Oman Oil Balance Sheet
Transcript of Oman Oil Balance Sheet
OMAN OIL MARKETING COMPANY SAOG
Financial statements
31 December 2007
Registered address Principal place of business
P.O. Box 92 Mina Al Fahal
Postal code 116 Sultanate of Oman
Sultanate of Oman
OMAN OIL MARKETING COMPANY SAOG
Financial statements 31 December 2007
Contents Page
Report of the Auditors 1
Balance sheet 2
Income statement 3
Cash flow statement 4
Statement of changes in equity 5
Notes 6-22
REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF
OMAN OIL MARKETING COMPANY SAOG
Report on the financial statements We have audited the accompanying financial statements of Oman Oil Marketing Company SAOG ("the Company") set out on pages 2 to 22, which comprise the balance sheet as at 31 December 2007, and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes.
Board of Directors responsibility for the financial statements The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, the disclosure requirements of the Capital Market Authority and the Commercial Companies Law of 1974, as amended. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessments of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity‘s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity‘s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Oman Oil Marketing Company SAOG as at 31 December 2007 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Report on other Legal and Regulatory Requirements
In our opinion, the financial statements of Oman Oil Marketing Company SAOG as at and for the year ended 31 December 2007, in all material respects comply with:
the relevant disclosure requirements of the Capital Market Authority; and the Commercial Companies Law of 1974, as amended.
22 January 2008 KPMG
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OMAN OIL MARKETING COMPANY SAOG
Balance Sheet as at 31 December
2007 2006
Notes RO RO
Assets
Property, plant and equipment 3 12,638,672 10,647,439
Interest in Joint Venture 4 &18 - 17,007
Deferred tax 13 46,048 ─────────
62,981 ─────────
Total non-current assets 12,684,720 ─────────
10,727,427 ─────────
Inventories 5 3,430,395 3,589,735
Trade and other receivables 6 15,319,389 16,465,147
Cash and cash equivalents 5,997,240 ─────────
1,790,027 ─────────
Total current assets 24,747,024 ─────────
21,844,909 ─────────
Total assets 37,431,744 32,572,336
═════════ ═════════
Equity
Share capital 7 6,450,000 6,450,000
Statutory reserve 8 2,150,000 2,150,000
Retained earnings 9,176,176 6,559,417
───────── ─────────
Total equity 17,776,176 ─────────
15,159,417 ─────────
Liabilities
Employees‘ end of service benefits 9 329,806 335,326
Provision for site restoration and abandonment cost 10 268,056 ─────────
240,241 ─────────
Total non-current liabilities 597,862 ─────────
575,567 ─────────
Trade and other payables 11 17,596,184 13,888,722
Payable to Joint Venture 4 &18 36,637 -
Short-term loan 12 - 2,000,000
Income tax 13 834,038 653,038
Environmental provision 14 590,847 295,592
───────── ─────────
Total current liabilities 19,057,706
__________
16,837,352
__________
_
Total liabilities
Total equity and liabilities
19,655,568
____________
37,431,744
17,412,919
__________
_
32,572,336
═════════ ═════════
Net assets per share 21&7 0.276 0.235
═════════ ═════════
The notes on pages 6 to 22 form an integral part of these financial statements.
These financial statements were approved and authorized for issue by the Board of Directors on 22 January
2008 and signed on their behalf by:
Chairman Chief Executive Officer
The report of the Auditors is set forth on page 1.
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OMAN OIL MARKETING COMPANY SAOG
Income statement for the year ended 31 December
2007 2006
Notes RO RO
Revenue 18 152,663,594 121,397,435
Cost of sales
(137,781,096) ─────────
(109,578,451) ─────────
Gross Profit 14,882,498 11,818,984
Other income 340,121 308,040
Administrative expenses
Distribution expenses
3,14,15 &18 (6,652,081)
(1,229,476)
(5,861,974)
(1,127,202)
Other expenses (722,494) (383,278) ───────── ─────────
Result from operating activities 6,618,568
________
4,754,570
__________
Finance income
Finance expenses
18
18
4,731
(127,990)
7,068
(171,174)
Net finance cost (123,259)
_________
(164,106)
________
Share of net loss from joint venture 18 (53,644)
_________
(30,519)
________
Profit before income tax 6,441,665 4,559,945
Income tax expense 13 (761,156) (543,915)
───────── ─────────
Profit for the year 5,680,509 ═════════
4,016,030 ═════════
Basic earnings per share 20 0.088 ═════════
0.062 ═════════
The notes on pages 6 to 22 form an integral part of these financial statements.
