ANNUAL REPORT 2016 · 2020-06-25 · ANNUAL REPORT 2016 1 Kuwait Shareholding Company (Public)...
Transcript of ANNUAL REPORT 2016 · 2020-06-25 · ANNUAL REPORT 2016 1 Kuwait Shareholding Company (Public)...
ANNUAL REPORT 2016
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Kuwait Shareholding Company (Public)Incorporated in Kuwait under
An Amiri Decree no. (46) issued in 02/04/1974
Authorized & Paid-up Capital : KD 18,024,151.700
Kuwaiti Dinars Eighteen Million Twenty Four Thousand One Hundred Fifty One and Seven 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]
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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
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CONTENTS
BOARD OF DIRECTORS ..................................................................................... 5
BOARD OF DIRECTORS REPORT ..................................................................... 6-15
INDEPENDENT AUDITORS REPORT ................................................................. 17-20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2016 ...................... 21
CONSOLIDATED STATEMENT OF INCOME 2016 ............................................. 22
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2016 ............ 23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2016 ...................... 24
CONSOLIDATED STATEMENT OF CASH FLOWS 2016 ................................... 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2016 ................ 26-53
HEISCO AT A GLANCE 2016 .............................................................................. 56-69
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BOARD OF DIRECTORS
ADNAN MUSAED KHALIFA AL KHARAFIChairman
TALAL JASSIM AL-KHARAFIVice Chairman
HUSSAIN MURAD BEHBEHANIDirector
AZZAM ABDUL AZIZ AL FULAIJDirector
GHAZI AHMAD AL MIJREN AL ROUMIDirector
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BOARD OF DIRECTORS REPORT FOR 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)
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 41st Annual Report which sets out the activities and performance of the Company during the Year 2016, 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 31.12.2016.
SHIPYARD OPERATIONS:
Projects Completed During the Year 2016 :-
● Dry-Docking and Repair of Oil Tanker ‘Al Forat’ for M/s Iraqi Oil Tanker Company, Iraq.
● Dry-Docking,Repairs and Underwater Services of Various Vessels (Barges, Tug Boats and Crew Boats) belonging to M/s Hyundai Engineering & Construction Co. (South Korea).
● Dry-Docking and Repairs of Various Vessels of M/s Baltic Marine LLC (Latvia) and M/s Al Mataf Shipping Company (United Arab Emirates).
● Major Steel Repairs of Backhoe Dipper Dredger ‘Kurtdereli’ for M/s STFA Construction Group, (Turkey).
● Major Repairs and upgrade of the existing Ship-Lift System at Kuwait Naval Base subcontract agreement with M/s Pearlson Shiplift Corporation (USA).
● Alongside Repairs of Accommodation Barge ‘Crest Support 1’ for M/s Mammoet Salvage B.V., (Netherlands).
● Agency Agreement with DAMEN Shipyard (Netherlands) for Design, Construction and Delivery of 14Nos. Tug Boats.
● Major Rehabilitation works on Supply Vessel, “Al Dorrar” for Ministry of Defense,(Kuwait).
● Major Rehabilitation works on Naval Tug Boat “Mashuwa” for Ministry of Defense,(Kuwait).
Projects Ongoing During the Year 2016:-
● Dry-Docking and Repairs of various Vessels for Kuwait Oil Company.
● Dry-Docking and Repairs of various Vessels for Kuwait Fire Services Directorate.
● Dry Docking and Repairs of Kuwait Coast Guard Fleet.
● Dry-Docking and Repairs of US Army Marine Fleet in Kuwait - US Army On Conditional Cyclic Maintenance (OCCM) Program.
● Construction and Fabrication of Steel Floating Pier complete with all utility items, as a subcontractor for M/s Gulf Dredging, for the US Army Corps of Engineers Umm Qasr Project.
Major Rehabilitation Works on Naval Tug Boat, " Al Mashuwa" for Ministry of Defence - Kuwait
Major Rehabilitation Works on Supply Vessel, " Al Dorrar" for Ministry of Defence - Kuwait
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● 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 (5 Year Contract).
● Supply of Marine Fleet Staff for KOC Marine Operations.
● Towing to Yard, Overhauling and Delivery of Calm Buoy at Sea Berth No. 3 at Al Khafji for Joint Operations, Saudi Arabia.
Projects Awarded During the Year 2016:-
● Dry-Docking and Repair of Oil Tanker ‘Al Forat’ for M/s Iraqi Oil Tanker Company, Iraq.
● Dry-Docking,Repairs and Underwater Services of Various Vessels (Barges, Tug Boats and Crew Boats) belonging to M/s Hyundai Engineering & Construction Co. (South Korea).
● Dry-Docking and Repairs of Various Vessels of M/s Baltic Marine LLC (Latvia) and M/s Mataf Shipping Company (United Arab Emirates).
● Major Steel Repairs of Backhoe Dipper Dredger ‘Kurtdereli’ for M/s STFA Construction Group, (Turkey).
● Alongside Repairs of Accommodation Barge ‘Crest Support 1’ for M/s Mammoet Salvage B.V., (Netherlands).
● A Three year contract for dry-docking, repair and maintenace of marine fleet of the Kuwait Fire Services Directorate.
● Towing to Yard, Overhauling and Delivery of Calm Buoy at Sea Berth No. 3 at Al Khafji for Joint Operations, Saudi Arabia.
Agreements & Other Achievements During the year 2016:-
● New Representative Agreements with Local & International Companies.
● Renewal / Amendments to Representative Agreements with Local Clients.
● Non-Disclosure Agreement with International Companies for the upcoming potential projects.
● Renewal for membership of International Marine Contractors Association (IMCA).
● HEISCO Shipyard participated in the 27th SMM (Shipbuilding, Machinery and Marine Technology) Exhibition from 06 – 09 September 2016, the world’s leading International Maritime Industry Trade Fair in Hamburg, Germany.
● HEISCO Shipyard participated in the SMME (Seatrade Maritime Middle East) Exhibition from 31 October – 02 November 2016 in Dubai International Convention and Exhibition Centre, UAE.
● Marketing Campaign carried out by publishing HEISCO Shipyard advertisements in various local / International magazines, handbooks and websites.
Construction and Fabrication of Steel Floating Pier Umm Qasr Port - Republic of Iraq
HEISCO Shipyard's Stand at SMMExhibition Hamburg, Germany
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● HEISCO Shipyard as one of the sponsors at the Seatrade Maritime Awards held on 31 October, 2016 in Atlantis Dubai, UAE.
● HEISCO Shipyard participated in IRANIMEX 2016 – Iran International Marine Industries Exhibition from 18 – 21 October 2016 in Kish International Exhibition’s Center, Kish Island, Iran.
● HEISCO Shipyard reserved space and registered for the Seatrade Offshore & Workboats Middle East, Abu Dhabi Exhibition from 25 - 27 September 2017.
OIL & GAS OPERATIONS:
Projects Completed During the Year 2016 :-
● Civil, Buildings, Piping, Mechanical, 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 for Fluid Catalytic Cracking (FCC), Sour Water Treating (SWT) and Cooling Tower (CT) for Clean Fuel Project at Mina Al Ahmadi Refinery with the Main Contractor for Kuwait National Petroleum Company.
● New Shipping Control Valve Station at Mina Saud for M/s Chevron Saudi Arabia.
● Construction of Flowlines and associated works at South East Kuwait Area with the Main Contractor for Kuwait Oil Company.
● Electrical, EICS, Fire Alarm, Plumbing, HVAC and all related works in Clean Fuel Project MAB Area # 2 Package with the Main Contractor for Kuwait National Petroleum Company.
