· PDF fileArabia) and M/s Eunsung O & C (South Korea). ... by a 1,200 Ton Crane. 11 ANNUAL...

39th ANNUAL REPORT 2014

ANNUAL REPORT 2014

Kuwait Shareholding Company (Public)Incorporated in Kuwait under

An Amiri Decree issued on 02/04/1974

Authorized & Paid-up Capital : KD 17,165,858.800

Kuwaiti Dinars Seventeen Million One Hundred Sixty Five Thousand EightHundred Fifty Eight and Eight Hundred Fils

Commercial Registration No : 20735Head Office : Shuwaik Port, Gate No.7.P.O.Box : 21998, Safat 13080, Kuwait

Tel : 2462 4000Fax : 2483 0291

website : www.heisco.comemail : [email protected]

ANNUAL REPORT 2014

ANNUAL REPORT 2014

His Highness The Amir of KuwaitSheikh Sabah Al-Ahmed Al-Jaber Al-Sabah

His Highness The Crown PrinceSheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah

ANNUAL REPORT 2014

CONTENTS

BOARD OF DIRECTORS .................................................................................................................................. 5

BOARD OF DIRECTORS REPORT ............................................................................................................. 6-14

INDEPENDENT AUDITORS REPORT ....................................................................................................... 16-17

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2014 ................................................................. 18

CONSOLIDATED STATEMENT OF INCOME 2014 ........................................................................................ 19

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2014 ....................................................... 20

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2014 ................................................................. 21

CONSOLIDATED STATEMENT OF CASH FLOWS 2014 .............................................................................. 22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2014 ...................................................... 23-49

HEISCO AT A GLANCE ............................................................................................................................. 52-65

ANNUAL REPORT 2014

5

BOARD OF DIRECTORS

JUHAIL MOHAMMED ABDUL RAHMAN JUHAILChairman

ADNAN MUSAED KHALIFA AL KHARAFIVice Chairman

HUSSAIN MURAD BEHBEHANIDirector

AZZAM ABDUL AZIZ AL FULAIJDirector

GHAZI AHMAD AL MIJREN AL ROUMIDirector

6

ANNUAL REPORT 2014

• Major Repairs of Supply vessels ‘MV Shark 30’ and ‘MV Shark 40’ at HEISCO Shipyard floating dock for Arabian Gulf Mechanical Services Co. (Kuwait).

• Salvage Barge ‘MSB 3301’ repairs at HEISCO Shipyard for Mammoet Salvage B.V. (Netherlands).

• Care of Stock/Supplies in Storage (COSIS) FY 12-13-14 and Field Level Maintenance to US Army Vessels stationed at Muhammad Al-Ahmad Naval Base and Camp Arifjan, (Kuwait).

• Crane Barges “ES 365 and ES18” and Tug Boat “ES 366” to carry out Sea Fastening and Repair Works on each vessel for M/S Huta Marine (Saudi Arabia) and M/s Eunsung O & C (South Korea).

Projects Ongoing During the Year 2014 :-

• Dry Docking and Repairs of various US Army Vessels at HEISCO Shipyard.

• Dry Docking and Repairs of various Kuwait Oil Company Vessels at HEISCO Shipyard.

• Dry Docking and Repairs of various Kuwait Fire Services Directorate Vessels at HEISCO Shipyard.

• Agency agreement with DAMEN Shipyard (Netherland) for Design, Construction And Delivery of 14 Nos. Tug Boats.

TO OUR SHAREHOLDERS,

The Board of Directors of the Company convey its greetings and is pleased to express its deep appreciation for your continued interest in the achievements of the Company in all sectors.

The Board of Directors is pleased to submit the 39th Annual Report which sets out the activities and performance of the Company during the Year 2014, which also contains the main indicators of the consolidated Financial Statements of Heavy Engineering Industries & Shipbuilding Company K.S.C (Public) and its subsidiary, Gulf Dredging and General Contracting Company K.S.C (Closed) for the year ended on 31.12.2014.

SHIPYARD OPERATIONS:

Projects Completed During the Year 2014 :-

• Dry-Docking and Major Repairs of Jack Up Barge ‘Hyundai Pioneer II’ and Conversion of Flat Top Barge to Spud Barge ‘Rangin Kaman’ at HEISCO Shipyard for Hyundai Engineering & Construction Co. (South Korea).

• Major Repairs of Flat Barge (‘Parslian 6’, ‘Parslian 7’) and Supply Vessel ‘MV Gypsumco’ at HEISCO Shipyard floating dock for Kuwait Gypsumco Trad. Co. (Kuwait).

Overview of Shipyard Workshops

Work in progress for US Army vessel

BOARD OF DIRECTORS REPORT FOR 2014

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)

7

ANNUAL REPORT 2014

• Miscellaneous repairs and maintenance of several vessels at HEISCO Shipyard for Hyundai Engineering & Construction Co. (South Korea), Smit Lamnalco (Netherlands).

• Dry Docking and Repair for all the Fleet (large units) of Kuwait Coast Guard.

Projects Awarded During the Year 2014 :-

Shipyard Mechanical Workshop

Motor Baking in Oven

• A five year contract with Kuwait Oil Company towards Provision of Marine Fleet Staff for KOC Marine Operations.

• A one year contract by Ministry of Defense towards Major Rehabilitation of supply vessel ‘Al Dorrar.

• An amendment to the existing contract with Ministry of Interior (Kuwait Coast Guard Department) for Dry-Docking and repairs of several vessels.

• A five year contract by US Army for Care of Stock/Supplies in Storage (COSIS) and Field Level Maintenance to US Army Vessels stationed at Muhammad Al-Ahmad Naval Base and Camp Arifjan, Kuwait.

• Providing Diving Services for KGOC Gas & Condensate Export System Project with Gulf Dredging (subsidiary of HEISCO).

• A three year contract by Saudi Aramco for “Ship Repair Services”.

• Providing Underwater Services Offshore Works & Intake Pump Station Azzour IWPP, HHI with Gulf Dredging (subsidiary of HEISCO).

Agreements & Other achievements During the Year 2014 :-

• New Representative Agreements with Local & International Companies.

• Renewal / Amendments to Representative Agreements with our valued Local Clients.

• Renewal / Amendment to Exclusive Agency Agreement with our valued International Client.

• Non Disclosure Agreement with International Company for the upcoming potential projects.

• Sale & Supply Agreement with Local Company.

• Teaming Agreements with several US Companies for SLEP (Service Life Extension Plan) Program.

• Renewal of membership of the International Marine Contractors Association (IMCA).

• Loan from Industrial Bank of Kuwait approved for the finance of New Floating Dock.

8

ANNUAL REPORT 2014

• HEISCO participated in the 26th SMM Exhibition 2014, the leading International Maritime Trade Fair which took place in Hamburg, Germany.

• HEISCO Shipyard reserved Booth and registered for the 27th SMM Exhibition 2016.

• HEISCO Shipyard reserved Booth and registered for the upcoming Seatrade Offshore Marine & Workboats Middle East Exhibition 2015, Abu Dhabi.

• HEISCO Shipyard participated in the 16th Iran International Marine Exhibition December 2014, in Bandar Abbas, Islamic Republic of Iran.

OIL & GAS OPERATIONS:


• Part-B, Pipeline Works for Installation of FG, Gas Oil Pipelines and Pumping Station from Mina Al Ahmadi to Azzour and Shuaiba Power Stations with the Main Contractor for Kuwait Oil Company.

• Part-A, Pipeline work for the Installation of Low Sulphur Fuel Oil (LSFO), FG and GAS Oil Pipeline form Mina Al Ahmadi to Sabiya and Doha Power Stations with the Main Contractor for Kuwait Oil Company.

• Electrical & Instrumentation Works of Valve Pit for LSFO Part-A Pipeline Project with the Main Contractor for Kuwait Oil Company.

• Pipeline Construction Works for Gas Flaring Reduction Project for joint operations at Wafra.

• Flowline and Associated Works to new GC-16 and Existing facilities at West Kuwait Areas for Kuwait Oil Company.

• Construction of Storage Tanks and Related Painting and Cathodic Protection System Works at Booster Station - BS-171 at West Kuwait with the Main Contractor for Kuwait Oil Company.

• Electrical & Instrumentation Works For New Um-Al-Aish LPG Filling Plant with the Main Contractor for Kuwait Oil Tankers Company.

• Construction of Gas Oil Tank and Auxiliary at Azzour South Power Station for the Ministry of Electricity and Water.

• Supply of Oil & Gas Separators and Scrubbers with the Main Contractor for Kuwait Oil Company.

• Structural Steel Fabrication for Wara PMP Project with the Main Contractor for Kuwait Oil Company.

HEISCO Shipyard built-up Stand at SMM 2014 , Hamburg , Germany

Completed Pressure Vessel being Transported

9

ANNUAL REPORT 2014

• Structural Steel Fabrication for North LPG Tank Farm Project with the Main Contractor for Kuwait national Petroleum Company.

• Electrical & Instrumentation Works for Halon Phase Out Project at Mina Al Alhmadi Refinery with the Main Contractor for Kuwait National Petroleum Company.

• Modification of Skin Casing of Boiler at Sabiya Power Station With the Main Contractor for Ministry of Electricity and Water.

• Cold Bending of Pipes for Wara Pressure Maintenance Project with the main Contractor for Kuwait Oil Company.

• Surge Vessel for Azzour Water Distribution Complex-II Project with the main Contractor for Ministry of Electricity and Water.

• Skid & Piping works for New GC-16 Project with the Filter Package Vendor for Kuwait Oil Company.