The report of the Auditors is set forth on page 1.
Page 4
OMAN OIL MARKETING COMPANY SAOG
Cash flow statement for the year ended 31 December
2007 2006
Note RO RO
Cash flows from operating activities
Profit before income taxes and after directors remuneration
Add : Share of loss from joint venture
6,441,665
53,644
4,559,945
30,519
Adjustments for:
Depreciation 3 1,734,946 1,498,698
(Profit)/Loss on disposal of property, plant and equipment (27,142) 64,769
Net finance costs 123,259 164,106
───────── ────────
Operating profit before working capital changes 8,326,372 6,318,037
Change in inventories 5 159,340 (1,478,426)
Change in receivables 6 1,145,758 (4,168,376)
Change in payables
Change in provisions and employee benefits
11
9
3,707,462
317,550
───────
5,704,560
24,684
───────
Cash from operations 13,656,482 6,400,479
Interest paid (127,990) (171,174)
Income tax paid 13 (563,223) (387,853)
─────── ───────
Net cash from operating activities 12,965,269
───────
5,841,452
───────
Cash flows from investing activities
Interest received 4,731 7,068
Proceeds from disposal of property, plant and equipment 55,296 5,643
Acquisition of property, plant and equipment 3 (3,754,333) (2,562,326)
─────── ───────
Net cash used in investing activities (3,694,306)
───────
(2,549,615)
───────
Cash flows from financing activities
Decrease in short term loan (2,000,000) (900,000)
Dividends paid (3,063,750) (2,902,500)
─────── ───────
Net cash used in financing activities (5,063,750)
───────
(3,802,500)
───────
Net change in cash and cash equivalents 4,207,213
(510,663)
Cash and cash equivalents at 1 January 1,790,027
───────
2,300,690
───────
Cash and cash equivalents at 31 December 5,997,240
═══════
1,790,027
═══════
The notes on pages 6 to 22 form an integral part of these financial statements.
The report of the Auditors is set forth on page 1.
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OMAN OIL MARKETING COMPANY SAOG
Statement of changes in equity for the year ended 31 December
Share
capital
Statutory
reserve
Retained
earnings
Total
RO RO RO RO
1 January 2006 6,450,000 2,150,000 5,445,887 14,045,887
Dividends paid – 2005 - - (2,902,500) (2,902,500)
Net profit for the year - - 4,016,030 4,016,030
————─ ————— ————— —————
31 December 2006 6,450,000 2,150,000 6,559,417 15,159,417
════════ ════════ ════════ ════════
1 January 2007 6,450,000 2,150,000 6,559,417 15,159,417
Dividends paid – 2006 - - (3,063,750) (3,063,750)
Net profit for the year - - 5,680,509 5,680,509
————─ ————— ————— —————
31 December 2007 6,450,000 2,150,000 9,176,176 17,776,176
════════ ════════ ════════ ════════
The notes on pages 6 to 22 form an integral part of these financial statements.
The report of the Auditors is set forth on page 1.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
1 Legal status and principal activities
Oman Oil Marketing Co. SAOG (―the Company‖) is registered as a joint stock company under the
Commercial Companies Law of Oman and is engaged in the marketing and distribution of petroleum
products. The Company is a subsidiary of Oman Oil Company SAOC, a closed joint stock Company
registered in the Sultanate of Oman. The Company has entered into a ‗Trademark License
Agreement‘ with Oman Oil Company SAOC dated 22nd September 2003, for the right to use the
trademark ‗Oman Oil‘, in exchange for an annual fee of 0.09% of all fuel sales.
2 Basis of preparation and significant accounting policies
Basis of preparation
a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (―IFRS‖), the disclosure requirements of the Capital Market Authority and the
requirements of the Commercial Companies Law of 1974, as amended.
b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for provisions for site
restoration and abandonment cost which are measured at amortized cost.
c) Functional currency
These financial statements are presented in Riyal Omani (RO), which is the Company‘s functional
currency.
d) Use of estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected. In particular, estimates that involve uncertainties and judgments which have a significant
effect on the financial statements include: provisions for impairment of receivables (note 6), provision
for environmental remediation (note 14) and provision for site abandonment and restoration cost
(note 10).
Significant accounting policies
The accounting policies set out below have been applied consistently by the Company and are
consistent with those used in the previous year.
a) Foreign currencies
Transactions in foreign currencies are translated to the Company‘s functional currency at exchange
rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting dates are retranslated to the functional currency at the exchange rate at
that date. The foreign currency gain or loss on monetary items is the difference between amortized
cost in the functional currency at the beginning of the period, adjusted for effective interest and
payments during the period, and the amortized cost in foreign currency translated at the exchange
rate at the end of the period. Foreign currency differences arising on retranslation are recognized in
the profit or loss.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
2 Basis of preparation and significant accounting policies (continued)
b) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
impairment losses.