● Enhancement of South Pier Integrity to facilitate import up to end of 2025 at Mina-Al-Ahmadi Refinery for Kuwait National Petroleum Company.
● Mechanical & Structural Works of Polyethylene Debottlenecking Project for M/s EQUATE Petrochemical Company.
● Manufacturing & Supply of LP Wet Crude Separators 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 MAB Area-1 Package with the Main Contractor for Kuwait National Petroleum Company.
● Supply, Fabrication and Painting/Galvanizing of Structural Steel Works for New Gathering Centre GC-29 in North Kuwait with the Main Contractor for Kuwait Oil Company.
Projects Ongoing During the Year 2016 :-
● Structural, Mechanical, Piping, Painting and Electrical & Instrumentation Works for North LPG Tank Farm (NLTF) Project with the Main Contractor for Kuwait National Petroleum Company.
HEISCO Shipyard's Stand at SMME Exhibition in Dubai International Convention and Exhibition
Centre, UAE.
Engineering, Procurement and Construction of Storage Tanks Project
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● 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.
● Fabrication, Supply & Construction of Storage Tanks, Civil & Building works for New Gathering Centre GC-30 in North Kuwait with the Main Contractor for Kuwait Oil Company.
● Supply and Construction of Storage Tanks for Lower Fars Heavy Oil Development Program Phase-1 Project in North & South Tank Farm with the Main Contractor for Kuwait Oil Company.
● Debottlenecking of Gathering Centre GC-17 at West Kuwait for Kuwait Oil Company.
● Industrial Radiography Services at MAA, MAB and SHU Refineries for Kuwait National Petroleum Company.
● Pipeline works in MGT(Manifold Group Trunk Line System) Project for GC 29, 30 & 31 in North Kuwait with Main Contractor for Kuwait Oil Company.
● Maintenance Support Service for Export Facilities for Kuwait 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.
● Mechanical Maintenance Services at Shuaiba South Power Station & Az-zour South Power Station for the Ministry of Electricity And Water.
● Professional Manpower Supply Services for M/s Khafji Joint Operations.
● Mechanical Maintenance Services for M/s Joint Operations at Wafra.
● Secondment Manpower Supply Services for Kuwait National Petroleum Company.
● Reconditioning of Plate Heat Exchangers for M/s EQUATE Petrochemical Company.
● Maintenance Works for Old Gas Turbines at Az-zour South Power & Water Distillation Station with Main Contractor for Ministry of Electricity & Water.
● Rehabilitation of Plate and Shell & Tube Type Heat Exchangers at North and West Kuwait Areas for Kuwait Oil Company.
● Supply of Pressure Vessels & Structural Steel for Clean Fuel Project MAA Package with the Main Contractor for Kuwait National Petroleum Company.
● Supply of Structural Steel for New & Existing Conveyors for Sulphur Handling Facilities Project at Mina-Al-Ahmadi Refinery with the Main Contractor for Kuwait National Petroleum Company.
Indirect Heaters for Gathering Centre
Maintenance of Heat Exchanger
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● Piping Fabrication Works for Clean Fuel Project MAB area1 Package with the Main Contractor for Kuwait National Petroleum Company.
● Manufacturing and Supply of Desalter Feed Heaters for New Gathering Centre GC-30 in North Kuwait with the Main Contractor for Kuwait Oil Company.
Projects Awarded During the Year 2016 :-
● Civil and associated building works for M20 substation in Mina Al-Ahmadi Refinery with the main contractor for Kuwait National Petroleum Company.
● Electrical and associated civil works for New Gathering Centre GC-30 in North Kuwait with the main contractor for Kuwait Oil Company.
● Electrical and instrumentation works for Clean Fuel Project MAB2 Area # 3 Package with the main contractor for Kuwait National Petroleum Company.
● General construction works for compressors, utilities and interconnecting sub areas and EPC for API tanks of the EPC & C of Gas Train 5 Project at Mina Al-Ahmadi Refinery with the main contractor for Kuwait National Petroleum Company.
● Mechanical, Electrical, Instrumentation and Telecom Works for Az-zour Refinery project (EPC Package 4) with the main contractor for Kuwait National Petroleum Company.
● Maintenance of Vapour Recovery Units at Sabhan and Ahmadi Depots for Kuwait National Petroleum Company.
● Operations and maintenance of Sludge Handling and Treatment Facility at Mina Abdullah Refinery for Kuwait National Petroleum Company.
● Supply of barge crane for maintenance of South Pier Exchangers during shutdown at Mina Al-Ahmadi Refinery for Kuwait National Petroleum Company.
● Retubing of heat exchangers during major shutdowns at Mina Al-Ahmadi Refinery for Kuwait National Petroleum Company.
● Piping spool fabrication and painting works for New Gathering Centre GC-29 project in North Kuwait with the main contractor for Kuwait Oil Company.
● Piping fabrication works for New Gathering Centre GC-30 project in North Kuwait with the main contractor for Kuwait Oil Company.
● Supply of pressure vessels & carbon steel columns for Az-zour Refinery Project (EPC Package 1) with the main contractor for Kuwait National Petroleum Company.
● Supply of Columns for Gas Train 5 Project with the main contractor for Kuwait National Petroleum Company.
● Piping fabrication and painting works for Az-zour Refinery Project (EPC Package 4) with the main contractor for Kuwait National Petroleum Company.
● Maintenance support services for Oil Movement and Measurement Facilities for Kuwait Oil Company.
● Structural steel fabrication for New Water Center (NWC) project in North Kuwait with the main contractor for Kuwait Oil Company.
● SPM Buoy Refurbishment and Chain Replacement at Mina Saud for M/s Chevron Saudi Arabia.
5 Axis Plasma cutting and profile station
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OFFSHORE OPERATIONS:
Projects Completed During the Year 2016 :-
● Maintenance Dredging of Seawater Intake channel at Doha West Power & Water Distillation Station for the Ministry of Electricity & Water.
● Offshore & Intake Structure works for Az-zour North Power Station Phase-1 Independent Water & Power Project (IWPP), with main contractor for M/s Shamal Az-zour Al Oula Co.
● Bathymetric & Geophysical Survey Works at Az-zour LNG Import Project with main contractor for Kuwait National Petroleum Company.
● Offshore Geotechnical Investigation works for Az-zour New Refinery Project Package #5 with main contractor for Kuwait National Petroleum Company.
● Bathymetric & Geophysical Survey Works for Az-zour New Refinery Project Package #5 with main contractor for Kuwait National Petroleum Company.
Projects Ongoing During the Year 2016 :-
● Construction, Completion & Maintenance of Police Officers Club Marina at Abu Al Hasaniya for the Ministry of Interior.
● Mubarak Al Kabeer Seaport Phase-1, Stage-1, Design and Construction of Roads, Rails, Bridges and Soil Improvement works M/s (China Harbour Engineering Company Limited – Gulf Dredging & General Contracting Company – Galfar Co.- Joint Venture) for the Ministry of Public Works.
● 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 Pier - Design, Build, Piers & Dredging Project at Umm Qasr Port-Iraq, for the United States Army Corps of Engineers.
● Maintenance Dredging of Seawater Intake Channel at Subiya Power & Water Distillation Station for the Ministry of Electricity & Water.
GULF DREDGING & GENERAL CONTRACTING CO. K.S.C (Closed)(Owned subsidiary)
Offshore & Intake Structure works for Az-zour North Power Station Phase-1 (IWPP) Project
Construction, Completion and Maintenance of Police Officers Club Marina at Abu Al Hasaniya
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Projects Awarded during the Year 2016:-
● Bathymetric & Geophysical Survey Works at Az-zour LNG Import Project with main contractor for Kuwait National Petroleum Company.