• Nutshell Filter Vessels & Skid Fabrication for Wara Pressure Maintenance Project with the Filter Package Vendor for Kuwait Oil Company.

• Manufacturing & Supply of Storage Tank for Telemetry System Project with the Main Contractor for Kuwait Oil Company.

• Fabrication & Supply of Structural Steel for Telemetry System Project with the Main Contractor for Kuwait Oil Company.

• Pressure Vessels for New BS-132 and Enhancement of BS-131 Project with the Main Contractor for Kuwait Oil Company.

• LP Separators & Manifolds for GC-17 for Kuwait Oil Company.


• Design, Fabrication and Supply & Erection of Storage Tanks for Wara Pressure Maintenance Project with the Main Contractor for Kuwait Oil Company.

• Mechanical Maintenance Services at Shuaiba South Power Station & Azzour South Power Station for the Ministry of Electricity And Water.

• Professional Manpower Supply Services for Khafji Joint Operations.

• Operations & Maintenance of Sludge Handling & Treatment Facility at Mina Abdullah Refinery for Kuwait National Petroleum Company.

• Combustion System upgrade/ Improvement of Boilers at Azzour South Power Station for Ministry of Electricity And Water.

• Structural, Mechanical, Piping, Painting, and Electrical & Instrumentation Works for North LPG Tank Farm (NLTF) Project with the Main Contractor for Kuwait National Petroleum Company.

• Secondment Manpower Supply Services for Kuwait National Petroleum Company.

• Mechanical Maintenance Services for the Joint Operations at Wafra.

• Civil, Buildings, Piping, and Mechanical works for Tail Gas Treatment Unit No.99 Project at Mina Al Ahmadi Refinery with the Main contractor for Kuwait National Petroleum Company.

• Civil & Mechanical Works for Azzour Water Distribution Complexes-II Project with the Main Contractor for Ministry of Electricity And Water.

Overhauling of Turbine at Azzour Power Station

10

ANNUAL REPORT 2014

• Civil Works at Mina Al Ahmadi Refinery for EPC of Preparatory for Clean Fuel Project with the Main Contractor for Kuwait National Petroleum Company.

• New Shipping Control Valve Station At Mina Saud for Chevron (Saudi Arabia).

• Rehabilitation of Tube Type Heat Exchangers for Kuwait Oil Company.

• Reconditioning of Plate Heat Exchangers for Equate.

• Chemical Cleaning of Boilers at all Power Generation Stations of Ministry of Electricity and Water.

• Installation of Main Extraction control Valves (ECVs) at Sabiya Power Generation & Water Distillation Station for Ministry of Electricity and Water.


• Construction of Flowlines and Associated Works In West Kuwait for Kuwait Oil Company.

• Design, Fabrication, Supply & Construction of Storage Tanks, Civil & Building works for New Gathering Centre GC-29 in North Kuwait with the Main Contractors for Kuwait Oil Company.

• Electrical & Instrumentation works For FCC, SWT and CT for Clean Fuel Project with the Main Contractor for Kuwait National Petroleum Company.

• Electrical & Instrumentation works for Tail Gas Treatment Unit No.99 Project at Mina Al Ahmadi Refinery with the Main Contractor for Kuwait National Petroleum Company.

• Electrical & Instrumentation works at Mina Al Ahmadi Refinery and Mina Abdullah Refinery for EPC of Preparatory for Clean Fuel Project with the Main Contractor for Kuwait National Petroleum Company.

• Maintenance Support Service for Export Facilities for Kuwait Oil Company.

Lifting of Vessel to 60 mtr Height by a 1,200 Ton Crane

11

ANNUAL REPORT 2014

• Structural Steel Fabrication and Assembly of Skid with Vessel, Piping, Platform/Ladder and E&I works for Wara Pressure Maintenance Project with the Main Contractor for Kuwait Oil Company.

• Structural Steel Fabrication for Sulphur Handling Facilities Project at Mina-Al-Ahmadi Refinery with the Main Contractor for Kuwait National Petroleum Company.

• Manufacturing & Supply of Drums and Fabrication of Structural Steel for KGOC Gas Condensate Export System Project with the Main Contractor for Kuwait Gulf Oil Company.

• Rehabilitation of Steam Turbines and Generators at Doha West Power and Water Distillation Station with the Main Contractor for Ministry of Electricity and Water.

• Enhancement of South Pier Integrity to Facilitate Import up to End Of 2025 at Mina-Al-Ahmadi Refinery for Kuwait National Petroleum Company.

• Manufacturing & Supply of LP Wet Crude Separators and Desalter Feed Heaters for New Gathering Centre GC-30 in North Kuwait with the Main Contractor for Kuwait Oil Company.

• Manufacturing & Supply of First Stage Desalter & Second Stage Desalter for Clean Fuel Project MAB1 package with the Main Contractor for Kuwait National Petroleum Company.

• Structural Steel Fabrication works for Jahra Court Complex Project with the Main Contractor for Amiri Diwan.

12

ANNUAL REPORT 2014

GULF DREDGING & GENERAL CONTRACTING CO. K.S.C (Closed)(Owned subsidiary)


• Mubarak Al Kabeer Seaport Phase-1, Stage-1, Design and Construction of Roads, Rails, Bridges and Soil Improvement works (China Harbor Engineering Company Limited – Gulf Dredging & General Contracting Company – GALFAR Co.- Joint Venture) for the Ministry of Public Works.

• Offshore & Intake Structure works for Azzour North Power Station Phase-1 ‘Independent Water & Power Project” (IWPP), with main contractor for Shamal Azzour Al Oula.

OFFSHORE OPERATIONS:


• Design, Fabrication, Supply & Installation of Concrete Pontoons for Mubarak Al Kabeer Seaport Project, Phase-1, Stage-2 with Main Contractor for the Ministry of Public Works.

• Supply of Rocks for Mubarak Al Kabeer Seaport Project, Phase-1, Stage-2, with Main Contractor for the Ministry of Public Works.

• Supply & Replacement of Fenders at Berth No. 18 & 19 in Sea Island of Mina Abdullah Refineries for Kuwait National Petroleum Company.

• Dredging of 5.0 million m3 to form the Temporary Access Channel – Sheikh Jaber Al Ahmed Al Sabah Causeway Project, Kuwait with Main Contractor for the Ministry of Public Works.

• Rock Supply for Azzour North Power Station Phase-1 “Independent Water and Power Project” (IWPP), with the main contractor for Shamal Azzour Al Oula.

• Supply of Rock to New Doha Port Project Stage-1, State of Qatar with the Main Contractor for the New Port Project Steering Committee.

• Dredging & Reinstatement of Breakwater of Marina for Private Sector.

Construction, Completion & Maintenance of Police Officers Club Marinaat Abu Al Hasaniya – Kuwait

Offshore & Intake Structure Works Azzour North IWPP Project - KuwaitDesign, Fabrication, & Supply and Installation of

Concrete Pontoon for Mubarak Al Kabeer Seaport, Phase-1, Stage-2 - Kuwait

13

ANNUAL REPORT 2014

• Construction, Completion & Maintenance of Police Officers Club Marina at Abu Al Hasaniya (Kuwait) for the Ministry of Interior.


• Maintenance Dredging of Seawater Intake Channel at Subiya Power & Water Distillation Station (Kuwait) for the Ministry of Electricity & Water.

• Maintenance Dredging of Seawater Intake at Doha West Power & Water Distillation Station (Kuwait) for the Ministry of Electricity & Water.

• Trenching, Backfilling and Rock dumping works for the subsea pipeline - Gas Condensate Export System Project at Al Khafji with the Main Contractor for Kuwait Gulf Oil Company.

• Dredging of 1.5 million m3, Supply and Installation of Steel Floating Pontoons for Piers & Dredging Project at Umm Qasr-Iraq, for the United States Army Corps of Engineers.

ONSHORE OPERATIONS:


• Civil, Building & Temporary Facilities works for the New Acid Gas Removal Plant (NAGRP) Revamp Project at Mina Al-Ahmadi with the main contractor for Kuwait National Petroleum Company.

• Civil works for New Booster Station Project (BS-171) at West Kuwait with main contractor for Kuwait Oil Company.

• Construction of 160 New Houses in South Ahmadi (Kuwait) for Kuwait Oil Company.

Offshore & Intake Structure Works Azzour North IWPP Project - Kuwait

Civil Construction Works BS-171 West Kuwait

14

ANNUAL REPORT 2014

In conclusion, the Board of Directors expresses its deep appreciation and thanks to His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and His Highness the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah and His Highness the Prime Minister Sheikh Jaber Al-Mubarak Al-Sabah and all Ministries and Official Departments of the State and to all Companies, Establishments, Institutions and Banks which have cooperated with the Company during the year 2014.

In particular, we express our thanks and appreciation to all the personnel of the Company and wish them continued progress and success.

BOARD OF DIRECTORS

FINANCIAL HIGHLIGHTS• Revenue increased from KD 81.839 Million in year

2013 to KD 110.581 Million in year 2014 reflecting a increase of 35.12%.

• Gross Profit increased from KD 7.171 Million in year 2013 to KD 8.767 Million in year 2014.

• General and administrative expenses increased from KD 3,994,713 in year 2013 to KD 4,673,969 in year 2014.

• Net Profit increased from KD 1,852,898 in year 2013 to KD 2,544,579 in year 2014.

• Earnings per share increased from 10.79 Fils in year 2013 to 14.82 Fils in year 2014.