Costs include expenditures that are directly attributable to the acquisition of the asset. The cost
includes any other cost that is directly attributable to bringing the asset to a working condition for its
intended use, and the costs of dismantling and removing the items and restoring the site on which
they are located.
When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying
amount of an item if it is probable that future economic benefits embodied within the part will flow to
the company and its cost can be measured reliably. The costs of the day-to-day servicing of property,
plant and equipment are recognized in the income statement as incurred.
(iii) Depreciation
Depreciation is recognised in the income statement on a straight-line basis over the estimated useful
lives of each part of the property, plant and equipment. Assets under construction are not
depreciated. The estimated useful lives for the current and comparative periods are as follows:
Years
Buildings 10 to 20
Plant, equipment and vehicles 2 to 13
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
c) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories include
expenditures incurred in acquiring the inventories and bringing them to their existing location and
condition, as follows:
Petroleum products and lubricants: purchase cost on a first-in-first out basis
Stores: at weighted average cost
Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and selling expenses.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
2 Basis of preparation and significant accounting policies (continued)
d) Impairment
(i) Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the
difference between its carrying amount, and the present value of estimated future cash flows
discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The
remaining financial assets are assessed collectively in groups that share similar credit risk
characteristics.
All impairment losses are recognized in income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognized. For financial assets measured at amortized cost, the reversal is
recognized in the income statement.
(ii) Non-financial assets
The carrying amounts of the Company‘s non-financial assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indications exist then the asset‘s
recoverable amount is estimated.
An impairment loss is recognized if the carrying amount of an asset or cash generating unit is the
greater of its value in use and its fair value less costs to sell. In assessing the value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specified to the asset.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a
change in estimates used to determine the recoverable amount. An impairment loss is reversed only to
the extent that the asset‘s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had been recognized.
e) Employee benefits
Defined contribution plan
Obligations for contributions to a defined contribution retirement plan, for Omani employees, in
accordance with the Oman Social Insurance Scheme, are recognized as an expense in the income
statement as incurred.
The Company's obligation in respect of non-Omani terminal benefits, under defined contribution
retirement plan, is the amount of future benefit that such employees have earned in return for their
service in the current and prior periods. The obligation is calculated using the projected unit credit
method and is discounted to its present value. The discount rate used reflects current market
assessments of the time value of money.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
2 Basis of preparation and significant accounting policies (continued)
f) Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. An environmental provision is recognised when the
Company, through environmental assessments, identifies a requirement for environmental
remediation as a result of a past event and the associated costs can be reasonably estimated.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
g) Revenue
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns, allowances and trade discounts. Revenue is recognised when the significant
risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is
probable, the associated costs and possible return of goods can be estimated reliably and there is no
continuing management involvement with the goods.
Transfers of risks and rewards vary depending on the individual terms of the contract of sale.
h) Leases
Payments made under operating leases are recognised in profit or loss on a straight line basis over the
term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
i) Income tax
Income tax comprises current and deferred tax. Income tax expense is recognised in the income
statement except to the extent that it relates to items recognized directly in equity, in which case it is
recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is calculated using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to
be applied to the temporary difference when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the temporary differences can be utilized. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
2 Basis of preparation and significant accounting policies (continued)
j) Earnings per share
The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period.
k) New standards and interpretation not yet effective
A number of new standards, amendments to standards and interpretations are not yet effective for the
year ended 31 December 2007, and have not been applied in preparing these financial statements:
IFRS 8 Operating Segments introduces the ―management approach‖ to segment reporting. IFRS 8,
which becomes mandatory for the Company‘s 2009 financial statements, will require the disclosure
of segment information based on the internal reports regularly reviewed by the Company‘s Chief
Operating Decision Maker in order to assess each segment‘s performance and to allocate resources
to them. The Company will be required to present segment information in respect of retail,
commercial, lubes and aviation segments.
Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs and requires that
an entity capitalise borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset as part of the cost of that asset. It is not expected that revised IAS
23 will have any significant impact on the financial statements.
IFRIC 11 IFRS 2 – Company and Treasury Share Transactions requires a share-based payment
arrangement in which an entity receives goods or services as consideration for its own equity
instruments to be accounted for as an equity-settled share-based payment transaction, regardless of
how the equity instruments are obtained. IFRIC 11 is not expected to have any significant impact
on the financial statements.
