Eastern Financial Statements Together With Auditor'S Report For The Financial Year Ended June 30, 2020
Eastern Financial Statements Together With Auditor'S Report For The Financial Year Ended June 30, 2020
Eastern Financial Statements Together With Auditor'S Report For The Financial Year Ended June 30, 2020
E)
FINANCIAL STATEMENTS
TOGETHER WITH AUDITOR’S REPORT
FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
1
INDEX
Description Pages
Statement of Income 4
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Translation of Auditor’s Report
Originally Issued in Arabic
Auditor's Report
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements 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
entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion on the financial statements.
-1-
Basis for Qualified Opinion
- The company management did not prepare expert actuarial study to validate accuracy
of the employees benefits as of June 30, 2020. (Note 25)
- The company management carried debit adjustments on the tobacco leaf raw materials
stock balance amounted to approximately 2 500 tons. This adjustment understated the
cost of sales and increase gross profit presented in the income statements, without
supporting documents and authorized approvals.
The company financial regulations prohibit any accounting adjustments over the
physical count discrepancies without justification. Any such adjustments must be
sanctioned by the head of costing department shared with the related parties for their
opinion and then inform the stores department about the decision. (Note 15)
Qualified Opinion
In our opinion, except for the effects of the matters described in the basis for qualified
opinion paragraph, the financial statements referred to above present fairly, in all material
respects, the financial position of Eastern Company (S.A.E) as of June 30, 2020, and its
financial performance and cash flows for the year then ended, in accordance with the
Egyptian Accounting Standards and the prevailing Egyptian laws and regulations.
The financial information included in the Board of Directors’ Report which are prepared
according to the requirements of Law No. 159 for the year of 1981, and its executive
regulations, is in agreement with the company’s records to the extent that such information
normally recorded.
Auditor
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Translation of Financial Statements
Originally Issued in Arabic
EASTERN COMPANY (S.A.E)
STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
Notes 30/6/2020 30/6/2019
ASSETS
Non - Current Assets
Property, plant and equipment (8) 5 236 863 4 951 149
Projects under construction (9) 804 710 1 249 540
Investments property (10) 9 303 9 303
Intangible assets (11) 1 674 2 989
Investments long-term (12) 20 668 120 668
Right of use leased assets (13) 79 665 107 944
Other assets (14) 765 875
Total Non- Current Assets 6 153 648 6 442 468
Current assets
Inventories (15) 5 928 230 7 956 653
Trade and notes receivables (16) 267 098 381 975
Debtors and other debit balances (17) 445 112 511 395
Trade payables - advance payments (18) 47 498 55 475
Cash on hand and at banks (19) 7 438 434 6 029 005
Total Current Assets 14 126 372 14 934 503
Total Assets 20 280 020 21 376 971
Equity
Issued and paid capital (20) 2 250 000 2 250 000
Reserves (21) 3 985 819 3 985 819
Treasury stocks (22) (432 343) --
Retained earnings (23) 1 492 707 1 540 289
Net profit for the year 3 794 249 --
Total equity 11 090 432 7 776 108
Non - Current Liabilities
Deferred tax liability (24) 210 198 185 245
Long-term employees benefits (25) 562 124 571 535
Total Non-Current liabilities 772 322 756 780
Current Liabilities
- The accompanying notes (from No. 1 to No. 47) are an integral part of these financial statements
and read therewith.
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Translation of Financial Statements
Originally Issued in Arabic
30/6/2020 30/6/2019
Net profit for the year 3 794 249 3 733 304
Other Comprehensive Income
Exchange differences resulting from translating the foreign
-- --
operations
Financial investments available for sale -- --
Cash flow hedges -- --
Remeasurements of defined benefit pension plans -- --
Company share of other comprehensive income from associates -- --
Income tax relating to other comprehensive income items -- --
Total other Comprehensive Income of the year after deduct tax -- --
Total Comprehensive Income for the year 3 794 249 3 733 304
- The accompanying notes (from No. 1 to No. 47) are an integral part of these financial statements
and read therewith.