ANNUAL REPORT 2014

15

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its Subsidiaries

CONSOLIDATED FINANCIAL STATEMENTSAND AUDITORS’ REPORT

31 DECEMBER 2014

ANNUAL REPORT 2014

16

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Heavy Engineering Industries and Shipbuilding Company K.S.C.(Public) (the Parent Company) and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

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.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS


ANNUAL REPORT 2014

17

Report on Other Legal and Regulatory Requirements

Furthermore, in our opinion, proper books of accounts have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Parent Company’s Board of Directors relating to these consolidated financial statements are in accordance therewith. We further report that we obtained all the information and explanations that we deemed necessary for the purpose of our audit; and that the consolidated financial statements incorporate all the information that is required by Companies Law No. 25 of 2012, as amended, and by the Parent Company’s Memorandum of Incorporation and Articles of Association; that an inventory was duly carried out; and that, to the best of our knowledge and belief, no violations of the Companies Law No. 25 of 2012, as amended, or of the Parent Company’s Memorandum of Incorporation and Articles of Association have occurred during the year ended 31 December 2014 that might have had a material effect on the business of the Group or on its consolidated financial position.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS(CONTINUED)


Rabea Saad Al-MuhannaLicence No. 152AHorwath Al-Muhanna & Co.

Bader A. Al-WazzanLicence No. 62ADeloitte & ToucheAl-Wazzan & Co.

Kuwait - 9 March 2015

ANNUAL REPORT 2014

18

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2014

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries

The accompanying notes form an integral part of these consolidated financial statements.

Note 20142013

Restated(Note 24)

2012Restated(Note 24)

Assets Non current assetsProperty, plant and equipment 5 39,666,392 35,375,220 34,708,681Investments available for sale 6 1,936,687 2,509,692 2,861,690

41,603,079 37,884,912 37,570,371Current assetsInventories 7 6,975,782 5,417,118 6,076,420Contracts in progress 8 31,423,010 26,712,086 23,082,322Trade and other receivables 9 37,337,980 37,685,961 41,546,822Cash and cash equivalents 10 3,380,555 1,795,577 633,136

79,117,327 71,610,742 71,338,700Total assets 120,720,406 109,495,654 108,909,071

Equity and liabilitiesEquityAttributable to Parent Company's shareholdersShare capital 11 17,165,859 16,348,437 16,348,437Statutory reserve 12 5,268,135 4,992,428 4,789,803General reserve 12 3,739,029 3,463,322 3,260,697 Fair valuation reserve 114 162,328 171,163 Retained earnings 10,210,218 9,034,739 7,587,561

36,383,355 34,001,254 32,157,661Non-controlling interest 7,075 6,811 6,341Total equity 36,390,430 34,008,065 32,164,002Non current liabilitiesPost employment benefits 13 9,585,319 8,309,851 7,171,837Due to banks 15 4,767,490 2,822,088 1,216,753

14,352,809 11,131,939 8,388,590Current liabilitiesTrade and other payables 14 46,093,544 33,847,636 41,852,944Due to banks 15 23,883,623 30,508,014 26,503,535

69,977,167 64,355,650 68,356,479Total liabilities 84,329,976 75,487,589 76,745,069 Total equity and liabilities 120,720,406 109,495,654 108,909,071

(All Amounts in Kuwaiti Dinars)

AdnanMusaedKhalifaAlKharafiVice Chairman

Juhail Mohammed Abdul Rahman JuhailChairman

ANNUAL REPORT 2014

19



CONSOLIDATED STATEMENT OF INCOME – YEAR ENDED 31 DECEMBER 2014

Note 20142013

Restated(Note 24)

Revenue 110,580,641 81,838,791

Cost of sales 16 (101,813,440) (74,667,730)

Grossprofit 8,767,201 7,171,061

Other income 111,396 110,760

General and administrative expenses 17 (4,673,969) (3,994,713)

Investment income 18 168,452 168,076

Finance costs (1,151,811) (1,247,597)

Foreign exchange (loss)/ gain (53,407) 92,520

Profit before provisions and contribution to taxes and Board of Directors’ remuneration 3,167,862 2,300,107

Impairment loss on investments available for sale (410,790) (273,861)

Board of Directors’ remuneration (62,000) (62,000)

Contribution to Kuwait Foundation for Advancement of Sciences (21,524) (12,360)

National Labour Support tax (96,695) (76,350)

Zakat expense (32,274) (22,638)

Netprofitfortheyear 2,544,579 1,852,898

Attributable to:Shareholders of the Parent Company 2,544,316 1,852,428

Non-controlling interest 263 470

2,544,579 1,852,898

Basic and diluted earnings per share (fils) 20 14.82 10.79


ANNUAL REPORT 2014

20

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - YEAR ENDED 31 DECEMBER 2014


20142013

Restated(Note 24)

Net profit for the year 2,544,579 1,852,898

OthercomprehensiveincometobereclassifiedtoStatement of Income in subsequent periods:

Changes in fair value of investments available for sale 43,183 128,096

Impairment loss on investments available for sale recycled from equity (205,397) (136,931)(162,214) (8,835)

Total comprehensive income for the year 2,382,365 1,844,063

Attributable to:Shareholders of the Parent Company 2,382,102 1,843,593Non-controlling interest 263 470

2,382,365 1,844,063



ANNUAL REPORT 2014

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(1,6

34,8

44)

Tran

sfer

to re

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es -

183

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18

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9-

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859

6,34

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Bal

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,348

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4,

789,

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3,26

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7 17

1,16

3 7,

587,

561

6,34

1 32

,164

,002

ANNUAL REPORT 2014

22

Note 2014 2013Operating activitiesNet profit for the year 2,544,579 1,852,898Adjustments for:Depreciation 5 5,043,668 5,047,432Investment income 18 (168,452) (168,076)Finance costs 1,151,811 1,247,597Impairment loss on investment securities 410,790 273,861Gain on disposal of property, plant and equipment (49,765) (57,177)Post employment benefits accrued 13 2,161,111 1,937,171Operating profit before working capital changes 11,093,742 10,133,706(Increase)/ decrease in inventories (1,558,664) 659,302Increase in contracts in progress (4,710,924) (3,629,764)Decrease in trade and other receivables 347,981 3,860,861Increase/ (decrease) in trade and other payables 12,180,631 (6,144,547)Post employment benefits paid 13 (885,643) (799,157)Net cash generated from operating activities 16,467,123 4,080,401

Investing activitiesPurchase of property, plant and equipment 5 (9,423,352) (6,079,179)Proceeds from sale of property, plant and equipment 138,277 422,385

Proceeds from redemption and sale of investments available for sale - 69,302

Dividends received from investments 18 171,163 171,163Net cash used in investing activities (9,113,912) (5,416,329)

Financing activities(Repayment of)/ proceeds from due to banks (4,678,989) 3,728,756Finance cost paid (1,086,294) (1,205,111)Dividends paid (2,950) (25,276)Net cash (used in)/ generated from financing activities (5,768,233) 2,498,369

Net increase in cash and cash equivalents 1,584,978 1,162,441 Cash and cash equivalents at 1 January 1,795,577 633,136Cash and cash equivalents at 31 December 10 3,380,555 1,795,577

CONSOLIDATED STATEMENT OF CASH FLOWS - YEAR ENDED 31 DECEMBER 2014




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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2014

1. Incorporation and activities

Heavy Engineering Industries and Shipbuilding Company K.S.C (Public) (the Parent Company) is a shareholding company registered in Kuwait and was incorporated in the year 1974. The main activities of the Parent Company are shipbuilding, ship repair and other related marine activities and industrial and engineering contracting with specialisation in oil and energy sectors.

The Parent Company’s registered office is P. O. Box 21998, Safat 13080, Kuwait

The consolidated financial statements include the Parent Company’s financial statements and the financial statements of the following two subsidiaries together referred to as “the Group”.

Company Name CountryPercentage of holding2014 2013

Gulf Dredging and General Contracting Company K.S.C (Closed) Kuwait 99.92 % 99.92 %

Kuwait International Company for Environmental Service and Industrial Inspection W.L.L Kuwait 80 % 80 %

The residual interest in Gulf Dredging and General Contracting Company K.S.C (Closed) is a non-controlling ownership.

The residual interest in Kuwait International Company for Environmental Service and Industrial Inspection WLL is held through Gulf Dredging and General Contracting Company K.S.C (Closed).

The subsidiaries are mainly engaged in dredging and related marine and civil construction activities and in providing services related to industrial inspection of materials, quality control and environment.

The consolidated financial statements for the year ended 31 December 2014 were authorised for issue by the Board of Directors (the Board) on 09 March 2015 and are subject to the approval of shareholders at the annual general meeting.

2.Basisofpreparationandsignificantaccountingpolicies

2.1 Basis of preparation

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). These consolidated financial statements have been prepared under the historical cost basis of measurement as modified by the revaluation of financial assets classified as “available for sale”. These consolidated financial statements have been presented in Kuwaiti Dinar.

The preparation of these consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that may affect amounts reported in these consolidated financial statements, as actual results could differ from those estimates. It also requires management to exercise its judgment in the process of applying the Group accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to these consolidated financial statements are disclosed in Note 4.

(All Amounts in Kuwaiti Dinars unless otherwise stated)

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2.2Significantaccountingpolicies

The accounting policies used in the preparation of these consolidated financial statements are consistent with those used in the previous year, except for the following new and amended IASB Standards adopted during the year:

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments are effective for annual periods beginning on or after 1 January 2014 and provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. The adoption of this Standard has not resulted in any impact on the financial position or performance of the Group, since none of the entities in the Group qualify to be an investment entity under IFRS 10.