IFRIC 12 Service Concession Arrangements provides guidance on certain recognition and
measurement issues that arise in accounting for public-to-private service concession arrangements.
IFRIC 12, which becomes mandatory for a company‘s 2008 financial statements, is not expected to
have any significant effect on the Company‘s financial statements.
IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities that operate, or
otherwise participate in, customer loyalty programmes for their customers. It relates to customer
loyalty programmes under which the customer can redeem credits for awards such as free or
discounted goods or services. IFRIC 13, which becomes mandatory for the Company‘s 2009
financial statements, is not expected to have any significant impact on the financial statements.
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and
their Interaction clarifies when refunds or reductions in future contributions in relation to defined
benefit assets should be regarded as available and provides guidance on the impact of minimum
funding requirements (MFR) on such assets. It also addresses when a MFR might give rise to a
liability. IFRIC 14 will become mandatory for the Company‘s 2008 financial statements, is not
expected to have any significant impact on the financial statements.
l) Directors’ remuneration
The total remuneration paid to non-executive directors comprising sitting fees and remuneration is in
accordance with the provisions, and within the limits of, the Commercial Companies Law; the CMA
guidance; and the Articles of Association of the Company. Executive directors, if any, apart from
their contractual benefits and performance linked pay are not eligible for any sitting fees or fixed
remuneration. Director‘s remuneration is recognised in the income statement.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
2 Basis of preparation and significant accounting policies (continued)
m) Joint venture
Joint venture: jointly controlled assets
Investment in jointly controlled assets is recognized only to the extent of the Company‘s share of
assets, classified according to the nature of assets, liabilities which it has incurred, income from the
sale or use of its share of the output of the joint venture, together with its share of any expenses
incurred by the joint venture.
Joint venture: jointly controlled entity
Investment in a jointly controlled entity is recognized using the equity method, from the date the
Company obtains joint control, at cost plus the Company‘s share of post acquisition retained results
and other changes in net assets.
The Company discontinues the use of the equity method from the date on which it ceases to have joint
control over, or have significant influence in, a jointly controlled entity.
n) Dividends
Dividends are recommended by the Board after considering the profit available for distribution and
the Company‘s future cash requirements and are subject to approval by the shareholders at Annual
General Meeting. Dividends are recognized as a liability in the period in which they are declared.
o) Determination of fair values
A number of the Company‘s accounting policies and disclosures require the determination of fair
value, for both financial and non-financial assets and liabilities. Fair values have been determined for
measurement and /or disclosure purposes based on the following methods. Where applicable, further
information about the assumptions made in determining fair values is disclosed in the notes specific
to the asset or liability.
(i) Property, plant and equipment
The market value of property is the estimated amount for which a property could be
exchanged on the date of valuation between a willing buyer and a willing seller in an arm‘s
length transaction after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. The market value of items of plant and equipments is
based on the quoted market prices for similar items.
(ii) Inventory
The fair value of inventory is determined based on its estimated selling price in the ordinary
course of the business less the estimated costs of completion and sale, and a reasonable profit
margin based on the effort required to complete and sell the inventory.
(iii) Trade and other receivables
The fair value of trade and other receivables approximates to their carrying amount due to
their short term maturity.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
p) Share capital
Ordinary and multi vote shares are classified as equity.
3 Property, plant and equipment
Buildings
Plant,
equipment
and vehicles
Assets under
construction
Total
RO RO RO RO
Balance at 1 January 2007, net of
accumulated depreciation 2,622,230 7,565,466 459,743 10,647,439
Additions - 13,401 3,740,932 3,754,333
Transfers 765,098 1,776,622 (2,541,720) -
Disposals - (28,154) - (28,154)
Depreciation for the year (203,951) (1,530,995) - (1,734,946)
──────── ──────── ──────── ────────
Balance at 31 December 2007,
net of accumulated depreciation
3,183,377 7,796,340 1,658,955 12,638,672
════════ ════════ ════════ ════════
Property, plant and equipment:
Cost 4,031,228 14,675,987 1,658,955 20,366,170
Accumulated depreciation (847,851) (6,879,647) - (7,727,498)
──────── ──────── ──────── ────────
Net carrying amount 3,183,377 7,796,340 1,658,955 12,638,672
════════ ════════ ════════ ════════
The Company‘s 50% share of plant and equipment and assets under construction at the main storage
depot at Mina Al Fahal (―the depot‖) in the amount of RO 987,692 (2006: RO 1,036,378) and
RO 12,953 (2006: RO 11,670), respectively, are included in property, plant and equipment. Under an
agreement dated 6 December 1995 between the Company and Al Maha Petroleum Products
Marketing Company SAOG (―Al Maha‖):
such assets are controlled jointly with Al Maha and cannot be sold without the mutual consent of
the Company and Al Maha;
costs of this depot are shared equally with Al Maha; and
the depot is operated by the Company for agreed management fees.
