNetgZB8XYURE]$͠X=\׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The useful life of trailers was adjusted from 4 years to 6 years. This resulted depreciation expense falling by ₦1.5 billion. 4.2.4 Valuation of deferred tax The recognition of deferred tax assets requires an assessment of future taxable profit. Deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The availability of future taxable profits depends on several factors including the Group’s future financial performance and if necessary, implementation of tax planning strategies. 170 Annual Report 2016 ׉ 7cassandra://ZbFWlcuv-lIGJzQRkON1SEohrh6MnOiLcIlKGlWnys0)`̵X=]׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Group Company 2016 2015 5. Revenue (Tonnes) Cement production capacity (for the year) Cement production volume Trade cement purchases (Increase)/decease in stock of cement Cement sales volume 42,550 2016 2015 ‘000 tonnes ‘000 tonnes ‘000 tonnes ‘000 tonnes 42,550 29,250 22,534 1,086 (45) 23,575 18,425 629 (196) 18,858 14,973 - 155 15,128 29,250 13,385 - (95) 13,290 Group Company ₦’million Revenue (Naira) Revenue from sales of cement Revenue from sales of other products Cement sales volume All group sales exclude intra-group sales. 5.1 Information about major customers Included in revenue arising from direct sales of cement of ₦614.9 billion (2015: ₦491.5 billion) is revenue of approximately ₦29.8 billion (2015: ₦19.8 billion) which arose from sales to the Group’s largest customer. No single customer contributed 10% or more to the Group’s revenue for both 2016 and 2015 financial years. 6. Segment information 6.1 Products and services from which reportable segments derive their revenue The Executive Management Committee is the Company’s Chief Operating Decision Maker. Management has determined operating segments based on the information reported and reviewed by the Executive Management Committee for the purposes of allocating resources and assessing performance. The Executive Management Committee reviews internal management reports on at least a quarterly basis. These internal reports are prepared on the same basis as the accompanying consolidated and separate financial statements. “ Segment information is presented in respect of the Group’s reportable segments. For management purposes, the Group is organised into business units by geographical areas in which the Company operates. The Company has 2 reportable segments based on location of the principal operations as follows: • Nigeria • Pan Africa In 2015, the group operated 3 reportable segments as follows: • Nigeria • West and Central Africa • South and East Africa 2016 2015 ₦’million 614,936 167 615,103 491,544 181 491,725 ₦’million 2016 2015 ₦’million 426,129 - 426,129 389,215 - 389,215 Annual Report 2016 171 ׉ 7cassandra://ADvcVQa_YSmyFL9O50rRIDfS-FupCrUz70AhJrBWgsQ`̵X=^X=]{בCט{u׉׉ 7cassandra://zqV5Vt_t33aQT4yf8vh5CRHEmakTa_mtPcDTok_Ea7M` ׉ 7cassandra://y0Grf9LdvQ83nLDznAO2R-_cNPJtCm8V8WoftBsJ8QI/`S׉ 7cassandra://4maTBmAMvZ4Zn8ZfgHTUD0sfausNPpVKbr3wpD6AUgU`̵׉ 7cassandra://od6HprJPSEppe4uvwqZifm2mgXAtxpOLk3YwyZwzkdAm$͠X=_ט{u׉׉ 7cassandra://CiV7vT2OloDh1YApYrdaUntaog3Izb9F1YwvDtfvaKwW7` ׉ 7cassandra://SmmiMW45pmkF7G2QT4f1Mc7tj7u72lgPUXE_I6qDASc+`S׉ 7cassandra://sILxIkypMFueubH0RGDCxjIv0KuGgpJzBwhhbfVW4xk`̵׉ 7cassandra://zEEGkulKsPw_92OEKj-5aGkP54tinsrFyWQvi4OPbskU͠X=`׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Following a restructuring of management during the year, West and Central Africa and South and East Africa were merged to form the Pan Africa segment. All segments are involved in the production, distribution, and sale of cement and/or related products. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 6.2 Segment revenue and results The following is an analysis of the Group’s revenue, results, assets and liabilities by reportable segment. Performance is measured based on segment sales revenue and operating profit, as included in the internal management reports that are reviewed by the Executive Management Committee. Segment revenue and operating profit are used to measure performance as management believes that such information is the most relevant in evaluating results of certain segments relative to other entities that operate within these industries. 2016 Central Segment Results Nigeria Revenue EBITDA* Depreciation & amortisation Operating profit/(loss) Other income Finance income Finance costs Profit/(loss) after tax Segment assets & liabilities Non-current assets Current assets Total assets Segment liabilities Net additions to non-current assets, excluding deferred tax ₦’million 426,129 241,969 47,113 194,856 4,767 224,708 34,042 379,331 1,336,473 193,602 1,530,075 548,795 309,241 Pan Africa ₦’million 195,028 26,456 28,384 (1,928) 5,775 (4,212) 44,267 (38,520) 631,118 126,924 758,042 832,163 234,869 Administrative costs ₦’million - (11,213) - (11,213) - - - (11,213) Eliminations ₦’million (6,054) 31 (747) 778 - (176,679) (32,928) (142,974) - - - - - (742,847) (17,362) (760,209) (650,395) (299,974) Total ₦’million 615,103 257,243 74,750 182,493 10,542 43,817 45,381 186,624 1,224,744 303,164 1,527,908 730,563 244,136 172 Annual Report 2016 ׉ 7cassandra://4maTBmAMvZ4Zn8ZfgHTUD0sfausNPpVKbr3wpD6AUgU`̵X=a׉ErFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 2015 Segment Results Nigeria Revenue EBITDA* Depreciation & amortisation Operating profit Other Income Finance income Finance costs Profit/(loss) after tax ₦’million 389,215 247,479 43,713 203,766 2,148 54,348 27,479 223,239 Pan Africa ₦’million 103,477 25,070 11,740 13,330 1,803 (46,415) 18,901 (23,594) * represents earnings before interest, taxes, depreciation & amortisation Central administrative costs were included as part of Nigeria in prior periods Segment assets & liabilities Non-current assets Current assets Total Assets Segment liabilities Net additions to non-current assets, excluding deferred tax 1,011,889 112,586 1,124,475 375,996 168,574 375,945 54,365 430,310 486,911 57,893 - - - - - (442,871) (971) (443,842) (396,684) (126,953) 944,963 165,980 1,110,943 466,223 99,514 The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 2. Each segment bears its administrative costs and there are no allocations from central administration. This is the measure reported to the Chief Operating Decision Maker for the purposes of resource allocation and assessment of segment performance. Group financing (including finance income and finance costs) and income taxes are managed at an individual company level. Administrative costs ₦’million - (10,068) - (10,068) - - - (10,068) Eliminations ₦’million (967) (33) (827) 794 - 6,016 (12,903) (8,254) Tota ₦’million 491,725 262,448 54,626 207,822 3,951 13,949 33,477 181,323 Annual Report 2016 173 ׉ 7cassandra://sILxIkypMFueubH0RGDCxjIv0KuGgpJzBwhhbfVW4xk`̵X=bX=a{בCט{u׉׉ 7cassandra://s2WBtoot_w4KjngjqEh3kkhf7eDsi9HsSGbOwdC8Z8c2` ׉ 7cassandra://dtMqZITGA40aIowrGHIWugu6dz7hyCd33e3yq8FijOk1>`S׉ 7cassandra://EiMx7rF6-cukKKU7dHaYNpVK5krGCfBwckv67HQm4uQ:`̵׉ 7cassandra://vsevLisyTO1c6jTcDRSzfT4RKJYDgKM460yI96FxIgcn͠X=dט{u׉׉ 7cassandra://4g7C1zdYGfHGf-tbO6dvQzMBhyUuZxse0u1spQuqsRQ` ׉ 7cassandra://OGf-7HecF0LfBS1KyHfDdz9fNs7AA22iGZEn0Xssb_U4`S׉ 7cassandra://DO88wveHlQ90se98-GpqvxVHCBFI3r3vUOrnnqN_VK4`̵׉ 7cassandra://3RBpXXTlcp2j-OyegQwFHqXZjdbAK9N2yWmpNRcdJD0a0͠X=g׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Significant non current assets by country excluding deferred tax Nigeria South Africa Senegal Zambia Ethiopia Tanzania Congo Cameroun Significant revenue by country (external customers) Nigeria Ghana South Africa Ethiopia Zambia Tanzania Senegal Cameroun ₦’million 1,282,708 75,248 72,201 88,913 112,680 104,342 70,748 35,568 2016 2015 ₦’million 1,000,976 43,984 48,089 54,679 79,043 74,601 33,123 21,422 420,075 32,856 41,381 40,071 16,968 12,022 19,937 31,194 388,248 15,436 35,393 16,961 8,854 - 13,900 12,933 Revenues are attributed to individual countries based on the geographical location of external customers. 6.3 Eliminations and adjustments Eliminations and Adjustments relate to the following: • Profit/(loss) after tax of ₦143.0 billion (2015: ₦8.3 billion) is due to elimination of interest on inter-company loan, trading activities and exchange differences reclassified to other comprehensive income. • Non-current assets of ₦742.8 billion (2015: ₦442.9 billion) are due to the elimination of investment in subsidiaries with the parent’s share of their equity and non current inter-company payable and receivable balances. • Current assets of ₦17.4 billion (2015: ₦971.0 million) are due to the elimination of current inter-company payable and receivable balances. • Total liabilities of ₦650.4 billion (2015: ₦396.7 billion) are due to the elimination of inter-company due to and due from subsidiaries. • Finance income of ₦176.7 billion (2015: ₦6.0 billion) and finance cost of ₦32.9 billion (2015: ₦12.9 billion) is due to the elimination of interest on inter-company loan and exchange differences reclassified to other comprehensive income. • Revenue of ₦6.1 billion (2015: ₦967 million) represents sales by the Nigeria region to the Pan Africa region. In addition to the depreciation and amortisation reported above, a sum of ₦471 million (2015: ₦1,624 billion) in the financial statements represents write off (impairment) in respect of property, plant and equipment. This was attributable to the Nigerian and Pan African operations. 174 Annual Report 2016 ׉ 7cassandra://EiMx7rF6-cukKKU7dHaYNpVK5krGCfBwckv67HQm4uQ:`̵X=h׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 7. Production cost of sales Group Material consumed Fuel & power consumed Royalty* Salaries and related staff costs Depreciation & amortization Plant maintenance Other production expenses Increase in finished goods and work in progress 31/12/2015 ₦’million 55,623 66,495 1,138 (2,526) 323,816 15,263 38,243 18,331 10,830 (4,115) 201,808 ^Royalty payable is charged based on volume of extraction made during the year. 8. Administrative expenses Group Salaries and related staff costs Corporate social responsibility Management fee (refer (a) below) Depreciation and amortisation Audit fees (b) Directors’ remuneration Rent, rates and insurance Repairs and maintenance Travel expenses Bank charges General administrative expenses Others Impairment of property, plant and equipment 31/12/2015 ₦’million 9,203 722 2,839 4,025 285 485 Company Year ended Year ended Year ended Year ended 31/12/2016 ₦’million 87,203 112,265 1,382 31/12/2016 ₦’million 24,927 81,678 741 24,019 51,245 29,063 21,165 15,089 33,870 17,690 4,840 (706) 178,129 31/12/2015 ₦’million 21,214 50,066 598 11,282 29,988 12,228 5,804 (762) 130,418 Company Year ended Year ended Year ended Year ended 31/12/2016 ₦’million 11,338 1,097 3,054 5,789 396 638 31/12/2016 ₦’million 6,378 812 3,054 1,946 215 632 3,934 1,019 1,905 1,126 4,088 3,540 (1,255) 36,669 3,642 781 1,510 833 3,140 3,457 1,624 32,546 2,064 843 898 438 969 426 (1,588) 17,087 31/12/2015 ₦’million 6,830 587 2,839 1,907 191 485 2,500 650 928 664 1,654 3,065 1,624 23,924 (a) The management fee is charged by Dangote Industries Limited for management and corporate services provided to Dangote Cement Plc. It is an apportionment of the Parent’s company shared-services to all its material subsidiaries. (b) In addition, ₦21 million (2015: ₦21 million) was paid to Akintola Williams Deloitte for quarterly limited reviews. Annual Report 2016 175 ׉ 7cassandra://DO88wveHlQ90se98-GpqvxVHCBFI3r3vUOrnnqN_VK4`̵X=iX=h{בCט{u׉׉ 7cassandra://Vjm4_COEtf34AfFSX6WGlP58IfZPr3r1EQJuR2yyXpI` ׉ 7cassandra://J2GGvuJptNd4WQipI83pVR9hX5KPgeNkc-KV9_T166c:3`S׉ 7cassandra://Slxtzd49kVWuQHMbOkPGMtsDAQrI3JgvXICVHJq4h1c`̵׉ 7cassandra://E5IYCjc1M5V16Dpy4D6jy65e2NNUg25qPrDYiknGnsEyh͠X=jט{u׉׉ 7cassandra://N5NKjVBhgntO17VF5OVTwn_sx5yJSS3HIZq_tAUIg9k ` ׉ 7cassandra://xB73ZfsDSWhSPvQvGf064wbhCyJvOuPjIMbBLN55S7c5/`S׉ 7cassandra://P8aObLofBv23lb6LzDrd0uSjrT6yD0CmxLtpFXGRwuE?`̵׉ 7cassandra://k6I71j8agmIIXosJB2fSJYDh-7ahQsa6oeXaCuTa8AsX8͠X=k׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Other employee related disclosures Group Aggregate payroll costs: Wages, salaries and staff welfare Pension costs Gratuity provision Chairman’s and Directors’ remuneration Directors’ remuneration comprises: Fees Emoluments Chairman Highest paid Director ₦ 1 – 3,200,001 – 3,200,000 8,750,000 8,750,001 – 20,000,000 Above 20,000,000 2016 - 31-Dec-15 ₦’million 29,214 931 - 45,691 Group 31-Dec-15 ₦’million 45 440 485 5 208 2016 - - 1 482 30,627 Company Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 43,399 2,292 31-Dec-16 ₦’million 27,588 1,534 - 29,122 31-Dec-15 ₦’million 22,373 658 482 23,513 Company Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 49 31-Dec-16 ₦’million 49 589 638 5 304 Number of Directors whose emoluments were within the following ranges: ₦ 2015 1 - 1 12 13 ₦ 2016 - 1 11 13 Permanent employees remunerated at higher rate excluding allowances: ₦ Up to 250,000 250,001 - 500,000 500,001 - 750,001 - 1,000,001 - 1,250,001 - 1,500,001 - 2,000,001 and above 750,000 1,000,000 1,250,000 1,500,000 2,000,000 8,883 3,035 1,381 724 311 120 283 578 2015 9,164 1,787 951 954 251 105 432 645 15,315 14,289 485 453 583 632 5 303 31-Dec-15 ₦’million 45 440 485 5 208 2015 1 - 1 12 11 13 2016 8,058 2,711 1,228 658 259 101 143 259 13,417 307 13 2015 8,482 1,580 853 923 232 93 304 279 12,746 The average number of permanent employees employed during the year excluding Directors was as follows: Management Non-management 13,916 14,401 12,327 12,780 12,610 12,917 302 10,970 11,272 176 Annual Report 2016 ׉ 7cassandra://Slxtzd49kVWuQHMbOkPGMtsDAQrI3JgvXICVHJq4h1c`̵X=l׉E0Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 9. Selling and distribution expenses Group Salaries and related staff costs Depreciation Advertisement and promotion Haulage expenses Others 10. Finance income and finance costs ₦’million 6,161 Company Year ended Year ended Year ended Year ended 31-Dec-16 31-Dec-15 ₦’million 10,334 17,716 1,534 12,358 3,147 49,344 3,739 82,667 Group ₦’million 29,276 2,558 53,500 31-Dec-16 31-Dec-15 ₦’million 7,655 11,297 701 29,465 2,831 51,949 Company Year ended Year ended Year ended Year ended 31-Dec-16 31-Dec-15 ₦’million 31-Dec-16 31-Dec-15 ₦’million Finance income: Interest income Net foreign exchange gain (Note 10.1) ** Finance costs: Interest expenses Less: amounts included in the cost of qualifying assets Other finance cost 2,662 41,155 43,817 45,583 (411) 45,172 209 45,381 1,699 12,250 13,949 33,807 (653) 33,154 323 33,477 45,439 179,269 224,708 34,244 (411) 33,833 209 34,042 ₦’million 23,410 30,938 54,348 27,809 (653) 27,156 323 27,479 The average effective interest rate on funds borrowed generally is 13% per annum for both Group and Company respectively (2015: 12.9% and 12.6% per annum for the Group and Company). These are the rates used for the capitalisation on qualifying assets. 10.1 Foreign exchange gain or loss arose as a result of the translation of foreign currency denominated balances at the year end across the Group. The increase in the current year was due to the depreciation of the respective currencies against the major foreign currencies at year end. ** In the prior periods exchange gain and losses were presented separately. Starting in 2016, the Group now presents net exchange gain/(losses) ₦’million 5,401 11,818 2,174 21,372 2,558 43,323 Annual Report 2016 177 ׉ 7cassandra://P8aObLofBv23lb6LzDrd0uSjrT6yD0CmxLtpFXGRwuE?