● Offshore Geotechnical Investigation Works for Az-zour New Refinery Project Package #5 with main contractor for Kuwait National Petroleum Company.
● Bathymetric, Geophysical & Topographic Survey Works for Az-zour New Refinery Project Package #5 with main contractor for Kuwait National Petroleum Company.
● Civil Works for the MGT (Manifold Group Trunk Line) System for New GCs 29, 30 & 31 at north Kuwait with M/s (HEISCO) for Kuwait Oil Company.
● Design, Construction, Completion, and Maintenance of Chalets and Cafeteria of Police Officers Club at Abu Al Hasaniya for the Ministry of Interior.
● Civil Works Package # 3 for the EPC & C of Gas Train 5 Project at Mina Al Ahmadi Refinery with M/s (HEISCO) for Kuwait National Petroleum Company.
Mubarak Al Kabeer Seaport Phase-1, Stage-1, Highway Bridge
Steel Floating Pier - Design, Build, Piers & Dredging Project at Umm Qasr Port -
Republic of Iraq
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● Civil works for New Booster Station Project (BS-171) at West Kuwait with the main contractor for Kuwait Oil Company.
● Construction, completion and maintenance of 160 New Houses in South Ahmadi area for Kuwait Oil Company.
● Civil Works for the Clean Fuel Project MAB Area 2 Package at Mina Abdullah,with the main contractor for Kuwait National Petroleum Company.
ONSHORE OPERATIONS:
Projects Ongoing During the Year 2016 :-
● Civil & Building works for the New Gathering Center (GC-30) at North Kuwait with M/s (HEISCO) for Kuwait Oil Company.
● Civil Works for the New Gathering Center (GC-29) in North Kuwait area with M/s (HEISCO) for Kuwait Oil Company.
Civil & Building Works GC-30 in North Kuwaitfor Kuwait Oil Company
Construction of 160 New Houses in South Ahmadifor Kuwait Oil Company
Civil Construction Works for Clean Fuel Project at Mina Abdallah for KNPC
Civil Construction Works New Acid Gas Removal Plant (NAGRP) Revamp Project for KNPC
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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 2016.
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 125.777 Million in
2015 to KD 130.684 Million in 2016, reflecting an increase of 3.90%.
● Gross Profit increased from KD 10.785 Million in 2015 to KD 15.574 Million in 2016.
● General and administrative expenses increased from KD 4,624,181 in 2015 to KD 5,085,588 in 2016.
● Net Profit increased from KD 4,659,553 in the year 2015 to KD 6,331,226 in 2016.
● Earnings per share increased from 25.85 fils in 2015 to 35.13 fils in 2016.
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Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTSAND AUDITORS’ REPORT
31 DECEMBER 2016
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Opinion
We have audited the consolidated financial statements of Heavy Engineering Industries and Shipbuilding Company K.S.C.(Public) (“the Parent Company”) and its subsidiaries (together referred to as “the Group”), which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities, under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each key audit matter below, our description of how our audit addressed the matter is provided in that context.
Revenue recognition
The construction industry is characterized by contract risk with significant judgements involved in the assessment of both current and future contract financial performance. Revenue is recognized based on the stage of completion of individual contracts using on internal surveys of work performed. The stage of completion of contracts is updated on a regular basis. In doing so, management is required to exercise significant judgement in their assessment of the stage of completion; claims and liquidated damages; the completeness and accuracy of forecast costs to complete; and the ability to deliver contracts within forecast timescales. Changes in these judgements and the related estimates, as contracts progress can result in material adjustments to revenue, which can be both positive and negative. Due to these complexities, we have considered revenue recognition as a key audit matter. The accounting policies for revenue recognition for contract revenue is set out in note 2.11 to the consolidated financial statements.
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)
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Our work on the recognition of contract revenue included: an assessment of the design and implementation of key controls over the recognition of contract revenue; tests to determine whether these controls were operating effectively throughout the year; and selecting a sample of contracts in order to challenge both current and future financial performance. Our substantive testing on a sample basis included the following procedures: a review of the contract terms and conditions through review of contract documentation; testing the stage of completion applied with reference to project progress reports and the Group’s survey department’s reports; assessment of claims and variations costs through inspection of correspondence with customers; a review of independent legal opinion received for contentious matters, if any; an assessment of the forecasts through discussion with finance and operational management; an assessment of the ability to deliver contracts within budgeted timescales and any exposures to liquidated damages for late delivery of contract works; a review of post-balance sheet contract performance to support year end judgements; and an assessment that contract loss provisions have been made wherever required.
Other information included in the Group’s 2016 Annual Report
Management is responsible for the other information. Other information consists of the information included in the Group’s 2016 Annual Report, other than the consolidated financial statements and our auditor’s report thereon. We obtained the report of the Parent Company’s Board of Directors, prior to the date of our auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of our auditor’s report.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those Charged with Governance are responsible for overseeing the Group’s financial reporting process.
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS(CONTINUED)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)
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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
● Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
● Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists, related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate to Those Charged with Governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide to Those Charged with Governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS(CONTINUED)
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From the matters communicated to Those Charged with Governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 required for the purpose of our audit; and that the consolidated financial statements incorporate all information that is required by Companies’ Law No. 1 of 2016, and its executive regulations; and by the Parent Company’s Memorandum of Incorporation and Articles of Association, as amended; that an inventory was duly carried out; and that, to the best of our knowledge and belief, no violations of the Companies’ Law No. 1 of 2016, and its executive regulations; or of the Parent Company’s Memorandum of Incorporation and Articles of Association, as amended, have occurred during the year ended 31 December 2016 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)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)
Bader A. Al-WazzanLicence No. 62ADeloitte & ToucheAl-Wazzan & Co.
Kuwait - 14 March 2017
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016
The accompanying notes form an integral part of these consolidated financial statements.
Note 2016 2015
Assets Non current assetsProperty, plant and equipment 5 55,506,320 48,290,024Investments available for sale 6 1,469,672 1,305,818
56,975,992 49,595,842Current assetsInventories 7 8,933,150 10,694,563Contracts in progress 8 29,877,284 29,657,838Trade and other receivables 9 47,591,597 43,488,498Cash and bank balances 10 4,320,725 3,333,851
90,722,756 87,174,750Total assets 147,698,748 136,770,592
Equity and liabilitiesEquityAttributable to Parent Company's shareholdersShare capital 11 18,024,152 17,165,859Statutory reserve 12 6,442,320 5,763,073General reserve 12 4,913,214 4,233,967Fair valuation reserve 239,628 -Retained earnings 16,276,431 13,020,775
45,895,745 40,183,674Non-controlling interest 8,392 7,902Total equity 45,904,137 40,191,576Non current liabilitiesPost employment benefits 13 12,667,103 10,656,408Due to banks 15 4,416,530 5,333,076
17,083,633 15,989,484Current liabilitiesTrade and other payables 14 59,847,453 53,174,871Due to banks 15 24,863,525 27,414,661
84,710,978 80,589,532Total liabilities 101,794,611 96,579,016Total equity and liabilities 147,698,748 136,770,592
(All Amounts in Kuwaiti Dinars)
Talal Jassim Mohammad Al KharafiVice Chairman
Adnan Musaed Khalifa Al KharafiChairman
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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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.