(Accountant/ Niveen Ali Hussein) (Accountant/ Osama Fouad Mohamed)
General Manager / Final accounts and financial Chief of the financial sector
statements
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Translation of Financial Statements
Originally Issued in Arabic
EASTERN COMPANY (S.A.E)
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
Issued and
Paid up Legal Statutory Capital Other Total Treasury Retained Net profit
capital reserve reserve reserve reserves reserves stocks earnings of the year Total equity
Balance as of July 1, 2018 1 500 000 1 116 106 1 673 498 529 911 1 210 857 4 530 372 -- 452 895 -- 6 483 267
Transferred from legal and other
750 000 (500 000) -- -- (250 000) (750 000) -- -- -- --
reserves for capital increase
Adjustment of expenses and revenues
-- -- -- -- -- -- -- 63 204 -- 63 204
from previous years
Transferred to reserves from dividends
-- 185 677 -- 19 770 -- 205 447 -- 1 024 190 -- 1 229 637
for the fiscal years 2018/2019
Balance as of June 30, 2019 2 250 000 801 783 1 673 498 549 681 960 857 3 985 819 -- 1 540 289 -- 7 776 108
Balance as of July 1, 2019 2 250 000 801 783 1 673 498 549 681 960 857 3 985 819 -- 1 540 289 -- 7 776 108
Treasury stocks -- -- -- -- -- -- (432 343) -- -- (432 343)
Remaining from boards directors
-- -- -- -- -- -- -- 7 000 -- 7 000
reward
Adjustment of expenses and revenues
-- -- -- -- -- -- -- (54 582) -- (54 582)
from previous years
Net profit for the year -- -- -- -- -- -- -- -- 3 794 249 3 794 249
Balance as of 30/6/2020 2 250 000 801 783 1 673 498 549 681 960 857 3 985 819 (432 343) 1 492 707 3 794 249 11 090 432
- The accompanying notes (from No. 1 to No. 47) are an integral part of these financial statements and read therewith.
(Accountant/ Niveen Ali Hussein) (Accountant/ Osama Fouad Mohamed)
General Manager / Final accounts and financial statements Chief of the financial sector
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Translation of Financial Statements
Originally Issued in Arabic
-7-
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
1- COMPANY
1.1 Company’s commercial name:
Eastern Company (S.A.E) Located in Giza.
1.2 Establish date and location:
- The Company was established on 12/7/1920 in Giza city - the Arab Republic of
Egypt.
- The Company was registered in the Commercial Register under No. 6069.
- The Company located at the sixth industrial zone – Oasis Road plots numbers 1
(87 to 98) - Fifth zone - 6th of October City - Giza.
1.3 Purpose
- The Company main activities are manufacturing and trading of Tobacco leaf, its
products and modern smoking alternatives and accessories/ practicing any
investment, financial, commercial, industrial, agricultural or service activities
(except all relevant provisions of the capital market according to the Law no. 95
for the year of 1992 with the commitment of the company to adjust its situation in
accordance with the provisions of the Law No. 120 for the year of 1982.
- Real estate Ownership and Construction, purchasing and dividing lands for the
purposes of utilization, rental or sale, import, export and commercial agencies.
- Establish, participate in establishing, purchasing of companies, contribute to them
even if these entities are practicing its activities or part of it inside or outside the
Arab Republic of Egypt, in order to develop or achieve any of its goals in
accordance to the provisions of the laws, regulations and current decisions. Taking
into consideration issuing the necessary licenses to practice these activities. The
Company may participate or cooperate in any way with other companies which
have similar or non-similar activities.
1.4 Main shareholders
The Holding Company for Chemical Industries owner of 50.5% from the company’s
shares as at 30/6/2020.
1.5 Trading Shares on the Stock Exchange Market:
The Company's nominal shares are traded in the Egyptian Stock Exchange market.
1.6 Company duration:
The Company's duration is Fifty years starting from 2/6/2019 till 1/6/2069 as from the
date of registration in the commercial registration.
1.7 Date of issuing the financial statements:
The financial statements have been approved by the board of directors on 23/9/2020.
-8-
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
1.8 Company’s financial year:
- From 1/7/2019 till 30/6/2020.
- Shares Percentage of the Holding Company for Chemical Industries have been
decreased from 55% to be 50.5%, after offering a percentage of 4.5% (maximum
number of 101 250 000 shares for Public & Private Offering IPO.
- Private Placement percentage was 95% from the total offered shares with number
of 96 187 500 shares, the share price was 17 EGP per share with total amount of
EGP 1 635 187 500.
- Public Placement percentage was 5% from the total offered shares with number of
(5 062 500 shares), the share price was 17 EGP per share with total amount of
EGP 86 062 500.
- Public & Private Offering has been covered by total amount of
EGP 1 721 250 000.
- According to the Extra-ordinary General Assembly meeting held on June 2, 2019
the shareholders approved to transfer the company and its legal statue from the
Public Business Sector Companies (Law no. 203 for the year of 1991) to be under
the Corporate Company Law no. 159 for the year of 1981, and its executive
regulation.