`̵X=mX=l{בCט{u׉׉ 7cassandra://loiByYHNpbLxNCncoBbrUOOHlQ5nGHZcKsWWeOjswko` ׉ 7cassandra://SR42HUSruQDQe_HJ1VvI5G8-BZ6hKEzP00Y2tkzbzkk2%`S׉ 7cassandra://fWrYfpMqzY57SjWEPwaGJ1E__SkFcANT6RNAzkk3wBE@`̵׉ 7cassandra://Iq70gOXoKMBhy0WfCwF9WhSL4DyfHz-qWeo0Znd70ugl@͠X=nט{u׉׉ 7cassandra://glCUJJh0RXvtCREVbaNquodksgRIl3HIw410wRDiWFA` ׉ 7cassandra://ZSMrdHGphje6G0R4dk_t5Qa4DAqdezPoDeeNrmd7lrc9`S׉ 7cassandra://_fVr8u-aPbt9NuAB5wa8pGp9L8-A00--g8d5uTa9Rsok`̵׉ 7cassandra://0kF74BYYSIjN6DkCKMxZneNobr94ZN0JmJ28_IOog2g_0͠X=o׉ERNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 11. Other income Group Insurance claims Government grant (Note 25.1) Sundry income* ₦’million 39 Company Year ended Year ended Year ended Year ended 31-Dec-16 31-Dec-15 ₦’million 48 31-Dec-16 31-Dec-15 ₦’million 42 417 10,077 10,542 * This represents provisions and other credit balances no longer required 12. Profit for the year Profit for the year includes the following charges: Group Company Depreciation of property, plant and equipment Amortisation of intangible assets Auditors’ fees Employee benefits expense Loss on disposal of property, plant and equipment Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 74,202 548 396 31-Dec-15 ₦’million 54,228 398 285 45,691 59 30,627 1 31 Dec 16 ₦’million 46,813 300 215 29,122 - 31-Dec-15 ₦’million 43,416 297 191 23,513 - 13. Earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: Group Company Profit for the year attributable to owners of the Company Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share (million) Basic & diluted earnings per share (Naira) Year ended Year ended Year ended Year ended 31-Dec-16 31-Dec-15 ₦’million 193,302 ₦’million 184,994 17,041 11.34 17,041 10.86 31-Dec-16 31-Dec-15 ₦’million 368,205 17,041 21.61 ₦’million 213,171 17,041 12.51 478 3,434 3,951 415 4,309 4,766 ₦’million 30 478 1,640 2,148 178 Annual Report 2016 ׉ 7cassandra://fWrYfpMqzY57SjWEPwaGJ1E__SkFcANT6RNAzkk3wBE@`̵X=p׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 14. Income taxes 14.1 Income tax recognised in profit or loss Group 31-Dec-15 ₦’million (1,042) Company Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 31-Dec-16 ₦’million Current tax Current tax expense in respect of the current year Deferred tax Deferred tax credit/(expense) recognised in the current year Total income tax recognised in the current year (4,637) (3,673) 31-Dec-15 ₦’million (1,037) 10,332 5,695 (5,929) (6,971) (2,518) (6,191) (6,359) (7,396) Deferred tax assets have been recognised by the Group, since it is probable that future taxable profits will be available for offset. The income tax credit/(expense) for the year can be reconciled to the accounting profit as follows: Group Profit before income tax Income tax expense calculated at 30% (2015: 30%) Education Tax Capital Gains Tax Effect of tax holiday and income that is exempt from taxation Effect of expenses that are not deductible in determining taxable profit Effect of previously unrecognised temporary difference now recognised as deferred tax assets. Effect of deferred tax not recognised on net investment exchange gains Effect of commencement rule Effect of income taxed at different rates Effect of unused tax losses and offsets not recognised as deferred tax assets Effect of different tax rates of subsidiaries operating in other jurisdictions Other Income tax income recognised in profit or loss 31-Dec-15 ₦’million 188,294 (56,488) (1,037) - 54,891 (21) 4,237 (8,908) 21,629 (12,206) 116 259 5,695 - - - (6,951) (17) (1,585) (6,971) Company Year ended Year ended Year ended Year ended 31-Dec-16 ₦’million 180,929 (54,279) (1,212) (2,413) 31-Dec-16 ₦’million 374,396 (112,319) (1,212) (2,413) 52,003 (1,623) 12,329 - 52,003 (872) 5,211 39,523 (8,908) 21,135 - - 1,661 (6,191) 31-Dec-15 ₦’million 220,567 (66,170) (1,037) - 54,811 (21) 4,237 - - - - - 784 (7,396) The income tax rate of 30% was used for the company tax computation as established by the tax legislation of Nigeria effective in 2016 and 2015. Annual Report 2016 179 ׉ 7cassandra://_fVr8u-aPbt9NuAB5wa8pGp9L8-A00--g8d5uTa9Rsok`̵X=qX=p{בCט{u׉׉ 7cassandra://LGEknqRjoBjWt88l08jrCnal9Jg4IfZQTUfCq9-hxtQ` ׉ 7cassandra://Mgq4ysHujOL49hVs9jVfHBdgTpZJeznLshC0ceiiLMM7``S׉ 7cassandra://aXyqDg22r-D_4WHOLuOgHbTth6Z4By_u3zsQNh_j1qU"`̵׉ 7cassandra://erf1zqdGOLP16fHFGR0nCa7lYzjbMY58SPIWV7LzFwk{L͠X=rט{u׉׉ 7cassandra://I-b-vaLcGWhnKLNJtzwwsuv82dnMS6mNe_CMHMs83XYFd` ׉ 7cassandra://EkEfyi0Or2ba0k51cBog-az7KqIlfqzcVIpbczdRpO48`S׉ 7cassandra://WjKV6oxnE5JcsQGSNuaZB59BoQcjecQ0tz5UX3ksiDQ`̵׉ 7cassandra://R9bWITnX1-A9YgwtOJu8QgTXpIl43FlrZZanfeJHbEAcU(͠X=s׉EiNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 14.2 Current income tax receivables Group 31-Dec-16 ₦’million Balance at beginning of the year Charge for the year Payments during the year Balance at the end of the year 14.2 Current income tax payables Balance at beginning of the year Charge for the year Payments during the year Arising during the period/Effect of currency exchange difference Balance at the end of the year 14.3 Deferred tax balance Deferred tax assets Deferred tax liabilities Net deferred tax assets/(liabilities) Group Recognised Effect of 2016 Deferred tax assets /(liabilities) in relation to: Property, plant & equipment Unrealised exchange gains Provision for doubtful debts Other provisions Tax losses Other Opening in profit or translation Closing balance loss ₦’million 2,760 (17,378) 392 784 - 3,403 (10,039) ₦’million (30,024) 4,553 (4) (1,852) 37,949 (290) 10,332 currency balance ₦’million - - - - - 6,122 6,122 ₦’million (27,264) (12,825) 388 (1,068) 37,949 9,235 6,415 - 9 - 9 Group 31-Dec-16 ₦’million 1,289 4,646 (1,128) (133) 4,674 Group 31-Dec-16 ₦’million 50,110 (43,695) 6,415 31-Dec-15 ₦’million 14,465 (24,504) (10,039) 31-Dec-15 ₦’million 2,481 1,042 (2,234) - 1,289 31-Dec-15 ₦’million - - - - Company 31-Dec-16 31-Dec-15 ₦’million - - - - ₦’million - - - - Company 31-Dec-16 ₦’million 1,305 3,673 (672) - 4,306 Company 31-Dec-16 ₦’million 26,255 (41,858) (15,603) 31-Dec-15 ₦’million 10,913 (23,998) (13,085) 31-Dec-15 ₦’million 2,481 1,037 (2,213) - 1,305 180 Annual Report 2016 ׉ 7cassandra://aXyqDg22r-D_4WHOLuOgHbTth6Z4By_u3zsQNh_j1qU"`̵X=t׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Recognised Effect of 2015 Opening in profit or translation Closing balance loss ₦’million Deferred tax assets /(liabilities) in relation to: Property, plant & equipment Unrealised exchange gains Provision for doubtful debts Other provisions Other Company 2016 ₦’million Deferred tax assets /(liabilities) in relation to: Property, plant & equipment Unrealised exchange gains Provision for doubtful debts Other provisions 2015 2,544 (16,923) 389 905 (13,085) (479) (7,128) 390 587 2,790 (3,840) ₦’million 3,239 (10,250) 2 197 883 (5,929) currency balance ₦’million - - - - (270) (270) Opening Recognised Closing balance in profit or balance loss ₦’million 178 (844) - (1,852) (2,518) ₦’million 2,722 (17,767) 389 (947) (15,603) Opening Recognised Closing balance in profit or balance loss ₦’million Deferred tax assets /(liabilities) in relation to: Property, plant & equipment Unrealised exchange gains Provision for doubtful debts Other provisions (695) (7,128) 389 708 (6,726) ₦’million 3,239 (9,795) - 197 (6,359) ₦’million 2,544 (16,923) 389 905 (13,085) Tax authorities in various jurisdictions where we operate in reserve the right to audit the tax charges for the financial year ended 31st December, 2016 and prior years. In cases where tax audits have been carried out and additional charges levied, we have responded to the tax authorities challenging the technical merits and made a provision we consider appropriate in line with the technical merits of issues raised by tax authorities. Unrecognised deferred tax asset amounted to ₦7.4 billion (2015: NIL) for the Group. There is no unrecognised deferred tax assets for the Company. Deferred tax liability amounting to ₦12.8 billion for both Group and Company was not recognised. This relates to exchange gains on amounts classified as part of the net investments in subsidiaries. ₦’million 2,760 (17,378) 392 784 3,403 (10,039) Annual Report 2016 181 ׉ 7cassandra://WjKV6oxnE5JcsQGSNuaZB59BoQcjecQ0tz5UX3ksiDQ`̵X=uX=t{בCט{u׉׉ 7cassandra://FGKUbzPV1G5rgZcQkG9hbYMBkDAZQihvYfGid7DCPCE` ׉ 7cassandra://qQHQcnIE44j1komS3qeLqvnvHP6zELVcgr4EqhCVubgF`S׉ 7cassandra://KkJFSxd7LCSxQJ1NyU0aDQ5BD19_pbuSgnhrGNWoPL8`̵׉ 7cassandra://jURnC1pEzqWs0P8pvaQ4HARY9dpUTT6p9DOOREdw9M0rE4͠X=vט{u׉׉ 7cassandra://Esp1dBulczbJ4kB1s1VdbVJ2KvqozS7N8QAlypOWtEsLw` ׉ 7cassandra://RdZrqkbbksDdJifN5-wccIx3YGgzjeVGB_DywHCTw9wA`S׉ 7cassandra://p0aoA3n5w2Kf7nyNbJlGeA5LSpag6fwey6xh_Ao-XY0`̵׉ 7cassandra://Z18a5kK_b4slHITrMjEb00wb1jWEHHz6oQ03DJpyJtAZY4͠X=w׉E NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 15. Property, plant and equipment 15.1 The Group Cost or deemed cost At 1st January, 2015 Additions Reclassifications (Note 15.1.1) Other reclassifications (Note 15.1.2) Disposal (Note 15.1.3) Effect of currency exchange differences Balance at 31st December, 2015 Additions Reclassifications (Note 15.1.1) Other reclassifications (Note 15.1.2) Disposal (Note 15.1.3) Write-off (Note 15.1.4) Effect of currency exchange differences Balance at 31st December, 2016 Accumulated depreciation and impairment At 1st January, 2015 Depreciation expense Reclassifications Disposal (Note 15.1.3) Impairment (Note 15.1.4) Leasehold improvements plant and 42,103 13,231 63,655 - - (1,042) 117,947 4,499 (3,436) (741) - - 35,599 Motor 393,390 68,543 90,275 36,994 (1,375) 266,241 772 - (9,096) 28,418 10,190 (985) (132) (242) 125,548 - (11,169) (354) 741,582 92,639 33,145 9,042 - (74) (422) 10,643 153,868 904,379 144,973 5,753 3,471 - - - Effect of currency exchange differences (117) Balance at 31st December, 2015 9,107 Depreciation expense Reclassifications Disposal (Note 15.1.3) Impairment (Note 15.1.4) 5,845 (329) - - Effect of currency exchange differences 1,355 Balance at 31st December, 2016 15,978 Carrying amounts: At 31st December, 2015 At 31st December, 2016 108,840 70,296 35,110 401 - - (1,043) 44,069 330 (132) (121) 9,417 32,643 14,742 (401) (11,168) 1,624 (118) 104,764 37,322 23,241 - (15) (1,664) 3,362 158,327 62,246 636,818 55,317 137,890 746,052 82,727 4,028 - - - - - 4,028 - - - - - - 4,028 311 403 - - - - 714 403 - - - - 1,117 3,314 2,911 Capital Furniture & Work-Inand buildings machinery vehicles Aircraft equipment progress ₦’million ₦’million ₦’million ₦’million ₦’million ₦’million ₦’million Total 1,990 360 - - 347,971 858,025 111,071 2,317 (330,838) (180) - (37) 992 (23) - (1) - 1,653 7,251 1,228 502 - - - (57) 1,673 644 (1) (1) - 312 2,627 251,931 - 592 (11,169) (18,058) (28,587) 4,630 109,966 1,070,792 69,114 (15,773) (3,578) - - 21,778 136,168 - (5,304) (207) (664) 195,221 181,507 1,396,006 - - - - - - 110,231 54,228 - (11,168) 1,624 (1,335) - 153,580 - - - - - 74,202 - (148) (1,785) 14,446 - 240,295 2,957 109,966 917,212 4,624 181,507 1,155,711 15.1.1 Represents transfer between various classes of assets 15.1.2 Includes amount transferred to prepayment and deposit for import for current year. 15.1.3 Represents motor trucks and heavy motorized equipments disposed of. 15.1.4 Represents write back of impairment after reassessing the damaged motor trucks and trailers during the year and write off for some trucks. 15.1.5 Some borrowings are secured by a debenture on all the fixed and floating assets of the Group 182 Annual Report 2016 ׉ 7cassandra://KkJFSxd7LCSxQJ1NyU0aDQ5BD19_pbuSgnhrGNWoPL8`̵X=x׉E Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 15. Property, plant and equipment 15.2 The company Cost or deemed cost At 1st January, 2015 Additions Reclassifications (Note 15.2.1) Leasehold improvements Plant and 35,285 198 Other reclassifications (Note 15.2.2) Disposal (Note 15.2.3) Additions Reclassifications (Note 15,2.1) Other reclassifications (Note 15.2.2) Disposal (Note 15.2.3) 8,194 - - Balance at 31st December 2015 43,677 3,914 4 - - Balance at 31st December, 2016 47,595 Accumulated depreciation and impairment Balance at 1st January, 2015 Depreciation expense Disposal (Note 15.2.3) Write-off (Note 15.2.4) 5,581 2,125 - - Balance at 31st December, 2015 Depreciation expense Disposal (Note 15.2.3) Impairment (Note 15.2.4) Balance at 31st December, 2016 Carrying amounts: At 31st December, 2015 At 31st December, 2016 7,706 1,883 - - 9,589 35,971 38,006 327,574 26,371 Motor and buildings machinery vehicles 4,028 - - - 530,799 17,643 1,194 (985) (130) 548,521 68,307 27,066 - - 95,373 29,462 (130) - 124,705 435,426 423,816 (11,168) 73,439 5,381 4,195 - - 83,015 30,662 13,524 (11,168) 1,624 34,642 14,780 - (1,592) 47,830 38,797 35,185 - - - Capital Furniture & work-inAircraft equipment progress Total ₦’million ₦’million ₦’million ₦’million ₦’million ₦’million ₦’million 60,291 22,946 1,370 176,854 - 4,028 - - - - 4,028 311 403 - - 714 403 - - 1,117 3,314 2,911 1,328 203,977 632,483 174 45,826 101 (186,519) (180) 95,515 - - - (180) - (11,168) 1,603 63,104 716,650 369 108 - 35,588 (5,501) - 62,895 - - (24,689) (25,674) (130) 2,080 68,502 753,741 900 298 - - 1,198 285 - - 1,483 405 - - - - 105,761 43,416 (11,168) 1,624 - 139,633 - - - 46,813 (130) (1,592) - 184,724 63,104 577,017 597 68,502 569,017 15.2.1 Represents transfer from capital work in progress to various classes of assets 15.2.2 Includes amount transferred to prepayment, deposit for import and Itori Cement Plc. 15.2.3 Represents motor trucks disposed last year and heavy motorized equipments disposed during the year 15.2.4 Represents write off and impairment on damaged motor trucks and plant and machinery charged to profit or loss last year and write back of impairment after reassessing the damaged motor trucks and trailers during the year 15.2.5 Some borrowings are secured by a debenture on all the fixed and floating assets of the company Annual Report 2016 183 ׉ 7cassandra://p0aoA3n5w2Kf7nyNbJlGeA5LSpag6fwey6xh_Ao-XY0`̵X=yX=x{בCט{u׉׉ 7cassandra://tjcZIodkouZyIFLqN4g-zx1xa9K5nvDK-d3z0ghjZfY{8` ׉ 7cassandra://SInMLVh23NJ0hpFAwGlD-q0gOemhZY6mFuJftp7FeQU,`S׉ 7cassandra://KhlLyesmq-HZ9cX4k5klrhUUL1BmcQgsIHJxpaakaA8`̵׉ 7cassandra://mt5QOXItxNajdvLj4rEmjb__hLLL7qCb8fq6RcbmA_Qg0͠X={ט{u׉׉ 7cassandra://Z4JsUulxcDW6JeKPmEKISOA7X5sk2iEgEUlMyKitMEw` ׉ 7cassandra://08aFbxEQ-GN-8uDpsgN_qJpP9AM90RBJIFbeor_h0UY%`S׉ 7cassandra://3Y8o5nRuUxvNTEmaoERt7G_rI_tVD71PhhHiEvHbrZs >`̵׉ 7cassandra://Xe9SIqo57j5fTwghoRw5fjqUuHLj_ipC--0fmbOWl0EI 4͠X=|׉E*NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 16. Intangible assets Group Computer software ₦’million Cost At 1st January, 2015 Additions Other reclassifications (Note 16.1) Effect of foreign currency differences Balance at 31st December, 2015 Additions Other reclassifications Effect of foreign currency differences Balance at 31st December, 2016 Amortization At 1st January, 2015 Amortization expense Effect of foreign currency differences Balance at 31st December, 2015 Amortization expense Effect of foreign currency differences Balance at 31st December, 2016 Carrying amounts: At 31st December, 2015 At 31st December, 2016 2,302 282 - (31) 2,553 660 (75) 718 3,856 757 384 (36) 1,105 531 223 1,859 1,448 1,997 Exploration assets ₦’million 2,169 16 (772) (227) 1,186 85 - 941 2,212 15 14 (5) 24 17 23 64 1,162 2,148 Total ₦’million 4,471 298 (772) (258) 3,739 745 (75) 1,659 6,068 772 398 (41) 1,129 548 246 1,923 2,610 4,145 Intangible assets (computer software) represent software which is amortized on a straight line basis There are no development expenditure capitalised as internally generated intangible asset. 