CONSOLIDATED STATEMENT OF INCOMEAS AT 31 DECEMBER 2016
Note 2016 2015
Revenue 130,684,496 125,777,031
Cost of sales 16 (115,110,134) (114,992,276)
Gross profit 15,574,362 10,784,755
Other income 228,105 301,465
General and administrative expenses 17 (5,085,588) (4,624,181)
Investment income 18 101,175 135,087
Provision for doubtful debts (3,000,000) -
Finance costs (1,113,045) (1,137,081)
Foreign exchange gain 139,374 108,915
Profit before provisions and contribution to taxes and Board of Directors’ remuneration 6,844,383 5,568,960
Impairment loss on investments available for sale (51,916) (619,578)
Board of Directors’ remuneration (110,000) (62,000)
Contribution to Kuwait Foundation for Advancement of Sciences (55,615) (34,200)
National Labour Support tax (217,888) (147,089)
Zakat expense (77,738) (46,540)
Net profit for the year 6,331,226 4,659,553
Attributable to:Shareholders of the Parent Company 6,330,736 4,658,725
Non-controlling interest 490 828
6,331,226 4,659,553
Basic and diluted earnings per share (fils) 20 35.13 25.85
(All Amounts in Kuwaiti Dinars)
ANNUAL REPORT 2016
23
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - YEAR ENDED 31 DECEMBER 2016
2016 2015
Net profit for the year 6,331,226 4,659,553
Other comprehensive income to be reclassified to Statement of Income in subsequent periods:
Changes in fair value of investments available for sale 239,628 (114)
Total comprehensive income for the year 6,570,854 4,659,439
Attributable to:Shareholders of the Parent Company 6,570,364 4,658,611Non-controlling interest 490 828
6,570,854 4,659,439
(All Amounts in Kuwaiti Dinars)
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.
ANNUAL REPORT 2016
24
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ANNUAL REPORT 2016
25
Note 2016 2015Operating activitiesNet profit for the year 6,331,226 4,659,553Adjustments for:Depreciation 5 5,285,119 5,311,012Provision for doubtful debts 3,000,000 -Investment income 18 (101,175) (135,087)Finance costs 1,113,045 1,137,081Impairment loss on investment securities 51,916 619,578Gain on disposal of property, plant and equipment (136,568) (231,828)Post employment benefits accrued 13 2,776,553 2,329,598Operating profit before changes in working capital 18,320,116 13,689,907Decrease/(increase) in inventories 1,761,413 (3,718,781)Increase/(decrease) in contracts in progress (219,446) 1,765,172Increase in trade and other receivables (7,103,099) (6,150,518)Increase in trade and other payables 6,636,498 6,959,870Post employment benefits paid 13 (765,858) (1,258,509)Net cash generated from operating activities 18,629,624 11,287,141
Investing activitiesPurchase of property, plant and equipment 5 (12,513,559) (13,961,691)Proceeds from sale of property, plant and equipment 148,711 258,875Proceeds from redemption of investments available for sale 23,858 11,177Dividends received from investments 18 102,698 136,931Decrease/(increase) in deposits with banks 235,543 (693,674)Net cash used in investing activities (12,002,749) (14,248,382)
Financing activitiesRepayment of/(proceeds from) due to banks (3,467,682) 4,096,624Finance cost paid (1,068,530) (1,063,943)Dividends paid (868,246) (811,818)Net cash (used in)/generated from financing activities (5,404,458) 2,220,863
Net increase/(decrease) in cash and cash equivalents 1,222,417 (740,378)Cash and cash equivalents at 1 January 2,640,177 3,380,555Cash and cash equivalents at 31 December 10 3,862,594 2,640,177
CONSOLIDATED STATEMENT OF CASH FLOWS - YEAR ENDED 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars)
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.
ANNUAL REPORT 2016
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
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 holding2016 2015
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 W.L.L. 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 number of personnel employed by the Group as of 31 December 2016 is 12,870 (2015: 7,978).
The new Companies Law No.1 of 2016 was issued on 24 January 2016 and it was published in the official Gazette on 1 February 2016 which replaced the Companies Law No 25 of 2012 and its amendments. According to Article No.5, the new law will be effective retrospectively from November 26, 2012. The new Executive Regulations of Law No. 1 of 2016 was issued on 12 July 2016 and was published in the Official Gazette on 17 July 2016 which cancelled the Executive Regulations of Law No. 25 of 2012.
The consolidated financial statements for the year ended 31 December 2016 were authorised for issue by the Board of Directors (“the Board”) on 14 March 2017 and are subject to the approval of shareholders at the annual general meeting.
(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
ANNUAL REPORT 2016
27
2. Basis of preparation and significant accounting policies
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.
2.2 Significant accounting policies
The accounting policies used in the preparation of these consolidated financial statements are consistent with those used in previous year, except for the following new and amended IASB Standards during the year:
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is a part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are applied prospectively and do not have any impact on the Group, given that it has not used a revenue-based method to depreciate its non-current assets.
Amendments to IAS 1: Disclosure Initiative
The amendments to IAS 1 clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:
● The materiality requirements in IAS 1
● That specific line items in the statement(s) of income and other comprehensive income and the statement of financial position may be disaggregated
● That entities have flexibility as to the order in which they present the notes to financial statements
● That the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to statement of income.
Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of income and other comprehensive income. These amendments do not have any impact on the consolidated financial statements of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
ANNUAL REPORT 2016
28
Annual Improvements 2012-2014 Cycle
IAS 19: Employee Benefits
The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment is applied prospectively. This amendment did not have any impact on the consolidated financial statements of the Group.
IFRS 7: Financial Instruments: Disclosures
Servicing contracts
The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures need not be provided for any period beginning before the annual period in which the entity first applies the amendments.
Other amendments to IFRSs which are effective for annual accounting period starting from 1 January 2016 did not have any material impact on the accounting policies, financial position or performance of the Group.
Standards issued but not yet effective
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 an option to early adopt. IFRS 9 sets out the requirements for recognising 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 new standard introduces an ‘expected credit loss’ model for the measurement of the impairment of financial assets. The Group is in the process of quantifying the impact of this standard on the annual consolidated financial statement, when adopted.
IFRS 15: Revenue from contracts with customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, effective for periods beginning on 1 January 2018 with early adoption permitted. IFRS 15 defines principles for recognising revenue and will be applicable to all contracts with customers. However, interest and fee income integral to financial instruments and leases will continue to fall outside the scope of IFRS 15 and will be regulated by the other applicable standards (e.g IFRS 9, and IFRS 16 Leases). This standard will supercede IAS 11 Construction contracts; IAS 18 Revenue; along with IFRIC 13, IFRIC 15; IFRIC 18 and SIC 13 from the effective date.
Revenue under IFRS 15 will need to be recognised as goods and services are transferred, to the extent that the transferor anticipates entitlement to goods and services. The standard will also specify a comprehensive set of disclosure requirements regarding the nature, extent and timing as well as any uncertainty of revenue and corresponding cash flows with customers.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
ANNUAL REPORT 2016
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
The Group does not anticipate early adopting IFRS 15 and is currently evaluating its impact.
IFRS 16 Leases
The IASB issued the new standard for accounting for leases IFRS 16 Leases in January 2016. The new standard does not significantly change the accounting for leases for lessors. However, it does require lessees to recognise most leases on their balance sheets as lease liabilities, with the corresponding right-of-use assets. Lessees must apply a single model for all recognised leases, but will have the option not to recognise ‘short-term’ leases and leases of ‘low-value’ assets. Generally, the profit or loss recognition pattern for recognised leases will be similar to today’s finance lease accounting, with interest and depreciation expense recognised separately in the consolidated statement of income.
IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted provided the new revenue standard, IFRS 15, is applied on the same date. Lessees must adopt IFRS 16 using either a full retrospective or a modified retrospective approach. The Group does not anticipate early adopting IFRS 16 and is currently evaluating its impact.
Other new standards or amendments to existing standard are not expected to have a material impact on the consolidated financial statements of the Group.