This is a result of decreasing the shareholder participation of the Holding company
for Chemical Industries percentage of shares to less than 51% of the share capital
of Eastern Company.
approving the new Articles of association which prepared in accordance with the
Corporate Law no. 159 for the year of 1981 and its executive regulation as it was
presented to the General Assembly.
- The Extra-ordinary General Assembly held on June 2, 2019 approved the
company’s New Articles of Association.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
- The financial assets value is determine based on the current purchase prices of these
assets, while the financial liabilities value are determine based on the current prices
which can settle these liabilities.
- In case of an active market to determine the fair value of financial instruments, the
fair value will be estimated by the different evaluation methods considering the
latest transaction’s prices or other similar instruments are guided, use the
discounted cash flows method or any other evaluation method that result a reliable
values.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
-
- Estimates of the future cash flows based on the best the management estimates
when use the discounted cash flows as an evaluation method , and determine the
used discounted rate according to the prevailing market price as at the financial
statements date of similar financial instruments of their nature and conditions.
The following are main items that the company applied estimation and
judgments:
Useful life of fixed assets
Provisions
Deferred tax assets
Deferred tax liabilities
- 11 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
3/4 Investments:
- Investments property are recorded at cost however, when there is impairment, the
book value should be adjusted with the impairment value and charge impairment
to the income statement.
- Government bonds are recorded at cost and income from bond charged to the
income statements.
3/6 Inventories:
- Inventories of raw materials and inputs materials are stated at cost, and the raw
materials consumptions are evaluated based on weighted average cost.
- Inventories of finished goods are stated at lower of cost or net realizable value.
- The company follow the continuing count method.
- The inventories of Tobacco leaf materials are sufficient for around 13 months.
- The inventories balance of finished goods is sufficient to meet the market needs 2
day.
- The raw materials inventory includes Tobacco leaf in customs warehouses
amounted to 2 912 million Egyptian pounds and the due customs duties must be
paid upon receipt from warehouses.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
3/8 Provisions:
- Provisions are recognized when the company has a present or constructive
obligation as a result of past events, and it is expected that the company will require
to settle the obligation, and a reliable estimated be made for the amount of the
obligation.
- The provisions balance are revised at financial statements date and adjusted
according to the best estimates (if necessary)
3/9 Capital:
- Paid up and issued capital represent the nominal value per share multiplied by the
number of shares as of financial statements date.
b. Share-Based Payments:
The fair value of shares-based payments paid as Equity instruments (at the grant
date ) is recognized as expense, and as a corresponding increase in equity during
the maturity period, the amount recognized as an expense is adjusted to reflect the
number of grants when the related services and performance conditions expected
to be met, therefore the recognized amount has to be based on the number of
granted equity instruments that met the relevant terms of service and non-market
conditions of performance on the maturity date, regarding the granting instruments
of equity on non-entitlement terms, the fair value of share-based payment (at the
date of granted) is recognized on paid of equity instruments is measured to reflect
these conditions and there is no subsequent adjustment to the differences between
the expected and actual results.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
- 14 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
- The bonds revenue are recognized when the following conditions are occurred:
The flow of economic benefits from the transaction is highly expected.
The revenue can be reliably measured.
The Minister of Investment and International Cooperation issued Decree
No. 69 for the year of 2019 to modify some standards of the Egyptian
Accounting Standards issued by the Minister of Investment Decree No. 110
for the year of 2015, The new Egyptian Accounting Standard no (48)
revenues from contracts with customers replace the standards No. (8 & 11).
- 15 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
4- FINANCIAL INSTRUMENTS
4/1 Credit Risk:
- The financial instruments risk represents the inability to pay due to liquidity issues
of debtors with credit term and cash and deposit at banks except for cash at safe.
- The company management to control credit risk deals with reputable financial
institution with high credit and stable rating.
4/2 Liquidity Risk:
- The liquidity risk is the risk that when the company cannot settle its liabilities or
financial commitments on due dates, the Company's approach regarding managing
liquidity is to ensure that it has a sufficient liquidity to meet its liabilities on its due
dates in both normal and critical circumstances without incurring unacceptable
losses or damaging the Company's reputation, the company also ensures the cash is
available on request to meet the expected operating expenses for an appropriate
period of time including the financial obligations and disposal the potential impact
of acute and unpredictable conditions such as natural disasters.
Also the company invests the available excess cash from daily cash receipts in the
best aspects of short-term investment
4/3 Market Risk:
- Market risk represents in the changes in the market prices such as foreign exchange
currencies and interest rate.