IAS 32: Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amendment)

The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The adoption of this Standard has not resulted in any impact on the financial position or performance of the Group.

IAS 36: Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendment)

These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognised or reversed during the period. The adoption of this Standard has not resulted in any material additional disclosures. The Group has adopted these amendments with effect from 1 January 2014.

IFRIC 21: Levies

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. Retrospective application is required for IFRIC 21. This interpretation has no impact on the Group as it has applied the recognition principles under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with the requirements of IFRIC 21 in prior years.

Other amendments to IFRSs which are effective for annual accounting period starting from 1 January 2014 did not have any material impact on the accounting policies, financial position or performance of the Group.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2014(All Amounts in Kuwaiti Dinars unless otherwise stated)

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Standards issued but not yet effective

The following IASB Standards have been issued/amended but are not yet mandatory, and have not been adopted by the Group:

IFRS 9: Financial Instruments

The IASB issued IFRS 9 - Financial Instruments in its final form in July 2014 and is effective for annual periods beginning on or after 1 January 2018 with a permission to early adopt. IFRS 9 sets out the requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non- financial assets. This Standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of this Standard will have an effect on the classification and measurement of Group’s financial assets but is not expected to have a significant impact on the classification and measurement of financial liabilities. The impact of this Standard on the initial application in 2018 is not reasonable estimable at the present time.

IFRS 15 – Revenue from Contracts with customers

IFRS 15 was issued by IASB on 28 May 2014 is effective for annual periods beginning on or after 1 January 2017. IFRS 15 supersedes IAS 11 – Construction Contracts and IAS 18 – Revenue along with related IFRIC 13, IFRIC 18 and SIC 31 from the effective date. This new Standard would remove inconsistencies and weaknesses in previous revenue recognition requirements, provide a more robust framework for addressing revenue issues and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The Group is in the process of evaluating the effect of IFRS 15 on the Group and do not expect any significant impact on adoption of this Standard.

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. It is not expected that this amendment would be relevant to the Group, since none of the entities within the Group has defined benefit plans with contributions from employees or third parties.

Adoption of other new or amended Standards are not expected to have material effect on the consolidated financial position or financial performance of the Group. Additional disclosures will be made in the consolidated financial statements when these Standards become effective.



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2.3 Consolidation

The Group consolidates the financial statements of the Company and subsidiaries (i.e. investees that it controls) and investees controlled by its subsidiaries.

The Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee, and

• The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee;

• Rights arising from other contractual arrangements;

• Voting rights and potential voting rights;

The financial statements of subsidiaries are included in the consolidated financial statements on a line-by-line basis, from the date on which control is transferred to the Group until the date that control ceases.

Non-controlling interest in an acquiree is stated at the non-controlling interest’s proportionate share in the recognized amounts of the acquiree’s identifiable net assets at the acquisition date and the non-controlling interest’s share of changes in the equity since the date of the combination. Total comprehensive income is attributed to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. Changes in the Group’s ownership interest in a subsidiary that do not result in loss of control are accounted for as equity transactions. The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interest in the subsidiary and any difference between the amount by which the non-controlling interests is adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the Company’s shareholders. Non-controlling interest is presented separately in the consolidated statements of financial position and profit or loss. The non-controlling interests are classified as a financial liability to the extent there is an obligation to deliver cash or another financial asset to settle the non-controlling interest.

Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances based on latest audited financial statements of subsidiaries. Intra group balances, transactions, income, expenses and dividends are eliminated in full. Profits and losses resulting from intra group transactions that are recognized in assets are eliminated in full.

When the Company loses control of a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost as well as related non-controlling interests. Any investment retained is recognized at fair value at the date when control is lost. Any resulting difference along with amounts previously directly recognized in equity is transferred to the consolidated statement of profit or loss.



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2.4 Financial Instruments

Classification

The Group classifies its financial instruments upon initial recognition based on the purpose of acquiring these financial instruments. The Group classifies its financial assets as “loans and receivables” or “available for sale” and its financial liabilities as “other than at fair value through profit or loss”.

Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and receivables comprises of contracts in progress, trade and other receivables, and cash and cash equivalents.

Available for sale

These are non-derivative financial assets not included in any of the above classifications and principally acquired to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

Recognition and de-recognition

A financial asset or a financial liability is recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire; or when the Group has transferred substantially all the risks and rewards of ownership; or when it has neither transferred nor retained substantially all risks and rewards of ownership and it no longer has control over the asset or portion of the asset. If the Group has retained control, it shall continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. A financial liability is derecognized when the obligation specified in the contract is discharged/ cancelled or has expired.

All regular way purchase and sale of financial assets are recognized on the trade date - the date on which the Group commits to purchase or sell the financial asset.

Offsetting

Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognized amounts and the Group intends to settle on a net basis.

Measurement

All financial instruments are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue are included as part of initial cost.

Loans and receivables are subsequently carried at amortized cost. The amortized cost is the amount at which the financial instrument is initially recognized minus principal repayments, plus or minus the amortization of premiums or discounts using effective interest rate, less any allowance for impairment.



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Available for sale financial assets are subsequently measured and carried at fair value and any resultant gains or losses arising from changes in fair value are recognized in other comprehensive income and accumulated in investment fair valuation reserve in equity. When the available for sale financial asset is disposed of or impaired, the related accumulated fair value changes earlier reported in equity are transferred to the consolidated statement of income as gains or losses. The translation gains or losses on non-monetary items classified as available for sale financial assets are included in equity.

Financial liabilities “other than at fair value through profit or loss” are subsequently measured and carried at amortized cost using the effective interest rate.

Financial guarantees are subsequently measured at the higher of the amount initially recognized less any cumulative amortization and the best estimate of the present value of amount required to settle any financial obligation arising as a result of the guarantee.

Fair values

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. The fair value of financial instruments carried at amortised cost is estimated by discounting the future contractual cash flows at the current market interest rates for similar financial instruments.

Impairmentoffinancialasset

A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An assessment is made at each consolidated statement of financial position date to determine whether there is objective evidence that a specific financial asset or a group of similar assets may be impaired. If such evidence exists, the asset is written down to its recoverable amount.

The amount of impairment loss is measured for financial assets carried at amortised cost as the difference between the asset’s carrying amount and the present value of estimated future cash flows, including amounts recoverable from guarantees and collateral, discounted at the financial asset’s original effective interest rate. If the financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. If in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the consolidated statement of income.

In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of assets below its cost is considered in determining whether the financial assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss measured is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the consolidated statement of income. If in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in the consolidated statement of income. Impairment losses recognised on available for sale equity investments are, however, not reversed through the consolidated statement of income.



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2.5 Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses, if any.

Depreciation is provided on a straight line basis on all property, plant and equipment, other than land which is determined to have an indefinite life. The rates of depreciation are based upon the following estimated useful lives:

• Dock and lifts 24 to 46 years• Buildings 12 to 56 years• Machinery and equipment 8 to 31 years• Other assets 2 to 33 years

The asset’s residual values, useful lives and method of depreciation are reviewed, and adjusted if appropriate, at each statement of financial position date.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. All other expenditure are recognised in the consolidated statement of income as the expense is incurred.

Projects under construction are included in property, plant and equipment until they are completed and ready for their intended use. At that time, they are reclassified under similar assets and depreciation is calculated since then.

These assets are reviewed periodically for impairment. If there is an indication that the carrying value of an asset is greater than its recoverable amount, the asset is written down to its recoverable amount and the resultant impairment loss is taken to the consolidated statement of profit or loss.

Gains and losses on disposals are determined by comparing proceeds with the carrying amounts and are recognised in the consolidated statement of income.

2.6 Inventories

Inventories are stated at the lower of cost and net realizable value. Costs are those expenses incurred in bringing each item to its present location and condition, determined on a weighted average cost basis. Net realizable value is the selling price less cost to sell.

2.7 Cash and cash equivalents

Cash on hand, demand and time deposits with banks whose original maturities do not exceed three months are classified as cash and cash equivalents in the consolidated statement of cash flows.

2.8Postemploymentbenefits

The Group is liable under Kuwait Labour Law to make payments under defined benefit plans to employees at termination of employment. The defined benefit plan is un-funded and is based on the liability that would arise on involuntary termination of all employees at the consolidated statement of financial position date. This basis is considered to be a reliable approximation of the present value of the Group’s liability.



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2.9 Provisions

Provisions are recognized when the Group has a legal or constructive obligation as a result of past events, and it is probable that an outflow of economic benefits will be required to settle that obligation. Provisions are reviewed at each consolidated statement of financial position date and adjusted to reflect the best current estimate of the obligation.

2.10 Foreign currencies

The functional currency of the Group is Kuwaiti Dinar. Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted to Kuwait Dinar at the rate of exchange ruling at the consolidated statement of financial position date. All differences are taken to the consolidated statement of income.

2.11 Revenue recognition

Revenue from contracts involving the rendering of services is recognised by reference to the stage of completion of the contract based on internal surveys of work performed. When the outcome of the contract cannot be estimated reliably, revenue is recognised only to the extent of expenses that are incurred are recoverable. Variation orders and claims are recognised upon acceptance by customers. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.Revenue from sales transactions are recorded when goods are delivered.

Dividend income is recognised when the right to receive payment is established.

2.12 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent that they are capitalised.

2.13 Segment reporting

A segment is a distinguishable component of the Group that engages in business activities from which it earns revenues and incurs costs. The operating segments are used by the management of the Group to allocate resources and assess performance. Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate are aggregated and reported as reportable segments.