16.1 Represents exploration assets reclassified to property, plant and equipment at the completion of the plant 184 Annual Report 2016 ׉ 7cassandra://KhlLyesmq-HZ9cX4k5klrhUUL1BmcQgsIHJxpaakaA8`̵X=}׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Exploration Company Cost At 1st January, 2015 Balance at 31st December, 2015 Additions Balance at 31st December, 2016 Amortization At 1st January, 2015 Amortization expense Balance at 31st December, 2015 Amortization expense Balance at 31st December, 2016 Carrying amount: At 31st December, 2015 At 31st December, 2016 Computer software ₦’million 1,278 1,278 28 1,306 596 297 893 300 1,193 385 113 There are no development expenditure capitalised as internally generated intangible asset. assets ₦’million - - - - Total ₦’million 1,278 1,278 28 1,306 - - - - - 596 297 893 300 1,193 - - 385 113 Annual Report 2016 185 ׉ 7cassandra://3Y8o5nRuUxvNTEmaoERt7G_rI_tVD71PhhHiEvHbrZs >`̵X=~X=}{בCט{u׉׉ 7cassandra://B2qRd8cPAcoPrcaUjBqGsIKbRt2SQrWk3DhBV9DqoIQQ` ׉ 7cassandra://I__udekHicVCyBIC7Xsf14NnjN3ryamjrL8b3lqGFs4<`S׉ 7cassandra://bOq5gitamYNpt82uMfPmS4z_l1Xrn1flM8YtYavzaDk`̵׉ 7cassandra://zJ_ND-EgqHo6b4t3_QNs5bAZcHMfoPqvnPIq_zwCM10n͠X=ט{u׉׉ 7cassandra://IdQGILTve_oika9P4QNI1wnyjjpdqPKjtjk0zEyWSOI ` ׉ 7cassandra://7Y8fQteehmw7rIfMDPD1AkbRCxGezZiGUJCuC720NEQ>`S׉ 7cassandra://COKKNxCxbXyG7T6cM8_wYztxmbG8-kZ1EH2IGldMZPI``̵׉ 7cassandra://XkFlPccOv06064wkB0BOL8oUEWk_yONDNebokgs4rd8bO͠X=׉E SNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 17. Information regarding subsidiaries and associate 17.1 Subsidiaries Details of the Group’s subsidiaries at the end of the reporting period are as follows; Place of Name of subsidiary Principal Activity Dangote Cement South Africa (Pty) Limited Cement production Dangote Industries (Ethiopia) Plc Dangote Industries (Zambia) Limited Dangote Cement Senegal S.A Dangote Cement Cameroun S.A Dangote Industries Limited, Tanzania Dangote Cement Congo S.A Cement production Cement production Cement production Cement grinding Cement production Cement production Dangote Cement (Sierra Leone) Limited Dangote Cement Cote D’Ivoire S.A Dangote Industries Gabon S.A Dangote Cement Ghana Limited Dangote Cement - Liberia Ltd. Dangote Cement Bukina faso SA Dangote Cement Chad SA Dangote Cement Mali SA Dangote Cement Niger SARL Dangote Industries Benin S.A. Dangote Cement Togo S.A. Dangote Cement Kenya Limited Dangote Quarries Kenya Limited Dangote Cement Madagascar Limited Dangote Quarries Mozambique Limitada Dangote Cement Nepal Pvt. Ltd. Zambia Senegal Cameroun Tanzania Congo Gabon Proportion of ownership or incorporation voting power held and operation by the Group 31-Dec-16 31-Dec-15 South Africa 64.00% 64.00% Ethiopia 94.00% 94.00% 75.00% 75.00% 90.00% 90.00% 80.00% 80.00% 70.00% 70.00% 100.00% 100.00% Bagging and distribution of cement Sierra Leone 99.60% 99.60% Bagging and distribution of cement Cote D’Ivoire 80.00% 80.00% Cement grinding Bagging and distribution of cement Ghana Bagging and distribution of cement Liberia 80.00% 80.00% 100.00% 100.00% 100.00% 100.00% Selling and distribution of cement Burkina Faso 95.00% 95.00% Selling and distribution of cement Chad Selling and distribution of cement Mali Selling and distribution of cement Niger Selling and distribution of cement Benin Selling and distribution of cement Togo Cement production Limestone mining Cement production Cement production Cement production Kenya Kenya 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 98.00% 98.00% 90.00% 90.00% 90.00% 90.00% 90.00% 90.00% Madagascar 95.00% 95.00% Mozambique 95.00% 95.00% Nepal Dangote Zimbabwe Holdings (Private) Limited Cement production Dangote Cement Zimbabwe (Private) Limited Cement production Dangote Energy Zimbabwe (Private) Limited Power production Dangote Mining Zimbabwe (Private) Limited Coal production Dangote Cement Guinea SA Cimenterie Obajana Sprl- D.R. Congo Itori Cement Plc. Okpella Cement Plc. Cement production Cement production Cement production Cement production Dangote Takoradi Cement Production Limited Cement drinding Zimbabwe Zimbabwe Zimbabwe Zimbabwe Guinea Nigeria Nigeria Ghana 100.00% 100.00% 90.00% 90.00% 90.00% 90.00% 90.00% 90.00% 90.00% 90.00% 95.00% 95.00% D.R. Congo 98.00% 98.00% 99.00% 99.00% 99.00% - - - 186 Annual Report 2016 ׉ 7cassandra://bOq5gitamYNpt82uMfPmS4z_l1Xrn1flM8YtYavzaDk`̵X=׉E eFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Indirect Subsidiaries Names of Dangote Cement South Africa (Pty) Limited Subsidiaries Sephaku Development (Pty) Ltd Sephaku Delmas Properties (Pty) Ltd Blue Waves Properties 198 (Pty) Ltd Mining right holder Investment property Exploration Sephaku Limestone and Exploration (Pty) Ltd Exploration Sephaku Enterprise Development (Pty) Ltd Social responsibility Portion 11 Klein Westerford Properties (Pty) Ltd Investment property Name of Dangote Industries (Zambia) Ltd subsidiary Dangote Quarries (Zambia) Ltd 17.2 Investments in subsidiaries Dangote Cement South Africa (Pty) Limited Dangote Industries (Ethiopia) Plc* Dangote Industries (Zambia) Limited Dangote Cement Senegal S.A Dangote Cement Cameroun S.A Dangote Cement Ghana Limited Dangote Industries Limited, Tanzania Dangote Cement Congo S.A Dangote Cement (Sierra Leone) Limited Dangote Cement Cote D’Ivoire S.A Dangote Industries Gabon S.A Dangote Cement Marketing Senegal SA Dangote Cement Bukina faso SA Dangote Cement Chad SA Dangote Cement Mali SA Dangote Cement Niger SARL Dangote Cement Madagascar Limited Dangote Industries Benin S.A. Dangote Cement Togo S.A. Dangote Cement - Liberia Ltd. Dangote Cement Kenya Limited Dangote Quarries Kenya Limited Dangote Quarries Mozambique Limitada Dangote Cement Nepal Pvt. Ltd. Dangote Zimbabwe Holdings (Private) Limited Dangote Cement Zimbabwe (Private) Limited Dangote Energy Zimbabwe (Private) Limited Dangote Mining Zimbabwe (Private) Limited Dangote Cement Guinea SA Cimenterie Obajana Sprl- D.R. Congo Itori Cement Plc. Okpella Cement Plc. Dangote Takoradi Cement Production Limited Limestone mining Group 31-Dec-16 ₦’million - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 31-Dec-15 ₦’million - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Percentage of voting power held by Dangote Cement South Africa (Pty) Limited 2016 2015 South Africa 100.00% 100.00% South Africa 100.00% 100.00% South Africa 100.00% 100.00% South Africa 80.00% 80.00% South Africa 100.00% 100.00% South Africa 100.00% 100.00% Percentage of voting power held by Dangote Ind. (Zambia) Ltd Zambia 49.90% 49.90% Company 31-Dec-16 ₦’million 25,381 39,338 - 29 9 - 13,851 3 18 16 6 - 3 3 3 5 - 3 5 - - - - - - - - - - - - - - 78,673 31-Dec-15 ₦’million 24,283 1,619 - 29 9 - 70 3 18 16 6 4 3 3 3 5 - 3 1 - - - - - - - - - - - - - - 26,075 * Part of the loan advanced to Dangote Industries Ethiopia Plc was converted to equity during the year resulting in the incease in the investment. Annual Report 2016 187 ׉ 7cassandra://COKKNxCxbXyG7T6cM8_wYztxmbG8-kZ1EH2IGldMZPI``̵X=X={בCט{u׉׉ 7cassandra://Fgd8L7cbjvtIAJ-yCf2MM9MnfJrva7uYt8S1lkq8tPM` ׉ 7cassandra://0vzAWBHLnrpp7VwYDQw6Jv1-dBoP0xCmzl9BCChOxjM`S׉ 7cassandra://F55yKe1vluSeqUjJm5_7kzoRMXannnyGIzXvER9ajHAw`̵׉ 7cassandra://mIU5N4wKHdYEmlFjPVjWeGqDY9KBknag9Zu1T6YwrNQW͠X=ט{u׉׉ 7cassandra://bskszlZUnoXtBYo-X7vHe7DTgyLPbV_IywBZFLtYFvwj` ׉ 7cassandra://TDKm6lgSECWzWXf_vrEC1hGaZA8_ud1ZA8sK-Mky2Ak+`S׉ 7cassandra://Du8cYhqzi7hekeiNRJuv_TW8HeimTHKAHVU8P3k5_Sk.`̵׉ 7cassandra://YNiALqp-5aM-Xa4NkwqSnPsLJNJiUlJXDpe5VUqO3IgI͠X=׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 17.3 Investment in associate Group Societe des Ciments d’ Onigbolo 31-Dec-16 31-Dec-15 ₦’million 1,582 1,582 ₦’million 1,582 1,582 Company 31-Dec-16 31-Dec-15 ₦’million 1,582 1,582 The entity is not yet in to full operations and the share of income attributable to the group is immaterial. ₦’million 1,582 1,582 188 Annual Report 2016 ׉ 7cassandra://F55yKe1vluSeqUjJm5_7kzoRMXannnyGIzXvER9ajHAw`̵X=׉ENFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 17.4 Composition of the Group Information about the composition of the Group at the end of the reporting period is as follows: Principal activity Place of incorporation and operation Cement production Bagging and distribution of cement Selling and distribution of cement Bagging and distribution of cement Cement production Principal activity Cement production Cement production Cement production Cement production Cement grinding Cement production Bagging and distribution of cement Bagging and distribution of cement Cement Grinding Selling and distribution of cement Selling and distribution of cement Selling and distribution of cement Selling and distribution of cement Limestone mining Cement production Cement production Selling and distribution of cement Selling and distribution of cement Cement production Holding company Cement production Power production Coal production Cement production Cement production Cement production Cement Grinding Congo Liberia Senegal Ghana Nepal Place of incorporation and operation South Africa Ethiopia Zambia Senegal Cameroun Tanzania Sierra Leone Cote D’Ivoire Gabon Bukina Faso Chad Mali Niger Kenya Kenya Madagascar Benin Togo Mozambique Zimbabwe Zimbabwe Zimbabwe Zimbabwe Guinea D.R. Congo Nigeria Ghana Number of wholly -owned subsidiaries 2016 2015 1 1 1 1 1 Number of non wholly -owned subsidiaries 2016 2015 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 - - 1 1 1 1 1 Annual Report 2016 189 ׉ 7cassandra://Du8cYhqzi7hekeiNRJuv_TW8HeimTHKAHVU8P3k5_Sk.`̵X=X={בCט{u׉׉ 7cassandra://-5l_gGMxlOK--thK_P19ktd6ZeaAgiaqChQD8noZ3Ro` ׉ 7cassandra://gg4MoNrPTU-tej0BtaX4OMba4eIdZsutjGzlAzxNrjs%`S׉ 7cassandra://59ySbEmJ-P-NguA9jH9wJJGyGE8u9lftklpCidRLKmY `̵׉ 7cassandra://5GbM5rqJtYCYPsZ4X4TNG34vct_FL7ygyr8f9qoJ-zUdQ͠X=ט{u׉׉ 7cassandra://sGSC6vhfeZu6Vl0C_P2SvqLa7JZOyYSI3sS7d9RyJoU;` ׉ 7cassandra://jyxx1zlkjPJeUwbWFwRirp5PnlM8KgSsKZ3gstKauWUA`S׉ 7cassandra://6AfByL9fLD02y_rfqTf8ZtvSz3XRz9wAlIhrkB-gN7k`̵׉ 7cassandra://kC5AOtHttNdntCLn2HB40EPf4aPxp9Fsjh7ZVWHh_zYY@͠X=׉ExNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 17.5 Details of non-wholly owned subsidiaries that have material non-controlling interests The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests: Place of incorporation Proportion of ownership interests and and principal voting rights held place of by non-controlling business interests 2016 2015 Name of subsidiaries Sephaku Cement (Pty) Limited South Africa 36.00% 36.00% Dangote Industries (Zambia) Ltd Zambia Dangote Industries (Ethiopia) Plc Ethiopia Dangote Industries Limited Dangote Cement Senegal S.A 25.00% 25.00% 6.00% 6.00% Tanzania Senegal 10.00% 10.00% Dangote Cement Cameroun S.A Cameroun 20.00% 20.00% Profit/(loss) allocated to non-controlling interests 2016 769 470 47 2015 (1,017) 76 30.00% 30.00% (6,409) (846) (498) (436) (1,208) (417) Accumulated non-controlling interests 2016 11,626 (2,945) (797) (13,169) (5,359) (1,820) 2015 ₦’million ₦’million ₦’million ₦’million (174) 5,367 (3,819) (228) (3,609) (2,951) (844) 190 Annual Report 2016 ׉ 7cassandra://59ySbEmJ-P-NguA9jH9wJJGyGE8u9lftklpCidRLKmY `̵X=׉E Financials 17.6 Summarised below is the financial information in respect of the Group’s subsidiaries that have material noncontrolling interests. Information below represent amounts before intragroup eliminations. Dangote Dangote Dangote Dangote Dangote Dangote Cement South Industries Industries Industries Cement Cement Africa (Pty) (Zambia) (Ethiopia) Limited, Limited Limited 2016 2016 Information in respect of the financial position of the subsidiaries Current assets Non-current assets Current liabilities Non-current liabilities Equity attributable to owners of the Company Non-controlling interests 17,923 79,952 25,082 40,498 32,217 78 41,381 5,973 104,564 122,069 246 (11,778) - Plc 2016 49,577 115,705 140,836 8 24,438 - Information in respect of the profit and loss and other comprehensive income Revenue 16,968 Expenses Tax credit (Loss)/Profit for the year Profit/(loss) attributable to owners of the Company Profit/(loss) attributable to the non-controlling interests (Loss)/Profit for the year Other comprehensive income Total comprehensive income for the year Total comprehensive income attributable to owners of the Company Total comprehensive income attributable to the non-controlling interests Total comprehensive income for the year (38,234) (1,012) 2,135 1,366 769 2,135 - 2,135 1,366 769 2,135 40,071 (27,879) (42,094) 12,792 1,881 2,805 782 1,411 470 1,881 9,852 11,733 8,800 2,933 11,733 Information in respect of the cash flows of the Subsidiary Dividends paid to non-controlling interests - Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash (outflow)/inflow from financing activities Net cash (outflow)/inflow 9,519 2,088 (13,098) (1,491) 735 47 782 (7,206) (6,424) (6,038) (386) (6,424) Tanzania 2016 ₦’million ₦’million ₦’million ₦’million 28,657 104,342 160,087 3,029 (30,117) - S.A 2016 7,313 72,201 132,905 197 (53,588) - 2016 ₦’million ₦’million 6,044 36,035 29,927 21,251 (9,099) - Senegal Cameroun S.A 12,022 (33,385) - (21,363) (14,954) (6,409) (21,363) (487) (21,850) (15,295) (6,555) (21,850) 19,937 (28,396) - (8,459) (7,613) (846) (8,459) - (8,459) (7,613) (846) (8,459) 31,194 (33,655) (31) (2,492) (1,994) (498) (2,492) - (2,492) (1,994) (498) (2,492) - - - - - 17,084 (3,103) (16,874) (2,893) 15,478 (3,993) 3,753 15,238 (36,026) (3,169) 41,867 2,672 4,360 (4,556) (1,588) (1,784) 2,233 (6,167) - (3,934) Annual Report 2016 191 ׉ 7cassandra://6AfByL9fLD02y_rfqTf8ZtvSz3XRz9wAlIhrkB-gN7k`̵X=X={בCט{u׉׉ 7cassandra://hFqB25nYeWZBOBvSTD8m7Ps8oEj-QJ185WupwWGSTTA[` ׉ 7cassandra://6exqC5qG9RibpVPkRN_Zg_BMV9iSgMW4lkQcAeiKlEc@`S׉ 7cassandra://QQ7pfTUyi_jbTDqbctBG5To-i9KGBpuhtBGL_RiKWi0`̵׉ 7cassandra://kERu5XpZFtukz_8s-5fTy3AvcTKaQDZhL_PiPGPlC8EpB,͠X=ט{u׉׉ 7cassandra://1FulKCTD2KBTts5kRx9aGgSZtRofuFaD7VKr1RazVnAR` ׉ 7cassandra://6qD1sluiOV_ASLj-00X8pMgREkcguGwMTuZj4_jLft4<`S׉ 7cassandra://hdseoMNBKJPZ7q8TnPOro7F4kEnpdeqKOWClbvPPARIZ`̵׉ 7cassandra://ocL63KBlni5LzgCS3zJOd48DYNGf6Wnq0EKobNt8Y3k`͠X=׉E 17.6 Summarised below is the financial information in respect of the Group’s subsidiaries that have material noncontrolling interests. Information below represent amounts before intragroup eliminations. Dangote Dangote Dangote Dangote Dangote Dangote Cement South Industries Industries Industries Cement Cement Africa (Pty) (Zambia) (Ethiopia) Limited, Limited Limited 2015 2015 Information in respect of the financial position of the subsidiaries Current assets 11,353 Non-current assets Current liabilities Non-current liabilities Equity attributable to owners of the Company Non-controlling interests 47,330 16,181 27,593 14,831 78 35,393 (483) (309) (174) (483) - (483) (309) (174) (483) 4,882 54,679 73,856 982 (15,277) - Plc 2015 19,469 79,043 102,256 - (3,794) - Tanzania 2015 ₦’million ₦’million ₦’million ₦’million 4,697 74,601 91,327 50 (12,030) - Information in respect of the profit and loss and other comprehensive income Revenue 8,854 Expenses Tax credit Profit/(loss) for the year Profit/(loss) attributable to owners of the Company Profit/(loss) attributable to the non-controlling interests Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year Total comprehensive income attributable to owners of the Company Total comprehensive income attributable to the non-controlling interests Total comprehensive income for the year (36,242) 366 (12,922) - (4,068) (3,051) (1,017) (4,068) (15,763) (19,831) (14,873) (4,958) (19,831) Information in respect of the cash flows of the Subsidiary Dividends paid to non-controlling interests - Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash (outflow)/inflow from financing activities Net cash (outflow)/inflow 192 Annual Report 2016 5,239 (196) (1,998) 3,045 16,961 (15,695) - 1,266 1,190 76 1,266 (3,591) (2,325) (2,185) (140) (2,325) S.A 2015 5,910 48,089 82,051 1,460 (29,512) - 2015 ₦’million ₦’million 4,411 21,422 30,018 33 (4,218) - Senegal Cameroun S.A - (1,454) - (1,454) (1,018) (436) (1,454) (10,779) (12,233) (8,563) (3,670) (12,233) 13,900 (25,977) - (12,077) (10,869) (1,208) (12,077) - (12,077) (10,869) (1,208) (12,077) 12,933 (14,877) (146) (2,090) (1,673) (417) (2,090) - (2,090) (1,673) (417) (2,090) - - - - - (8,883) (21,280) 32,544 2,381 6,358 (17,441) 21,163 10,080 (5,541) (30,048) 35,752 163 (916) (996) 3,323 1,411 4,514 (7,786) 4,243 971 ׉ 7cassandra://QQ7pfTUyi_jbTDqbctBG5To-i9KGBpuhtBGL_RiKWi0`̵X=׉E HFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 17.7 Change in the Group’s ownership interest in a subsidiary There was no change in the Group’s ownership interest in its subsidiaries from the prior year. However, additional subsidiaries were incorporated in Nigeria and Ghana during the year. 17.8 Significant restrictions There are no significant restrictions on the Company’s or its subsidiaries’ ability to access or use its assets to settle the liabilities of the Group. 