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 acquire 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
ANNUAL REPORT 2016
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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.
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 bank balances.
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.
ANNUAL REPORT 2016
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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.
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.
Impairment of financial asset
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.
ANNUAL REPORT 2016
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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.
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.
ANNUAL REPORT 2016
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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 and cash equivalents comprise of cash in hand, current account with banks and time deposits with banks with maturities not exceeding three months from acquisition date.
2.8 Post employment benefits
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.
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.
ANNUAL REPORT 2016
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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.
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 balances with banks.
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:
2016 2015 Contracts in Progress 20,053,992 24,055,857Trade and other receivables 45,020,091 41,327,985Balances with banks 4,201,017 3,260,336
69,275,100 68,644,178
ANNUAL REPORT 2016
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
(B) Market risk
Market risk comprises of foreign currency risk, interest rate risk and equity price risk arises due to movements in foreign currency rates, interest rates and market prices of assets respectively.
(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.
Following is the net receivables/(payables) in foreign currency as of the date of the consolidated financial statements:
2016 2015
US Dollar 3,393,657 2,412,621Others currencies 986,383 1,890,174
4,380,040 4,302,795
If as at 31 December 2016, 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 2016, is shown below:
2016 2015
US Dollar 169,683 115,247Others currencies 49,319 94,509
219,002 209,756
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.
ANNUAL REPORT 2016
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
The Group’s quoted equity investment is primarily quoted on the Kuwait Stock Exchange. At 31 December 2016, if equity prices had increased by 5%, the equity of the Group would have been higher by KD 69,321 (2015: KD 59,907).
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.
If as on 31 December 2016, the interest rates had increased by 50 basis points the net profit would have been lower by KD 116,921 (2015: KD 146,930). Alternatively, a 50 basis points 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 twelve 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 2016Bank Overdrafts 12,895,770 - - 12,895,770Term loans 6,293,061 840,000 - 7,133,061Advance against promissory notes 4,483,009 - - 4,483,009Wakala payable 2,279,228 779,228 2,837,302 5,895,758Trade and other payables 59,847,453 - - 59,847,453Commitments 7,982,563 - - 7,982,563
93,781,084 1,619,228 2,837,302 93,237,614
ANNUAL REPORT 2016
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
Less than1 year
Between1 and 2 years
Between2 and 7 years Total
At 31 December 2015Bank Overdrafts 14,940,478 - - 14,940,478Term loans 6,819,032 3,094,795 - 9,913,827Advance against promissory notes 5,095,137 - - 5,095,137Wakala payable 993,796 498,134 1,869,692 3,361,622Trade and other payables 53,174,871 - - 53,174,871Commitments 9,716,086 - - 9,716,086
90,739,400 3,592,929 1,869,692 96,202,021
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 bank balances. 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 2016 and 2015 were as follows:
2016 2015
Total borrowings 29,280,055 32,747,737Less: cash and bank balances (4,320,725) (3,333,851)Net debt 24,959,330 29,413,886Total equity 45,904,137 40,191,576Total capital 70,863,467 69,605,462Gearing ratio 35.22% 42.26%
Under the laws of Kuwait, the Parent Company appropriates 10% of its net profit to a statutory reserve till it reaches 50% of the share capital, with restrictions on distribution. This reserve can be utilized only for the distribution of a maximum dividend of up to 5% in years when retained earnings are inadequate for this purpose. The Parent Company also appropriates 10% to general resereve.
3.3 Fair value of financial instruments
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:
ANNUAL REPORT 2016
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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.
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
2016Investments available for sale: Listed shares 1,386,421 - - 1,386,421Unlisted shares - - 83,251 83,251
1,386,421 - 83,251 1,469,672
Level 1 Level 2 Level 3 Total
2015Investments available for sale: Listed shares 1,198,142 - - 1,198,142Unlisted shares - - 107,676 107,676
1,198,142 - 107,676 1,305,818
Movement in Level 3 investments:2016 2015
At 1 January 107,676 122,358Capital redemption (23,858) (11,177)Impairment loss (567) (3,505)At 31 December 83,251 107,676
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.
ANNUAL REPORT 2016
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
4. Significant accounting estimates and judgements
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.
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.
ANNUAL REPORT 2016
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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 2016
41
NO
TES
TO T
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- 31
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--
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,024
ANNUAL REPORT 2016
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016(All Amounts in Kuwaiti Dinars unless otherwise stated)
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
The depreciation charge has been allocated in the consolidated statement of income as follows:
2016 2015
Cost of sales 5,174,590 5,191,419General and administrative expenses 110,529 119,593
5,285,119 5,311,012
The Group obtained valuation of the freehold land and leasehold land from two independent valuers at KD 2,889,000 and KD 12,091,000 (2015: KD 3,196,000 and KD 13,022,000) 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
2016 2015
Quoted 1,386,421 1,198,142Unquoted 83,251 107,676
1,469,672 1,305,818
During the year, the Group recognized an impairment loss of KD 51,916 (2015: KD 619,578) in the consolidated statement of income. Quoted equities are traded in active markets.
Investments available for sale are denominated in the following currencies:
2016 2015
Kuwaiti dinar 1,386,421 1,198,142US dollar 83,251 107,676
1,469,672 1,305,818
ANNUAL REPORT 2016
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
7. Inventories
2016 2015
Materials 8,971,077 10,741,214Provision for obsolete and slow moving items (37,927) (46,651)
8,933,150 10,694,563
This includes materials at sites and at the warehouse to be utilized in the projects.
8. Contracts in progress
2016 2015
Contract costs incurred 310,974,299 346,232,328Recognised profits less expected losses 84,706,415 66,538,961
395,680,714 412,771,289Progress billings (365,803,430) (383,113,451)
29,877,284 29,657,838
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:
2016 2015
Kuwaiti dinar 26,513,110 24,596,309US dollar 2,142,262 3,544,617Other currencies 1,221,912 1,516,912
29,877,284 29,657,838
9. Trade and other receivables
2016 2015
Trade receivables 41,404,694 34,900,274Less: Provision for doubtful debts (4,178,071) (1,178,071)
37,226,623 33,722,203Contract retentions 6,917,030 7,152,460Advances to subcontractors 1,482,372 1,397,224Prepayments 1,089,134 763,289Other receivables 876,438 453,322
47,591,597 43,488,498
ANNUAL REPORT 2016
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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 2016, trade receivables of KD 14,881,085 were neither past due nor impaired (2015: KD 16,196,592) and trade receivables of KD 22,345,538 were past due but not impaired (2015:KD 17,525,611).
The ageing of trade receivables past due but not impaired is as follows:
2016 2015
From 1 month up to 3 months 8,889,815 4,914,268More than 3 months up to 6 months 1,791,556 2,668,061More than 6 months up to 1 year 3,581,963 779,249More than 1 year 8,082,204 9,164,033Total 22,345,538 17,525,611
As of 31 December 2016, trade receivables of KD 4,178,071 (2015: KD 1,178,071) were past due and impaired.
The following is the movement on the Group’s provision for doubtful debts:
2016 2015
At 1 January 1,178,071 1,178,071Provisions Provided during the Year 2016 3,000,000 -At 31 December 4,178,071 1,178,071
Trade and other receivables are denominated in the following currencies:
2016 2015
Kuwaiti dinar 45,266,231 41,797,550US dollar 1,715,249 1,000,786Other currencies 610,117 690,162
47,591,597 43,488,498
ANNUAL REPORT 2016
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
10. Cash and bank balances
2016 2015
Cash on hand 119,708 73,515Balances with banks 3,742,886 2,564,912Deposits with banks - 1,750Cash and cash equivalents in the statement of cash flows 3,862,594 2,640,177Deposits with banks whose original maturity period exceeds three months from the date of acquisition 458,131 693,674
Cash and bank balances 4,320,725 3,333,851
The carrying amount of cash and bank balances approximates its fair value.