2.14 Accounting for leases

Where the Group is the lessee

Operating lease

Leases of property and equipment under which, all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the consolidated statement of profit or loss on a straight-line basis over the period of the lease.



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3. Financial risk management

3.1 Financial risk factors

The Group’s use of financial instruments exposes it to a variety of financial risks such as credit risk, market risk and liquidity risk. The Group continuously reviews its risk exposures and takes measures to limit it to acceptable levels. Risk management is carried out by the finance department of the Group under policies approved by the Board. The Board approves policies for overall risk management and for specific areas such as credit risk; market risk comprising of foreign currency risk and interest rate risk; and liquidity risk. The finance department identifies and evaluates financial risks in close co-operation with the Group’s operating units. The significant financial risks that the Group is exposed to are discussed below:

(A) Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation causing the other party to incur financial loss. The financial assets of the Group exposed to credit risk are contracts in progress, trade and other receivables and cash equivalents.

The Group transacts business with customers with financial stability and high credit worthiness. The Group’s cash balances are placed with financial institutions with high credit rating.

The table below shows the gross exposure to credit risk on the consolidated statement of financial position date without taking into account collateral or other credit mitigants:

2014 2013 Contracts in Progress 26,215,283 21,250,943 Trade and other receivables 35,530,924 36,338,799 Balances with banks 3,297,583 1,643,191

65,043,790 59,232,933

(B) Market risk

(i) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign currency risk arising from transacting business with certain customers in US Dollar and other foreign currencies.

The Group ensures that the net exposure is kept to acceptable levels and the management is monitoring the foreign currency exchange rates on a regular basis to identify any changes that may affect the Group’s operations.



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Following is the receivables/(payables) in foreign currency as of the date of the consolidated financial statements:

2014 2013

US Dollar 375,793 (2,426,247)Others currencies 722,303 61,662

1,098,096 (2,364,585)

If as at 31 December 2014, Kuwaiti Dinars had weakened against the major currencies by 5% with all other variables held constant the net impact on the profit, as of 31 December 2014, is shown below:

2014 2013

US Dollar 18,790 (121,312)Others currencies 36,115 3,083

54,905 (118,229)

A 5% strengthening of the Kuwaiti Dinars against the above currencies would have had the equal but the opposite effect on profit for the year.

The impact on foreign currency risk on equity is not material.

(ii) Equity price risk

Equity price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices caused by factors specific to the instrument or its issuer or factors affecting all instruments traded in the market.

The Group’s investments are primarily quoted on the Kuwait Stock Exchange. At 31 December 2014, if equity prices had increased by 5%, the equity of the Group would have been higher by KD 90,716 (2013: KD 116,391).

Alternatively, a 5% decrease in the equity prices would have had the equal but the opposite effect on the Group’s equity.

(iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk arising from borrowings carrying variable interest rates as it exposes the Group to cash flow interest rate risk. The Group’s policy is to enter into derivative contracts to protect it from significant adverse impact from potential volatility in interest rates. However, at present the Group enjoys competitive interest rates from various banks in Kuwait.



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If as on 31 December 2014, the interest rates had increased by 5% the net profit would have been lower by KD 1,167,934 (2013: KD 1,509,380). Alternatively, a 5% decrease in the interest rates would have had the equal but the opposite effect on the Group’s net profits.

(C) Liquidity risk

Liquidity risk is the risk that the Group may not be able to meet its funding requirements. Prudent liquidity risk management implies maintaining sufficient cash and making available funding through an adequate amount of committed credit facilities. To manage this risk, the Group periodically assesses the financial viability of its customers and ensures that adequate funding facilities are available from its lenders.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the consolidated statement of financial position date to the contractual maturity date. The balances disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts balances as the impact of discounting is not significant.

Less than1 year

Between1 and 2 years

Between2 and 7 years Total

At 31 December 2014Bank Overdrafts 14,450,873 - - 14,450,873Term loans 5,846,418 2,374,323 1,736,509 9,957,250

Advance against promissory notes 3,778,119 - - 3,778,119

Wakala payable 690,326 194,664 629,326 1,514,316Trade and other payables 46,093,544 - - 46,093,544Commitments 16,174,755 - - 16,174,755

87,034,035 2,568,987 2,365,835 91,968,857

Less than1 year

Between 1 and 2 years

Between2 and 7 years Total

At 31 December 2013Bank Overdrafts 21,792,608 - - 21,792,608Term loans 7,813,364 1,740,000 210,356 9,763,720

Advance against promissory notes 1,925,750 - - 1,925,750

Wakala payable 194,664 194,664 827,424 1,216,752Trade and other payables 33,847,636 - - 33,847,636 Commitments 3,322,341 - - 3,322,341

68,896,363 1,934,664 1,037,780 71,868,807



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3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the costs of capital. In order to maintain or adjust the capital structure, the Group monitors capital on the basis of gearing ratio. The ratio is calculated as net debt divided by total capital. Net debts calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated statement of financial position plus net debt.

The gearing ratio as at 31 December 2014 and 2013 were as follows:

2014 2013

Total borrowings 28,651,113 33,330,102Less: cash and cash equivalents (3,380,555) (1,795,577)Net debt 25,270,558 31,534,525Total equity 36,390,430 34,008,065 Total capital 61,660,988 65,542,590 Gearing ratio 40.98% 48.11%

3.3Fairvalueoffinancialinstruments

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. Fair values are obtained from current bid prices, discounted cash flow models and other models as appropriate. At December 31, the fair values of financial instruments approximate their carrying amounts.

Determination of fair value and fair value hierarchy:

The Group uses the following hierarchy for determining and disclosing the fair values of financial instruments:

Level 1 : Quoted (unadjusted) prices in active market for the same instrument;

Level 2 : Quoted prices in active market for similar instruments or other valuation techniques for which all significant inputs are based on observable market data; and

Level 3 : Valuation techniques for which any significant input is not based on observable market data.



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The following table presents the Company’s assets and liabilities that are measured at fair value as of 31 December.

Level 1 Level 2 Level 3 Total

2014Investments available for sale: Listed shares 1,814,329 - - 1,814,329Unlisted shares - - 122,358 122,358

1,814,329 - 122,358 1,936,687

Level 1 Level 2 Level 3 Total

2013

Investments available for sale:

Listed shares 2,327,817 - - 2,327,817Unlisted shares - - 181,875 181,875

2,327,817 - 181,875 2,509,692

The impact on the statement of financial position or the statement of changes in equity would be immaterial, if the relevant risk variables used to determine fair values for the unquoted securities were altered by 5%. During the year, there were no transfers between the levels.

4.Significantaccountingestimatesandjudgements

In the preparation of these consolidated financial statements, the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the related actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Fair value of unquoted equity investments

Valuation techniques for unquoted equity investments in which estimates are used are representing in the expected cash flows discount rates, return trades, adjusted local market prices, credit risks, related cost and other valuation techniques used by market participants.

The Group calibrates the valuation techniques periodically and tests these for validity using either prices from observable current market transactions in the same instrument or other available observable market data.



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Impairment losses of accounts receivable

The Group reviews its receivables to assess impairment on a regular basis. In determining whether an impairment loss should be recorded in the consolidated statement of comprehensive income, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from the receivables. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty, and actual results may differ resulting in future changes to such provisions. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimated and the actual loss.

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence.

Impairment of property, plant and equipment

The Group reviews the property, plant and equipment to determine whether an impairment loss should be recognised. An estimate is set by the management in terms of amount and timing of expected cash flows as well as the discount rates used when calculating the value in use.

Revenue recognition

The Group uses the percentage of completion method in accounting for its fixed priced contracts. Use of percentage of completion method requires the Group to estimate the physical work performed to date as a proportion of the total work to be performed.



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Judgements

Classification of investments

On acquisition of an investment, management has to decide whether it should be classified as “at fair value through profit or loss”, “loans and receivables”, “held to maturity” or as “available for sale”. In making that judgment the Group considers the primary purpose for which it is acquired and how it intends to manage and report its performance. Such judgment determines whether it is subsequently measured at cost or at fair value and if the changes in fair value of instruments are reported in the consolidated statement of income or directly in equity.

Impairment of available for sale financial assets

The Group follows the guidance of IAS 39 to determine when an available-for-sale financial asset is impaired. A significant or prolonged decline in the fair value of equity instruments classified as available for sale is objective evidence of an impairment. Determining which is significant and which is prolonged requires judgement from management. In making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Contingent liabilities

Contingent liabilities are potential liabilities that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Provisions for liabilities are recorded when a loss is considered probable and can be reasonably estimated. The determination of whether or not a provision should be recorded for any potential liabilities is based on management’s judgment.



ANNUAL REPORT 2014

38

NO

TES

TO T

HE

CO

NSO

LID

ATED

FIN

AN

CIA

L ST

ATEM

ENTS

- 31

DEC

EMB

ER 2

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5. P

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quip

men

t

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hold

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and

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tA

s at

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(184

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)(9

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sfer

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s –

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- 1

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87

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201

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35,3

75,2

20

ANNUAL REPORT 2014

39

The depreciation charge has been allocated in the consolidated statement of income as follows:

2014 2013

Cost of sales 4,930,236 4,884,669General and administrative expenses 113,432 162,763

5,043,668 5,047,432

The Group obtained valuation of the freehold land and leasehold land from two independent valuers at KD 1,936,000 and KD 13,732,000 respectively as at the reporting date that has been generally derived using market comparable method.

The Group’s legal suit against the order of Kuwait Port Authority to terminate the lease contract for the property in Shuwaikh port, and to vacate the property was decided against the Group by the Court of Appeal on 14 December 2010. The Group has filed an appeal in the Court of Cassation against this order, which was accepted by the Court and suspended the execution of the order of the Court of Appeal until final decision is issued. The Court has not yet delivered its final decision.