17.9 Financial support to consolidated structured entities During the year, the Company provided financial support to its subsidiaries for capital development and/or for operational purposes. Assistance rendered was always in the form of funds transferred to them for the normal running of their operations or on their behalf to vendors/contractors for settlement of commitments. As part of the requirements of the Syndicated Term Loan of R1.95bn facility from Nedbank Capital and Standard Bank of South Africa for the finance of the Group’s South African plant in 2012, the Company extended an interest bearing subordinated loan to Dangote Cement South Africa (Pty) Limited to the tune of R265 Million as a guarantee to help access the remainder of its loan with Nedbank/Standard Bank. This loan is expected to be repaid in two tranches at an interest rate of Johannesburg Inter-Bank Agreed Rate (JIBAR) plus 4% per annum but in order for the Company to fulfil this, it entered into a contractual obligation with Zenith Bank Plc. to avail a credit facility for a Term Loan to be on lent to Dangote Cement South Africa (Pty) Limited. The loan has a quarterly interest rate payment of 6% per annum and is expected to have a bullet repayment of the principal upon maturity which is 48 months from the date the loan was advanced. In addition, the loan has been secured by a debenture over fixed and floating assets of Dangote Cement Plc. All financial support given on behalf of the subsidiaries have been accounted for as receivables from subsidiaries and eliminated on consolidation. The table below shows the financial support given to major subsidiaries by the Company during the year: 2016 2015 Dangote Cement Ghana Limited Dangote Cement Senegal S.A Dangote Industries (Zambia) Limited Dangote Cement Cameroun S.A Dangote Industries (Ethiopia) Plc Dangote Industries Limited, Tanzania Dangote Cement (Sierra Leone) Limited Dangote Cement Congo S.A Dangote Cement Cote D’Ivoire S.A Dangote Industries Gabon S.A Dangote Cement Liberia Ltd. ₦’million 506 129 1,260 1,457 4,836 10,179 1,092 10,834 5,045 - 57 35,395 ₦’million 568 1,503 3,713 3,826 13,352 19,780 486 12,616 839 2 123 56,808 The Group management has continued to show its intention to provide financial support to its subsidiaries and to assist, when necessary, any subsidiary to obtain financial support in the future and does not envisage any material risk as a result of this. Interest charged to the subsidiaries on the advances extended to them during the year was between 5% to 10% per annum. Annual Report 2016 193 ׉ 7cassandra://hdseoMNBKJPZ7q8TnPOro7F4kEnpdeqKOWClbvPPARIZ`̵X=X={בCט{u׉׉ 7cassandra://lDEPx8zWt3x2vXflp6LPTw20FY-M72unOW-pbnMwaWs[T` ׉ 7cassandra://DTynzOZWGubx0jFBHkdXHyvYELxjDmmLXlcTWJ3VOwU8`S׉ 7cassandra://bBwNNaj3Zea_eqBFbOOtHR2Y4v2Ze5JpTykbuxxRjec'`̵׉ 7cassandra://2IhlbYddsD66L4VkbL5R-k-zAh1I9-4vlopQSA1fsNwpO<͠X=ט{u׉׉ 7cassandra://T1Nq1W4ssvryXcxIpG_ykMK1JWzcI5sSUFIFVSVA-JI.` ׉ 7cassandra://beGolQMqnkHvbyL3yMAzH8byhmHVHpT4mA1jHbYHNJ05L`S׉ 7cassandra://ky9lkmgoJZV8E-oypekA2hOzpNIWij5zPgd1dSGq8N0 `̵׉ 7cassandra://vaVzEmabtwnoDgZYT1ooY6Qn-7o2tONe3H7YpgUwuwMY0͠X=׉ENOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 18. Prepayments 18.1 Prepayments for property, plant & equipment Non-current Advances to contractors Total non-current prepayments 18.2 Prepayments and other current assets Advances to contractors Deposits for import Deposit for supplies Rent, rates and insurance Total current prepayments Related Party Transactions Parent company Entities controlled by the parent company Affiliates and associates of parent company Total related party transactions Prepayments and other current assets Group 31-Dec-16 31-Dec-15 ₦’million 13,196 13,196 15,126 36,774 5,144 2,627 59,671 ₦’million 9,094 9,094 18,009 24,295 7,412 2,167 51,883 Company 31-Dec-16 31-Dec-15 ₦’million - - ₦’million - - 2,109 36,360 2,019 1,359 41,847 11,726 24,295 5,829 1,528 43,378 - - 18,537 72 18,609 78,280 8,169 474 8,643 60,526 - 18,537 - 18,537 60,384 - 8,169 456 8,625 52,003 Non-current advances to contractors represent various advances made to contractors for the construction of plants while current advances to contractors represent various advances made for the purchase of materials which were not received at the year end. 19. Inventories Finished product Work-in-progress Raw materials Packaging materials Consumables Fuel Spare parts Goods in transit Group 31-Dec-16 31-Dec-15 ₦’million 5,363 10,336 4,925 4,262 9,936 14,861 30,948 2,272 82,903 ₦’million 5,732 7,441 3,917 3,474 2,184 7,165 21,904 1,301 53,118 Company 31-Dec-16 31-Dec-15 ₦’million 3,310 3,734 1,456 2,636 7,931 11,465 24,926 392 55,850 ₦’million 4,118 2,220 2,516 1,299 2,006 5,943 20,163 104 38,369 The cost of inventories recognised as an expense during the year was ₦212.37 billion and ₦115.64 billion (2015: ₦116.72 billion and ₦79.75 billion) in the consolidated and separate financial statements respectively. 194 Annual Report 2016 ׉ 7cassandra://bBwNNaj3Zea_eqBFbOOtHR2Y4v2Ze5JpTykbuxxRjec'`̵X=׉E+Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 20. Trade and other receivables Group Trade receivables Impairment allowance on trade receivables Staff loans and advances Other receivables Total trade and other receivables 31-Dec-16 31-Dec-15 ₦’million 16,695 (708) 15,987 1,398 8,894 26,279 ₦’million 7,559 (1,325) 6,234 1,045 4,265 11,544 Company 31-Dec-16 31-Dec-15 ₦’million 10,454 (627) 9,827 1,150 880 11,857 ₦’million 3,924 (1,298) 2,626 919 707 4,252 Trade receivables The average credit period on sales of goods for both the Group and Company is as shown below. Of the trade receivables balance at the end of the year in the consolidated and separate financial statements respectively, ₦537.0 million (2015: ₦603.6 million) and ₦4.2 billion (2015: ₦603.6 million) is due from the Group’s and company’s largest trade debtor respectively. There are no other customers who represent more than 9% of the total balance of trade receivables of the Group after impairment. Trade receivables that are neither past due nor impaired are considered to be of high quality as most of these are guaranteed by reputable banks. The company’s largest trade debtor is a subsidiary and the amount is eliminated on consolidation. Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period for which the Group has not recognised an allowance for impairment because there has not been a significant change in credit quality and the amounts are still considered recoverable. Trade receivables are considered to be past due when they exceed the credit period granted. Age of receivables that are past due and not impaired Group Company 0 - 60 days 60 - 90 days 90 - 120 days 120+ Total Average age (days) 31-Dec-16 31-Dec-15 ₦’million 5,536 1,599 3,568 872 11,575 43 ₦’million 1,848 253 247 625 2,973 32 31-Dec-16 31-Dec-15 ₦’million 3,878 1,068 3,463 802 9,211 48 ₦’million 1,120 85 139 625 1,969 26 Annual Report 2016 195 ׉ 7cassandra://ky9lkmgoJZV8E-oypekA2hOzpNIWij5zPgd1dSGq8N0 `̵X=X={בCט{u׉׉ 7cassandra://cz5JhzfL_5Kea46sn73owAm6yjvRr2iZSAE3uLr7FZs` ׉ 7cassandra://yQZ-sprhbaQtZzkSYyzhUsL9oxeyrPugeUm3JtyRPTE7'`S׉ 7cassandra://VWEX8Swhs1Y_aJN4G2bx22MQ2kTFRRcbQNsBPoQBdMA`̵׉ 7cassandra://NAzRTuZrT4FBZXdPzI8qZ3fgQnj5jsD2-BR73OpRJ50o8͠X=ט{u׉׉ 7cassandra://uuoFLERxPBMtx3NeMEYHusPwOkXCFDTeLmBemw8jM1Q` ׉ 7cassandra://6jVhIkesUG191gj0W-aERbX11gOHKd_cLmMMgnzih2M0]`S׉ 7cassandra://pYbAiRxURhgnsyxtLg2nh6Me2PYAJ30ZCWiuBKwfu80`̵׉ 7cassandra://v_oClZaWSZrl1wVeL_oKrGwngkzyWEgmxgUC-GlIY-MY͠X=׉E'NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Movement in the allowance for doubtful debts Group Balance at the beginning of the year Impairment losses recognised on receivables Amounts written off during the year as uncollectible Balance at the end of the year 31-Dec-16 31-Dec-15 ₦’million 1,325 54 (671) 708 ₦’million 1,303 22 - 1,325 Company 31-Dec-16 31-Dec-15 ₦’million 1,298 - (671) 627 ₦’million 1,298 - - 1,298 In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated. Age of past due and impaired trade receivables 60-90 days 90-120 days 120+ days 21. Share capital and reserves Issued and fully paid 21.1 Share capital 17,040,507,405 (2015: 17,040,507,405) ordinary shares of ₦ 0.5 each Share premium Group 31-Dec-16 31-Dec-15 ₦’million 3 24 681 708 ₦’million 4 1 1,320 1,325 Company 31-Dec-16 31-Dec-15 ₦’million - - 627 627 ₦’million - 1,298 1,298 31-Dec-16 31-Dec-15 ₦’million ₦’million 8,520 42,430 8,520 42,430 21.2 Authorised share capital Authorised share capital as at reporting dates represents 20,000,000,000 ordinary shares of ₦ 0.5 each. Fully paid ordinary shares carry one vote per fully paid up share and a right to dividends when declared and approved. 21.3 Currency translation reserve Exchange difference relating to the translation of the results and net investments of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e Currency Units) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal of foreign operations 196 Annual Report 2016 ׉ 7cassandra://VWEX8Swhs1Y_aJN4G2bx22MQ2kTFRRcbQNsBPoQBdMA`̵X=׉EoFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 21.4 Capital Contribution A subordinated loan was obtained by the Company from the immediate parent, Dangote Industries Limited in 2010. The interest on the long term portion was waived for 2011. Given the favourable terms at which the Company secured the loan, an amount of ₦2.8 billion which is the difference between the fair value of the loan on initial recognition and the amount received, has been accounted for as a capital contribution. 21.5 Employee benefit reserve The employee benefit reserve arises on the re-measurement of the defined benefit plan. Items of other comprehensive income included in the employee benefit reserve will not be reclassified subsequently to profit or loss. 22. Dividend On 19th April, 2016, a dividend of ₦8.00 per share (total dividend ₦136.3 billion) was approved by shareholders to be paid to holders of fully paid ordinary shares in relation to the 2015 financial year. In respect of the current year, the Directors proposed a dividend of ₦8.50 per share. This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these consolidated and separate financial statements. 23. Trade and other payables Trade payables Payable to contractors Value added tax Withholding tax payable Defined contribution plan (Note 28.1) Advances from customers Suppliers’ credit Other accruals and payables Total trade and other payables Group 31-Dec-16 31-Dec-15 ₦’million 83,164 33,851 651 8,439 211 44,077 42,353 56,220 268,966 ₦’million 44,044 34,234 1,520 5,006 44 11,286 - 31,463 127,597 Company 31-Dec-16 31-Dec-15 ₦’million 53,660 22,532 399 2,351 41 35,783 42,353 21,448 178,567 ₦’million 30,341 19,893 110 1,557 40 8,769 - 18,874 79,584 The average credit period on purchases of goods is 94 days (2015: 80 days). Normally, no interest is charged on trade payables. The Group has financial risk management policies in place to ensure that all payables are paid in line with the pre-agreed credit terms. Annual Report 2016 197 ׉ 7cassandra://pYbAiRxURhgnsyxtLg2nh6Me2PYAJ30ZCWiuBKwfu80`̵X=X={בCט{u׉׉ 7cassandra://RTYmYhnXqIpHm_nQjI2dTdUj5Vvo3N8jObhrRmS_ABs5` ׉ 7cassandra://CzJfQr9PI4fh7o3YSmE5P1l7WDDT1OJ4-zA1uglBmbIC!`S׉ 7cassandra://Kp3Ofb7bjiAcBAK1rswzqHyh7ovT5-X3ba94PxLrCVg`̵׉ 7cassandra://7mnbErtl224xkqZIR7O8M_Jav_xaVwnw6gZtSAQg6uEz4͠X=ט{u׉׉ 7cassandra://j8zKIbz8t6Vf8eshlsTlDctYp8PaOSAodyR9iMbF4ws$` ׉ 7cassandra://yAQvobtV74zWj-fCnAXR6z0CsSa_3YpC72zmxTLK8b4?`S׉ 7cassandra://b5PccmcHbnCBm2bvK8-oCK4OKL1G83bqjp2vKhN_9D8`̵׉ 7cassandra://REAtpUwwZRHIpowTe67uEa_bHsaAYgIb2GyVBECvlx0ZL͠X =׉E NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Group Company 24. Financial liabilities Unsecured borrowings at amortised cost Subordinated loans (Note 24(a)) Loans from Dangote Industries Limited Bulk Commodities loans Loans from Dangote Oil Refinery Company Secured borrowings at amortised cost Power intervention loan (Note 24 (b)) Bank loans Total borrowings at 31st December Long-term portion of loans and borrowings Current portion repayable in one year and shown under current liabilities Overdraft balances Short-term portion Interest payable Financial liabilities (short term) 31-Dec-16 ₦’million 29,998 46,097 9,794 130,000 215,889 12,496 128,080 140,576 356,465 152,475 197,698 6,292 203,990 16,310 220,300 31-Dec-15 ₦’million 29,989 146,200 657 - 176,846 14,661 53,462 68,123 244,969 208,329 33,693 2,947 36,640 10,635 47,275 31-Dec-16 ₦’million 29,998 46,097 1,004 130,000 207,099 12,496 42,683 55,179 262,278 86,182 176,096 - 176,096 16,174 192,270 31-Dec-15 ₦’million 29,989 146,200 657 - 176,846 14,661 16,411 31,072 207,918 181,384 26,534 - 26,534 10,635 37,169 (a) A subordinated loan of ₦55.4 billion was obtained by the Company from Dangote Industries Limited in 2010. ₦30 billion was long-term and the remaining balance was short term and is repayable on demand. The long-term loan is unsecured, with interest at 10% per annum and is repayable in 3 years after a moratorium period ending 31st March, 2017. The interest on waived for 2011. Given the favourable terms at which the Company secured the the term portion was loan, an amount of ₦2.8 billion which is the difference between the fair value of the loan on initial recognition and the amount received, has been accounted for as a capital contribution.” (b) In 2011 and 2012, the Bank of Industry through Guaranty Trust Bank Plc and Access Bank Plc granted the Company the sum of ₦24.5 billion long-term loan repayable over 10 years at an all-in annual interest rate of 7% for part financing or refinancing the construction cost of the power plants at the Company’s factories under the Power and Aviation Intervention Fund. The loan has a moratorium of 12 months. Given the concessional terms at which the Company secured the loan, it is considered to have an element of government grant. Using prevailing market interest rates for an equivalent loan of 12.5%, the fair value of the loan is estimated at ₦20.7 billion. The difference of ₦3.8 billion between the gross proceeds and the fair value of the loan is the benefit derived from the low interest loan and is recognised as deferred revenue. The facility is secured by a debenture on all fixed and floating assets of the Company to be shared pari passu with existing lenders. long 198 Annual Report 2016 ׉ 7cassandra://Kp3Ofb7bjiAcBAK1rswzqHyh7ovT5-X3ba94PxLrCVg`̵X =׉E/Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Group Currency Bank overdrafts Other borrowings Subordinated loans from Parent company Other loans from Parent Company Loan from Bulk Commodities Inc. Loans from Dangote Oil Refinery Company Power intervention loan Short term loans from Banks Long term bank loans Nedbank/Standard Bank Loan Total borrowings at 31st December Company Currency Other borrowings Subordinated loans Loans from Parent Company Loan from Bulk Commodities Inc. Loans from Dangote refinery