Deposits with banks are held as margin money deposits against letter of guarantee facilities from local commercial banks.
Cash and bank balances are denominated in the following currencies:
2016 2015
Kuwaiti dinar 3,038,667 2,179,351US dollar 1,131,047 1,057,502Other currencies 151,011 96,998
4,320,725 3,333,851
11. Share capital
The Extraordinary General Meeting of shareholders held on 28 April 2016 resolved to increase the authorised share capital of the Parent Company from KD 17,165,859 comprising of 171,658,588 number of shares with a face value of 100 fils to KD 18,024,152 comprising of 180,241,517 number of shares with a face value of 100 fils.
The Annual General Assembly meeting of the shareholders held on 28 April 2016 approved the annual audited consolidated financial statements for the year ended 31 December 2015 and cash dividend of 5 fils per share amounting to KD 858,293 (31 December 2014: cash dividend of 5 fils per share amounting to KD 858,293) to the registered shareholders as at the date of the Annual General Assembly. It also approved the distribution of bonus shares in the ratio of 5 shares for every 100 shares totalling 8,582,929 shares, amounting to KD 858,293 (31 December 2014: Nil) to the registered shareholders on the date of regulatory approval for distribution of bonus shares.
Accordingly, the authorized, issued and fully paid up share capital of the Parent Company as at 31 December 2016 is KD 18,024,152 comprising of 180,241,517 shares of 100 fils each which has been approved in the commercial register of the Ministry of Commerce on 22 May 2016 (31 December 2015: KD 17,165,859 comprising of 171,658,588 shares of 100 fils each).
ANNUAL REPORT 2016
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
Proposed dividend:
The Board of Directors, subject to the approval of the shareholders have recommended cash dividend of 10 fils per share to the registered shareholders as of the date of the Annual General Assembly Meeting. The financial statements has not been adjusted to reflect this as they are subject to the approval of the shareholders in the Annual General Assembly Meeting.
12. Reserves
a) Statutory reserve
In accordance with the Companies Law No. 1 of 2016 and the Parent Company’s Articles of Association, as amended, 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, as amended, 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 (2015: 10%) for the year 2016.
13. Post employment benefits
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:
2016 2015
As at 1 January 10,656,408 9,585,319Provision during the year 2,776,553 2,329,598Paid during the year (765,858) (1,258,509)As at 31 December 12,667,103 10,656,408
ANNUAL REPORT 2016
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
14. Trade and other payables
2016 2015
Trade payables 10,804,130 8,304,785Retention 2,517,813 1,846,394Due to employees 4,533,123 3,550,419Dividend payables 785,443 795,397Advances from customers 16,917,427 8,273,994Accrued expenses 24,289,517 30,403,882
59,847,453 53,174,871
The carrying amount of account payables approximately equal their fair value as they are short term balances maturing within one year.
Trade and other payables are denominated in the following currencies:
2016 2015
Kuwaiti dinar 58,710,642 52,513,513US dollar 140,154 247,460Other currencies 996,657 413,898
59,847,453 53,174,871
15. Due to banks
2016 2015CurrentBank overdrafts 12,895,770 14,940,478Term loans 5,205,518 6,385,250Advance against promissory notes 4,483,009 5,095,137Wakala payable 2,279,228 993,796
24,863,525 27,414,661Non-currentTerm loans 800,000 2,965,250Wakala payable 3,616,530 2,367,826
4,416,530 5,333,076Total due to banks 29,280,055 32,747,737
Bank overdrafts are denominated in Kuwaiti Dinars and are repayable on demand.The effective rate of interest as at 31 December 2016 is 4.25% per annum (2015: 4.19%).
ANNUAL REPORT 2016
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
Term loans include:
● Kuwait Dinar loan facilities amounting to KD 4,467,518 (31 December 2015: KD 6,300,000) from local banks. The effective rate of interest of these term loans as at 31 December 2016 is 4.49% per annum (31 December 2015: 4.42%).
● US Dollar loan facility amounting to KD 1,538,000 (2015: KD 3,050,500) 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 2016 is 4.89% per annum (2015: 4.32%).
The following is the maturity analysis of term loans as at the consolidated statement of financial position date:
2016 2015
Up to 1 year 5,205,518 6,385,250Between 1 to 2 years 800,000 2,085,250Over 2 years - 880,000
6,005,518 9,350,500
Advance against promissory notes represents Kuwaiti Dinar facilities from local commercial banks. The effective interest rates on these facilities as at 31 December 2016 was 4.5% (31 December 2015: 4%) per annum.
Wakala payables represent Kuwaiti Dinar credit facilities granted by a local Islamic bank. Of the above, wakala payables amounting to KD 4,395,758 (31 December 2015: 2,865,960) is secured by mortgage of land and building with a net book value of KD 7,259,769 (31 December 2015: KD 4,956,365). The effective cost of wakala payables as of 31 December 2016 was 3.75 % to 4.25% (31 December 2015: 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:
2016 2015
Up to 1 year 2,279,228 993,796Between 1 to 2 years 794,637 498,134Over 2 years 2,821,893 1,869,692
5,895,758 3,361,622
The fair value of term loans equals its carrying amount as they bear interest rates which, approximate the current rates in the market.
ANNUAL REPORT 2016
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
16. Cost of sales
2016 2015
Materials 30,838,840 47,453,371Labour 31,724,201 27,137,259Subcontracting expenses 30,413,202 14,306,520Equipment hire and operational overheads 15,159,039 19,147,233Depreciation 5,174,590 5,191,419Bank charges 882,874 682,684Others 917,388 1,073,790
115,110,134 114,992,276
17. General and administrative expenses
2016 2015Staff costs 4,262,180 3,887,547Rent 62,074 62,074Depreciation 110,529 119,593Others 650,805 554,967
5,085,588 4,624,181
18. Investment income
2016 2015
Cash dividends received 102,698 136,931Management fees paid (1,523) (1,844)
101,175 135,087
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:
2016 2015Key management compensationSalaries and other short term employee benefits 268,614 258,519Post-employment benefits 26,475 51,638Other benefits 352,434 241,022
647,523 551,179
ANNUAL REPORT 2016
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
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:
2016 2015
Net profit for the year 6,330,736 4,658,725Weighted average number of outstanding ordinary shares during the year 180,241,517 180,241,517
Earnings per share (fils) 35.13 25.85
Earnings per share was 27.14 fils for the year ended 31 December 2015 before retrospective adjustment to the number of shares following the distribution of stock dividend.
ANNUAL REPORT 2016
51
NO
TES
TO T
HE
CO
NSO
LIDA
TED
FIN
AN
CIA
L ST
ATEM
ENTS
- 31
DEC
EMB
ER 2
016
(All
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ount
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Kuw
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e st
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)
21. B
usin
ess
segm
ents
Hea
vy E
ngin
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g In
dust
ries
and
Ship
build
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Com
pany
K.S
.C. (
Publ
ic) a
nd it
s su
bsid
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s
The
Gro
up is
org
anis
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to th
ree
maj
or o
pera
ting
divi
sion
s: In
dust
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nd O
il &
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, Shi
pyar
d, O
ffsho
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s m
entio
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in n
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1.