However, on 1 October 2013, a Ministerial order has been issued by the General Secretariat for Economic Affairs at Ministries Council to extend the lease contract of all companies located inside Shuwaikh and Shuaiba Ports at new rates.

6. Investments available for sale

2014 2013

Quoted 1,814,329 2,327,817 Unquoted 122,358 181,875

1,936,687 2,509,692

During the year, the Group recognized an impairment loss of KD 410,790 (2013 – KD 273,861) in the consolidated statement of income. Quoted equities are traded in active markets. Investments in unquoted equities of KD 122,358 (2013 - KD 181,875) are valued based on valuation techniques using unobservable inputs.

Investments available for sale are denominated in the following currencies:

2014 2013

Kuwaiti dinar 1,814,329 2,327,817 US dollar 122,358 181,875

1,936,687 2,509,692



ANNUAL REPORT 2014

40

7. Inventories

2014 2013

Materials 7,026,366 5,508,635Provision for obsolete and slow moving items (50,584) (91,517)

6,975,782 5,417,118

This includes materials at sites and at the warehouse to be utilized in the projects.

8. Contracts in progress

2014 2013

Contract costs incurred 286,105,398 241,635,704 Recognised profits less expected losses 48,666,992 55,824,479

334,772,390 297,460,183 Progress billings (303,349,380) (270,748,097)

31,423,010 26,712,086

This represents unbilled portion of amounts due from customers for contracts work in progress and accordingly, it is considered as neither past due nor impaired.

Contracts in progress are denominated in the following currencies:

2014 2013

Kuwaiti dinar 27,642,645 26,056,029US dollar 3,749,355 452,056Other currencies 31,010 204,001

31,423,010 26,712,086

9. Trade and other receivables

2014 2013

Trade receivables 29,849,034 29,888,826Less: Provision for doubtful debts (1,178,071) (1,212,627)

28,670,963 28,676,199Contract retentions 5,194,829 4,019,354 Advances to subcontractors 1,044,938 935,234 Prepayments 762,118 411,928 Other receivables 1,665,132 3,643,246

37,337,980 37,685,961



ANNUAL REPORT 2014

41

The carrying amount of trade and other receivables approximately equals their fair value as they are short term balances maturing within one year.

Trade receivables that were due for less than one month are considered as neither past due nor impaired. As of 31 December 2014, trade receivables of KD 11,758,072 were neither past due nor impaired (2013 - KD 7,616,904) and trade receivables of KD 16,912,891 were past due but not impaired (2013 - KD 21,059,295).

The ageing of those trade receivables is as follows:

2014 2013

From 1 month up to 3 months 1,804,710 4,905,153 More than 3 months up to 6 months 1,205,836 2,896,100 More than 6 months up to 1 year 3,385,858 4,550,082 More than 1 year 10,516,487 8,707,960 Total 16,912,891 21,059,295

As of 31 December 2014, trade receivables of KD 1,178,071 (2013: KD 1,212,627) were past due and impaired.

The following is the movement on the Group’s provision for doubtful debts:

2014 2013

At 1 January 1,212,627 1,212,627 Provisions no longer required (34,556) -At 31 December 1,178,071 1,212,627

Trade and other receivables are denominated in the following currencies:

2014 2013

Kuwaiti dinar 35,564,176 34,773,593 US dollar 752,744 2,425,688 Other currencies 1,021,060 486,680

37,337,980 37,685,961



ANNUAL REPORT 2014

42

10. Cash and cash equivalents

2014 2013

Balances with banks 2,464,731 1,589,441 Deposits with banks 832,852 53,750 Cash on hand 82,972 152,386

3,380,555 1,795,577

The carrying amount of cash and cash equivalent approximates its fair value.

Deposits with banks are held as margin money deposits against letter of guarantee facilities from local commercial banks.

Cash and cash equivalents are denominated in the following currencies:

2014 2013

Kuwaiti dinar 2,433,749 552,278 US dollar 767,194 1,215,534 Other currencies 179,612 27,765

3,380,555 1,795,136

11. Share capital

The Extraordinary General Meeting of shareholders held on 22 May 2014 resolved to increase the authorised share capital of the Parent Company from KD 16,348,437 comprising of 163,484,370 shares with a face value of 100 fils to KD 17,165,859 comprising of 171,658,588 shares with a face value of 100 fils. This was approved by the Ministry of Commerce and Industry in their letter dated 19 June 2014.

The Annual General Meeting held on 22 May 2014 approved the distribution of stock dividend amounting to KD 817,422 for the financial year ended 31 December 2013 in the ratio of five shares for every 100 shares held by the shareholders on record at the date of regulatory approval for distribution of stock dividend.

Accordingly, the authorised, issued and fully paid up capital of the Parent Company as of 31 December 2014 is KD 17,165,859 (31 December 2013: KD 16,348,437) comprising of 171,658,588 shares of 100 fils each (31 December 2013: 163,484,370 shares of 100 fils each).



ANNUAL REPORT 2014

43

12. Reserves

a) Statutory reserve

In accordance with the Companies Law and the Parent Company’s Articles of Association, 10% of the net profit for the year has been transferred to statutory reserve. The Board of Directors may resolve to discontinue such transfers when the reserve reaches 50% of the paid up share capital of the Parent Company. The legal reserve can be utilized only for distribution of a maximum dividend of up to 5% in years when the retained earnings are inadequate for this purpose.

b) General reserve

In accordance with the Parent Company’s Articles of Association, 10% of the profit for the year before deductions may be transferred to general reserve. The Parent company may resolve to discontinue such annual transfers by resolution of the shareholders’ upon a recommendation by the Board. The Board has proposed the transfer 10% of the net profit to general reserve (2013: 10%) for the year 2014.

13.Postemploymentbenefits

The Group provides for an end of service benefit for its employees based on employment contracts and the Kuwait Labour Law.

Movements in the post employment benefits are as follows:

2014 2013

As at 1 January 8,309,851 7,171,837 Provision during the year 2,161,111 1,937,171 Paid during the year (885,643) (799,157)As at 31 December 9,585,319 8,309,851

14. Trade and other payables

2014 2013

Trade payables 10,449,734 7,217,861 Retention 1,899,195 1,926,442 Due to employees 3,237,146 2,911,193 Dividend payables 748,922 751,872 Advances from customers 9,958,184 5,973,311 Accrued expenses 19,800,363 15,066,957

46,093,544 33,847,636

The carrying amount of account payables approximately equal their fair value as they are short term balances maturing within one year.



ANNUAL REPORT 2014

44

Trade and other payables are denominated in the following currencies:

2014 2013

Kuwaiti dinar 44,983,557 32,161,452US dollar 600,608 1,029,400Other currencies 509,379 656,784

46,093,544 33,847,636

15. Due to banks

2014 2013CurrentBank overdrafts 13,868,428 20,890,600 Term loans 5,546,750 7,497,000Advance against promissory notes 3,778,119 1,925,750 Wakala payable 690,326 194,664

23,883,623 30,508,014Non-currentTerm loans 3,943,500 1,800,000 Wakala payable 823,990 1,022,088

4,767,490 2,822,088 Total bank overdrafts and term loans 28,651,113 33,330,102

Bank overdrafts are denominated in Kuwaiti Dinars and are repayable on demand. The effective rate of interest as at 31 December 2014 is 4.3% per annum (2013: 4.4%).

Term loans include:

• Kuwait Dinar loan facilities amounting to KD 5,075,000 (31 December 2013: KD 3,625,000) from local banks. Of the above, term loan amounting to KD 1,018,654 (31 December 2013: 1,216,752) is secured by mortgage of land. The effective rate of interest of these term loans as at 31 December 2014 is 4.56% per annum (31 December 2013: 4.58%).

• US Dollar loan facility amounting to KD 4,415,250 (2013: KD 5,672,000) from a foreign bank. This facility is secured by a negative pledge over the Group’s assets. The effective rate of interest of this term loan as at 31 December 2014 is 4.23% per annum (2013 – 4.16%).



ANNUAL REPORT 2014

45

The following is the maturity analysis of term loans as at the consolidated statement of financial position date.

2014 2013

Up to 1 year 5,546,750 7,497,000 Between 1 to 2 years 2,271,750 800,000 Over 2 years 1,671,750 1,000,000

9,490,250 9,297,000

Advance against promissory notes represents Kuwaiti Dinar facilities from local commercial banks. The effective interest rates on these facilities as at 31 December 2014 was 4% (31 December 2013: 4%) per annum.

Wakala payables represent Kuwaiti Dinar credit facilities granted by a local Islamic bank. The effective cost of wakala payables as of 31 December 2014 was 3.75% to 4.25% (31 December 2013: 3.75% to 4.25%) per annum.

The following is the maturity analysis of wakala payable as at the consolidated statement of financial position date:

2014 2013

Up to 1 year 690,326 194,664 Between 1 to 2 years 194,664 194,664Over 2 years 629,326 827,424

1,514,316 1,216,752

The fair value of term loans equals its carrying amount as they bear interest rates which, approximate the current rates in the market.

16. Cost of sales

2014 2013

Materials 36,000,678 24,131,115 Labour 22,772,527 20,509,168 Subcontracting expenses 21,685,225 11,548,204Equipment hire and operational overheads 14,563,524 12,358,654 Depreciation 4,930,236 4,884,669 Bank charges 962,192 421,277 Others 899,192 814,643

101,813,440 74,667,730



ANNUAL REPORT 2014

46

17. General and administrative expenses

2014 2013Staff costs 3,648,254 3,270,253 Rent 83,534 78,527 Depreciation 113,432 162,763 Others 828,749 483,170

4,673,969 3,994,71318. Investment income

2014 2013

Cash dividends received 171,163 171,163 Management fees paid (2,711) (3,087)

168,452 168,076

19. Related party transactions

The Group has entered into transactions with related parties on terms approved by management. Transactions and balances with related parties (in addition to those disclosed in other notes) are as follows:

2014 2013Key management compensationSalaries and other short term employee benefits 211,885 178,154Post-employment benefits 49,636 17,019Other benefits 195,496 157,782

457,017 352,955

20. Earnings per share

Earnings per share represent net profit for the year divided by the weighted average number of ordinary shares outstanding during the year as follows:

2014 2013

Net profit for the year 2,544,579 1,852,898Weighted average number of outstanding ordinary shares during the year 171,658,588 171,658,588

Earnings per share (fils) 14.82 10.79

Earnings per share was 15.56 fils for the year ended 31 December 2014 (31 December 2013: 11.33 fils) before retroactive adjustment to the number of shares following the distribution of stock dividend in 2014 (Note 11).



ANNUAL REPORT 2014

47

NO

TES

TO T

HE

CO

NSO

LID

ATED

FIN

AN

CIA

L ST

ATEM

ENTS

- 31

DEC

EMB

ER 2

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.C. (

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)

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l

2014

2013

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2014

2013

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t rev

enue

76,

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,047

ANNUAL REPORT 2014

48

22. Annual general meeting

The annual general meeting of the shareholders held on 22 May 2014 approved the consolidated financial statements of the Group for the year ended 31 December 2013.

23. Contingent liabilities and capital commitments

2014 2013Contingent liabilitiesLetter of guarantees 38,864,183 26,019,693

Capital commitmentsLetter of credit 16,174,755 3,322,341

24. Restatement

Certain comparative numbers have been restated to reflect the impact of 0.08% holding of non-controlling interest in the subsidiary, Gulf Dredging and General Contracting Company K.S.C (Closed) The impact of the restatement is as follows:

201331 December

2013(Restated)

31 December2013

(as reported previously)

ConsolidatedstatementoffinancialpositionTrade and other receivables 37,685,961 37,678,761Retained earnings 9,034,739 9,034,350Non-controlling interests 6,811 -

Consolidated statement of income and other comprehensive incomeTotal comprehensive income attributable to:Owners of the Parent Company 1,852,428 1,852,898Non-controlling interests 470 -



ANNUAL REPORT 2014

49

201231 December

2012(Restated)

31 December2012

(as reported previously)

ConsolidatedstatementoffinancialpositionTrade and other receivables 41,546,822 41,539,622Retained earnings 7,587,561 7,586,702Non-controlling interests 6,341 -

25.Comparativefigures

Certain prior year amounts have been reclassified to conform to current year presentation with no effect on net profit or equity.



HEISCO AT A GLANCE

52

ANNUAL REPORT 2014

HEISCO AT A GLANCE

Oil & Gas Operations

• Steel Fabrication and Galvanization Workshop

Operations

• Trading Operations

• Gulf Dredging & General Contracting Co K.S.C

(Closed) (Owned subsidiary of HEISCO)

Oil & Gas Operations

Oil & Gas Operations (formerly known as Industrial

Contracts Division) was established in 1982 with a

view to diversify HEISCO’s activities by expanding

into Oil and Gas, Petrochemical and Power and Water

Desalination Sectors in areas of Project Management,

Construction, Process Equipment Manufacturing and

Supply, Maintenance, Inspection Services and

Industrial Trading Activities.

Oil & Gas Operations’ services cover a diverse range

of clients and a variety of projects with particular

emphasis on expertise, experience, capabilities and

quality across all Engineering and Management

Functions.

Oil & Gas Operations are carried out through the

following two main broad divisions:

• Construction Operations

• Industrial Maintenance Operations

Construction Operations consists of following six

business units:

• Oil & Gas Services (Flowline) Unit

• Pipeline Unit

• Oil & Gas (Construction) Unit

• Electrical & Instrumentation Unit

• Tank Farms Unit

Heavy Engineering Industries and Shipbuilding Co.

K.S.C (Public). HEISCO is a major Engineering,

Procurement and Construction (EPC) Contracting

company based in Kuwait with a diversified range of

business in Oil and Gas, Petrochemicals, Power,

Pressure Equipment Manufacturing, Shipbuilding and

Repair, Dredging & Marine Construction, Major Civil

Construction, Maintenance and other industrial

services including Heavy Industry projects.

HEISCO’s commitment to its clients is proven by its

quality management system certification to ISO

9001:2008, Occupational Health & Safety Management

System certification to OHSAS 18001:2007 standards

and International Marine Contractors Association

(IMCA).

Activities in Brief:

HEISCO’s wide ranging fields of activities and

capabilities are operated through:

• Oil & Gas Operations

• Shipyard Operations

53

ANNUAL REPORT 2014

Yard Piping Works at Azzour WDC-II Project

Fire Water Tank under Construction

• Steel Fabrication and Galvanization Unit

• Civil Construction Unit

Industrial Maintenance Operations consists of

following two business units:

• Maintenance Unit

• Miscellaneous Services Unit

Storage Tanks

HEISCO is a leading storage tank manufacturer in

Kuwait with complete in-house facilities for full turn-

key projects from design, detailed engineering,

procurement, fabrication of tank plates and

appurtenances, to site erection, installation of

interconnecting pipe-works, electrical connections,

instrumentation, painting and lining or coating.

HEISCO is the only Kuwaiti Company to possess KOC

approval for EPC of Storage Tanks up to a capacity of

500,000 bbls.

The Codes followed are API 650, API 620 or equivalent

standards complete with all required associated

standards such as AWS A.1, ASME IX etc., and

surface preparation to Swedish Sa or SPCC

specifications with painting, coating and lining to

clients or international standard.

Pipelines

HEISCO’s extensive experience in Engineering,

Procurement & Construction of Pipeline projects

demonstrates its enormous capabilities for executing

major pipeline projects in the Oil & Gas, Petrochemicals,

Refineries, Power and Water Sectors in Kuwait.

Maintenance

HEISCO’s Industrial Maintenance Operations is

recognized as a main provider of value-added services

to prestigious clients such as MEW, KOC, KNPC, PIC

EQUATE and JO.

HEISCO’s Industrial Maintenance Operations is

highly competent in the following fields of

operation:

• Complete On-site maintenance of Power Stations

(including annual shutdown works for Boilers,

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Turbine Maintenance Services

chemical cleaning operations and refractory

works, major overhauling of Steam Turbines,

Pumps, DG Sets, and Distillation & Intake facilities)

• Oil Field Up stream facilities, Shell & Tube Heat

Exchangers, Plate Type Heat Exchangers

• Various Insulation and Cladding Works

• Sludge Treatment

• Other Miscellaneous Technical Services

A specialized and professional team ensures that fast-

track shutdown jobs are accomplished safely before

time, and the quality of the job has won accolades

from respected clientele.

The comprehensive in-house Maintenance Workshop

Facility is well equipped with Lathe Machines, Hollow

Spindle Lathe Machines, Shaping Machines,

Horizontal Boring Machines, Radial Drilling Machines,

Pipe Threading Machines, Valve Lapping Machines,

Valve Test Bench, Mechanical Seal Lapping Machines,

Welding Machines & all kinds of Specialized Heat

Exchanger Re-tubing Equipment & Tools.

Furthermore, a state of the art Heavy Machinery

Workshop equipped to deal with heavy rotating

machinery components such as Turbine parts is under

construction (expected completion by July 2015). The

Vertical Turning Lathe and the Horizontal Boring

machines that are being installed in this new workshop

will be some of the largest capacity of such machines

in the Middle East.

This facility is capable of undertaking various

services such as:

• Maintenance of all types of Rotating Equipment

including Turbines, Compressors, Pumps, ID/FD/

GR Fans, Blowers etc

• Re-tubing of all types of Shell & Tube Heat

Exchangers and Fin Fan Coolers

• Repairing and Reconditioning of all kinds of Valves

such as Ball Valves, Gate Valves, Globe Valves,

Check Valves, Plug Valves, Butterfly Valves, and

Safety Valves etc

• Overhauling of DG Sets, Heavy Duty Engines,

and Reconditioning of Engine Components

Chemical Cleaning of Boilers at site

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Brine Re-Circulation Pump during Assembly

• Dynamic Balancing of Shafts, Impellers, and other

Rotating Parts

• Repairing and reconditioning of Mechanical Seals

• Repair / Maintenance of all kinds of Plate Heat

Exchangers

• Repairing of Heavy Duty Radiators, Oil Coolers,

Condensers, and Air coolers

• Special Machining services

• Maintenance of Heavy Duty Gear Boxes

• Supply, Installation, Operation and Maintenance

of Sludge Handling and Treatment Plant Facilities

for all KNPC refineries and Local Markets

Quality Control & Testing Services

To ensure the fulfillment of its contractual, safety and

legal obligations, HEISCO has set up an entirely

independent Quality Control Department in accordance

with International Quality Systems. HEISCO’s Quality

Management System is certified to ISO 9001:2008

and is in compliance with API-Q1 specifications.

Today, HEISCO is one of the leading companies

providing QC services to various clients / contractors

in Oil & Gas, Refineries, Petrochemicals and Power

Sectors in Kuwait.

HEISCO has the most modern testing equipment and

highly skilled NDT technicians, inspectors and

inspection engineers to meet project requirements

related to Quality Control, Inspection and NDE

Services.

Magnetic Particle Testing Process

Advanced (Non-Destructive Testing, Time-of-Flight Diffraction)

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Pressure Vessel Before Painting

Loading and Transport of Pressure Vessel

Major Services Provided:

• Corrosion Control

• Third Party Inspection & Quality Control

• Non Destructive Testing – RT/ UT/ AUT/ MT/ PT/

VT

• Metallurgical Analysis & Material Testing

• Welding Consultancy

• Heat Treatment

Fabrication Workshop Operations

HEISCO’s commitment to excellence is not only

evident in the multiple awards received and the

professionalism of its staff but also the ambition to

grow and further increase quality and efficiency of its

current business units. Improvements are consistently

being made for the company growth for providing

improved services to all clients.

HEISCO’s commitment to its clients is proven by its

quality management system certification to ISO

9001:2008 & Occupational Health & Safety

Management System certification to OHSAS

18001:2007 standards.

In addition, HEISCO’s facilities are trained to use

ASME U, U2, PP, S and National Board ‘R’ stamps,

API Monograms for separators (API - 12J) and storage

tanks (API 12D & 12F).

Brinell Hardness Test

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capacity and efficiency. This facility will include

CNC cutting and milling with automatic assembly

and welding for Stainless Steel and Carbon Steel,

will be commissioned in March 2015.

Calibration Laboratory

Generally Calibration Laboratory is an integral part of

the Heavy Industries, HEISCO Calibration Laboratory

is capable of providing a wide array of test and

calibration services for in-house operations and

external customers as well, we also arrange third-

party calibration of specialized instruments. which

have been achieved through a highly qualified and

trained engineers and technicians, and state of the art

master calibrators traceable to international standards.

Services to support the various operations and

projects of HEISCO in accordance with ISO 9001

Quality Management System.

CNC Plate Cutting and Boring Machine

During 2014 several improvements and

investments were made such as:

• New Galvanization shop of high capacity capable

of providing galvanized material that meets the

needs of local market.

• New fully automated CNC Plate Process Machine

for steel plates, one of a kind in kuwait that utilizes

software received input from a 3D module to

reduce human error down to nearly 0 % thereby

increasing capacity and efficiency. The CNC

machine works on plates with thickness up to 70

mm. used for high speed drilling, plasma/gas

cutting, plate marking, and other processes.

• 50 new welding machines to increase Welding

force and capacity for the fabrication works of

Storage Tanks and Pipes.

• A new fully automated Piping Spool Line facility

for Prefabrication of Pipes, with reduce human

error down to nearly 0 %; thereby increase

Dead Weight Tester

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ANNUAL REPORT 2014

HEISCO Calibration Services cover the following

groups of instruments and equipment:

• Electrical Instruments and Devices

• Mechanical Equipments and Instruments

• Pressure Control Instruments

• Temperature/ Humidity Gauges

• Chemical Testing & Analysis Instruments

• Non-Destructive Testing Instruments

• Process Control Instruments such as Pressure/

Temperature Transmitters, Control Valves, On-Off

Valves, and Level gauges etc...

Metric Calibration Tester

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ANNUAL REPORT 2014

Trading Operations

HEISCO’s dynamic marketing and sales force is

charged with responsibilities for promoting and

marketing the Products, Equipment and Services of

leading international companies to the local Marine

Industry, Oil & Gas, Power and Water Desalination

Sectors. HEISCO offers its customers an unrivalled

service of experience, technical competence and

reputation backed up by after sales service from the

formidable engineering & maintenance resources of

our combined operations.

Some of our products promoted by HEISCO's Trading

Operations are Boilers and Turbine Spares, Solar

Power Systems, CS/SS/AS, Seamless Pipes, Welding

Equipment, Consumables & Automation Modules,

Blasting & Painting Equipment, Steel Abrasives,

Gratings Material, Oil Field Spares Parts & Pipeline

Accessories such as Quick Opening Closures etc.

HEISCO also promotes the interests of sponsorship

for recogonized International EPC Contractors in

Kuwait.

Main Stores

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ANNUAL REPORT 2014

Workshops Equiped with Machines such as:

• Motor Analyzer PDMA

• Flux Core Automated Arc Welding Machines

• LASER Alignment Machines

• LASER Coupling Machines

• Dynamic Balancing Machines

• CNC Profile Cutting Equipment

• Submerged Automated ARC Welding Machines

• Steel Rolling Machines

• New Lathe Machine 4m length

• Advanced Hydraulic Hacksaw Machines

Conveniently located in Shuwaikh deep water harbor the shipyard is ideally placed to execute ship repair and construction.

HEISCO’s skilled and well trained work force has the ability to work in both marine and industrial fields.

Together with modern equipment and strong yard management team, HEISCO provides the correct combination to ensure excellent quality and delivery on time.

HEISCO is proud of its long reference list including major local, regional and international clients. HEISCO is an international ship repair company which aims to be the leader among Middle East shipyards by utilizing state-of-the-art equipment.

Syncrolift and Repair Bay Yard

Shipyard Operations

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ANNUAL REPORT 2014

Facilities & Services:

• Floating dry dock, 190 meters, for vessels up to

35,000 ton dwt.

• Syncrolift accommodates vessels up to 5,000 ton

dwt.

• 5 Berths, ranging from 90 meters to 230 meters

with cranes.

• 5 Cranes, 10 to 30 tons, cover the yard area.

• Afloat and along side repairs.

• Modification and conversion of vessels.

• Shipbuilding of specialized vessels.

• Steel and Aluminium Construction.

• Underwater and Diving Services following the

International Marine Contractors Association

(IMCA) Standards.

• Repair, testing, calibration of equipment and

machinery.

• Jet Propulsion, Repair and Overhauling.

• Agent for International Marine Equipment and

Devices Vendors.

HEISCO Floating Dock

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Gulf Dredging & General Contracting Company K.S.C (Closed) was formed in 1975 as a Joint Shareholding Company of the Government of Kuwait and Ballast Nedam Company of the Netherland, to cater to the growing requirement of dredging in and around Kuwait. Starting off the business solely in dredging, Backhoe Dredger and Allied equipment, the Company concentrated in the Capital Dredging Projects in Kuwait. Later in 1980, the Company diversified into other areas of Marine Construction.

After the privatization of the Government of the State of Kuwait, GD became a subsidiary of the Heavy Engineering Industries & Shipbuilding Co. K.S.C (Public) – (HEISCO).

In the year 1999 GD Management established Civil Construction Division to carryout Civil and Infrastructure works and executed several complexes projects. Since then Gulf Dredging has been classified as Class-I Civil Contractor by the Central Tenders Committee of the State of Kuwait.

Activities in Brief:

Offshore Operations:

• Dredging and Reclamation

• Construction of Ports, Harbors & Marinas

• Construction of Wharfs and Berths

• Breakwaters and Revetments

• Offshore Pipelines and Intake/Outfall Structures

• Offshore Cable Pulling Works

• Bathymetric, Hydrographic and Topographic surveys

• Piling Works

• Marine Transportation of Bulk Cargo

• Various Maintenance Services

GULF DREDGING & GENERAL CONTRACTING CO. K.S.C (Closed)

Offshore & Intake Structure WorksAzzour North IWPP Project - Kuwait

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ANNUAL REPORT 2014

Construction, Completion & Maintenance of Police Officers Club Marina at Abu Al Hasaniya - Kuwait

Onshore Operations:

• Construction and Infrastructure Works

• Steel Structure Works

• Soil Treatment

• Dewatering

• Piling Works

• Value Engineering

Gulf Dredging has its presence in the following GCC Countries:

• Kingdom of Saudi Arabia

• State of Qatar

• Sultanate of Oman

• Republic of Iraq

Certifications:

• CTC Grade-I in Civil Construction Works

• CTC Grade-IV in Roads & Infrastructure Works

• Certified as Marine Contractor with Kuwait National Petroleum Company

• KNPC approved subcontractor for Seawater Intake and Outfall Works.

• Member of IMCA (International Marine Contractors Association)

• ISO 9001:2008

• OHSAS 18001: 2007

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• Cargo Barges (Flat Top) up to 14000 Mt

• Flat Top Barges (for Marine Construction)

• A Frame Barge for fuel supply and anchor handling

• Diving Barges

• Anchor Pontoons for Dredger Floating Pipeline

• Speed Boats

Resources

Offshore Equipment:

Gulf Dredging is well equipped with Offshore Equip-ment comprising of:

• Cutter Suction & Dipper Dredgers

• Tug Boats

• Work Boats

• Survey Boats

• Fuel Supply Boats

• Multicat Boat / 7 ton crane / fuel supply

• Jack-up Barge (Self Elevating Platform)

• Split Hopper Barges

Split Barge

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Onshore Equipment :

GD is well equipped with Land Equipment comprising of:

• Heavy Lifting Mobile & Crawler Cranes (Capacity from 50 ton to 280 tons)

• Earth Moving Equipment, Bulldozers, Dump Trucks, Wheel Loaders, and Excavators

• Piling Rigs for Sheet Piles, Concrete and Steel Tubular Piles with capacity to drive up to dia 2850 mm

• Auguring and Boring Equipment

• Dewatering Equipment

Logistics

• Capable of Sea Bulk Cargo Transport using

Barges with Capacity up to 14000 Mt

• Capable of Land Transport using Fleet of Rock

Body Trucks / Trailers

• Berthing and Offloading Facility at Shuwaikh Port

Construction Equipment

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