Power intervention loan Short term loans from Banks Total borrowings at 31st December The maturity profiles of borrowings are as follows: Group Company Due within one month Due from one to three months Due from three to twelve months Total current portion repayable in one year Due in the second year Due in the third year Due in the fourth year Due in the fifth year and further Total long-term portion of loans and borrowings Total 31-Dec-16 31-Dec-15 ₦’million 6,699 3,071 194,220 203,990 19,145 16,111 41,111 76,108 152,475 356,465 ₦’million 3,353 4,104 29,183 36,640 97,032 7,036 36,395 67,866 208,329 244,969 31-Dec-16 31-Dec-15 ₦’million 406 250 175,440 176,096 2,625 2,625 27,625 53,307 86,182 262,278 ₦’million 406 250 25,878 26,534 92,625 2,625 31,985 54,149 181,384 207,918 Nominal Maturity on interest rate Naira Naira USD Naira Naira USD MPR +1% MPR +1% MPR +1% demand 31-Dec-16 ₦’million 12/2019 12/2019 6% On demand 12/2017 7% 07 & 12/2021 6% 2017 29,998 46,097 1,004 130,000 12,496 42,683 262,278 31-Dec-15 ₦’million 29,989 146,200 657 - 14,661 16,411 207,918 Naira Naira USD Naira Naira USD CFA Rands MPR +1% MPR +1% MPR +1% Nominal Maturity on interest demand rate On demand 12/2019 12/2019 6% On demand 12/2017 7% 07 & 12/2021 6% 8.50% 9.95% 2017 07/2021 11/2022 31-Dec-16 31-Dec-15 ₦’million 6,292 ₦’million 2,947 29,998 46,097 9,794 130,000 12,496 47,604 24,028 50,156 350,173 356,465 29,989 146,200 657 - 14,661 19,163 - 31,352 242,022 244,969 Annual Report 2016 199 ׉ 7cassandra://b5PccmcHbnCBm2bvK8-oCK4OKL1G83bqjp2vKhN_9D8`̵X =X ={בCט{u׉׉ 7cassandra://q9CkwbOfUEDSXxLWYUOD2zvSI_qFc0xSPYEXI-J1DiM` ׉ 7cassandra://WB4CKcdR3c2I3nYWpwE8t3NXup6N4uDPMGRv8TRd6T8=g`S׉ 7cassandra://kNieHue0Ip9axRhkhXWUIfMHZ6Om-G6RY6kVYOhlvJQ`̵׉ 7cassandra://l4nDMsHF3rRaYK5gJ_hr12LJZ-fNblWCin2riHY3kTIn h͠X =ט{u׉׉ 7cassandra://kYrckz67TsQvLMbFlDosFaV8AFJhuhs-H3OikAKOm8Q)J` ׉ 7cassandra://dGeD85EsULBQHLe-8FIkENFcLszcIAbVyfzcJcTZ9ZM4`S׉ 7cassandra://YIo4dGdITeuVxJz6dFlyQcHw7jDJpXhrsvz5ahpUYGs`̵׉ 7cassandra://0K_K-COFW-ETrxmpbAu6q3CRCj1P9r0vhp04U3kEN0cX(͠X =׉E:NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 25. Deferred revenue Group 31-Dec-16 31-Dec-15 ₦’million 25.1 Deferred revenue arising from government grant (refer to (a) below Current Non-current 1,446 1,446 374 1,072 1,446 ₦’million 1,390 1,390 415 975 1,390 Company 31-Dec-16 31-Dec-15 ₦’million 975 975 346 629 975 ₦’million 1,390 1,390 415 975 1,390 (a) The deferred revenue mainly arises as a result of the benefit received from government loans received in 2011 and 2012 (see note 24). The revenue was recorded in other income line. Movement in deferred revenue At 1st January Additions during the year Released to profit and loss account (Other income) Closing balance 25.2 Other current liabilities Current portion of deferred revenue Related party transactions Parent company Entities controlled by the parent company Affiliates and associates of parent company Total of related party transactions Other current liabilities 26. Provisions for liabilities and other charges Balance at beginning of the year Effect of foreign exchange differences Provisions made during the year Write back of provision no longer required Unwinding of discount Balance at the end of the year Group 31-Dec-16 31-Dec-15 ₦’million 1,390 473 1,863 (417) 1,446 374 8,003 1,956 7,974 17,933 18,307 Group 31-Dec-16 31-Dec-15 ₦’million 3,283 123 1,854 (1,984) 68 3,344 ₦’million 4,011 (44) 810 (1,532) 38 3,283 1,868 (478) 1,390 415 7,291 1,387 15,444 24,122 24,537 ₦’million 1,868 - Company 31-Dec-16 31-Dec-15 ₦’million 1,390 - 1,390 (415) 975 346 8,003 1,237 5,497 14,737 15,083 1,868 (478) 1,390 415 7,256 1,035 13,822 22,113 22,528 Company 31-Dec-16 31-Dec-15 ₦’million 619 - 1,615 - 68 2,302 ₦’million 295 - 286 - 38 619 ₦’million 1,868 - 200 Annual Report 2016 ׉ 7cassandra://kNieHue0Ip9axRhkhXWUIfMHZ6Om-G6RY6kVYOhlvJQ`̵X =׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The Group’s obligations to settle environmental restoration and dismantling / decommissioning cost of property, plant and equipment. The expenditure is expected to be utilised at the end of the useful lives for the mines which is estimated to be between the years 2025 to 2035. 27. Long term payables Balance at beginning of the year Credit obtained during the year Transfer to short term Foreign exchange differences Balance at the end of the year Group 31-Dec-16 31-Dec-15 ₦’million 24,442 21,354 (42,353) 14,287 17,730 ₦’million - 24,442 - - 24,442 Company 31-Dec-16 31-Dec-15 ₦’million 24,442 3,624 (42,353) 14,287 - Long term payables represent amounts payable for trucks acquired on 2 to 3 years suppliers’ credit. 28. Employee benefits Group 28.1 Defined contribution plans Balance at beginning of the year Provision for the year Payments during the year Balance at the end of the year 31-Dec-16 31-Dec-15 ₦’million 44 2,292 (2,125) 211 ₦’million 134 931 (1,021) 44 ₦’million - 24,442 - - 24,442 Company 31-Dec-16 31-Dec-15 ₦’million 40 1,534 (1,533) 41 ₦’million 94 658 (712) 40 Provisions for staff pensions have been made in the financial statements in accordance with the relevant pension rules applicable in the country. The accrual at 31st December, 2016 amounted to ₦211 million (2015: ₦44 million) for the Group. Outstanding staff pension deductions that have not been remitted as at year end have been accrued accordingly. The employees of the Group are members of a State arranged Pension scheme which is managed by several private sector service providers. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the defined contribution plan is to make the specified contributions. The total expense recognised in profit or loss of ₦2.29 billion (2015: ₦931 million) represents contributions payable to these plans by the Group at rates specified in the rules of the plans. Annual Report 2016 201 ׉ 7cassandra://YIo4dGdITeuVxJz6dFlyQcHw7jDJpXhrsvz5ahpUYGs`̵X =X ={בCט{u׉׉ 7cassandra://RzfHeBfAmS_YhRnbXzVqeKmzk7b5yqyn7Xg0HkMUtKEq` ׉ 7cassandra://zBaOZL7YpGiyNaqgk0amt3OVArl3rbtJmlqqK6E7KWw7`S׉ 7cassandra://IPJQV7ABhW6DS1f71q5Kc3td6G4BEvC8QgPHbUmGBLEx`̵׉ 7cassandra://bYD0Zo72n9Mvww_cb58gBhLdOoQAMwvdb7b-gBDzrzEq$͠X =ט{u׉׉ 7cassandra://X-CjOku37oRZ0L-jEXxLRPD0uOKoiSUkPdWjtS1MfN8b` ׉ 7cassandra://mKCeD5hpf7N4Gh9bNPiuzgSTji9XK395SOrUlgtHwx02`S׉ 7cassandra://7RUemwe7WZvYK838VY5YgpLXoYd9Zm8PVgWwklH6uBY`̵׉ 7cassandra://_B5dAjjjRZkl7fCqw2r7YQCE3CPYgH9OyjiY_RjaywgUH͠X =׉E NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 28.2 Defined benefit plan The Group used to operate a funded defined benefit plan (gratuity) for qualifying employees of the Group. This scheme has been discontinued with accrued benefits up to 31st December, 2014 transferred to an independent fund. The difference between the assets transferred to the fund and the accrued benefits is carried in the Statement of Financial position as a current liability. The plan typically exposes the Group to actuarial risks such as; investment risk, interest rate risk, longevity risk and salary risk. Investment risk The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government bond yields; if the return on plan assets is below this rate, it will create a plan deficit. Currently the plan has a relatively balanced investment in Government Securities and money market instruments. Due to the long-term nature of the plan liabilities, the board of the pension fund considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities and in real estate to leverage the return generated by the fund. Interest rate risk Longevity risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s debt investments. The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability. Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability. The principal assumptions used for the purposes of the actuarial valuations were as follows. Group & Company Discount rate(s) Expected rate(s) of salary increase Inflation rate Movements in the fair value of plan assets are as follows: Group & Company At 1st January Interest income Re-measurement loss- Return on plan assets excluding amounts included in net interest expense Benefit paid by the employer Curtailment At 31st December 202 Annual Report 2016 31-Dec-16 31-Dec-15 ₦’million 974 - - - (974) - ₦’million 964 164 (47) (107) - 974 31-Dec-16 31-Dec-15 % % 12 11 9 - - - ׉ 7cassandra://IPJQV7ABhW6DS1f71q5Kc3td6G4BEvC8QgPHbUmGBLEx`̵X =׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Movements in the present value of the defined benefit obligation are as follows: Group & Company 31-Dec-16 31-Dec-15 ₦’million At 1st January Current service cost Interest cost Re-measurement (gains)/losses Actuarial losses/(gains) Curtailment Benefits paid At 31st December 4,966 - - - (4,966) - - ₦’million 3,034 646 449 944 - (107) 4,966 The major categories of plan assets, and the expected rate of return at the end of 2015 for each category, are as follows. Group & Company 31-Dec-16 31-Dec-15 Government securities Cash Money market instruments Liability on plan asset - Group & Company % % ₦’million 14 - - - 13 31-Dec-16 31-Dec-15 ₦’million 425 - - - - - - The fair value of the above assets are based on quoted prices in active markets as at 31st December, 2015 The actual return on plan assets in 2015 was ₦117.1 million Amounts recognised in profit or loss in respect of these defined benefit plans are as follows. Group & Company 31-Dec-16 31-Dec-15 ₦’million Current service cost Net Interest expense Curtailment credit Amounts recognised in other comprehensive income Group & Company 31-Dec-16 31-Dec-15 ₦’million Re-measurement on the net defined liability Actuarial (loss)/gain on defined benefit obligation Return on plan assets (excluding amounts included in net interest) - - - ₦’million (944) (47) (991) - - (2,985) (2,985) ₦’million 646 285 - 931 - 560 985 (11) 974 Annual Report 2016 203 ׉ 7cassandra://7RUemwe7WZvYK838VY5YgpLXoYd9Zm8PVgWwklH6uBY`̵X =ŁX =ā{בCט{u׉׉ 7cassandra://T8DYPr6iymN75dTB8B4Wz_sXA2b4LMNcTgySvYwB8GY` ׉ 7cassandra://AV3-1PsLuXGVFPqBKQStIYCyruqTikpwk1t7ZwDs7kg=`S׉ 7cassandra://5E5yiwVTy7WV6D7F-kzs_tsIqIYj7jFq6xDWam-q78w`̵׉ 7cassandra://Me22hu4-DS28xvheIN2pApUgyuQ76Qtghs1gOuQIl2ww(͠X =ט{u׉׉ 7cassandra://wDZ5pnG1-W87pgC9QhLUHRr8PGccEbv34vU8rt9GvXc` ׉ 7cassandra://caKXYH2_L5MR5uSGvi6AFUJbWeb95eg4vrutoYvlku8:*`S׉ 7cassandra://FMDyaBdOuiIV06Gi5S5we-bwyJS1PKw-9hUWytXqS5M9`̵׉ 7cassandra://Cbas5XxXWphxLmUTfEUpERVuZ4B3kAPMCVY-FXlaiWM[U<͠X =׉E NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The amount included in the consolidated and separate statement of financial position arising from the entity’s obligation in respect of its defined benefit plans is as follows. Group & Company 31-Dec-16 31-Dec-15 ₦’million Present value of defined benefit obligations Fair value of plan assets Net liability arising from defined benefit obligation - - - ₦’million 4,966 (974) 3,992 • If the discount rate is 100 basis points higher (lower), the defined benefit obligation at at 31st December, 2015 would decrease by ₦651 million (increase by ₦792 million). • If the expected salary growth increases (decreases) by 1%, the defined benefit obligation as at 31st December, 2015 would increase by ₦817 million (decrease by ₦680 million). • If the the assumed mortality age is rated up (down) by one year, the defined benefit obligation as at 31st December, 2015 would increase by ₦39 million (decrease by ₦35 million). The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of 2015, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position. 29. Financial Instruments 29.1 Capital Management The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of net debt (borrowings as detailed in note 24 offset by cash and bank balances) and equity of the Group (comprising issued capital, reserves, retained earnings and non-controlling interests as detailed below. Group Company Net debt (Note 29.1.1) Equity 31-Dec-16 31-Dec-15 ₦’million 240,772 797,345 ₦’million 204,177 644,720 31-Dec-16 31-Dec-15 ₦’million 196,768 981,367 ₦’million 189,956 748,479 The Group’s Audit, Compliance and Risk management committee reviews the capital structure of the Group on a semi-annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group endeavours to maintain an optimum mix of net gearing ratio which provides benefits of trading on equity without exposing the Group to any undue long term liquidity risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To maintain the capital or adjust the capital structure, the Group may adjust the dividend payment to shareholders, issue new and/ or bonus shares, or raise debts in favourable market conditions. 204 Annual Report 2016 ׉ 7cassandra://5E5yiwVTy7WV6D7F-kzs_tsIqIYj7jFq6xDWam-q78w`̵X =׉EoFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The net debt to equity ratio as on 31st December, 2016 is 30% (2015: 32%). 29.1.1 Debt to equity ratio The debt to equity ratio at end of the reporting period was as follows. Group Company Financial debt (Note 24) Cash and bank balances (Note 31.1) Net debt Equity Net debt/ Equity ratio 29.2 Categories of financial instruments Financial assets- Loans and receivables Cash and bank balances Short term deposits Trade and other receivables (29.2.1) Due from related parties and receivables from subsidiaries Total financial assets Financial liabilities - at amortised cost Trade and other payables (29.2.2) Financial liabilities (29.2.3) Due to related parties Long term payables Total financial liabilities 31-Dec-16 31-Dec-15 ₦’million 356,465 115,693 240,772 797,345 0.30 ₦’million 244,969 40,792 204,177 644,720 0.32 Group 31-Dec-16 31-Dec-15 ₦’million 74,001 41,692 26,279 18,609 160,581 215,799 372,775 17,933 17,730 624,237 ₦’million 24,907 15,885 11,544 8,643 60,979 109,785 255,604 24,122 24,442 413,953 31-Dec-16 31-Dec-15 ₦’million 262,278 65,510 196,768 981,367 0.20 ₦’million 207,918 17,962 189,956 748,479 0.25 Company 31-Dec-16 31-Dec-15 ₦’million 33,173 32,337 11,857 651,860 729,227 140,034 278,452 14,737 - 433,223 ₦’million 8,189 9,773 4,252 404,542 426,756 69,148 218,553 22,113 24,442 334,256 29.2.1 Defined as total trade and other receivables excluding prepayments, accrued income and amounts relating to taxation. 29.2.2 Defined as total trade and other payables excluding taxation and advances from customers. 29.2.3 Defined as total borrowings, principal and accrued interest. 29.3 Financial risk management objectives The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group and analyses exposures by degree and magnitude of risks. These risks include market risk, credit risk, and liquidity risk Annual Report 2016 205 ׉ 7cassandra://FMDyaBdOuiIV06Gi5S5we-bwyJS1PKw-9hUWytXqS5M9`̵X =ɁX =ȁ{בCט{u׉׉ 7cassandra://HpEHlvxQQZGEaz84dci7qw_PN2VH7Nq0SNLYAkCSJGk*g` ׉ 7cassandra://Tv8jMW-s430j0cFj2oLzOT_V3hoK3T0L71sNozre-lU?`S׉ 7cassandra://M1m2f8TAlpTmuY1BJ2Q31Zl8BZsUpULJDDd5QXFuc0A`̵׉ 7cassandra://jSNqEuzOEXVu-_PYGAiCswj-lxFRACJLPjhMhdnxGkcuy<͠X =ט{u׉׉ 7cassandra://3vEsG8_ngfy9Y1F6I0M7SFcJxc0OlzldzWrYyw6fUJo^` ׉ 7cassandra://-VJr7Q1L1N0lesl-e32Jr-zYw6LfFDzCkTGlNO5SkC0:`S׉ 7cassandra://1uL99w-ouq1hIE2zskXhns30QLgwNW6cNJNZf7V4TyA_`̵׉ 7cassandra://_tyPaKSSHyqzOKqzHhBsp2n5xhtWws5AUweui3xFfqYdW͠X!=׉E NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 29.4 Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (Note 29.5.1) and interest rates (Note 29.7.1). 