The land, on which the main storage depot and buildings are located, is leased from the Ministry of
Oil and Gas jointly with Al Maha under a lease which commenced on 23 November 1998 and expires
on 22 November 2008.
4 Interest in Joint Venture
The Company has entered into a joint venture agreement with Al Sarooj Group LLC dated 10 June
2004 (―the Agreement‖). Under the terms of the Agreement the Company has a 50% interest in a
jointly controlled entity, Oman Oil Marketing & Sarooj Group LLC (―the Joint Venture‖), a limited
liability company incorporated in the Sultanate of Oman with share capital of RO 40,000. The Joint
Venture was registered on 10 August 2004. The Joint Venture‘s principal activity is to carry out
commercial activities in the oil and gas sector outside the Sultanate of Oman.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
4 Interest in Joint Venture (continued)
The Company‘s share of assets and liabilities of the Joint Venture is as follows:
2007 2006
RO RO
Current assets 190,774 274,446
Non-current assets 4,626 4,626
Current liabilities (236,690) (261,228)
Non-current liabilities (2,265) (837)
──────── ────────
(43,555)
═══════
17,007
═══════
5 Inventories
2007 2006
RO RO
Oil and lubricants 3,422,898 3,581,279
Stores 7,497 8,456
──────── ────────
3,430,395
═══════
3,589,735
═══════
6 Trade and other receivables
2007 2006
RO RO
Trade receivables 14,135,898 15,779,253
Less: impairment provision (954,848) (1,028,329)
──────── ───────
13,181,050 14,750,924
Amounts due from related parties (note 18) 644,944 370,615
Other receivables
Prepaid expenses
306,349
1,187,046
378,130
965,478
─────── ───────
15,319,389
═══════
16,465,147
═══════
Changes in the impairment provision for trade accounts receivable during the year are as follows:
2007 2006
RO RO
Balance at 1 January 1,028,329 575,183
(Released) provided during the year (73,367) 458,490
Written off during the year (114) (5,344)
──────── ──────
Balance at 31 December 954,848
═══════
1,028,329
══===══
The Company has accepted guarantees / collateral valued at RO 469,215 (2006: RO 9,304) from
customers to secure fully/ partly their dues to the Company.
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
6 Trade and other receivables (continued)
The maximum exposure to credit risk for trade receivables (considered as being the gross carrying value before impairment provisions) at the reporting date by type of customer was: Carrying amount 2007 2006 RO RO Aviation 2,192,879 5,080,883 Commercial 5,653,749 7,037,955 Fuel Card 3,661,111 1,442,979 Lubes 620,673 352,366 Retail 2,186,427 2,211,911 Others 535,323 46,206 ─────── ─────── 14,850,162 16,172,300 Less: Related party receivables (644,944) (370,615) Others (103,119) (31,845) Add: Receivable from Joint venture 33,799 9,413 ─────── ─────── 14,135,898
════════ 15,779,253 ════════
Whilst the Company sells its products to a large number of customers in Oman, its five largest customers account for 33% of trade receivables at 31 December 2007 (2006: 38%). The aging of trade receivables at the reporting date was: Gross Impairment Gross Impairment 2007 2007 2006 2006 In thousands of Rials Not past due 10,599,389 91,807 9,746,772 43,248 Past due 1-90 days 3,337,693 40,301 5,017,669 49,462 Past due 91-360 days 289,319 244,031 754,430 329,379 More than one year 623,761 578,709 653,429 606,240 ─────── ─────── ─────── ─────── 14,850,162
════════ 954,848
════════ 16,172,300 ════════
1,028,329 ════════
7 Share capital
The shareholders in the extraordinary general meeting held on 25 March 2006 have resolved to amend the authorized share capital from 15,000,000 to 150,000,000 shares and the issued and fully paid share capital from 6,450,000 to 64,500,000 shares by reducing the nominal value of share from RO 1 per share to baizas 100 per share. The Company‘s authorized share capital consists of 150,000,000 (2006: 150,000,000) shares of baizas 100 each (2006: Baizas 100 each). The Company‘s issued and fully paid up share capital comprises 64,500,000 (2006: 64,500,000) shares of baizas 100 each (2006: Baizas 100 each) as follows: 20074 2006 Number of
shares Number of
shares Multi-vote shares 3,225,000 3,225,000 Ordinary shares 61,275,000 61,275,000 ─────── ─────── 64,500,000
════════ 64,500,000 ════════
In accordance with Article 5 of chapter two of the Company‘s Articles of Association, the holder of each multi-vote share is entitled to two votes at the annual general meeting of the Company.
Page 15
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
7 Share capital (continued)
Shareholders of the Company who own 10% or more of the Company‘s shares, whether in their name
or through a nominee account, are as follows:
20074 2006
No. of shares No. of shares
Oman Oil Company SAOC – Multi-vote shares 3,225,000 3,225,000
– Ordinary shares 28,380,000 28,380,000
─────── ───────
31,605,000 ════════
31,605,000 ════════
8 Legal reserve
As required by the Commercial Companies Law of the Sultanate of Oman, 10% of the profit of each
year is transferred to a legal reserve until the reserve reaches a minimum one-third of the issued share
capital. The Company has resolved to discontinue any further transfers to this reserve, as the reserve
equals one-third of the issued share capital. This reserve is not available for distribution.
9 Employees’ end of service benefits
2007 2006
RO RO
Movements in the liability recognised in the balance sheet are as
follows:
Accrual as at 1 January 335,326 310,642
Accrued during the year 45,752 41,586
End of service benefits paid (51,272) (16,902)
_______ _______
Accrual as at 31 December 329,806 ══════
335,326 ══════
10 Provision for site restoration and abandonment cost
Movements in the provisions are as follows:
2007 2006
RO RO
As at 1 January 240,241 207,678 Additional provision (net) 13,401 20,102 Unwind of discount (included in finance costs) 14,414 12,461 _______ _______ As at 31 December 268,056
══════ 240,241 ══════
The key assumptions underlying the estimate of this provision are as follows:
the average cost per filling station of restoration and abandonment is RO 4,000;
the expected cash flows are discounted over the estimated life of the filling stations using an
interest rate of 6%; and
the estimated life of filling station is ten years.
Page 16
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
11 Trade and other payables
2007 2006 RO RO Trade accounts payable 14,510,619 12,907,631 Accrued expenses 3,010,565 908,591 Directors‘ remuneration payable 75,000 72,500 ————— ————— 17,596,184
════════ 13,888,722 ════════
The Company in accordance with Capital Markets Authority (CMA) regulations transfers dividends
unclaimed for a period of more than 6 months from the date they became due to the CMA‘s investor
fund. Such unclaimed dividends transferred during the year amounted to approximately RO 23,728
(2006: RO 9,031). Eligible shareholders who have not received their dividends are entitled to claim
them from the CMA. Trade accounts and other payables are payable within 45 days on average from
the balance sheet date.
12 Short-term loan
The loan was repayable within one year of the balance sheet date. The loan was unsecured and carried
interest at current market rates.
13 Income tax
2007 2006
RO RO
Current liability:
Current year 778,000 583,000
Prior years 56,038 70,038
──────── ────────
834,038 653,038
════════ ════════
Income statement:
Current year 778,000 583,000
Reversal of excess tax provision relating to earlier years (33,777) -
Deferred tax relating to the origination and reversal of
temporary differences 16,933
(39,085)
──────── ────────
761,156 543,915
════════ ════════
Deferred tax asset:
At 1 January 62,981 23,896
Movement for the year (16,933) 39,085
──────── ────────
At 31 December 46,048 62,981
════════ ════════
The deferred tax asset comprises the following temporary differences:
Provisions and other charges 237,778 281,704
Property, plant and equipment (191,730) (218,723)
──────── ────────
46,048 62,981
════════ ════════
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OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
13 Income tax (continued)
The Company is subject to income tax in accordance with the income tax law of the Sultanate of
Oman at the enacted tax rate of 12% of taxable income in excess of RO 30,000. For the purpose of
determining the tax expense for the year, the accounting profit has been adjusted for tax purposes.
The reconciliation of tax as per accounting profit to effective tax is set out below:
Reconciliation of effective tax rate
2007 2006
Rate % RO Rate % RO
Profit before tax 6,441,665 4,559,945
Income tax 12.00 769,400 12.00 543,593
Effect of tax specific allowances (1.83) (117,212) (0.16) (7,127)
Effect of tax specific
disallowances
1.70 108,968 1.16 7,449
──────── ────────
Effective tax 11.87 761,156 12.00 543,915
════════ ════════
The adjustments are based on the current understanding of the existing tax laws, regulations and
practices.
The income tax assessment of the Company for the year 2006 has not been finalized with the Secretariat
General of Taxation Affairs at the Ministry of Finance. The Management considers that additional tax
liability, if any, in respect of open tax years would not be material to the financial position of the
Company as at 31 December 2007. The deferred tax asset has been computed at the tax rate of 12%.
14 Environmental provision
2007 2006
RO RO
Balance as at 1 January 295,592 322,606
Provided during the year 360,010 2,558
Utilised (64,755) (29,572) ─────── ───────
Balance as at 31 December 590,847 295,592 ═══════ ═══════
The Company provides for environmental remediation costs based on environmental contamination
assessments made on its delivery and storage sites. The entire provision of RO 590,847 is expected to be
used as per site specific remediation plans drawn up by the Company with their environmental
consultants.
15 Employee costs
2007 2006
RO RO
Wages and salaries (907,382) (830,312)
Other benefits (1,028,606) (866,203)
Contributions to a defined contribution retirement plan (60,276) (52,704)
Increase in liability for unfunded defined benefits retirement plan (45,751) (41,586)
────── ──────
(2,042,015) (1,790,805) ═══════ ═══════
Page 18
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
16 Expenditure commitments
Operating leases
The Company has entered into certain long-term non-cancellable operating leases. Under the terms
of these leases the future rental payments are as follows:
2007 2006
RO RO
Future minimum lease payments:
Not later than one year 472,542 402,870
Later than one year and not later than five years 727,114 612,378
More than five years 454,911 ───────
559,034 ───────
1,654,567 ═══════
1,574,282 ═══════
Capital Commitments
Contracted 505,156 405,298 ═══════ ═══════
17 Segmental information
The Company‘s operating revenues arise primarily from the marketing and distribution of petroleum
products in the Sultanate of Oman.
18 Related party transactions
The Company has provided a corporate guarantee to a bank on behalf of the Joint Venture (refer note
22) for no consideration.
The Company has entered into transactions with entities over which certain Directors are able to
exercise significant influence. In the normal course of business, the Company provides services on
commercial terms to related parties and avails services from related parties. The Directors believe
that the terms of providing and receiving such services are comparable with those that could be
obtained from third parties.
The volumes of significant related party transactions during the year and with parties with a
shareholding of 10% or more in the Company and / or related to Directors, were as follows:
2007 2006
RO RO
Fuel sales to filling stations owned by Directors 3,832,531 3,125,667
Fuel sales to commercial customers related to Directors of the
Company
Brand royalty
555,299
(133,699)
-
(106,208)
IT and other services from companies owned directly or indirectly by
Directors
(47,002) (65,136)
Remuneration to Directors (75,000) (72,500)
Directors‘ sitting fees (20,300) (17,300)
Net interest paid 31,436 53,684
Fee for accounting services 6,000 6,000
Share of losses of Joint Venture (53,644) (30,519)
Sale of company car - 5,500
Page 19
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
18 Related party transactions (continued)
Amounts due from related parties are disclosed in note 6. Bank balances in the amount of
RO 419,002 (2006: RO 1,196,392) are with a related party bank.
At 31 December 2006, an amount of RO 27,759 was due from an entity over which the Directors are
able to exercise significant influence.
19 Dividends paid and proposed
During the year, dividends of RO 0.0475 per share totaling RO 3,063,750 relating to 2006 were
declared and paid (2006- RO 0.0450 per share totaling RO 2,902,500 relating to 2005).
The Board of Directors has proposed a cash dividend of RO 0.0475 per share for 2007, totaling
RO 3,063,750, which is subject to the approval of the shareholders at the Annual General Meeting.
20 Basic earnings per share
Earnings per share are calculated by dividing the net profit for the year by the weighted average
number of shares outstanding during the year as follows:
2007 2006
Net profit for the year after deducting Directors‘ remuneration (RO) 5,680,509 4,016,030 ─────── ───────
Weighted average number of shares outstanding during the year (Nos.) 64,500,000 64,500,000
────── ──────
Earnings per share (RO) 0.088 0.062 ═══════ ═══════
21 Net assets per share
The calculation of net assets per share is based on net assets for the year ended 31 December 2007
attributable to ordinary shareholders of RO 17,776,176 (31 December 2006: RO 15,159,417) and on
64,500,000 shares (31 December 2006: 64,500,000 shares).
22 Contingencies
At 31 December 2007 the Company had contingent liabilities in respect of guarantees and other
matters arising in the ordinary course of business, from which it is anticipated that no material
liabilities will arise, amounting to RO 534,887 (2006: RO 1,364,314).
The Company has also provided a corporate guarantee of RO 500,000 (2006: RO 500,000), to secure
a credit facility of RO 1 million for the joint venture (see note 4).
23 Financial instruments
The following note presents information on the risks, arising from the Company‘s use of financial
instruments namely credit risk, liquidity risk and market risk that the Company is exposed to, its
objectives, policies and processes for measuring and managing risk and the Company‘s management
of capital. Further quantitative disclosures are included throughout these financial statements.
Page 20
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
23 Financial instruments (continued)
The Board of Directors has overall responsibility for the establishment and oversight of the
Company‘s risk management framework. The Board has entrusted the audit committee with the
responsibility of development and monitoring the Company‘s risk management policies and
procedures and its compliance with them.
Risk management policies and systems are reviewed regularly to ensure that reflect any changes in
market conditions and the Company‘s activities. The Company, through its induction and training
program, aims to develop a disciplined and constructive control environment in which all employees
understand their roles and obligations.
Foreign currency risk
Foreign currency risk is minimal as most transactions are either denominated in RO, US Dollars or in
currencies linked to US Dollars. The rate of exchange between RO and US Dollars has remained
unchanged since January 1986.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Company‘s
receivables from customers. The carrying amount of financial assets represents the maximum credit
exposure.
Trade and other receivables:
Credit is extended to corporate customers only with an objective of optimizing the Company‘s profits
and the prime responsibility for providing credit to customers and the timely collection of all debts
rests with the functional manager. Credit has a cost to the business and necessary controls and
procedures are established to manage the Company‘s credit risk and its working capital. It is therefore
Oman Oil Marketing Company‘s policy to have effective credit control systems in place which are
flexible enough to respond to changing market needs yet rigorous enough to ensure that customer
credit limits are established and regularly updated on the basis of reliable up-to-date information.
Generally credits are not allowed in excess of agreed credit periods except for government customers
and debts are collected within agreed credit terms and grace days. A stop supply mechanism is in
place which will automatically inactivate customer accounts and stop further supplies in the event of a
delay of payment beyond the credit period and the grace days. All exceptions and overrides are
approved in line with the policy guidelines. Debtor positions are regularly monitored and reviewed to
assess the overall risk and exposure. Though losses on account of default are infrequent, adequate
provisions for impairment based on the ageing of the debts are made to reflect the debtors position as
accurately as possible in the financial statements.
The significant concentration of credit risk has been disclosed in note 6.
The Company establishes an allowance for impairment that represents its estimate of incurred losses
in respect of trade and other receivables. The main components of this allowance are a specific loss
component that relates to individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that have been incurred but not yet
identified.
Investments:
The Company does not hold any investments other then its interest in a joint venture.
Page 21
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
23 Financial instruments (continued)
Guarantees:
The Company only provides financial guarantees to government bodies in the form of tender and
performance bond, and a guarantee of RO 0.5 million to Bank Muscat on behalf of its Joint venture
Oman Oil Marketing & Sarooj Group LLC. As at 31st December 2007 the total amount of guarantees
provided was in the amount of RO 1 million.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
fall due. The Company‘s approach to managing liquidity risk is to ensure, as far as possible, that it
will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company‘s reputation.
The Company uses local and international banks operating in the Sultanate to ensure that it has
sufficient cash on demand to meet expected operational expenses and sufficient credit facilities to
manage its liquidity risk. The Company has a credit facilities totaling of RO 34 million from 6 banks
which are unsecured and unutilized at the balance sheet date. Short term loans and overdraft ranging
are, on average, utilized for period of 7 to 14 days to bridge the gap between collections of receivables
and settlement of product purchase bills during the middle of every month.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the Company‘s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return.
Currency risk
The Company‘s foreign exchange transactions are very minimal and, as a consequence, the
Management do not believe that Company has significant exposure to market risk.
Interest rate risk
The Company manages its exposure to interest rate risk by ensuring that borrowings are on a
contracted fixed rate basis as far as possible.
Other Market risk
The Company is not exposed to other significant market risk.
Capital Management
The Board‘s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The Board of Directors monitors the
return on equity, which the Company defines as net profit divided by total shareholders‘ equity. The
Board of Directors also monitors the level of dividends to ordinary shareholders.
There were no changes in the Company‘s approach to capital management during the year.
The Company is not subject to externally imposed capital requirements.
Page 22
OMAN OIL MARKETING COMPANY SAOG
Notes (forming part of the financial statements)
23 Financial instruments (continued)
The Board of Directors believes that the fair values of financial assets and liabilities are not
significantly different to their carrying amounts at the Balance sheet date