- The purpose of managing market risk is managing and controlling the market risk
exposure within the acceptable parameters with maximizing revenue.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
(a) Foreign currencies risk: The foreign currency risk is represented in changes in
foreign currency exchange rates, which affect the payments and receivables in
foreign currencies, as well as evaluating assets and liabilities in foreign currencies
which the company management facing it through setting policies such as the
value of what the company gets from the spare parts local manufacturing and
capital equipment, purchasing from suppliers agents, etc.
(b) Interest rate risk: The Company is dealing with various banks with interest rates
that enable it to reduce the risk of changes in interest rates, whether debit interest
or credit interest through competition among banks in order to get the best rates
based on the large business size.
- Interest-bearing bank deposits during the financial time period referred to which
are the total deposits in local and foreign currencies.
- The fair values for the financial instruments are not materially different from their
carrying values at the end of the financial period.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
6- IMPAIRMENT OF FINANCIAL ASSETS:
- Periodically the company management at financial statement date assess if there is
an objective evidence that a financial asset or a group of assets is impaired or not.
Financial assets or a group of assets can be considered as an impairment asset. If
there is any objective evidence referring to such impairment which results from one
or more events occurring after the initial recognition of the asset and have an impact
on the estimated cash flows of a financial asset or group of financial assets that can
be estimated reliably.
6/1 Non-derivative financial assets:
Non-derivative financial assets is valued at fair value through profit or loss,
including shares that are accounted by the equity method, the company estimates
at the end of each financial period whether there is indicators for impairment in the
value of the asset.
Indicators of impairment of the asset includes:
- Non-payment or late payment by a debtor.
- Rescheduling amounts due to the group on conditions that the company would
not have accepted in other circumstances.
- Indicators of bankrupt the debtor or issuer.
- Adverse changes in the repayment status of borrowers or issuers.
- The disappearance of the active market for the financial asset due to financial
difficulties.
- The presence of clear data indicating a measurable decrease in the expected
future cash flows from the group of financial assets.
- Investment in the equity instrument includes objective evidence of important
or continues impairment in fair value from cost.
Financial assets recognized at amortized cost
The company assesses whether there is objective evidence of an impairment in the
value of these assets individually or at the aggregate level of all assets that represent
relative importance on their own, they are evaluated in relation to individual
impairment, and in the absence of evidence of the impairment of these assets
individually, they are evaluated collectively with respect to any impairment a value
has occurred and has not yet been identified on the individual assets, assets that are
not individually considered as relatively important assets are assessed collectively
for any impairment in value for the purposes of the aggregate assessment of assets,
assets with similar risk characteristics are grouped together.
When assessing the impairment at the aggregate level of the assets, the company
uses historical information on the timing of recovery for the loss arising from the
impairment and the value of the losses incurred, and makes adjustments if the
current economic and credit conditions indicate that effective losses are more likely
to be more or less than expected with historical indicators.
Impairment losses are calculated as the difference between the asset's carrying
amount and the present value of expected future cash flows discounted by the
effective interest rate of the financial asset, the amount of the loss is recognized in
profit or loss, the accumulated impairment is deducted to the carrying amount of
the asset.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
If the company considers that there are no possibilities for reversing the loss
resulting from the impairment of the asset's value, then write-off the related value.
In case of the subsequently decrease in impairment loss value, and the decrease can
be related objectively to an event occurring after the impairment loss was
recognized, then the previously recognized impairment loss is reversed through
profit or loss.
Financial assets available for sale
Impairment losses are recognized in available-for-sale financial assets by
reclassifying previously recognized losses under other comprehensive income
items that are accumulated in the fair value reserve and recognized in profit or loss.
The amount of accumulated loss excluded from equity and recognized in profit or
loss is the difference between the acquisition cost (net of any amortization or
payment of any amount of the principal) and the fair value less any loss of
impairment for this financial asset that has previously been recognized in profit or
loss.
When the fair value of the performance of a debt, which classified as available for
sale are increased in the subsequent period, and this increase is related to an
objective relation to an event that occurred after the recognition of the impairment
loss in profit or loss, then this impairment loss is reversed in profit or loss.
Impairment losses recognized in profit or loss are not reversed for any investment
in an equity instrument classified as available for sale in profit or loss.
Investments accounted for using Equity Method:
Impairment losses of financial investment which accounted using the Equity
Method are measured by comparing the carrying amount with the recoverable
amount, and the impairment losses are recognized in profit or loss, the impairment
loss is reversed when detailed changes occur in the estimates used to determine the
recoverable amount.
6/2 Non-Financial assets:
The carrying amounts of the company’s assets, except inventory, are reviewed at
each balance sheet date to determine whether there is any indication of impairment.