29.5 Foreign currency risk management The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Income is primarily earned in local currency for most of the locations with a significant portion of capital expenditure being in foreign currency. The Group manages foreign currency by monitoring our financial position in each country we operate with the aim of having assets and liabilities denominated in the functional currency as much as possible. The carrying amounts of the Group and Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows. Group Liabilities Assets US Dollars 31-Dec-16 31-Dec-15 ₦’million 150,791 ₦’million 51,728 31-Dec-16 31-Dec-15 ₦’million 15,618 Company Liabilities Assets US Dollars 31-Dec-16 31-Dec-15 ₦’million 120,004 ₦’million 49,645 31-Dec-16 31-Dec-15 ₦’million 622,832 ₦’million 390,580 29.5.1 Foreign currency sensitivity analysis The Group is mainly exposed to US Dollars. The following table details the Group and Company’s sensitivity to a 35% (2015: 15%) increase and decrease in the Naira against the US Dollar. 35% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 35% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity for a 35% change in the exchange rates. A negative number below indicates a decrease in profit or equity for a 35% change in the exchange rates. Group Effect on Profit or loss/Equity for a 35% (2015:15%) appreciation Effect on Profit or loss/Equity for a 35% (2015:15%) depreciation 33,117 5,263 Company 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 ₦’million ₦’million ₦’million ₦’million (123,193) 123,193 (33,117) (5,263) (35,798) 35,798 This is mainly attributable to the exposure outstanding on US dollar receivables and payables at the end of the reporting period. 29.6 Credit risk management Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. 206 Annual Report 2016 ₦’million 1,606 ׉ 7cassandra://M1m2f8TAlpTmuY1BJ2Q31Zl8BZsUpULJDDd5QXFuc0A`̵X!=׉E Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The Group’s and Company’s business is predominantly on a cash basis. Revolving credits granted to major distributors and very large corporate customers approximate about ₦5 billion and these are payable within 30 days. Stringent credit control is exercised over the granting of credit, this is done through the review and approval by executive management based on the recommendation of the independent credit control group. Credit to major distributors are covered by bank guarantee with an average credit period of no more than 30 days. For very large corporate customers, clean credit is granted based on previous business relationships and positive credit worthiness which is performed on an on-going basis. This credit is usually payable at no more than 30 days. The Group and the Company do not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as related entities with similar characteristics. There is no material single obligor exposure to report. Trade receivables consist of a large number of customers, spread across diverse geographical areas. On-going credit evaluation is performed on the financial condition of accounts receivable. The credit risk on liquid funds financial instruments is limited because the counterparties are banks with high credit-ratings assigned by credit-rating agencies. 29.6.1 Maximum Exposure to Credit risk Financial assets- Loans and receivables Cash and bank balances Short term deposits Trade and other receivables Due from related parties Group 31-Dec-16 ₦’million 74,001 41,692 26,279 18,609 160,581 31-Dec-15 ₦’million 24,907 15,885 11,544 8,643 60,979 Company 31-Dec-16 ₦’million 33,173 32,337 11,857 651,860 729,227 31-Dec-15 ₦’million 8,189 9,773 4,252 404,542 426,756 29.7 Liquidity risk management The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures and preference shares. The Group has access to sufficient sources of funds directly from external sources as well as from the Group’s parent. 29.7.1 Liquidity maturity table The following tables detail the Group and Company’s remaining contractual maturity for its financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay. The tables below include both interest and principal cash flows for the Group. Annual Report 2016 207 ׉ 7cassandra://1uL99w-ouq1hIE2zskXhns30QLgwNW6cNJNZf7V4TyA_`̵X!=́X!=́{בCט{u׉׉ 7cassandra://ulljj_NTo1Yu2YcDGE8uXWFi4yen_Krwv2VJAi-1XSs` ׉ 7cassandra://Ni0vkByf09ulwZdUDS6Xk8ig62RvFtbOIseqUa2cvfM9-`S׉ 7cassandra://RKtue75FGNICeHIBzNUtMHEgwADqNbRpb2uaAcWcY64`̵׉ 7cassandra://31pgWM2ur9wXOG8aMreEUwmG60fi1AGQA8Fxp3WW1oUsX͠X!=ט{u׉׉ 7cassandra://2cESB2IPJfyz8SCXnlv5b43Qraq9MS9p7FxnTSxbhHk` ׉ 7cassandra://zaYi8XmMT0gQSXtDp97baAjYyLuBHQ2L_Q--miZkgis8 `S׉ 7cassandra://mHTmdQQhyaXUjzYKQ9y6l3xXlS12x1T1qxe4jGM-cO0W`̵׉ 7cassandra://ElGZscQBojGQUDDWq9rIKjxHxL7hLGca_La4LmUtDY0` ͠X!=׉EVNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 Group <1 mth 1– 3 mths 3 mths – 1yr ₦’million ₦’million As at 31st December, 2016 Financial debts Trade payables and other payables Due to related parties Long term payables Total 23,708 173,446 17,933 - 215,087 6,113 - - - 6,113 ₦’million ₦’million 203,753 42,353 - - 246,106 ₦’million >1 yr ₦’million 169,964 - - 17,730 187,694 <1 mth 1– 3 mths 3 mths – 1yr >1 yr ₦’million As at 31st December, 2015 Financial debts Trade payables and other payables Due to related parties Long term payables Total 14,356 109,785 24,122 - 148,263 6,557 - - - 6,557 Company <1 mth 1– 3 mths 3 mths – 1yr >1 yr ₦’million ₦’million As at 31st December, 2016 Financial debts Trade payables and other payables Due to related parties Total 16,701 97,681 14,737 129,119 2,245 - - 2,245 ₦’million ₦’million 180,622 42,353 - 222,975 ₦’million ₦’million 92,709 - - 92,709 <1 mth 1– 3 mths 3 mths – 1yr >1 yr ₦’million As at 31st December, 2015 Financial debts Trade payables and other payables Due to related parties Long term payables Total 11,163 69,148 22,113 - 102,424 2,243 - - - 2,243 32,222 - - - 32,222 ₦’million 195,120 - - 26,886 222,006 Interest Risk The following table details the sensitivity to a 1% (2015: 1%) increase or decrease in LIBOR which is the range of margin by which the Group and Company envisage changes to occur in 2016. Group Company 31-Dec-16 31-Dec-15 Effect on Profit or loss/Equity for a 1% (2015:1%) increase in rate Effect on Profit or loss/Equity for a 1% (2015:1%) decrease in rate 208 Annual Report 2016 449 (348) 348 31-Dec-16 31-Dec-15 ₦’million ₦’million ₦’million ₦’million (449) 3,846 (3,846) 2,387 (2,387) 37,401 - - - 37,401 ₦’million 228,283 - - 26,886 255,169 ׉ 7cassandra://RKtue75FGNICeHIBzNUtMHEgwADqNbRpb2uaAcWcY64`̵X!=׉E Financials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 29.7.2 Fair valuation of financial assets and liabilities The carrying amount of trade and other receivables, cash and bank balances and amounts due from and to related parties as well as trade payables, other payables approximate their fair values because of the short-term nature of these instruments and, for trade and other receivables, because of the fact that any loss from recoverability is reflected in an impairment loss. The fair value of financial debt approximate the carrying amount as the loans are pegged to market rates and reset when rates change. 30. Related party transactions Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. Details of transactions between the Group and Company, and other related parties are disclosed below. The Group and the Company, in the normal course of business, sells to and buys from other business enterprises that fall within the definition of a ‘related party’ contained in International Accounting Standard 24. These transactions mainly comprise purchases, sales, finance costs, finance income and management fees paid to shareholders. The companies in the Group also provide funds to and receive funds from each other as and when required for working capital financing and capital projects. 30.1 Trading transactions During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group: Sale of goods 31-Dec-16 ₦’million Parent company Entities controlled by the parent company - 7,995 31-Dec-15 ₦’million - 565 31-Dec-16 ₦’million Purchases of goods 31-Dec-15 ₦’million - 111,028 During the year, the company entered into the following trading transactions with related parties: Sale of goods Entities controled by the company Entities controlled by the parent company 31-Dec-16 ₦’million 6,054 7,995 31-Dec-15 ₦’million - 565 - 167,348 31-Dec-16 ₦’million Purchases of goods 31-Dec-15 ₦’million - 77,007 - 147,604 In addition to sales and purchases of goods, the Company charged interest amounting to ₦43.8 billion (2015: ₦21.9 billion) on loans granted to subsidiaries. This interest is eliminated on consolidation. Also during the year, the parent company charged the Group a total interest of ₦29.0 billion (2015: ₦25.2 billion), being the cost of borrowing to finance capital projects and other operational expenses. Balances at year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables. Annual Report 2016 209 ׉ 7cassandra://mHTmdQQhyaXUjzYKQ9y6l3xXlS12x1T1qxe4jGM-cO0W`̵X!=сX!=Ё{בCט{u׉׉ 7cassandra://h8ezgmWPauDO0P4hfc9yVP1BHChlWtYXCQ3kDv7RN1E` ׉ 7cassandra://qP0qBrtycHgAQx3Mo_WDlDOMvSdAX9wneQGYa6ucYdw8`S׉ 7cassandra://8c3L0VUy_vq03wXG27peQjry7QcVLLgwDHdQBBL7F94`̵׉ 7cassandra://UqBgczdwpYNiE9fzsVTUksoK708580iKtClcwrySUZkpT͠X!=ט{u׉׉ 7cassandra://wgxjEMO_VhVt7IfqNc8yNch6Ck2ZdfhMV8ZCOI62DV4M` ׉ 7cassandra://byC_fCfuuzvOtutWjwiXXiKOF5qqjAwaoiP8HoEmPXI:`S׉ 7cassandra://I-IyJeCcwQUif8XraU56zbWVkMzqgC4vfOyn8igpGqE`̵׉ 7cassandra://vQH4LWpIkDVj5yFMky_QQm2Gq-vjXn4FIadpL19znlQ^`͠X!=׉E\NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 The following balances were outstanding at the end of the reporting period: Group Amounts owed by related parties Current Parent company Entities controlled by the parent company Affiliates and associates of parent company 31-Dec-16 ₦’million - 18,537 72 18,609 31-Dec-15 ₦’million - 8,169 474 8,643 Company Amounts owed by related parties Non-Current Entities controlled by the company 31-Dec-16 ₦’million 633,323 31-Dec-15 ₦’million 395,917 Amounts owed to related parties 31-Dec-16 ₦’million - 31-Dec-15 ₦’million - The above balances represents expenditures on projects in African countries. These are not likely to be repaid within the next twelve months and have been classified under non-current assets. Company Amounts owed by related parties Current Parent company Entities controlled by the parent company Affiliates and associates of the parent company 30.2 Loans from related parties Affiliates and associates of the parent company Entities controlled by the parent company Loans from parent company 31-Dec-16 ₦’million - 18,537 - 18,537 Group 31-Dec-16 ₦’million 9,794 130,000 76,095 31-Dec-15 ₦’million 657 - 176,189 31-Dec-15 ₦’million - 8,169 456 8,625 Amounts owed to related parties 31-Dec-16 ₦’million 8,003 1,237 5,497 14,737 Company 31-Dec-16 ₦’million 1,004 130,000 76,095 31-Dec-15 ₦’million 657 - 176,189 Except as described in note 24 (a), the Group has been provided loans at rates and terms comparable to the average commercial rate of interest terms prevailing in the market. The loans are unsecured. 31-Dec-15 ₦’million 7,256 1,035 13,822 22,113 Amounts owed to related parties 31-Dec-16 ₦’million 8,003 1,956 7,974 17,933 31-Dec-15 ₦’million 7,291 1,387 15,444 24,122 210 Annual Report 2016 ׉ 7cassandra://8c3L0VUy_vq03wXG27peQjry7QcVLLgwDHdQBBL7F94`̵X!=׉EFinancials NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 30.3 Compensation of key management personnel The remuneration of directors and other members of key management personnel during the year was as follows: Group Company 31-Dec-15 ₦’million 485 31-Dec-16 ₦’million Short-term benefits Provision for staff pension benefits 638 - 638 - 485 31-Dec-16 ₦’million 632 - 632 31-Dec-15 ₦’million 485 - 485 Other related party transactions In addition to the above, Dangote Industries Limited performed certain administrative services for the Company, for which a management fee of ₦3.054 billion (2015: ₦2.839 billion) was charged, being an allocation of costs incurred by relevant administrative departments. 31. Supplemental cash flow disclosures 31.1 Cash and cash equivalents Cash and bank balances Short term deposits Total cash and bank balances Bank overdrafts used for cash management purposes Cash and cash equivalents Group 31-Dec-16 ₦’million 74,001 41,692 115,693 (6,292) 109,401 31-Dec-15 ₦’million 24,907 15,885 40,792 (2,947) 37,845 Company 31-Dec-16 ₦’million 33,173 32,337 65,510 - 65,510 31-Dec-15 ₦’million 8,189 9,773 17,962 - 17,962 32. Operating lease arrangements Operating leases relate to leases of depots with lease terms of between 1 and 3 years. The Group does not have an option to purchase the leased land at the expiry of the lease periods. Payments recognised as an expense Minimum lease payments Non-cancellable operating lease commitments Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years 31-Dec-16 ₦’million Group Company 31-Dec-15 841 31-Dec-16 ₦’million ₦’million 826 31-Dec-16 ₦’million 706 Group Company 31-Dec-15 700 756 - 1,456 ₦’million 545 242 - 787 31-Dec-16 ₦’million 356 74 - 430 31-Dec-15 ₦’million 549 31-Dec-15 ₦’million 341 46 - 387 Annual Report 2016 211 ׉ 7cassandra://I-IyJeCcwQUif8XraU56zbWVkMzqgC4vfOyn8igpGqE`̵X!=ցX!=Ձ{בCט{u׉׉ 7cassandra://quCEDedYla1JLrG9GqCHWzJCCyIyelYzK2KFaFOv7Acw` ׉ 7cassandra://26kCy7L8uGoLbnaREP3AIpcFSUeSRb94UStiRoflc58 8`S׉ 7cassandra://uhQSV4FeSpnGQi3bHZt3OzjSg2jQcin07npgCAwe0mM c`̵׉ 7cassandra://0HMfkXAbsPfAJLIgVaYdp5I_J_Zsq2Gzuj_C8ESIEQQl͠X!=ט{u׉׉ 7cassandra://nygzaLUnixpB_e-WEBGx1vx_6ECD8fEo8CXWHs689u0` ׉ 7cassandra://DEhB4SEjHOjq2PakZcd7hs_05mV0gILl38m_Pxob51U6`S׉ 7cassandra://qGBboSBLzMkEAqoBd3sN_x3UxUVBnO7S-AzpfECmB1I`̵׉ 7cassandra://6IzFzktPgjn0nVwL8wP7veHZHKKY7DtTyxa7tb4VScgYx(͠X!=׉EaNOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2016 33. Commitments for expenditure Group 31-Dec-16 ₦’million Commitments for the acquisition of property, plant and equipment 470,294 31-Dec-15 ₦’million 372,493 Company 31-Dec-16 ₦’million 257,877 31-Dec-15 ₦’million 213,673 The Company also has unconfirmed letters of credit amounting to ₦208.97billion (USD686.96 billion) as at year end. 34. Contingent liabilities and contingent assets No provision has been made in these consolidated and separate financial statements for contingent liabilities in respect of litigations against the Company and its subsidiaries amounting to ₦6.870 billion (2015: ₦32.015 billion). According to the solicitors acting on behalf of the Company and its subsidiaries, the liabilities arising, if any, are not likely to be significant. 35. Subsequent Events On 24th February, 2017 a dividend of ₦8.50 per share was proposed by the directors for approval at the Annual General Meeting. This will result in a dividend payment of ₦144.8 billion. 212 Annual Report 2016 ׉ 7cassandra://uhQSV4FeSpnGQi3bHZt3OzjSg2jQcin07npgCAwe0mM c`̵X!=׉EFinancials FIVE YEAR FINANCIAL SUMMARY OTHER NATIONAL DISCLOSURE Group Balance sheet Assets/liabilities Property, plant and equipment Intangible assets Investments Prepayments for property, plant & equipment Net current liabilities Deferred taxation assets/(liabilities) Long term debts Long term payables Staff gratuity Other non-current liabilities Net assets Capital and reserves Share capital Share premium Capital Contribution Employee Benefit Reserve Currency Translation Reserve Revenue reserve Non controlling interest Turnover, Profit or Loss account Turnover Profit before taxation Taxation Profit after taxation Per share data (Naira): Earnings - (Basic & diluted) Net assets 2016 ₦’million 1,155,711 4,145 1,582 13,196 (209,083) 6,415 (152,475) (17,730) - (4,416) 797,345 8,520 42,430 2,877 - 78,964 677,479 (12,925) 797,345 615,103 180,929 5,695 186,624 11.34 46.79 2015 ₦’million 917,212 2,610 1,582 9,094 (34,718) (10,039) (208,329) (24,442) (3,992) (4,258) 644,720 8,520 42,430 2,877 (1,007) (22,366) 620,501 (6,235) 644,720 491,725 188,294 (6,971) 181,323 10.86 37.83 2014 ₦’million 747,794 3,699 - 79,491 (95,846) (3,840) (131,942) - (2,070) (5,401) 591,885 8,520 42,430 2,877 (16) (3,837) 537,750 4,161 591,885 391,639 184,689 (25,188) 159,501 9.42 34.73 2013 ₦’million 581,465 2,306 - 91,716 (15,464) 19,128 (124,850) - (1,963) (2,245) 550,093 8,520 42,430 2,877 (466) (4,753) 496,456 5,029 550,093 386,177 190,761 10,437 201,198 11.85 32.28 2012 ₦’million 478,091 1,727 - 45,016 (12,135) 8,941 (112,462) - (1,744) (2,898) 404,536 8,520 42,430 2,877 (746) (1,444) 345,665 7,234 404,536 298,454 135,648 9,377 145,025 8.52 23.74 Earnings per share are based on profit after taxation and the weighted average number of issued and fully paid ordinary shares at the end of each financial year. Net assets per share are based on net assets and the weighted average number of issued and fully paid ordinary shares at the end of each financial year. Annual Report 2016 213 ׉ 7cassandra://qGBboSBLzMkEAqoBd3sN_x3UxUVBnO7S-AzpfECmB1I`̵X!