All
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ns a
re c
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cted
with
in K
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t. Fi
nanc
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mat
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abou
t bus
ines
s se
gmen
ts is
pre
sent
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elow
:
KD
000
’s
Indu
stria
l, O
il &
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Ship
yard
Offs
hore
Tota
l
2016
2015
2016
2015
2016
2015
2016
2015
Seg
men
t rev
enue
90,
724
85,
365
13,
236
14,
499
26,
725
25,
913
130,
685
125,
777
Seg
men
t gro
ss p
rofit
10,
027
5,1
25
3,72
03,
647
1,82
72,
013
15,
574
10,
785
Una
lloca
ted
inco
me
469
546
Una
lloca
ted
expe
nses
(9,7
12)
(6,6
71)
Profi
t for
the
year
6,3
31
4,6
60
Ass
ets
Pro
perty
, pla
nt a
nd e
quip
men
t 4
3,28
9 3
6,09
7
5,69
1
5,31
3 3
,440
3
,638
52
,420
45
,048
U
nallo
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and
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ent
3,0
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3,2
42
55,5
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48,2
90
Oth
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s 6
1,25
8 4
6,53
0 4
,149
1
5,40
9 2
0,76
1 2
1,84
6 86
,168
83
,785
U
nallo
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s 6
,025
4
,696
92
,193
88
,481
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1
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s 4
7,67
4 3
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4
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7
8,56
1 1
2,56
3 1
5,98
3 68
,004
58
,538
U
nallo
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bilit
ies
33,7
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Tota
l lia
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101,
795
96,5
79
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1 1
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9 89
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046
8 1
1,87
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8 U
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2
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,033
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,023
U
nallo
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prec
iatio
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2 28
8
5
,285
5
,311
ANNUAL REPORT 2016
52
22. Annual general meeting
The annual general meeting of the shareholders held on 28 April 2016 approved the consolidated financial statements of the Group for the year ended 31 December 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
ANNUAL REPORT 2016
53
23. Contingent liabilities and capital commitments
2016 2015Contingent liabilitiesLetter of guarantees 53,005,650 48,205,815
Capital commitmentsLetter of credit 7,982,563 9,716,086
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2016
Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries
ANNUAL REPORT 2016
54
HEISCO AT A GLANCE
ANNUAL REPORT 2016
55
ANNUAL REPORT 2016
56
Heavy Engineering Industries & Shipbuilding Co. K.S.C. (Public), [HEISCO] is a leading Engineering, Procurement and Construction (EPC) contracting company in the State of Kuwait. It delivers diversified range of services to oil & gas construction, power, distillation & desalination, refineries, petrochemical industries, process equipment manufacturing, civil construction, shipbuilding, ship repair, dredging, marine construction and industrial maintenance.
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.
Fields of Activity:● Oil & Gas Construction Operations
● Shipyard Operations
● Industrial Maintenance Operations
● Fabrication Operations
● Trading Operations
● Onshore and Offshore Operations (through Gulf Dredging & General Contracting Co. K.S.C. (Closed), a subsidiary company.
Oil & Gas Construction
Oil & Gas Construction Operations was established in 1982 with a view to expand and diversify HEISCO’s activities into oil & gas, petrochemical, power and water desalination sectors. Its services cover a variety of clients and a wide range of projects with particular emphasis on expertise, experience, capabilities and quality across all engineering and management functions.
Activities in brief:
Mechanical Operations
Flowlines
Oil & Gas Operations
HEISCO AT A GLANCE
Flowline
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57
HEISCO executes its works from field survey and site investigation to installation of flowlines and commissioning. It performs planning, procurement, supply of materials, supervision, fabrication, inspection and testing for the flowlines and pipelines of carbon steels and RTP, extension of headers/manifolds and construction of new remote manifolds with all associated civil works.
Pipelines
HEISCO prides itself on the extensive experience in Engineering, Procurement and Construction of pipeline projects in Kuwait keeping safety an important cornerstone. The company is an expert in large diameter pipeline construction and has completed a subcontract of Low Sulphur Fuel Oil (LSFO) project having 200 km of 48” pipelines and 600 km of different sizes up to 56” pipelines for Kuwait Oil Company. Another major pipeline project completed was Engineering, Procurement, Construction and commissioning of 2 X 20” Heavy Fuel Oil Pipelines of 120 km each from Mina Ahmadi Refinery Pumping Station to Doha Power Station for MEW.
Presently HEISCO is undertaking pipeline subcontract for Manifold Group Trunk Line System (MGT) for Gathering Centers (GC) 29, 30, 31 for Kuwait Oil
Company. This project will provide a pipeline network towards the three Gathering Centers to convey the well fluids from numerous wells in North Kuwait.
Plants
HEISCO has strong capabilities to execute major plant construction projects. With highly qualified, experienced and skilled manpower and large fleet of construction equipment, HEISCO successfully carried out construction activities from concept to commissioning, committing to high quality standards and efficiency. It works under extreme environmental conditions to execute projects focusing on employees’ health and safety and environmental protection and offers multidisciplinary services. HEISCO’s execution excellence and proficiency ensure on-time delivery within the budget.
The services involve project management, construction management, site preparation, temporary facilities, civil construction works, piping and structural fabrication, mechanical construction works, electrical and instrumentation works, start-up, commissioning assistance, etc.
Pipelines
Plants
ANNUAL REPORT 2016
58
Civil Operations
Civil construction is crucial to a project’s success. HEISCO offers years of extensive experience in the civil construction and development. Our professional civil construction team, with dedicated technologies and equipment, deals with design, construction and maintenance of industrial civil construction and infrastructure.
The civil work ranges from excavation, backfilling and trenching to road and asphalt works, construction of all kinds of buildings for control rooms, sub-stations, process and utility stations, construction of various types of foundations for static and rotary equipment, pipe rack and pipe supports and fabrication and installation of equipment platforms.
Electrical & Instrumentation Operations
HEISCO is a recognized leader in Electrical and Instrumentation Engineering Services and provides a wide range of services such as installation, calibration, communication, maintenance, trouble-shooting, testing, pre-commissioning and commissioning.
It delivers essential support and solution for operation and maintenance for oil and gas and power projects
in the industry. The Electrical and Instrumentation division is managed by highly qualified engineers and technicians and is capable of carrying out precise
jobs of any kind using HEISCO’s facilities equipped with sophisticated instruments, equipment, tools. It has vast experience in large construction projects in electrical and instrumentation and cathodic protection systems.
Tanks Operations
With decades of experience in manufacturing and successful installations of storage tanks, HEISCO is capable of manufacturing tanks of complex plate
Civil Operations
Electrical & Instrumentation Operations
Tanks Operations
ANNUAL REPORT 2016
59
structures. Today, HEISCO is the only Kuwaiti company to possess KOC approval for EPC of storage tanks up to the capacity of 500,000 bbls. It has complete in-house facilities for full turnkey projects from design, detailed engineering, procurement and fabrication of tank plates to site erection, installation of interconnecting pipe-works, electrical connections, instrumentation, painting, lining and coating.
The international standard codes followed are API 650, API 620 or equivalent standards complete with all required associated standards such as AWS A.I, ASME IX etc., surface preparation to Swedish Sa or SPCC specifications with painting, coating or lining.
Industrial Maintenance
HEISCO’s Industrial Maintenance Operations is recognized as a main provider of value-added services to prestigious clients such as MEW, KOC, KNPC, KGOC, PIC, EQUATE and JO. The Industrial Maintenance team has acquired vast experience, expertise and proficiency in complete industrial services. It provides technical supports and solutions with high standards of quality and safety in a cost-effective way.
Maintenance Operations
HEISCO is competent in maintenance of oilfield up stream facilities, various insulation and cladding works, sludge treatment, etc. It is capable of undertaking services such as maintenance and trouble shooting of rotary equipment, stationary equipment, shell & tube and plate type heat exchangers, filters, compressors, repairing and reconditioning of all kinds of valves, overhauling of heavy duty engines and reconditioning of engine components and repairing of heavy duty radiators and special machining of critical components by using CNC Machinery.
HEISCO also undertakes complete Plant shutdowns, unit-shutdowns on a full responsibility basis. Additionaly our Industrial Maintenance Operations has involved in supply of professional, technical and administrative manpower to KNPC and KJO. In an industry that demands quick response, our experienced team is available 24/7. It ensures safe, efficient and quality services while maintaining low costs.
Industrial Maintenance
Maintenance Operations
ANNUAL REPORT 2016
60
Power Plant Operations
With extensive experience in operation and maintenance of power plants and with a wide range of equipment, HEISCO executes complete onsite maintenance of power stations. It includes variety of services: annual shutdown works for boilers, chemical cleaning operations, major overhauling of steam turbines, rehabilitation of steam turbines and gas turbines, boiler combustion efficiency improvements, mechanical, electrical, instrumentation and control systems, maintenance of water distillation units, re-carbonation plant, fuel oil pumping station, compressors, pumps, distillation and intake facilities, ID/FD/GR fans and blowers, maintenance and re-tubing of plate type and shell & tube type heat exchangers and fin fan coolers, condensers, oil and air coolers, etc. Our services cover all aspects and activities necessary to run a power plant in a safe, reliable, compliant, efficient and most economical manner.
HEISCO possesses a comprehensive in-house Maintenance Workshop Facility equipped with most modern machinery. To deal with heavy rotating machinery components such as turbine parts, a new
state-of-the-art heavy machinery workshop has been built. The CNC vertical turning lathe and 5 Axis CNC horizontal boring machines installed in the workshop have the highest capacity of its kind in the Middle East.
Fabrication 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. It makes consistant improvements in the fabrication facilities to provide its clients with improved services.
Highlights:
● The only Kuwaiti company approved as manufacturer of indirect type Oil-fired Heaters.
● Design and engineering capabilities with latest software like COMPRESS, PVElite, TEKLA V20, STADD PRO V8i, Raptor, EPCPROMAN, Iso-Builder Piping, RAMP Piping, AUTOCAD, G-Star, LANTEK Expert Cut II Plus and Cut Logic 1D.
● Independent in-house NDE and Material Testing Facility.
Power Plant Operations
Fabrication Operations
ANNUAL REPORT 2016
61
In addition to Quality Management System Certification ISO 9001:2008 and Occupational Health and Safety Management System Certification to OHSAS 18001:2007 standards, the workshops facilities are certified by the American Society of Mechanical Engineers (ASME) and the National Board of Boiler and Pressure Vessel Inspectors. HEISCO is authorized to put the U, U2, S, PP and NB R stamps to its products and API Monograms for separators (API - 12J) and storage tanks (API 12D & 12F).
The Company offers an array of products such as specialized pressure vessels, industrial modular structures, process equipment including skid packages, separators, desalters, scraper traps/pig launchers and receivers, heaters, reactors, power boilers, column and towers, shell and tube heat exchangers, shop fabricated tanks, pre-fabricated pipe spools, etc.
Trading Operations
HEISCO’s dynamic sales and marketing 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 by after sales service from the formidable engineering and maintenance resources of our combined operations.
Trading Operations promotes variety of industrial products and also the interests of sponsorship for recognized international EPC contractors in Kuwait.
Some of the products promoted are boilers and turbine spares, SMLS pipes (line pipes and flow pipes), valves (ball, gate, globe and check), RTP pipes and fittings, steel abrasives (steel grits and shots), blasting and painting equipment, welding equipment and gas detection instruments, coating and NDT instruments, NDT inspection equipment for tanks, pipes and vessels, hot tapping, leak sealing, composite pipe repair and nozzle testing, wellhead Christmas tree, SSV and a complete range of drilling and wellhead equipment.
Quality Control & Testing Services
To ensure the fulfillment of its contractual safety and legal obligations, HEISCO has set up an entirely
Trading Operations
Quality Control and Testing
ANNUAL REPORT 2016
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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 that provide QC services to various clients, contractors in Oil & Gas, Refineries, Petrochemicals and Power Sectors in Kuwait.
HEISCO has cutting edge technology, the most modern testing equipment, highly skilled NDT technicians, inspectors and inspection engineers to meet project requirements related to Quality Control, Inspection and NDT Services.
Calibration Laboratory
HEISCO’s Calibration Laboratory, initially established to provide in-house calibration services, grew rapidly to cater its services to external customers as well with a wide range of testing and calibration services. The Calibration Laboratory, with highly qualified and trained engineers, technicians and state-of-the-art master calibrators, has the capability to provide calibration services that can be performed in-house or on-site and third-party calibrations of specialized instruments.
The Calibration Laboratory is functioning in accordance with ISO 9001:2008 Quality Management System and is accredited to International Standard ISO/IEC 17025 of American Association for Laboratory Accreditation (A2LA).
Calibration Laboratory
Quality Control and Testing
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63
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.
Workshops Equipped with Machines such as:
● LAYHER Scaffolding Marine Materials
● Pneumatic Paint Agitator (Air Mixer)
● Vapor Abrasive Blast Equipment
● GRACO Airless Paint Spray Machine
● Jet Unit 500 Bar (Trail Jet)
● (FALCH) Base Jet 500 Bar
● (FALCH) Trail Jet 2500 Bar
● Cable Tags Portable Embossing Machine
● Refrigerator System Analyzer
● Sensor Test Machine
● Ajax Centre Lathe Machine 1m Length
● Shaft Straightness Machine 10000 Psi
● Laser Shaft Alignment Machine
● Machine Condition Advisor Machine
● Stick Plasma And Mig Welding Machines With Wire Feeder
Shipyard Workshops
Shipyard Operations:
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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 areas.
● 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 / Overhauling.
● Agent for International Marine Equipment and Devices Vendors.
Floating dock
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65
Floating dock
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66
Offshore & Intake Structure at Az Zour North IWPP Project - Kuwait
GULF DREDGING & GENERAL CONTRACTING CO. K.S.C (Closed)
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.
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.
ANNUAL REPORT 2016
67
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
Construction, Completion & Maintenace of Police Officers Club Marina - Ministry of Interior (MOI) - 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 Countries:
● Kingdom of Saudi Arabia
● State of Qatar
● Sultanate of Oman
● Republic of Iraq
ANNUAL REPORT 2016
68
● Multicat Boat / 7 ton crane / fuel supply
● Jack-up Barge (Self Elevating Platform)
● Split Hopper Barges
● 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 Pipelines
● Speed Boats
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, Wheel Loaders, Graders and Excavators
● Piling Rigs for Sheet, Concrete and Steel Tubular Piles with capacity to drive up to dia 2850 mm
● Auguring and Boring Equipment
● Dewatering Equipment
Certifications:
● CTC Grade-I in Civil Construction Works & Grade-IV in Roads & Infrastructure works
● Approved Civil & Marine Contractor with Kuwait National Petroleum Company.
● MEW approved subcontractor for Seawater Intake and Outfall works.
● Member of IMCA (International Marine Contractors Association)
● ISO 9001:2008
● OHSAS 18001: 2007
Resources
Offshore Equipment:
Gulf Dredging is well equipped with Offshore Equipment comprising of:
● Cutter Suction & Dipper Dredgers
● Tug Boats
● Work Boats
● Survey Boats
● Fuel Supply Boats
Cargo Barge Jack-Up Barge
ANNUAL REPORT 2016
69
Onshore Equipment
Design & Construction of Chalets and Cafeteria for Police Officers Club
Crawler Cranes
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
70
71