If any such indication exists, the asset’s recoverable amount is estimated. The
recoverable amount of the asset is assessed if there is any indication to impairment.
The recoverable value of the good will and intangible assets which have indefinite
useful lives or not available to be used should be assessed at the date of each
financial statements.
An impairment loss is recognized if the carrying amount of an asset or its cash-
generating unit exceeds its recoverable amount. A cash-generating unit is the
smallest identifiable asset group that generates cash flows that largely are
independent from other assets and groups. Impairment losses are recognized in the
income statement.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
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 pre-tax discount rate
that reflects current market assessments of the time value of money and the risks
specific to the asset.
The impairment losses of other assets recognized in the previous periods are
reviewed at the date of each financial statements to determine the indication to the
decrease of loss or that it does not exist. An impairment loss is reversed if 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 does
not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.
FINANCIAL INSTRUMENTS
The company classifies non-derivative financial assets among the following
categories: Financial assets classified at fair value through profits or losses,
Investments held to maturity, Loans, debts and financial assets available for sale.
The company classifies non-derivative financial liabilities between the following
categories:
Financial liabilities classified at fair value through profit or loss and a group of
other financial liabilities.
- 20 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
- 21 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
contingent assets
The potential assets represent the compensation values issued in favor of the
company according to the following statement:
Value (in millions)
A judgment was issued in Case No. 9869 of 1994 (total civil) 12
Cairo appeals to compensate the company, and that was during
the 10/5/2017 hearing and until this date, the judgment has not
been implemented.
A judgment was issued in Case No. 3650 Civilians, College of 42
Giza, on December 25, 2019, and to date, the judgment has not
been implemented
Total 54
7- TAX POSITION
7/1 Corporate Tax:
- The company was inspected till the financial year 2014/2015.
- The financial year 2015/2016 and 2016/2017 is under inspection.
- The company submit the tax return till 2018/2019 according to the income tax law
no. 91 for 2005 om due dates.
7/2 Stamp duty fees:
- The company was inspected till the financial year 2015/2016.
- The financial year 2016/2017 is not inspected
7/3 Payroll Tax:
- The company was inspected till the financial year 2012.
- The company has received for years 2013, 2014 and 2015 form no. (38) amounted
to 209 238 thousand Egyptian Pounds and it has been objected upon the estimated
inspection of the tax office on 3/8/2017 and the company required to re-inspecting
the file.
7/4 Value Added Tax:
- The company is paying the monthly value added tax amount (VAT) according to
the Law no. 67 for the year of 2016, and the company was inspected till the financial
year 2013/2014.
- The company was inspected till financial years 2014/2015 and 2015/2016 and the
notification was made with a form no. 15 dated 2/3/2020 and this form was
contested on legal dates and transferred to the internal committee.
- The years of 2016/2017, 2017/2018 and 2018/2019 are under inspection.
7/5 Property Tax:
- The company paid the accrued preporty according to claims received from real state
tax authorities for the year of 2020.
- 22 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds unless otherwise stated)
8- PROPERTY, PLANT AND EQUIPMENT
(Amounts expressed in Thousands of Egyptian Pounds)
Machines Furniture
and and office
Fixed assets movement statement: Lands Buildings equipment Vehicles Tools equipment Total
Cost as of 1/7/2018 218 103 3 498 629 4 455 517 329 215 161 842 771 833 9 435 139
Additions during the year -- 39 204 563 873 20 365 5 467 16 844 645 735
Disposals during the year -- ) 1 984( ) 19 697( ) 168( )4 435( ) 322( )26 606(
Total Cost as of 30/6/2019 218 103 3 535 849 4 999 693 349 412 162 874 788 355 10 054 286
Cost as of 1/7/2019 218 103 3 535 849 4 999 693 349 412 162 874 788 355 10 054 286
Additions during the year 83 930 48 676 872 7 809 3 793 70 282 842 734
Disposals during the year -- -- )5 778( -- )36( )123( )5 937(
Total Cost as of 30/6/2020 302 033 3 535 897 5 670 787 357 221 166 631 858 514 10 891 083
- 23 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
On 15/2/2020 the company was have the approval of the Exceptions Committee of the
Housing and Utilities Directorate in Giza was obtained and initial approvals of (water,
sanitation, civil defense, traffic, electricity) were obtained and the approval to construction
of the project was paid, and the first installment was paid upon obtaining this approval.
* The fully depreciated property, plant and equipment as of June 30, 2020 is 2 728 712
Thousand Egyptian Pounds include:
* Fully depreciated property, plant and equipment still in use amounted to 2 076 317
Thousand Egyptian Pounds (including machines and equipment amounted to 1 294 832
Thousand Egyptian Pounds)
* Fully carried depreciated fixed assets and others under scrap process amounted to
613 762 Thousand Egyptian Pounds.
* The fixed assets are including approximately 109 381 Thousand Egyptian Pounds
representing net donated assets as following:
Amounts expressed in Thousands of
Donated Assets
Egyptian Pounds
Production’s machinery 104 990
Production Utilities, equipment of Services 2 577
Transportation 21
Furniture 1 793
Total 109 381
* Deduct amount 6 009 Thousand Egyptian Pounds from Production Utilities, equipment
which represent impairment in line in Talbieh and this reduction appeared in note (37) of
other expenses in the income statement
Book value
in million
The Manesterly buildings are being used in part, and the necessary
20
licenses are being extracted for its use as a commercial mall.
Giza buildings an optimization study is underway. 4
Al-Zomor buildings and stores are currently obtaining the necessary
0.9
licenses for their use as a hospital.
Total book value 24.9
Financial Leasing:
- The Decree of Minister of Investment and International Cooperation No. 69 of 2019
was issued to modify some provisions of the Egyptian Accounting Standards which
issued by the Minister of Investment Decree No. 110 of 2015 by replacing the Financial
Leasing Standard no. 20 (old one) by a new one numbered (49) covering the Financial
Leasing Contracts.
- 24 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- The financial leasing contracts were treated by the Egyptian Accounting Standard no.
(49) according to the Amended Accounting Standards for the year of 2019, This
amended standard applied for the leasing contracts which were under the finance
leasing law no. 95 for the year of 1995 and its amendments, these contracts were treated
by the Egyptian Accounting Standard no. (20) which was stating that “the accounting
rules and standards related to process of the finance leasing” and the finance leasing
contracts which established under the law of organizing the finance leasing and the
factoring activities no. 176 for the year of 2018 starting from the beginning of the
annual report time period which in the law no. 95 for 1995 was canceled and instead of
the law no. 176 for 2018 was issued.
- A contract was signed with Al-Ahly Company for Financial Leasing to sell and rent
some machines with total cost of (398 324 153 Egyptian Pounds) by changing interest
rate (average price of corridor + 1.2%) on 28/6/2012 for 6 years in addition to two years
as an extra years, after that time period the total rental amount should be paid for
72 months amounting to almost 8 404 Thousand Egyptian Pounds.
- The ownership of these machines will devolve to the company at the end of contract
with a memorial amount of one Egyptian Pound.
- The last installment of the lease value of the financial leasing contract was paid with
QNB Al-Ahly Financial Leasing Company on 28/6/2020.
9- PROJECTS UNDER CONSTRUCTION
In thousands
30/6/2020 30/6/2019
Projects 719 110 916 612
Advance payments an LCs 85 600 332 928
Total 804 710 1 249 540
Projects investment Formation include:
30/6/2020 30/6/2019
Buildings 59 103 1 359
Machinery 540 735 746 917
Tools 626 --
Transportation 15 831 10 134
Office equipment and installations* 102 815 158 202
Total 719 110 916 612
* The amount 4 907 Thousand Egyptian Pounds has been deducted from the Projects
account of typewriters and calculators for the impairment of the J.D Edwards
program.
Advance payments an LCs Investment Formation include:
30/6/2020 30/6/2019
Advance payments fixed assets 82 480 79 215
Goods in transit - fixed assets 640 49 671
LCs of fixed assets 2 480 204 042
Total 85 600 332 928
- 25 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
* The plot of land owned by the company located at 41 Abu Al-Dardaa Street,
El-Laban, Alexandria Governorate, was put up for sale by public bidding for the
closed envelopes system on Thursday 30/1/2020, as a total amount 51 743
Thousand Egyptian Pounds, the payment will be as follows:
- Supplying the initial insurance amount of 500 Thousand Egyptian Pounds to the
company’s treasury after an auction is awarded.
- The initial insurance amount must be completed up to 25% of the sale value within
fifteen days from the date of award notification.
- 25% of the sale value shall be paid within 3 months from the date of award
notification.
- The remaining 50% must be paid in 12 installments for a period of three years, in
equal installments, provided that an interest equivalent to the interest of the Central
Bank is added to the declared borrowing on the amounts of these installments as
compensatory interest.
- The preliminary sale contract is released upon payment of 50% of the total value of
the sale.
- 26 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 27 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
15- INVENTORIES
30/6/2020 30/6/2019
Raw materials * 645 248 608 623
Raw materials (Tobacco leaf) under customs
2 912 310 4 284 172
custody (unpaid custom yet) **
Fuel inventory 1 312 2 548
Spare parts 583 298 483 760
Packaging 1 641 177 2 271 943
Waste and scrap 2 356 1 875
Materials and spare parts under process storage 757 926
Production work in process 63 290 94 696
Finished goods 81 290 63 828
Consignment packing materials and spare parts 937 1 851
Goods in transit 5 298 11 165
Letter of Credit 62 196 133 142
Total 5 999 469 7 958 529
Less the impairment in inventory *** 71 239 1 876
Net 5 928 230 7 956 653
- The company management used to in previous years to record the inventory (in) from
the tobacco leaf raw material under custom custody at the lower of cost according to
the quantities as per supplier invoice or the actual quantities weight per customs.
- The Egyptian Custom Authority select a sample from tobacco leaf raw material
shipment to be weighted. Customs make adjustment to increase weights in case of the
sample selected from tobacco leaf cartons is lower than standard cost recorded on the
cartons. According to the Minister of Finance decree No. (189) for year 2008 amending
some of the executive regulation articles from custom Law issued by the Minister of
Finance No. (10) for year 2006. “The tobacco leaf imported weight recorded with
estimated custom taxes, other taxes and fees should be recorded for custom tax purpose
based on the higher weight of the actual weight performed by the custom upon storing
in customs warehouse or weight stated in shipment documents”.
- Upon release of tobacco leaf shipment from customs warehouse to the factory
warehouse the imported tobacco leaf should be recorded for customs tax purpose based
on weights approved from custom (Higher weight) the related customs taxes and other
taxes are settled based on the approved customs weights.
- Due to the incorrect accounting treatment in previous years which lead to a difference
in inventory book value with approximately 2 600 ton from different tobacco leaf
grades initially amounted to 111 5 Million EGP representing 2.6% from inventory
opening balance and 1.3% from current year cost of sales.
- 28 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
* The trade receivables (co-production) will be paid in the next month, although the
company does not give credit in the domestic sales.
- 29 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
30/6/2020 30/6/2019
VAT tax authority 282 587 345 372
Custom authority 36 921
Debit balance for other governmental authorities 67 293 22 781
349 916 369 074
30/6/2020 30/6/2019
Guarantees for others 10 795 10 740
Employees loans 11 027 10 391
Other debit balances * 78 325 119 295
Total 100 147 140 426
* The other debit balance includes the follows:
48 381 thousand pounds for the State Company for Paper Industry (Racta)
12 961 thousand pounds for stock for others joint production (Viceroy / pal mal)
8 014 thousand pounds for confiscated goods belonging to the company and fines
owed to the company, as well as a travel allowance abroad
3 255 thousand belonging to the treasury of the Rusafa factory, which is registered
with Misdemeanor No. 4900/2016
1 249 thousand pounds for insurance claims under settlement and for cars
657 thousand pounds belong to the mosque deposit, and it has a charge in other
credit accounts of the same value
- 30 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
* The cash is including 5.9 Million Egyptian Pounds related to the social solidarity
fund of the company’s employees Against a commitment confirmed in other credit
balances of the same amount
- 31 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- The nominal share was divided by percentage of 1:5 to be one Egyptian Pound
instead of five Egyptian Pounds with keeping the company’s’ capital as it is
amounted to 2.25 Billion Egyptian Pounds to be divided to 2.25 Billion Shares, and
the necessary approval has been obtained from the concerned authorities according
to the decision of the extra-ordinary general assembly for the Eastern company
which held on 29/8/2018.
- The employee’s association of the Eastern company has bought number of
1 199 529shares from the Eastern company shares During the period from 1/7/2019
to 30/3/2020, so, the company’s shares will be 138 035 692 shares by contributions
percentage up to 6.14%.
- The company’s board of directors which held on 19/3/2020 decided that buy of
treasury stock up to a maximum of 3% of the company's shares traded on the stock
exchange, the purchasing process will be during a month start from 23/3/2020 till
22/4/2020 and notifying the shareholders that not perform any operations on it, The
board of directors also decided to seek the assistance from (CI Capital company and
EFG company).
- The company’s board of directors which held on 23/4/2020 approved to complete
the purchase of treasury shares start from 28/4/2020 till 27/7/2020 to complete the
aforementioned percentage 3%, the number of treasury shares purchased amounted
to 40 410 210 share as percentage 1.796% from the company’s shares till 27/7/2020,
The company’s board of directors, held on 28/7/2020, also decided to extend the
completion of the purchase of treasury shares, provided that the purchase process
starts from 29/7/2020 and ends on 28/10/2020 and another 6 013 208 shares were
purchased during the period from 29 /7/2020 until 5/8/2020
21- RESERVES
30/6/2020 30/6/2019
Legal reserve 801 783 801 783
Regular /Statutory reserve 1 673 498 1 673 498
Capital reserve 549 681 549 681
Reserve to be invented in governmental bonds 20 662 20 662
Reserve of profits estimated budget 940 170 940 170
Other reserves 25 25
Total 3 985 819 3 985 819
- 32 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
The legal reserves: according to the corporate law no .159 for 1981 and the company’s
article was conforming by percentage of 5% from the year net profit and to legal reserve
account, and based on the suggestion of the Board of Directors, it is permissible to suspend
part of the profits for the legal reserve account if the legal reserve reaches 50% of the issued
capital the legal reserve is not available for distribution to shareholders.
The Other reserves: the remaining reserves in the financial statements its formation
according to law no. 203 for 1991.
- 33 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- The deferred tax which result from temporary time differences between book value
for assets and liabilities according to the account basic and its value according to the
tax basic are recognized, the amount of deferred tax was determined according to
what expected to achieve or settle values of assets and liabilities by using current tax
price on the financial statements date, the deferred tax assets will be recognized
when having a strong probability to achieve profits that may be taxed in the future
where the assets can be used and the value of deferred tax assets can be decreased
by the value of the part which will not achieve any tax benefits through the future
years.
- Clearing was performed between the deferred tax assets and deferred tax liabilities.
*** 9,000 thousand Egyptian pounds is no longer needed provision, and the amount
of 1,192 thousand Egyptian pounds is used provision.
- 34 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
The provisions have been created against expected claims from third parties related to
The Company activities.
The Company's management did not disclose provisions details as per Egyptian
Accounting Standard No. (28) article No. (92) due to the Company management's
consider that such disclosure may extremely negatively impact the negotiations results
with external parties, the company management reviews the provisions periodically
and adjusts their value according to the latest updates, discussions and agreements
with those parties.
* The amount of notes payables represent the due installment to re-exploit the company’s
stores and factories of Al-Zumar Street and change its activities to a hospital.
* The amount of value added tax includes two-months “February and March” because
of the electronic payment system from March 2019 where tax payment will be first
day of the next month instead of being at the previous month.
- 36 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 37 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 38 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 39 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- The weighted average number of ordinary shares was calculated according to standard
(22) weighted by the number of days after the reduction of treasury stocks.
The Cash Flows Statement:
43- CASH AND CASH EQUIVALENT
- The cash and cash equivalent balance amounted to 7 438 434 Thousand Egyptian
Pounds are as following:
30/6/2020 30/6/2019
Banks - time deposits -- 751
Banks - current accounts 7 419 268 5 831 822
Cash on hand 19 166 196 432
Total 7 438 434 6 029 005
- The credit facilities which available to be used in future amounted to 7 320 Million
Egyptian Pounds.
- Cash balance as of 30/6/2020 include an amount of 1.872 Billion Egyptian Pounds
for the favor of the Ministry of finance regarding the declaration of May which was
paid in first day of July 2020 instead of the last day of June 2020 because the
company applied the electronic payment system.
- 40 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
46/3 Insurance:
- The company have various insurance using insurance policies which covered all
potential risks that company may face, such as:
a. Comprehensive Certificate/document:
- To cover risks of fire properties, risk of cash transfer, dishonesty, machinery
malfunction, the common civil responsibility, loss revenues, and remove debris.
b. Cars Certificate/document:
- Cover all risks fleet of cars facing (comprehensive insurance - compulsory
insurance).
c. Transportation Certificate/document:
- Cover risks of transportation, sea and air transportation for all production
materials and finished goods.
d. Lifts Certificate/document:
- Cover the civil responsibility result from operation.
e. Political violence Certificate/document:
- Cover terrorism, vandalism, willful acts, riots, civil unrest, armed insurrection,
revolution, rebellion, military coup, and costs of rubble elimination.
f. Personnel accident violence Certificat/document :
- Cover the death, the full and partial disability result from accidents and the
medical care expenses (10% from the insurance amount). Terrorism risk was
added.
g. Dishonesty Certificate/document:
- Cover the drivers who are working on contractual terms for transporting the
company’s’ products.
- 42 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 43 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2020
(Amounts expressed in Thousands of Egyptian Pounds)
- 44 -