=ہX!=ځ{בCט{u׉׉ 7cassandra://6gkKZXqtfhHnMgHJyKJpVFub9YTC4_PsyAB_ZcPh-gk ` ׉ 7cassandra://XkMlUzsUmdBHRU7dNpQCfToqj3k1IHRBBvtszNBN7Zg4m`S׉ 7cassandra://w47CDqv1DvTVpdAHsWhIAPZpyZ8WBNqBMWWjXrd-a7I`̵׉ 7cassandra://f5khLQDIfaVJBS7cv-hstq2iPTrOmMfhrrud-mmaOl8o$͠X!=ט{u׉׉ 7cassandra://V5V6VCL_9KOaMK6TXGGK8HCZjyzrYVOffLJ3dGXDo4Qp` ׉ 7cassandra://-USdTp9HVoM8ZiPOr3sVgLUXm8rvt24OwcSaFIj7JgE-`S׉ 7cassandra://KK0XtpmCF54qhqgpGAJaQh5Dgv1WgH_EujvZ5WTrcxs`̵׉ 7cassandra://CY59GSXv_Vv4oB4s91xOagWivPGVk4DZIBAcHPrbpokR ͠X!=׉EFIVE YEAR FINANCIAL SUMMARY OTHER NATIONAL DISCLOSURE Company Balance sheet Assets/( liabilities) Property, plant and equipment Intangible assets Investments Receivables from subsidiaries Prepayments for property, plant & equipment Net current liabilities Deferred taxation (liabilities)/assets Long term debts Long term payables Staff gratuity Other non-current liabilities Net assets Capital and reserves Share capital Share premium Capital contribution Employee benefit reserve Revenue reserve Turnover, profit or loss account Turnover Profit before taxation Taxation Profit after taxation Per share data (Naira): Earnings - (Basic & diluted) Net assets 2016 ₦’million 569,017 113 80,255 633,323 - (196,625) (15,603) (86,182) - - (2,931) 981,367 8,520 42,430 2,828 - 927,589 981,367 426,129 374,396 (6,191) 368,205 21.61 57.59 2015 ₦’million 577,017 385 27,657 395,917 - (28,000) (13,085) (181,384) (24,442) (3,992) (1,594) 748,479 8,520 42,430 2,828 (1,007) 695,708 748,479 389,215 220,567 (7,396) 213,171 12.51 43.92 2014 ₦’million 526,722 682 26,075 277,150 1,773 (87,944) (6,726) (95,435) - (2,070) (1,685) 638,542 8,520 42,430 2,828 (16) 584,780 638,542 371,534 213,040 (27,226) 185,814 10.90 37.47 2013 452,047 672 25,208 164,525 23,950 (14,054) 18,359 (95,079) - (1,963) (2,102) 571,563 8,520 42,430 2,828 (465) 518,250 571,563 371,552 200,011 10,252 210,263 12.34 33.54 2012 ₦’million ₦’million 377,864 1 25,097 85,926 21,062 (18,437) 8,107 (83,050) - (1,744) (2,685) 412,141 8,520 42,430 2,828 (746) 359,109 412,141 285,635 138,089 7,927 146,016 8.57 24.19 Earnings per share are based on profit after taxation and the weighted average number of issued and fully paid ordinary shares at the end of each financial year. Net assets per share are based on net assets and the weighted average number of issued and fully paid ordinary shares at the end of each financial year. 214 Annual Report 2016 ׉ 7cassandra://w47CDqv1DvTVpdAHsWhIAPZpyZ8WBNqBMWWjXrd-a7I`̵X!=׉EFinancials STATEMENT OF VALUE ADDED OTHER NATIONAL DISCLOSURE 2016 2015 Revenue Finance Income Other income Bought-inmaterials and services: - Imported - Local Value added Applied as follows: To pay employees: Salaries, wages and other benefits To pay Government: Current taxation Deferred taxation To pay providers of capital: Finance charges To provide for maintenance of fixed assets: - Depreciation - Amortization Retained in the Group: - Non controlling interest - Profit and loss account ₦’million % 615,103 43,817 10,542 669,462 (86,226) (236,485) 346,751 100 Group Company 2016 ₦’million % ₦’million % 491,725 13,949 3,951 426,129 224,708 4,766 509,625 (50,669) (151,932) 307,024 100 655,603 (63,724) (107,206) 484,673 100 2015 ₦’million % 389,215 54,348 2,148 445,711 (38,656) (91,783) 315,272 100 45,691 4,637 (10,332) 45,381 13 1 (3) 13 30,627 10 1,042 5,929 33,477 29,122 - 2 11 3,673 2,518 34,042 6 1 1 7 23,513 1,037 6,359 27,479 7 - 2 9 74,202 548 22 - 54,228 398 (6,678) (2) 193,302 56 346,751 100 (3,671) 18 - 46,813 300 (1) 184,994 60 307,024 100 9 - 43,416 297 14 - - 368,205 - - 76 484,673 100 213,171 - 68 315,272 100 Value added represents the additional wealth which the Group and company have been able to create by its own and its employees’ efforts. The statement shows the allocation of that wealth to employees, government, providers of finance, and that retained for future creation of more wealth. Annual Report 2016 215 ׉ 7cassandra://KK0XtpmCF54qhqgpGAJaQh5Dgv1WgH_EujvZ5WTrcxs`̵X!=߁X!=ށ{בCט{u׉׉ 7cassandra://bcxj_QoIAF7g75eQk3qq9N9u2sOnC5Td-G1cHZ2JswoR}` ׉ 7cassandra://4E6jOQmR3kdfAGhaghOQtm2Ndui5Z8kxfT77ggfthcI`S׉ 7cassandra://LSDYDNk7jtM2EJYRkC5xgIlcYLvH2ijhsi7SvF8gm1E`̵׉ 7cassandra://cozdXvGKuwZ58StejUAojfRlFp2uNYd9VWPh4OuLEEMT͠X"=ט{u׉׉ 7cassandra://wWHs1nDyl7qlDLsWIx9IUFeQwsLQB83d7uiezRxWgck)` ׉ 7cassandra://XH9hwaAu9AQQ5S2nim88UuHErmJfTKONv1grJAkrEAU;`S׉ 7cassandra://37dgeS9Snim2lFmYPtt0RM2n-YOQ8UDi_nGfaPCL6Zk`̵׉ 7cassandra://zYTzQq2XqHWJTJsd3Z73JckYvrfyPZT7bLwpzSCGfac^͠X"=׉ESHARE CAPITAL HISTORY Authorised Date 1992 2001 increase 500,000,000 - - cumulative Issued and fully paid increase Consideration/Remarks cumulative Cash/Bonus/Others 210,000,000 210,000,000 210,000,000 Cash 500,000,000 290,000,000 500,000,000 Cash 2010 9,500,000,000 10,000,000,000 7,000,000,000 7,500,000,000 Bonus 2010 2011 2012 2013 2014 2015 2016 - - 10,000,000,000 - 10,000,000,000 - 10,000,000,000 - 10,000,000,000 - 10,000,000,000 - 10,000,000,000 774,568,578 8,520,253,762 Bonus - 8,520,253,762 No Change - 8,520,253,762 No Change - 8,520,253,762 No Change - 8,520,253,762 No Change 245,685,184 7,745,685,184 Share Exchange (Merger) - 7,745,685,184 No Change 216 Annual Report 2016 ׉ 7cassandra://LSDYDNk7jtM2EJYRkC5xgIlcYLvH2ijhsi7SvF8gm1E`̵X"=׉E Financials NOTICE OF 8TH ANNUAL GENERAL MEETING Notice is hereby given that the 8th Annual General Meeting (AGM) of Dangote Cement Plc will be held on Wednesday, May 24, 2017, at the Civic Centre, Victoria Island, Lagos at 11.00 a.m. to transact the following business: AGENDA ORDINARY BUSINESS 1. To receive the audited Financial Statements for the year ended 31st December, 2016 and the Reports of the Directors, Auditors and the Audit Committee thereon; 2. To declare a dividend; 3. To elect or re-elect Directors; 4. To fix the remuneration of the Directors; 5. To authorize the Directors to fix the remuneration of the Auditors; 6. To elect members of the Audit Committee. SPECIAL BUSINESS To amend Article 21 of Articles of Assoociation of Dangote Cement Plc by deleting: ‘unless and untill otherwise determined by the Company in General Meeting, the number of Directors shall not be less than four or more than thirteen’ and replacing with: ‘unless and untill otherwise determined by the Company in General Meeting, the number of Directors shall not be less than four or more than twenty.’ NOTES: PROXIES A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member of the Company. A proxy for an organization may vote by a show of hand and on a poll. To be valid, executed forms of proxy should be deposited at the Registered Office of the Company or with the Registrars not less than 48 hours before the time of holding the meeting. DIVIDEND WARRANTS AND CLOSURE OF REGISTER OF MEMBERS If the Dividend declared by the Directors is approved by the Shareholders at the Annual General Meeting, dividend warrants will be posted on Friday, May 26, 2017 to the shareholders, whose names are registered in the Company’s Register of Members at the close of business on Friday, May 12, 2017. AUDIT COMMITTEE In accordance with Section 395(5) of the Companies and Allied Matters Act, CAP C20 LFN 2004, a shareholder may nominate another shareholder for appointment as member of the Audit Committee by giving notice to the Company Secretary at least 21 days before the Annual General Meeting. CLOSURE OF REGISTER OF MEMBERS Notice is hereby given that the Register of Members and the Transfer Books of the Company will be closed from Monday, May 15, 2017 to Friday May 19, 2017, both days inclusive. RIGHTS OF SECURITIES HOLDERS TO ASK QUESTIONS Securities holders have a right to ask questions not only at the Annual General Meeting, but also in writing prior to the meeting. Questions should be submitted to the Company Secretary at the Company’s registered office by the day before the Annual General Meeting is held. BY THE ORDER OF THE BOARD OF DIRECTORS. Mahmud Kazaure Company Secretary REGISTERED OFFICE Union Marble House, 1, Alfred Rewane Road, P.O Box 40032, Falomo, Ikoyi, Lagos. Dated this 28th February, 2017 Annual Report 2016 217 ׉ 7cassandra://37dgeS9Snim2lFmYPtt0RM2n-YOQ8UDi_nGfaPCL6Zk`̵X"=X"={בCט{u׉׉ 7cassandra://mCOWTodZIQsq3YV_f6NS9ywze6HGEXnmDP3RzEuYU_s~` ׉ 7cassandra://89QFceGxXIs0TJi3AKLk9c7gFidRPP-Y8AL679MkaqA`S׉ 7cassandra://aM25fEj8Es0jCSQ-bK9aGuqot5jrIP9ryxdHstYaPjo`̵׉ 7cassandra://PMwJoK-BrUm5GYtOdfN3T6Md3OE509g5HTEZ64CS5IY\!͠X"=ט{u׉׉ 7cassandra://nMVd1PD4-_uM2Hge7ogElAbgUzLgviEqAv1qCzI9xwI@h` ׉ 7cassandra://D8W4uPMTOOiqQhrCVyyfmczixPDRG2w3B_9SD8Succ8c`S׉ 7cassandra://mDLRTkDByWyjWSp3YqgA72blB8E1WMl6BqUzhgm1x1M`̵׉ 7cassandra://PFShBJDLmBKTrsZjpPqeMUB6wNGiUm5-oti9VdhLAXoP͠X"=נX#>-c 9ׁH#mailto:anthony.chiejina@dangote.comׁ ׁ ЈנX#>-̮ 9ׁH mailto:carl.franklin@dangote.comׁ ׁ Ј׉ELDIRECTORS AND PROFESSIONAL ADVISERS Directors Aliko Dangote Onne van der Weijde Olakunle Alake Sani Dangote Abdu Dantata Ernest Ebi Devakumar Edwin Emmanuel Ikazoboh Fidelis Madavo Joseph Makoju Olusegun Olusanya Dorothy Ufot Douraid Zaghouani Chairman Group Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Independent Non-Executive Director Non-Executive Director Independent Non-Executive Director Non-Executive Director Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Non-Executive Director Group Legal Counsel and Company Secretary Mahmud Kazaure Joint Auditors Akintola Williams Deloitte Chartered Accountants Plot GAI, Ozumba Mbadiwe Avenue Victoria Island, Lagos, Nigeria Ahmed Zakari & Co. Chartered Accountants 5th Floor, African Alliance Building F1, Sani Abacha Way, Kano Nigeria Principal Bankers Access Bank Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Zenith Bank Plc United Bank for Africa Plc Primary Legal Advisers Banwo & Ighodalo Olaniwun Ajayi Fola Sowemimo 218 Annual Report 2016 ׉ 7cassandra://aM25fEj8Es0jCSQ-bK9aGuqot5jrIP9ryxdHstYaPjo`̵X"=׉EFinancials CORPORATE INFORMATION Capital Market Information Dangote Cement Plc is listed on the main board of the Nigerian Stock Exchange (NSE). Each share carries one voting right NSE Ticker Symbol Bloomberg Code Reuters Code Date Listed DANGCEM DANGCEM:NL DANGCEM:LG Market Capitalization (31-Dec-16) Outstanding Shares Free Float Registration Information RC Number Date of Incorporation Registered Office Union Marble House 1, Alfred Rewane Road P.O. Box 40032 Falomo, Ikoyi Lagos, Nigeria Registrars United Securities Limited 10, Amodu Ojikutu Street Victoria Island Lagos, Nigeria For any queries regarding Dangote Cement please contact: Investor Relations Carl Franklin +44 207 399 3070 carl.franklin@dangote.com Corporate Communications Anthony Chiejina +234 1 448 0815 anthony.chiejina@dangote.com 26th October, 2010 ₦2,964,877,883,222 17,040,507,404 8.91% 208767 4th November, 1992 Annual Report 2016 219 ׉ 7cassandra://mDLRTkDByWyjWSp3YqgA72blB8E1WMl6BqUzhgm1x1M`̵X"=X"={בCט{u׉׉ 7cassandra://mU65PEtJohr7bBwCD8lCOOFWMwwczIOev1KVE-N2hVw&` ׉ 7cassandra://VBrwUEld2OveTmpFr8Q76klB_aIttuzA1HIYH4AJozQ `S׉ 7cassandra://gTfLuQqwNLhvxv8vl5TLRQHh0gRcxQreFwNaCBF-3Rc |`̵׉ 7cassandra://AdFCZ_UFUco3KmwaJbbBmiqZBOyRF3MhBP0wAWUQSJ8ck͠X"=ט{u׉׉ 7cassandra://uoB1J1YfBvaEhonCa799J5Wz3qfryybOrdIpsm0JQb4w` ׉ 7cassandra://brxIftiQp5L0gaYko5R_Uqo8fP8M9IBjEUncKBUSzs0#X`S׉ 7cassandra://94FrPdNt-QlNN3jcauh3p1bqB0AaPEtETskam59jlus z`̵׉ 7cassandra://lpLf54a9B5TKtA44ikC5NbUWZFIEjj5Jy9ZEYnCGXDgK͠X"=׉EDONATIONS AND SPONSORSHIPS ₦’000 Congo Individual villagers and community Ethiopia Donation for elederly and mentally disabled people Student desks Chancho Birate School Financial support to build rest room Dugda Police South Africa Paint for Hoerskool Lichtenburg Cleaning materials for Dingake Primary School Trophies for High School - Delmas Trophies for High School - Delmas 45 chairs donated to Dingake Primary School Aluminium sheets for hospital corners and doors - Lichtenburg Cement donated to high school in Delmas Advert Hoerskool Lichtenburg newsletter Tanzania Masasi Leprosy Centre School desks Zambia Zambia National Association of the Physically Handicapped Donation for fertilizer to villagers Cement donated to the chief for the Community Senegal Ramadan (Food Rice ) donation to village around the plant Cement donation for religious mosque and church construction and rehabilitation Pilgrimage donation to the villagers around the plant Bridge construction for Ngomene village around the plant Donation to the Senegalese Women Association Tabaski sheep donation for the villagers Donation for Pout village Donation to local governor of Pout Donation for the school of Pout Donation for hall construction of Sebikotane Mayor village Donation for Football Village Association Donation for Dangote Women Association Donation for Thies University Sponsorship of local movie - Janxeen Sponsorship of local movie - Sukaroo Koor 5,248,440 2,123,517 22,772,520 8,027,895 219,600 1,950,048 175,680 281,088 439,200 439,200 219,600 577,987 219,600 1,317,600 1,756,800 158,112 2,338,520 144,906 566,745 678,171 701,556 90,780 11,012 45,056 48,212 42,852 117,645 96,612 117,899 211,582 8,887,500 38,274 362,326 607,125 220 Annual Report 2016 ׉ 7cassandra://gTfLuQqwNLhvxv8vl5TLRQHh0gRcxQreFwNaCBF-3Rc |`̵X"=׉E`Financials DONATIONS AND SPONSORSHIPS Sponsorship for the Touba Magal religious events Sponsorship for the Senegalese Union Of Bailif Sponsorship for the Tivavouane religious events Sponsorship for the Senegalese Union of Traders (Unacois) Sponsorship for the Local Young Forum Sponsoship for internationnal football match Senegal/Niger Sponsorship for the Mines Forum (Sim) Sponsorship for the final of Senegalese Football Cup Sponsorship of local movie - Ndogouli Walf TV Sponsorship of local movie - La Gargotte Tfm Cameroun Njoya Foundation Ngondo Celebration Chefferie of Sodiko Nigeria Central Mosque, Obajana Koji State Donation for Construction of Police Intelligence Hostel at Ilorin, Kwara State The Nigerian Centenary Nigerian Legion Corps Commissionaires Lagos State Command Nigerian Society of Engineers Theirworld African Progress Panel Foundation Eunice Spring of Life Foundation Federal Road Safety Corps NASS Senate and House Committe on Capital Market and Institution National Union of Chemical Footware, Rubber, Leather and Non-Metallic Products Employyees Donation towards Annual Ojude Oba Festival Federal Road Safety Corps - Mowe Unit Oba Joel Bamgbose - Aboro of Ibese Land Nigeria Society of Chemical Engineers Ministry Of Culture and Tourism Kaduna Chamber of Commerce Manufacturers’ Association of Nigeria Centre for Values in Leadership Sponsorship of Police Weeks Games 2016 Palsea Capital Markets Association Media Techniques Ltd National Association of Oduduwa Students Ogun State Ministry of Culture and Tourism National Association of Block Makers International Chamber of Commerce African Public Relations Association Ogun State Investors’ Forum National Association of Oduduwa 2,196,000 439,200 1,317,600 2,723,040 109,800 439,200 2,970,676 878,400 1,317,600 2,196,000 8,784,000 4,392,000 1,233,274 2,900,000 10,627,240 500,000 2,000,000 100,000 115,655,375 49,637,500 12,000,000 1,680,000 10,000,000 250,000 2,500,000 500,000 3,000,000 2,000,000 5,000,000 5,000,000 2,000,000 2,000,000 20,000,000 3,000,000 500,000 420,000 2,000,000 2,800,000 5,000,000 1,000,000 25,000,000 300,000 Annual Report 2016 221 ׉ 7cassandra://94FrPdNt-QlNN3jcauh3p1bqB0AaPEtETskam59jlus z`̵X"=X"={בCט{u׉׉ 7cassandra://5To6HV7qwf0T0VHoIKRkJ73RGiYEyi6ck4MQ1yWS1EA` ׉ 7cassandra://Quexo7H7A_ra7v9ZPj7SEfsl0Zab0YmxridUSf4b95EP`S׉ 7cassandra://FRWFR0s0QznB3Yw2x5nKjDUv19Psp2lJGr4gUTR3Fb4`̵׉ 7cassandra://BshEm1I-8VT1JOBtwvCkslsdzyR2r6-cDHHxAJ3Oj4UYx ͠X"=ט{u׉׉ 7cassandra://YO8luuTJD1JXMxar2FwWx9Fmn9NrBBy8Hc1yOoVegS8` ׉ 7cassandra://DgMvR4m3kIxvy8TrL9XAXhof2ynbEcDxGBDVJ0b68lI4`S׉ 7cassandra://rcYCjwKFnonF7SwDELNSw2g3Y9y59bFSgPk66S_sriw`̵׉ 7cassandra://84xAJHJ1ahoOwrZ_ojOjGOxV7KP6cKW44m64sFRA4gQJh͠X"=׉EDONATIONS AND SPONSORSHIPS Federal Ministry of Environment Nigerian Institute of Training Property and Environment Writers Chartered Institute of Personnel Management Manufacturers’ Association of Nigeria The Nigerian Economic Summit Crime Reporters Association of Nigeria Nigerian Union of Journalist 16th Annual National Women Conference Manufacturers’ Association of Nigeria International Chamber of Commerce Nigerian Society of Chemical Engineers Kogi State Government of Nigeria Ebira Carnival 2016 Institute of Directors, Nigeria Financial Reporting Council of Nigeria Akoma Hot Mix Newsletter Rakiya Galadima Publishers’ Association of Nigeria Eti-Osa Local Govt Correspondents’ Associations of Nigeria Humun Bachama Annual Kwaite Festival Construction of Automation Skills Development Centre, Kogi State School of Science F.C.E Okene Onov Tyuulugh National Association of Oduduwa Students Itori town hall in Ogun State CSR Projects in Itori Ogun State 500,000 900,000 200,000 100,000 20,000,000 20,000,000 200,000 1,500,000 5,000,000 2,000,000 200,000 2,000,000 900,000 1,000,000 5,000,000 9,490,000 6,084,000 2,000,000 3,000,000 1,000,000 250,000 2,000,000 4,833,880 2,000,000 2,000,000 400,000 1,950,000 2,500,000 474,408,444 222 Annual Report 2016 ׉ 7cassandra://FRWFR0s0QznB3Yw2x5nKjDUv19Psp2lJGr4gUTR3Fb4`̵X"=׉E Financials BOARD AND COMMITTEE MEETING DATES AND ATTENDANCE Board Meetings Directors Aliko Dangote Onne van der Weijde Devakumar Edwin Sani Dangote Olakunle Alake Abdu Dantata Joseph Makoju Olusegun Olusanya Ernest Ebi Emmanuel Ikazoboh Fidelis Madavo Douraid Zaghouani Dorothy Ufot Olusegun Olusanya Devakumar Edwin Sani Dangote Olakunle Alake Ernest Ebi Emmanuel Ikazoboh Fidelis Madavo Douraid Zaghouani Ernest Ebi Olusegun Olusanya Devakumar Edwin Sani Dangote Olakunle Alake Emmanuel Ikazoboh Fidelis Madavo Dorothy Ufot Emmanuel Ikazoboh Sani Dangote Devakumar Edwin Joseph Makoju Abdu Dantata Olusegun Olusanya Ernest Ebi Dorothy Ufot Technical and Operations Committee Directors Fidelis Madavo Olakunle Alake Devakumar Edwin Joseph Makoju Abdu Dantata Ernest Ebi Douraid Zaghouani Nomination Committee Directors Aliko Dangote Olusegun Olusanya Ernest Ebi Fidelis Madavo Emmanuel Ikazoboh Statutory Audit Committee Directors Olakunle Alake Emmanuel Ikazoboh Olusegun Olusanya Robert Ade-Odiachi Brigid Sheidu Sherrif Yusuf Nicholas Nyamali 19th Jan. 29th Feb. 19th Apr.             N/A Finance and General Purpose Committee Directors  N/A   N/A N/A              N/A                     27th July 26th Oct. 12th Dec.              N/A     N/A  Audit, Compliance and Risk Management Committee Directors       N/A Remuneration and Governance Committee Directors       N/A        22nd Feb. 12th Apr.  N/A                     N/A  20th July 20th Oct.       N/A 22nd Feb. 12th Apr.         N/A 22nd Feb. 12th Apr.             29th Feb. 19th Apr.               N/A N/A              N/A N/A N/A  20th Jul.        N/A N/A N/A N/A      26th Oct.      29th Feb. 26th July 20th Oct.     N/A    Annual Report 2016 223 26th Jul.  20th Oct.     N/A    25rd Oct.                             27th Jan. 29th Feb. 20th Apr. 26th July 25th Oct. 9th Dec.   N/A N/A     ׉ 7cassandra://rcYCjwKFnonF7SwDELNSw2g3Y9y59bFSgPk66S_sriw`̵X"=X"={בCט{u׉׉ 7cassandra://jyi5q5Jy164lxOKWPL8R0dvJ-BQcjtMllWgEfPEOwVo` ׉ 7cassandra://ZIXxd9ceWXjDngQ2bXyg6MK8JFyuhgJimJvuzDPaCuY)`S׉ 7cassandra://lKqLRCWklHaCL0s6TBpr_YhiqjonGL4QafrXLIaaFz0 H`̵׉ 7cassandra://lV1HMLVurkJYC54lTBIvfJovuA4D8-rNshwfAORaxCE\O͠X"=ט{u׉׉ 7cassandra://v8DTwCkGFiQbTfpvcMEJhgBlHXzn43yWUAxIDq8gq2M(` ׉ 7cassandra://NrXUMg5K21a_qHwcwc6vMprGcm984XGJG8d7UEr3kcwXJ`S׉ 7cassandra://J_Aj4byPYu3B07pUm4NENN-QzBBDMQ9lN5na6VwuCqM`̵׉ 7cassandra://Lf1TPuLqGqjlzyrZRVg8NJCxIAnnY3xFCv3vDBxMKSA͆͠X"=נX$>N̾ 9ׁH'mailto:info@unitedsecuritieslimited.comׁ ׁ ЈנX$>e̿ 9ׁH&http://www.unitedsecuritieslimited.comׁ ׁ Ј׉EaGLOSSARY OF ABBREVIATIONS AGM CAC CBN CEO CFO CEMAC CMAN COREN CORBON CO2 DIL EBITDA EBIT ECOWAS EHSS GDP GETS IFC IMF ISO LPFO NIOB NIQS NIS NSE MT OEMS OHSMS SEPCEM SON SOX SAP CGRS ERM ICD IASB CAMA FRC GCEO VRM LPG CBI EMS HSE KPIDRC – Annual General Meeting Corporate Affairs Commission Central Bank Of Nigeria Chief Executive Officer Chief Financial Officer Central African Economic and Monetary Community Cement Manufacturer Association of Nigeria Council for the Regulation of Engineering in Nigeria Council of Registered Builders of Nigeria Carbon dioxide Dangote Industries Limited Earnings Before Interest, Taxes,, Depreciation and Amortization Earnings Before Interest and Tax Economic Community of West African States Environmental Health, Safety and Security Gross Domestic Product Global Environment Telecommunications Service International Finance Corporation International Monetary Fund International Standards Organisation Low Pour Fuel Oil Nigerian Institute of Building Nigerian Institute of Quantity Surveyors Nigeria Industrial Standards Nigerian Stock Exchange Million Tonnes Original Equipment Manufacturer Occupational Health and Safety Management System Q Quarter SEC Security and Exchange Commission Sephaku Cement Standards Organization of Nigeria Sulfur Oxides System Application Package UEMOA West African Economic and Monetary Union VTS Vaccination Tracking System Corporate Governance Rating System Enterprise Risk Management Investment Corporation of Dubai International Accounting Standards Board Company and Allied Matters Act Financial Reporting Council Group Chief Executive Officer ertical Rolling Mill Liquid Petroleum Gas Convention for Business Intelligence Environmental Management System Health, Safety & Environment Key Performance Index Democratic Republic of Congo BARMAC – Board Audit and Risk Management Committee 224 Annual Report 2016 ׉ 7cassandra://lKqLRCWklHaCL0s6TBpr_YhiqjonGL4QafrXLIaaFz0 H`̵X"=׉E,Financials MANDATE FOR E-DIVIDEND PAYMENT Date (DD/MM/YYYY) The Registrar, United Securities Limited, 10, Amodu Ojikutu Street, Victoria Island, Lagos, Nigeria. Dear Sir/Madam, Kindly find below my/our bank details for the purpose of electronic payments of dividends due to me/us. I/We confirm that all information supplied is to the best of my/our knowledge correct and hereby indemnify United Securities Limited against any loss that may arise from their adoption of the details as supplied hereunder. Surname /Company Name: Other Names (for individual Shareholder) Present Postal Address City State E-Mail Address 1:E-Mail Address 2:Mobile (GSM) Phone Number Bank Name (SECTION TO BE COMPLETED BY YOUR BANK) Bank Address Bank Account Number Bank Sort Code Name of Company Kindly tick & quote your shareholder account no. in the box below Shareholder Account No. I/We hereby request that from now, all dividend warrant (s) due to me/us from my/our holdings in all the companies indicated above be mandated to my/our Bank named above. Shareholder`s signature or thumbprint Shareholder`s signature or thumbprint Company Seal/ Incorporation number (Corporate Shareholder) AUTHORISED SIGNATURE & STAMP OF BANKERS PLEASE NOTE THAT THE SECTION FOR YOUR BANK ACCOUNT D ETAILS HAS TO BE COMPLETED BY YOUR BANK Kindly return the duly completed form to the Registrar, United Securities Limited at the address stated below United Securities Limited. RC 126257 10, Amodu Ojikutu Street, Off Saka Tinubu Street, Victoria Island, P.M.B 12753 Lagos, Nigeria. Tel: +234(1)271-4566, 271-4567 Website: www.unitedsecuritieslimited.com; Email: info@unitedsecuritieslimited.com UNITED SECURITIES LIMITED hereby disclaims liability or responsibility for any errors/omissions/misstatements in any document transmitted electronically. Annual Report 2016 225 ׉ 7cassandra://J_Aj4byPYu3B07pUm4NENN-QzBBDMQ9lN5na6VwuCqM`̵X"=X"={בCט{u׉׉ 7cassandra://mGWGSOJpTFisdq5IFoC19yqE0Rb7zMMD0nJgiMDyPyY5` ׉ 7cassandra://L4UADJV9yFDcUASDrW7A3TkDuTLBzyZte1-jNA45rhI`S׉ 7cassandra://JbOYLcJOa4hupy8GHAwxP5c83RIoeZ_ICTYrJ8o_BbY`̵׉ 7cassandra://yXuZiJy1knNG0y3hHhRDbBN_jgei0B7hFcRSrPytYJU9C͠X#=ט{u׉׉ 7cassandra://LzKbEhUZJPBL4nkcO0v3lrcP-WmyQiTASqPegkRst2gF` ׉ 7cassandra://oUc5WukgyPdIdcISn1uQU00jAm5PYqe21fZj404JyS89s`S׉ 7cassandra://iZ2kcIFAVdknKQDOlXQAV2O-GOAIz_VB3u-vJbrNpBw`̵׉ 7cassandra://JsROgi6GOz9nswvQQuZd4CdUhzInVLXnaap435LPAuc`8~͠X#=׉E226 Annual Report 2016 ׉ 7cassandra://JbOYLcJOa4hupy8GHAwxP5c83RIoeZ_ICTYrJ8o_BbY`̵X#=׉EFinancials PROXY FORM Dangote Cement Plc Rc: 208767 The 8th Annual General Meeting to be held at the Civic Centre, Victoria Island, Lagos, on Wednesday 24th May, 2017 at 11.00 a.m. I/WE ....................................................................................................................................................................................................................................................... of ..................................................................................................................................................................................................................................................................... being a shareholder of Dangote Cement Plc hereby appoint ........................................................... or failing him/her .................................................................................................................... or .................................................................................................................................................. as my/our Proxy to act and vote for me/us on my/our behalf at the 8th Annual General Meeting to be held on 24th May, 2017 and at any adjournment thereof. Dated the ....................................................... 2017 shareholder’s signature ......................................................... NO. I/We desire this proxy to be used in favour of/or against the resolution as indicated alongside (strike out whichever is not applicable) 1. ORDINARY BUSINESS To receive the audited Financial Statements for the year ended 31st December, 2016, and the reports of the Directors, Auditors and Audit Committee thereon; 2. 3. To declare a dividend; To elect or re-elect Directors: Re-election as a Director of Sani Dangote, who is retiring by rotation Re-election as a Director of Fidelis Madavo, who is retiring by rotation Re-election as a Director of Douraid Zaghouani, who is retiring by rotationRe-election as a Director of Abdu Dantata, who is retiring by rotation 4. 5. 6. To fix the remuneration of the Directors; To authorize the Directors to fix the remuneration of the Auditors; To elect members of the Audit Committee. FOR AGAINST Please indicate with an “X” in the appropriate column, how you wish your votes to be cast on the resolutions set out above. Unless otherwise instructed, the Proxy will vote or abstain from voting at his/her discretion. This proxy form should NOT be completed and sent to the registered office if the member will be attending the meeting. Note: i. A member (shareholder) entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his stead All proxy form should be deposited at the registered office of the Registrar (as in notice) not later than 48 hours before the meeting. ii. In the case of joint shareholders, any of them may complete the form, but the names of all joint shareholders must be stated iii. If the shareholder is a Corporation, this form must be executed under its Common Seal or under the hand of some officers or an attorney duly authorized. iv. The proxy must produce the admission card sent with the notice of the meeting to gain entrance to the meeting. v. It is a legal requirement that all instrument of proxy to be used for the purpose of voting by any person entitled to vote at any meeting of the shareholders must bear appropriate stamp duty from the Stamp Duties office (not adhesive postage stamps). Before posting this form, please tear off this part and retain it for admission to the meeting. NAME AND ADDRESS NUMBER OF SHARES HELD: NUMBER OF SHAREHOLDER(S): ADMISSION CARD Please admit .............................................................. to the 8th Annual General Meeting of Dangote Cement Plc to be held at Civic Center, Victoria Island, Lagos at 11.00 a.m. on Wednesday, 24th May, 2017. Signature of person attending: .................................................................................... • This admission card should be produced by the shareholder or his/her proxy in order to obtain entrance to the Annual General Meeting. • You are requested to sign this card at the entrance in the presence of the Company Secretary or his Nominee on the day of the Annual General Meeting. Annual Report 2016 227 Please be advised that to enable a Proxy gain entrance to the meeting, the Proxy Form is to be duly completed and delivered to the Company Secretary not later than 48 hours before the time fixed for the meeting. ׉ 7cassandra://iZ2kcIFAVdknKQDOlXQAV2O-GOAIz_VB3u-vJbrNpBw`̵X#=X#={בCט{u׉׉ 7cassandra://Ukjldzs6MfITMtUyLx94mMrSO6OfoDTdO2iQvbzE1FooL` ׉ 7cassandra://6H7p46791QaF6BWg4F_CcGSK70LTJ6eUGmredFPvjmM `S׉ 7cassandra://FnqR75yWTCx0Layl_3VDO2cO-qlVVOmnp5UjfOq2Yyw `̵׉ 7cassandra://kTC0j3uw1VOAJKGef-jqQw_2NxzUzClO4N8AmmUiaQMD͠X#=ט{u׉׉ 7cassandra://xZwgOIdtavZmHe25qmBtvHLxcmKbLSYTsE32FriK8sE+` ׉ 7cassandra://87ZqqsFYfLnhVEOATyBu2_95AYlyJf4TeeHAgAz1vG0`S׉ 7cassandra://aeD9sH2B_betqQr6IwlaUCqzD5K4pSKYisgoxdk94yg`̵׉ 7cassandra://V_KhkpBOqx739IJo_q7DECTx-sUKr5freM_U25aZja8%8͠X#=׉EyThe Registrar, United Securites Limited 10, Amodu Ojikutu Street, Victoria Island, Lagos, Nigeria 228 Annual Report 2016 ׉ 7cassandra://FnqR75yWTCx0Layl_3VDO2cO-qlVVOmnp5UjfOq2Yyw `̵X#=׉E"Financials Annual Report 2016 229 ׉ 7cassandra://aeD9sH2B_betqQr6IwlaUCqzD5K4pSKYisgoxdk94yg`̵X#=X#={בCט{u׉׉ 7cassandra://iwdlaew5gbnOGE5edROCuwoZmHovRy3_nToq_MPkSbg5^` ׉ 7cassandra://9aOOAi8PbcpH82tn_AN6UbPEOWgEhVopayJJFGKI3K8`S׉ 7cassandra://0TDx3_GQKhZ9BgIc7Ov7_MWYkBYlovMD_6F8moYAxC0`̵׉ 7cassandra://prCnIHMI-09gkfea1Hc5bhILmv98SLiUU3z0Ed99GDc:͠X#=ט{u׉׉ 7cassandra://5GFO1q4AmoUS01FoAcj_jFjzhTvQEgDXNgCftcGE_n8+w` ׉ 7cassandra://rF8vuTLYN9IVEJuM0yPU700NGEWeJ_EvsEAnnJxBmls`S׉ 7cassandra://mB4AsEpIxyjRLj8Wh9w27SSY2VsfTdyH9V-tftAvseY`̵׉ 7cassandra://epMf53kMl6slDgdCGW1nw6-USPUR_BQ5HBxm36y8zxk%͠X#>׉E230 Annual Report 2016 ׉ 7cassandra://0TDx3_GQKhZ9BgIc7Ov7_MWYkBYlovMD_6F8moYAxC0`̵X#>׉E"Financials Annual Report 2016 231 ׉ 7cassandra://mB4AsEpIxyjRLj8Wh9w27SSY2VsfTdyH9V-tftAvseY`̵X#>X#>{בCט{u׉׉ 7cassandra://9jykY1DgLAc7L-ToFCwGvuyXiOMY4V0Y-ESBcFSdBw85` ׉ 7cassandra://vtgpfrXQMMEHAurXCI6qwFAVw8kNoik8U60WXXOCjqE`S׉ 7cassandra://SDEyoL6wNsMiQ13QQwh_N9u0DXOO8I9fZzk_dz0TvF8g`̵׉ 7cassandra://kvb-qJXtxnVPNQIVqRk_zdefxiWY5gGKuL0VmmnM1Xw9T͠X#>׉E232 Annual Report 2016 ׉ 7cassandra://SDEyoL6wNsMiQ13QQwh_N9u0DXOO8I9fZzk_dz0TvF8g`̵X#>׈EX#>X#>{,4DangoteCement: Dangote Cement 2016 Annual Report.pdfX䰏: